Guest Post by Willis Eschenbach
Last night I saw Carol Browner, ex-head of the EPA, make an astounding statement on the Colbert Report TV show. I was so amazed, I tracked down the video to make sure I’d heard her right.
Before I tell you what Ms. Browner said that so bemused me, let me take a moment to talk about broken windows.
In economics theory, there’s a famous parable called the “Broken Window Fallacy”. There’s a good description over at the Investopedia:
The broken window fallacy was first expressed by the great French economist, Frederic Bastiat. Bastiat used the parable of a broken window to point out why destruction doesn’t benefit the economy.
In Bastiat’s tale, a man’s son breaks a pane of glass, meaning the man will have to pay to replace it. The onlookers consider the situation and decide that the boy has actually done the community a service because his father will have to pay the glazier (window repair man) to replace the broken pane. The glazier will then presumably spend the extra money on something else, jump-starting the local economy.
The onlookers come to believe that breaking windows stimulates the economy, but Bastiat points out that further analysis exposes the fallacy. By breaking the window, the man’s son has reduced his father’s disposable income, meaning his father will not be able purchase new shoes or some other luxury good. Thus, the broken window might help the glazier, but at the same time, it robs other industries and reduces the amount being spent on other goods. Moreover, replacing something that has already been purchased is a maintenance cost, rather than a purchase of truly new goods, and maintenance doesn’t stimulate production. In short, Bastiat suggests that destruction – and its costs – don’t pay in an economic sense.
OK, so we’re clear about that part. There’s absolutely no net gain, there is a net loss, from the breaking of the window.
Now, suppose that instead of breaking a window, the EPA orders the man to replace the window with high cost anti-UV coated glass to protect his workers from the sun. Once again the glazier makes money, once again, the man loses money, so once again there’s no gain or loss.
Clear so far?
Given that as an introduction, here is Carol Browner, former head of the EPA, explaining how the EPA helps the economy, transcribed from the video:
Carol Browner: The EPA creates opportunities. The EPA creates jobs. When the EPA says “that dirty smokestack needs a new scrubber”, someone has to engineer that scrubber, someone has to build that scrubber, someone has to install it, maintain it, operate it. Those are American jobs.
I leave it to the reader to draw the obvious parallels.
But in fact, this is good news if looked at the right way. Two facts.
First fact.
Think about this.
Obama and the Republicans both want to create jobs.
Second fact.
Add this in.
EPA regulations create jobs.
Well, duh, folks, don’t you get it yet … all we have to do is keep jacking the number of EPA regulations, and watch the unemployment level drop week by week as people are hired to build filters and install scrubbers and climb chimneys and inspect lawnmowers, and check window shades and re-calibrate your sphincter and measure trace gases and do that vital EPA work all over this great land of ours! And the beauty part is, we don’t have to specify in advance how many regulations we’re going to impose.
We’ll just gradually impose more and more EPA regulations, until unemployment has dropped down to say 6%. Then we can take off and add regulations as necessary, subtracting or adding jobs to maintain it right there in the sweet spot.
So America, all those proposed new EPA regulations on CO2? Understood correctly they’re not really a problem and an un-necessary wasteful PITA like you think. That’s the short-sighted view.
When you take a mature, long-range view, EPA regulations are a sign that good times and full employment are just around the corner. The EPA itself said that to implement the full CO2 regulations on all emitting point sources would require a quarter million new federal employees … I mean, all those shiny new jobs will whack ugly old Mr. Unemployment on his head right there!
…
…
I suppose I should put in [sarcasm] tags in there somewhere, but the whole thing is such a parody of itself, I don’t know where to start. Sometimes I just sit quietly and bump my head against the desk to think that in America, it’s gotten to the point where
BUREAUCRATS THINK REGULATIONS CREATE JOBS.
Sigh …
w.
PS—Colbert, as usual, got off the best line of the interview, viz:
You want to protect the air and water, right? You know what the air and water have done to us lately? Hurricanes. Tornados. I think it’s time we fight back, OK, give’m a taste of their own medicine.
Brilliantly demented.
PPS: Regulations are absolutely necessary for us humanoids, including environmental regulations. Otherwise, we’re pigs as a species, every river would be full of filth. It is a question of degree, not underlying need or justification for regulations. We need them, there’s no doubt of that.
So don’t abolish the EPA, that would be a huge mistake. Instead, fix it. It’s out of control. Whack its knuckles with a ruler. My favorite scam?
The EPA funds agencies that then sue the EPA to enforce ridiculous regulations. Then the EPA can wash their hands and say “They made me do it, I couldn’t help it.” That government branch is way off the reservation, fire half the employees and start over or something, it is sick to the core. It is in bed with the groups it is funding, using them to sue itself in a never-ending orgy of symbiotic green greed. Why is the EPA funding anyone at all? They’re an enforcement agency, they shouldn’t be funding anyone. That’s nuts.
Most importantly, take the EPA out of the trace gas business. Regulating CO2 is an incredibly stupid idea, but even if it weren’t, the EPA is not set up to handle it. Congress, you need to act here …
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“BUREAUCRATS THINK REGULATIONS CREATE JOBS.”
Bureaucracy breeds bureaucracy – which bureaucrats think is job creation. We are in the midst of a large-scale bureaucracy bloom; an economy mortality event. They are pond scum – a red tide. And I do mean red!
“”””” Dennis Ray Wingo says:
October 20, 2011 at 9:23 pm
Steven Chu certainly thought so when demanding the phase out of the incandescant light bulb. “”””
Well he evidently thougth that Solyndra’s way of making solar panels with at least pi times as much glass (which is a very high energy intensive manufacturing process); was a good way to collect solar energy.
Actually it is much worse than just pi times as much glass. It is well kown that cylinders that abutt each other also shadow each other when the sun is not directly normal to the layer of cylinders; so you have to space the cyclinders apart so they don’t shadow each other over the sun angle range; and use up even more real estate area.
It is well known that side by side flat sheets do NOT shadow each other, and they receive exactly as much sunlight as does Solyndra’s cylinders. You would think that a Nobel Prize winning Physicist, whose Nobel was in the field of Optics, would know that; but then you probably don’t know the history of that particular Nobel Prize either.
Anyhow, I dispatched my very last 60 Watt halogen incandescent bulb just last Monday morning, and replaced it with an 8 Watt LED. Don’t have ANY CFLs either; and that means I no longer have any radio interference noise either. I do have one 4 ft fluorescent tube in the garage; but I never go in there much anyway. Did it just for the hell of it. Cost a bit, but the prices have dropped a lot since I did it
No, abolishing the EPA is a great idea, Willis. It is one of the many malignant tumors that we need cut off ASAP from the body that is our Federal government.
jimmi_the_dalek said on October 20, 2011 at 8:58 pm:
Not true. The smokestack scrubber was made to existing standards, maintaining those standards became normal maintenance. Then the EPA comes up with stricter standards and insists there must be a new scrubber that meets their new standards. It’s like taking a 1950’s automobile, then mandating it has to meet the latest California emissions standards. The smokestack was in no way “broken” until the EPA declared it was “broken.” Does that make sense?
I’ve seen that happen locally. My father worked maintenance at a Celotex fiberboard plant. They spent a lot of money installing a new scrubber system. Under five years later, the EPA changed the rules and they had to install a brand new multi-million dollar scrubber system.
And now, there is no fiberboard plant there. Recently cleared empty lot, they might be putting up a warehouse there, but currently no plant and no plant jobs. Yup, that was a good day for the EPA when that place shut down, eliminated a whole lot of emissions in one stroke!
Well, there is need for some regulation. But this has gotten way out of control. Nebulizers? For the past quarter century all I have done is clean up toxic cocktails, some really big ones, in several countries, I’ve gotten really good at it. In the end though, for all that time, I may have been a sort of leach.
So when I ponder the “public trust”, I take into consideration the age of the concept in human civilization, until recently evolved into protection of our common water resources. I may have been one of the very first ecoterrorists (that story I will not tell), so in a lifetime of often intense comprehension, I take pause to consider such things as the Clean Water and Air Acts, and I contemplate the cost-benefit relationship.
If you had only seen the things I have seen…….and fixed. It brings perspective.
And a not inconsequential part of that perspective is perception, now long established, of overreach.
I ponder the “public trust climate”, here, at possibly, maybe probably, the end-Holocene and I wonder……….if climate, at an end extreme interglacial, at least from previous end extreme interglacials, is known to be so unstable as to have resulted in a ~+6M sea level highstand at the end of the last one (the Eemian), and perhaps as much as a ~+21.3M highstand near the end of the Holsteinian (that pesky 3rd of only 3 extreme interglaciations, and the last half perhaps our closest orbital analogue), what might we expect as this one approaches what might be its curtain call?
Would this envelope of natural climate noise, at an end extreme interglacial, constitute what is really the “public trust climate” at this point in post-MPT time?
@Gordon Oehler October 20, 2011 at 9:29 pm
Please show a causal relationship between the clean air act and the job growth…or were you trying to ironic?
Jimmi the Dalek has it right regarding smoke stacks and in the general case some things that we humans make are broken on day one by design. Smoke stacks that don’t lift the effluvia out of the atmosphere to be carried away by the solar wind are not working right. Shipping it from Detroit to Odessa via the jet stream is not acceptable. Really.
The other thing that is not acceptable is to expect that the effluvia can be created and then rendered back to original state. There isn’t enough energy in the universe to do that. We can’t scrub our way out of by-products. What we keep out of the air goes into a landfill. How’s that been working out for you?
Now we’re deconstructing Jimmi’s theme – no matter what we do, animate features on this planet create by-products. Drawing squarely on first principles we can now conclude that animated terraform features, generally, are incompatible with the inanimate terraform features. Jimmi’s Postulate becomes clear: Life, being incompatible with inanimate planetary features, sux, Daleks rule.
We now have entered the problem resolution phase of Jimmi’s postulate: Are the needs of the inanimate features of a terraform planet greater than the needs of the animate features of the planet? Some would say so, and in fact certain governments are even now enacting laws that preserve the inanimate features at great expense to the animate features.
And finally, what is the end game? One given is, animate planetary features can reduce the inanimate features to a level incompatible with continued animation. I’ll need some grant money to discover if this is a forcing or a feedback, and what the role of Daleks will be going forward.
“So don’t abolish the EPA, that would be a huge mistake. Instead, fix it. It’s out of control. Whack its knuckles with a ruler.”
The EPA started small, then grew “out of control”. If by some miracle it gets its “knuckles rapped” (whatever that means), what prevents it from growing out of control again?
Excellent article, Willis! However…
“Once again the glazier makes money, once again, the man loses money, so once again there’s no gain or loss.”
…is not quite correct. When the window is broken, or when the window is discarded because of an EPA requirement, there is a net loss.
Nobody who gets business as a result of the breakage or EPA requirement actually has a profit equal to all of what they are paid for the work or product. If you follow all the supply chains back as far as they go, you end up with the sum of all the profits from all the transactions coming to less than what the man had to pay for his new window.
Now, it is theoretically possible for government regulations, even EPA regulations, to have a net positive economic impact. If, for example, air quality regs reduce the incidence of respiratory ailments, there’s no fundamental reason that the resulting savings in healthcare expenses and worker disabilities could not exceed the cost of implementing the regulations.
Nevertheless, you are certainly correct that what Carol Browner said is purest nonsense. She obviously has an appalling ignorance of basic economics.
anna v says:
October 20, 2011 at 9:38 pm
“I would be interested to see in some future post of yours how you envisage the world future when robots and nanotechnology lead us to the point where all menial and easy intellectual jobs are taken care of by robots.”
============================================================================
A long time ago I read a SF short story, whose title and author I don’t remember. But it took place in a future time that anna v describes. The consumption problem was taken care of by requiring people to consume a certain amount of goods. The higher up the social ladder you were the LESS goods you had to consume. People like judges and professions had to consume only moderate amounts, But bus drivers, ditch diggers, etc. had to consume staggering amounts of goods. Of course you had to turn in (recycle?) the used goods to prove they had been consumed. Those that kept the statistics noted one individual that consumed several times his quota of clothes. He was awarded “Consumer of the Year.” It turned out he had taken several of his household robots, put them in his basement wearing his clothes, and had them doing things that would wear out the clothes.
The real answer is that people will find something they can do that others will pay a living wage for. It would have been hard for a farmer 400 years ago to imagine that 4 percent of the population could produce enough food for the remaining 96 percent(and what would that 96 percent do to make a living, if not farm?).
While it is not hard for us to imagine how robots could produce enough manufactured goods that only 4% of the population could produce enough manufactured goods for the rest of us, we really need to explore what the remaining population would do to earn a living. Robots could build the CO2 control devices. Maybe the rest of us could write EPA regulations.
Hurricanes, tornadoes, floods and earthquakes create jobs in the same manner new EPA regulations create jobs. Any lunatic out there see those natural calamities as a net benefit for the national economy?
With Carol Browner’s logic, you could justify a Ministry of Silly Walks.
One of the reasons that the 90’s roared is that, thanks to Ronald Reagan, we were able to slow down the stock piling of better and bigger rocks to throw through Soviet windows.
Brilliant engineers all over the world turned their thoughts from GPS for targeting to GPS for navigation. Every segment of civilian industry benefitted by the shift of resources from ‘window breaking’ to things useful.
The focus of the EPA is 97.3% window breaking.
“Otherwise, we’re pigs as a species, every river would be full of filth. It is a question of degree, not underlying need or justification for regulations. We need them, there’s no doubt of that.”
The problem with idea that business fill every river with filth, is business doesn’t want to risk being sued for damages from said filth.
So said regulations usually protect a business from lawsuits if complying to regulation.
A second part is govt should provide means of taking out the garbage.
If you didn’t have garbage service, you would live in filth, regardless of number of regulations imposed upon you. One can’t have a city without a sewage system- if you don’t want plagues in said city.
Generally businesses should be no different than any other citizen of a city.
“someone has to build that scrubber, someone has to install it, maintain it, operate it”
And someone has to pay for it.
You have oversimplified this considerably.
The problem with your model is that it assumes a static state. If windows lasted forever, and windows installed 500 years ago were just as good as modern windows, and where and how we want them to be, that would be fine.
It is a microcosm of Schumpeter’s ‘creative destruction’ in reverse.
Obviously, it is a fallacy to assume that replacing a broken window in itself constitutes real economic growth. But replacing it with a better window, or a window in a better place, might. This is quite independent of regulation – it is just plain economics.
It is not necessarily about replacing like with like, or about being compelled to do so.
If a cyclone destroys a bunch of infrastructure, and it is replaced with infrastructure that is better able to withstand cyclones, that is not a zero sum game for the economy. Your ‘economics’ are just a touch Malthusian. Everything has to be replaced sometime, hopefully with something better.
Compelling people to to this because of the latest enviro fad is a different thing altogether, and is to be deplored. You are correct, it does not ‘create’ jobs or industries at no cost. But you need to study economics a bit more before you start using analogies like the broken window, which is about something quite different. No-one broke the window and forced the homeowner to do something afterwards in that example.
I used to like those shows when I was younger, but now I see them for what they are – ridiculously exaggerated strawman arguments that are so easy to knock over a paraplegic could do it.
By the fate of my dvr, my tv happened to be on Comedy Central and I caught that segment. I was mentally screaming all the points and counterpoints that propagandistic tripe wouldn’t dare give voice to, because, heaven forbid, some young liberal somewhere might be persuaded to disagree with the party dogma.
“First fact.
Think about this.
Obama and the Republicans both want to create jobs.”
Obama and the Senate, 74 against 26 votes, just appointed a Rino Eco Fascist in the function of Secretary of Commerce who’s only mission in life is to destroy commerce and expand California’s carbon suicide pact nation wide.
Soylant Green has quite emotional rant on the subject so only read it if the F-word doesn’t offend you. I only read the headline and clicked the links in the article to find out what made him so mad.
http://cbullitt.wordpress.com/2011/10/20/senate-confirms-eco-fascist-as-commerce-secretary/
Obama nor the Republicans, at least the Rino bunch of traitors that voted in favor of the new Secretary of Commerce don’t care a heck about jobs but their own.
And all Obama wants is to look good with his eco fascist friends from Europe, Australia and the UN. He wants to sign Kyoto II and finally introduce the nation wide carbon tax the new World Order is waiting for.
That’s why Browner was selling her snake oil with Colbert in the first place.
That’s why we have another wave of climate hubris to cope with and that’s why we have the OWS ‘protesters’ calling for climate justice and solar panels.
And that’s why Bank of America started trading carbon credits in California even though the start of the scheme was set for 2012.
http://www.mybanktracker.com/bank-news/2011/10/12/bank-america-start-trading-carbon-ca/
and
http://cbullitt.wordpress.com/2011/10/20/so-who-bails-out-bank-of-america-when-the-ca-thermageddon-market-crashes/
The reality is that Obama and the banksters are in a hurry because of the “Agenda”, the elections and the banking crises which is why the banks now badly need the business as the ‘window’ of opportunity is getting smaller by the day.
I really hope they all fail.
“We need them, there’s no doubt of that. So don’t abolish the EPA, that would be a huge mistake.” We need a gov’t of laws not regulation. If we had a system w/ objectively defined property rights and a gov’t willing to protect said rights then we wouldn’t need such things as the EPA which can only violate a person’s rights. Certainly we should abolish the EPA.
very good articole, Willis!!!!
Here in Italy, we are facing the same thing; our ARPAs (kind of mini-EPA at a regional government level) are actively trying to DESTROY our economy through a series of regulations and controls…
This is not bureaucracy, it’s CLEPTOCRACY, as stated by J. Diamond in his Pulitzer-winning “Guns, germs and steel”….
The Browner quote is awful, as you point out.
The usual justification is that the costs of regulating the pollutants (costs that are focused and easy to measure) are outweighed by the benefits (which are diffuse and hard to measure, being improved health to many nonidentifiable people.) Browner does not seem to acknowledge costs at all.
There is a school of thought (you have probably read this elsewhere) that people with control over capital are unwisely sequestering it in bank accounts where it performs no useful service. For the government to take it and invest it anywhere the government wants does not, according to believers, take investment money away from other business. Supposedly, America has in excess of $1.5 trillion of this idle wealth, just waiting for the government to liberate it from its prisons. My guess is that Browner is one of these believers.
At 11:01 PM on 20 October, old engineer had written:
The name of the short story was “The Midas Plague,” written by Frederick Pohl. It was originally published in Galaxy magazine, April 1954 (when H.L. Gold was still the editor), and had been reprinted many times thereafter, most notably in The Science Fiction Hall of Fame, Volume Two: The Greatest Science Fiction Novellas of All Time (1973, which is probably where you’d read it).
A damned nice anthology, that. Anybody else recall a work collected therein, written by Pohl’s frequent collaborator, C.M. Kornbluth? A tale for our times titled “The Marching Morons.”
While the analogy isn’t a bad one, it isn’t entirely accurate either. The original window does not represent the negative externality that a “dirty” smokestack does. If the smokestake is emitting gases that have a negative impact on other parties, then it might be appropriate to internalise the externalities (the costs to others of the pollution). Having said that, it is a huge stretch to suggest that the EPA somehow creates jobs … the additional costs of pollution abatement would have been additional profits received by the factory owner(s) or reduced prices of the output enjoyed by the consumers of their wares.
To work out the benefit:cost would be an involved exercise, but one thing is certain… if the cost of abatement is greater than the benefit of reduced pollution, then the money would be better spent elsewhere.
There are entire volumes written on this subject…
johanna at 11:54pm
500 year old windows like these?
http://www.world-city-photos.org/Paris/paris_notre_dame/Paris_Notre_Dame_stained_glass.jpg
No, nobody lives in Notre Dame, but most folks don’t replace the windows in their house just to replace them(and folks with 100+ year old houses are likely to call you a blasphemer for suggesting it!). Yes replacing older windows with newer technolgy windows does help the homeowner, but it is still at the cost of the loss of those windows. Most newer technology windows go into new construction(or major home remodels), which in terms of windows can not be considered “destruction” at all(Your not static model). Broken windows (and cyclone destruction) even if you replace with newer technologies are still destruction and a loss, which have to be considered/subtracted from the gain to come up with a true amount of gain/progress.
And then we come to the EPA and Browner…new regulations for the sake of new regulations, which seems to be SOP for the EPA, that don’t do anything for the economy, nor necessarily for the environment IS breaking the window without any gain in replacing it, and could very easily be a large economic loss.
“…and re-calibrate your sphincter …”
Hey!, I don’t want no one, no-how re-calibrating any of MY sphincters.