The Economic Silliness Of The Ocasio Cortez Green New Deal

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This is truly dire, this resolution that Alexandria Ocasio Cortez has put together to try and sell her idea of a Green New Deal to the American public. For in what she’s saying she’s actually undermining her own case for tackling climate change. She’s actually insisting upon, with her own numbers, making it all more expensive than it should be, even showing us why we shouldn’t be doing it.

It’s as if she knows nothing at all of the work that’s been done on the economics of climate change. Which, of course, is true, she is ignorant of it all. For if she weren’t she wouldn’t be promoting a grand plan like this she’d be doing what absolutely every environmental economist has been insisting, have a carbon tax.

Take this for example:

Whereas the House of Representatives recognizes that a new
national, social, industrial, and economic mobilization on
a scale not seen since World War II and the New Deal
is a historic opportunity—
(1) to create millions of good, high-wage jobs in the
United States;

A job is a cost of doing something. Sure, it’s an income to the person doing it but it’s still a cost to us out here who are getting the work done. So, the insistence on creating well paid jobs means that we’re deliberately going to make the whole thing more expensive.

Think it through, if we could get he job done with one gal working at $10 an hour and using a few machines would we prefer this to having millions of people making $30 an hour and getting the same job done? Quite, we’d prefer the girl with the Rhoomba wouldn’t we? Sure, maybe it’s not possible to do it with the labour of one person, that’s true enough. But the insistence that we want to do it with millions being highly paid is to insist that we’d like to do it the expensive way. We’re celebrating it costing more that is.

Then there’s this:

..global warming at or above 2 degrees Celsius be-
yond preindustrialized levels will cause— (A) mass migration from the regions most af-
fected by climate change; (B) more than $500,000,000,000 in lost annual
economic output in the United States by the year
2100;

$500 billion a year isn’t a lot in the context of the US economy. It’s currently around $20 trillion in size, so we’re talking about 2.5% of the economy being lost. But of course we’re also predicting that the economy will grow between now and then. Actually, we think the US economy will be about $100 trillion a year by 2100. So we’re talking about 0.5% of that economy. Or about the change in size of the US economy between September and December last year. Think how much richer we did feel over those few months. And how much poorer we’d be if it hadn’t happened, that growth.

Oh, and to avoid that loss AOC is suggesting that we spend $7 trillion now? That just doesn’t pass the cost benefit test. It doesn’t even pass at the Stern Review’s special discount rate.

Which is, of course, what all the economists have been trying to tell us all about dealing with climate change. Don’t do it by central planning, do it by using market incentives. Have a carbon tax. Don’t try and do it too quickly – William Nordhaus gained his Nobel in part for saying this – but do it more gradually over time. Don’t junk what we’ve got that already works, instead when the normal time comes to replace it then make sure it’s non-carbon emitting. Finally, don’t do it the expensive way, do it the cheap way. For the cheaper we make it to solve it then the more of the problem we’ll solve. You know, humans usually doing less of the expensive things and more of the cheap?

Sure and can’t Alexandria get a head of steam behind an idea? But wouldn’t it be better if she did so behind ideas that actually made sense? Even those which agreed with the scientific consensus on climate change? You know, $80 carbon tax and leave it to the market to do the rest?

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