The Washington Times has an interesting commentary by Richard W. Rahn, a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth. In addition to the fallacies pointed out in the article, I would like to bring up another, the idea that government mandates for alternative energy can create jobs.
Like anything else, the production of energy requires labor. Even the most automated production system was designed and built by human labor. So mandating a less efficient form of energy production, such as ethanol, wind turbines, or solar, seems to require more labor to produce the same amount of energy. And so it does. Thus, stopping with this simple analysis, we would conclude that less efficient energy production results in more jobs.
But energy is used to produce other things. Thus, the cost of producing those other things has now gone up. This cost can either be borne by the owner of the company in lower profits, by the employees in lower wages, or by the consumer in higher prices. Whoever bears the burden, and it is probably a combination of the three, the purchasing power of these people is reduced. They will buy less because they have less to spend. Because they are buying less, companies will produce less, and employ fewer people.
The net result is that there will be fewer jobs because of the less efficient energy production.
Adam Smith’s seminal work on Economics, An Inquiry into the Nature and Causes of the Wealth of Nations, is available online. Although economic theory has progressed since 1776, like Newtonian Mechanics, Smith’s theories are still applicable 99.9% of the time. For a more up-to-date economic treatise, try John Kenneth Galbraith’s The New Industrial State. For those of you who want something a little lighter, try Thomas Sowell’s Basic Economics.
An understand of economics is critical to one’s participation in politics today. When our leaders are proposing Universal Health Care, windfall profits taxes on oil companies, and taking so much of our money in taxes, it is a dereliction of duty for a voter not to have as much understanding of economics as he can.