Where’s Frédéric Bastiat when you need him?

CRDaily

UNC’s beloved “Grey Lady” is sadly perpetuating the myth of “green jobs”- and jobs created due to the stimulus, generally. The article (“Grant creates green jobs at UNC”) starts out okay. Obviously, if you spend money to hire people, you are creating jobs. But in the first paragraph, Miss Serdetchnaia (who is, by the way, a friend and a delightful individual) commits a fatal error:

As unemployment rates continue to hover around double digits, universities are using federal funds to create internships in a sector that the Obama administration has repeatedly said will lead the U.S. out of the recession.

This assumes that jobs created is the same as a net gain in jobs.  An easy mistake to make (one the Obama Administration has made many a time), but a mistake nonetheless because it falls afoul of the “Broken Window Fallacy.” First articulated by Frédéric Bastiat, it basically says you have to take hidden costs of a particular action into account. In the parable Bastiat used to illustrate his point, the shopkeeper’s careless son breaks his father’s window, and a sequence of actions follows: the shopkeeper pays the glazier six francs to fix the window, who uses the money to pay another merchant, who uses the same money to buy goods from another merchant, etc.

To the onlookers, the son is a hero! He broke a window which caused the glazier to get money, which he used to buy more goods, down the line. But Bastiat says, hold on one second. The onlookers are only looking at the benefits accrued to the glazier et al. What about the initial cost to the shopkeeper? Instead of paying six francs to fix the window, maybe he wanted to buy a jacket for his wife which cost 12 francs? So now he’s out six francs and has to save up more, with no economic expansion because all that happened was a pre-existing window was replaced.

Back to the jobs created by the federal grant money. We see the internships provided by the grant money (which at UNC amount to $324,736), but what else could have been used with that money? Think about it. $5.6 billion, immediately added to our national debt (which impacts interest rates for borrowers). $5.6 billion which sucks up labor and resources that could have been directed elsewhere, in a more efficient manner. And $5.6 billion which is being used to prop up an already economically inefficient industry (seeing as it wouldn’t exist without huge government subsidies) by training people to learn economically inefficient skills for economically inefficient jobs. See where this is going?

The only way this all makes sense is if you believe the threat posed by global warming (climate change, take your pick) is great enough to warrant massive inefficiencies. But then we’ve finally dispensed with economics and have moved full on to the moral imperative of action. Which is fine, you just can’t have pundits and politicians claiming “green jobs” are economically efficient or will create a net gain in jobs because that’s just empirically false.

4 thoughts on “Where’s Frédéric Bastiat when you need him?

  1. "It wouldn’t exist without huge government subsidies"

    Can you name a few industries that do not derive substantial benefit from government subsidies?

    1. Hey is this a new thing? Leftists opposed to government subsidies for businesses? I haven't heard it before until recently. If this is new, that's great! Liberals and free marketeers finding common ground–or am I just getting my hopes up?

      ____o_, any thoughts on the sugar tariff, corn subsidies, or other agricultural government handouts? Or how about local corporate welfare, such as is so prevalent in North Carolina? I think we may be onto something here…

    2. If you're going to cite Bastiat then you're going to have to have a much broader definition than that.

      Let's look at Wal-Mart, the biggest retail company in the world. They've received subsidies in the form of free or cheap real estate, infrastructure (access roads, sewer lines etc), tax increment financing, property tax breaks, corporate income tax credits, sales tax rebates, job training, bond financing and outright grants. In 2004 a study documented subsidies of more than $1 billion: http://www.goodjobsfirst.org/pdf/wmtstudy.pdf

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