Clean Energy: A Rebuttal to a Critique

Murray Weidenbaum is a prominent figure in business and government. He served as Assistant Secretary of the Treasury from 1969 to 1971, and in 1981-82 as Chairman of the Council of Economic Advisers. His research and teaching interests are government regulation of business, public finance, and economic policy. Weidenbaum is an honorary fellow of the Society of Technical Communication and a fellow of the National Association of Business Economics. His book, Small Wars, Big Defense, was selected by the Association of American Publishers as the outstanding economics book of 1992. His Bamboo Network was a finalist for global business book of the year in 1996. His book, One-Armed Economist: The Intersection of Business and Government was published in 2004. In 2008, The Competition of Ideas: The World of Washington Think Tanks, was published by Transaction Press.  He founded the Center for the Study of American Business at Washington University and directed the Center for many years. The center was renamed in his honor in 2001 to the Murray Weidenbaum Center on the Economy, Government, and Public Policy. Professor Weidenbaum teaches a popular course on business and government. 

           My friend and colleague, Professor Itai Sened, raises important points in his April 16 critique of my entry of April 1 on the subject of clean energy subsidies.  His first point (“Dirty Politics”) related to a mutual criticism, the sad state of U.S. infrastructure.  But that issue provides a useful example of the shortcomings of political intervention in the U.S. economy.

            By statute, the federal government diverts a substantial portion of the proceeds of the special excise taxes paid by motorists to support projects unrelated to highways.  Those non-highway transportation facilities usually operate at a substantial loss (e.g., mass transit).  If the money could stay in the highway trust fund, it could be used to finance the needed repair and/or replacement of bridges and tunnels that are in bad shape.

            As for Professor Sened’s next point, “Subsidizing Clean Energy,” he may be missing my basic motivation in opposing subsidizing energy programs, especially those that embody old technology.  Over the centuries, economic history demonstrates clearly that, when the development of new technology enables new energy projects to be competitive with conventional energy sources, the pressures of the marketplace will take over.  Simultaneously, our joint desire for a cleaner and healthier environment will be advanced.  The need for government intervention will diminish if not disappear.

            To clear the air (no pun intended), my opposition to government subsidizing the private sector is not limited to “green energy” — or to energy projects per se.  My opposition (and that of a great many economists) to farm subsidies is of far longer standing.

            Let us now turn to Professor Sened’s optimistic assessment of the financial performance of “clean energy” companies.  The May 20 issue of Fortune reported that “the past few years have been a dark period for the solar industry.”  This article cites the bankruptcy of several major solar companies, at home and abroad.

            I am delighted that Professor Sened and I are in agreement that the current prospects for clean energy jobs have been overstated.  Along those lines it may be helpful to note a new study of green jobs by Benn Steil and Dinah Walker of the Council of Foreign Relations.  They report that each job in wind energy costs the taxpayer an average of $46,667.  For solar energy, the average cost per job is $18,333, and $1,959 for oil and gas.

            The basic way to encourage employment is not via special interest subsidies, but through a more rapid and durable pace of economic growth.  There are many sensible ways of attaining that desirable condition.  They range from increasing the skills of American job seekers (a task for government as well as the private sector) to reducing the barriers to business expansion (through rationalizing the labyrinth of regulatory and tax obstacles that reduce the nation’s competitiveness).  The resultant higher levels of income and output would provide individual citizens greater opportunities to devote resources to achieving their longer-term goals.