Obma’s SOTU And His Flawed Green Energy Economics

But — but here’s the thing. Even if you doubt the evidence, providing incentives for energy efficiency and clean energy are the right thing to do for our future, because the nation that leads the clean-energy economy will be the nation that leads the global economy, and America must be that nation.

Transcript- Obama SOTU

“[T]he nation that leads the clean-energy economy will be the nation that leads the global economy.”

Says who?

Any serious economist will tell you that subsidizing green energy is simply a modern version of Frederic Bastiat’s classic “broken window” economic model. Rather than breaking our own window, replacing and it calling this economic activity we are spending vast sums of money replacing existing reliable, functioning and cost effective energy generating capacity with so-called “green energy” (that is less reliable and more expensive). How does this make any sense?

The Cato Institute’s Michael Tanner points out how this picking ‘winners and losers’ is a classic example politicians “fatal conceit:

As the economist F. A. Hayek noted, government’s ability to manage the economy is premised on a “fatal conceit” — politicians’ inability to recognize their own limitations. For example, studies show that not only do government “green jobs” policies create few jobs, but the ones they do create often come at the expense of existing jobs. To cite just one finding: A study by Gabriel Calzada of the Juan Carlos University of Madrid found that every green job created by the Spanish government destroyed an average of 2.2 other jobs, and that only one in ten of the “green jobs” created was permanent. The fact is, if these industries were viable and profitable, the private sector would be rushing to invest in them. The very fact that they require government subsidies demonstrates that they are not the road to future economic growth.

As long as our government insists on picking winners and losers in the market place. And, as long as they continue to divert large amounts of capital from productive areas of the economy to non productive areas, our economy will not return to robust growth.

Further reading on the subject @ MCT:

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