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If Thomas Friedman Knew Economics He Would Have Made a Stronger Case

Wednesday, 06 October 2010 03:56

Thomas Friedman devoted his column this morning to criticize an effort by the oil firms to roll back environmental regulation in California. The effort takes the form of a referendum that would delay rules requiring greater energy efficiency until the unemployment rate is below 5.5 percent.

While this sequence appears to be motivated by a concern for California's economy, the logic goes in the opposite direction. In periods of high unemployment investments in more efficient technology have very little cost to California since they are likely to employ workers who would otherwise be idle. In fact, by requiring California firms to invest in clean technology the regulations could well be net job creators.

By contrast, in standard economic theory environmental regulations will pull workers away from other sectors in periods of full employment. This would raise costs and therefore reduce total output and employment. From an economic standpoint it would make more sense to only require firms to take steps to reduce emissions when the unemployment rate is above 5.5 percent rather than below.

Comments (6)Add Comment
written by AndyfromTucson, October 06, 2010 7:27
Exactly. Thank goodness at least Dean Baker can see the obvious. As mentioned in a NYT article a few days ago many of the big corporations are raising piles of cash through low rate bond issues and then sitting on it because they don't see anything worth investing in at the moment. One way to mobilize all that idle cash to create jobs would be for Congress to issue new environmental mandates that require significant investment by major corps to comply; it would force the big corps to spend big on investments in new technology. But what are the chances of that happening when Fox News has the Democrats terrified of doing anything sensible to boost the economy.
written by izzatzo, October 06, 2010 7:36
When is the time to be making some energy efficiency upgrades in production capacity?

Now is not the time. Sales are strong, the labor market is tight with high wages and we would lose revenue on the shut-downs.

Now is not the time. Capacity utilitization is low and sales are sluggish. No point in investing in a weak market during a deep recession.

Now is not the time. We have the market cornered so competitors with advanced technology are not a threat. Just run what we have and continue pulling in enough economic rents to buy off the pols and we'll be fine under our One Hundred Year Leap Backward Subsidy and Obsolescence Plan.
This just in from the wires,
written by diesel, October 06, 2010 10:22
In an patriotic effort to thwart the solar-powered electric grid made economically feasible through the enactment of California environmental energy regulation, the Koch brothers have hired an evangelical preacher who claims that he can order the sun to stand still. Solar panels, which are programmed to track the apparent motion of the sun across the sky, would no longer focus the sun's rays on their collection devise and consequently fail to produce electricity. A spokesman for the Koch's has stated that their intention is not to interfere with government incentives in the free market but to demonstrate the potential vulnerability of scientifically controlled systems to manipulation by faith-based terrorists. The spokesman said that "contrary to what many Americans think, Muslims too, believe in the Old Testament, giving them the same access to God's power to alter nature's laws as Jews and Christians" and further stated that "it would be folly to risk the welfare of this great nation by exposing the fulfillment of our energy needs to potential manipulation by religious zealots from Arab nations".

written by izzatzo, October 06, 2010 11:58
Stupid liberal twit. The sun was ordered to be still because it's easier to focus on and concentrate enough heat to fry energy terrorists with solar rays rather than cook them up as usual in an ordinary coal fired steam boiler.
Catylic converter production destroys jobs??
written by Ralph Musgrave, October 08, 2010 7:07
Dean Baker in his last para claims stricter environmental regulations raise unemployment. I doubt it. Introducing catalytic converters for cars will just have induced car buyers to pay more for their cars, which means they’ll have spent less on housing, holidays, beer, PCs, etc etc. Net effect on employment: zero.
written by China Electronics Wholesale, October 20, 2010 9:31
The leading China wholesale electronics marketplaces!

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.