Its Not New and its Not Green; the Green New Deal is the Broken Window Fallacy
- The Green New Deal isn't new and it isn't a deal.
- Instead, its one of the most transparently obvious economic fallacies brought to life - that of the broken window.
- The Green New Deal is based on the same economic irrationalism as the Depression-era Agricultural Adjustment Act and the post-financial crisis era 'Cash for Clunkers' program.
- When all the costs are accounted for, replacing today's electricity generation system - which has never been cleaner or more efficient - with wind and solar makes no economic sense whatsoever.
- When all the associated resources necessary to produce and distribute all this new wind and solar energy - including tens of millions of batteries, thousands of miles of new transmission lines and the tens of millions of acres turned over to renewable energy - the idea doesn't make much environmental sense either.
A book , the knowledge of which is far more economic enlightening then a Harvard economics degree, is Frederic Bastiat's Essays on Political Economy and Candlemakers' Petition. (1) In this book Bastiat distinguishes between good and bad economists on the basis of one ability - to see what is unseen;
"In the department of the economy, an act, a habit, an institution, a law, gives birth not only to an effect but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause - it is seen. The others unfold in succession - they are not seen; it is well for us if they are foreseen. Between a good and bad economist this constitutes the whole difference - the one takes account of the visible effect; the other takes account of both of the effects which are seen and also of this which it is necessary to foresee." (2)
In his book Bastiat gives a famous example of seen and unseen effects: the Broken Window. In this example, Bastiat describes how a storefront window is broken by a shopkeeper's ne'er-do-well son. By-standers attempt to console the shopkeeper by noting that if windows were never broken, glazier's would all go out of business. They argue, 'Now that the window has to be replaced, think of all the good the glazier will be able to do with the money you pay him.' The by-standers - like nearly all economists today - are only reacting to what is seen, not what is unseen. They don't appreciate that if the glass had not been broken, then the shopkeeper could have spent his money on something else. Society would not only have the pane of glass that was never broken, it would also have what the shopkeeper would have otherwise purchased. The notion - widely believed by Paul Krugman and many other 'renowned' economists - that war makes a society richer is merely the broken window fallacy taken to its absurd extreme. (3)
Because of politicians and the dismal state of economic understanding - which continues to move in reverse - Americans are constantly exposed to one example of the broken window fallacy after another. In the Depression era there was FDR's Agricultural Adjustment Act, which thought it brilliant to destroy crops and livestock when millions were starving. (4) A more recent example of the broken window fallacy is "Cash for Clunkers."
In the Cash for Clunkers program, automobiles – which were fully functional, licensed to be on the road and had economic value – were destroyed. The program required the cars to be destroyed, not simply turned in. For volunteering your car for destruction, a person would receive a nominal amount of “cash,” which could only be used to purchase a new car. (The cash was only a small fraction of the purchase price of a new car.) Apparently, the proponents of the program believed the economic interests of the country were advanced by destroying things with economic value. Of course, the program did lead to the purchase of some new automobiles, but along with the new automobile came new car payments. To anyone who pauses for an instant to think about the ramification of this program, it becomes immediately clear that every dollar spent on car payments is one less dollar the purchaser could spend on other goods. There is no way a program like this could ever lead to real economic growth. In fact, by believing economic growth could be achieved by a destructive catalyst – destroying used cars - cash for clunkers was one of the most of the spectacular examples of the intellectual and moral bankruptcy of modern economics and modern economists.
Regrettably, Cash for Clunkers merely hinted at the toxic combination of ignorance and arrogance that lay at its foundation. Indeed, today's "Green New Deal" makes Cash for Clunkers seem tame by comparison. Cash for Clunkers merely hoped to goose the automobile market by perhaps a few million extra cars being sold. The Green New Deal seeks to replace 62% US generating capacity. It takes the equivalent of around six-hundred 1000-MW power plants to generate the electricity the US requires. (5) In 2019, 62% of this electricity was generated with coal, (23.4%), and natural gas, (38.4%). (6) Stripped of the raw political power and veneer of respectability given to it by a phalanx of PhD economists, the Green New Deal takes 370 of these power plants, the ones fueled by coal and gas, and destroys them. As all this electricity generating infrastructure is being destroyed, an equally intensive effort to build wind and solar power plants will take place. As was the case with cash for clunkers, an enormous destructive enterprise is supposed to catalyze economic growth. It is completely absurd.
Not only is the program absurd from an economic standpoint, it doesn't make any environmental sense either. The wind and solar plants will take up enormous amounts of land. To manage the intermittency of renewable power generation, tens of millions of lithium ion batteries will be required. Of course manufacturing the solar cells and wind turbines are energy and environmentally intensive. Solar cells in particular involve a witches brew of all sorts of toxic substances. For example, hydrofluoric acid, one of the most dangerous industrial chemicals in use today, is used to etch solar glass substrates. In refining metallurgical grade silicon to wafer grade polysilicon, 3-4 tons of silicon tetrachloride are produced for every ton of polysilicon. (7) Now that nearly all photovoltaic manufacturing has been moved to China, the notion that all this waste material is being managed in an environmentally manner is deeply suspect. (8)
Sugar Land, TX
May 02, 2021
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1. Frederic Bastiat, Essays on Political Economy and Candlemakers' Petition, The Perfect Library, London 1873
2. Bastiat, p. 37
5. In 2019 the US used 4,126,882 x103 MW-hours of electricity. If a 1000-MW plant runs at an average capacity of 80% for 350 days of the year, then it will take 614 such plants to provide the country's electricity.
6. See Table 1;
8. Thin-film solar cells don't appear to be as environmentally intensive as the cells based on wafer grade silicon. However, thin-film technology has had difficulty generating market share in the US and elsewhere. In the US, one of the companies at the vanguard of thin-film solar cells was the infamous Solyndra.