Lipow on Stiglitz on Green New Deal
By David Henderson
My former colleague at the Naval Postgraduate School Jonathan Lipow posted something on Facebook that I think deserves wider readership. We don’t see eye to eye on everything and we don’t even see eye to eye on what’s in his Facebook post. But he says it well and makes some valid points.
While Stiglitz is truly a great economist, his forays into the public square have been consistently embarrassing, and this is no exception. Three core problems:
- The actual proposal for the green new deal is ridiculous. It is simply not possible, even if we throw an infinite amount of money at it, to reduce CO2 emissions to zero in 12 years. Or even 50, though a serious policy could probably get us to 1/3 of current emissions (my guess) in that time frame.
- The actual evidence does not support such extreme cuts making sense. I had a long talk about this with my niece – who is doing a PhD in climate science at Columbia (where Stiglitz teaches), and she confirmed something I have touched on in previous posts on recent IPCC and U.S. reports on climate change, which engendered terrifying headlines. The actual science is not nearly as dire as what the reporting suggests. The press simply chooses not to bother to actually read the reports. Instead, the press reads the summaries, which are not consistent with the reports. And then it exaggerates what is in the summaries.
- Stiglitz’s claim that the “green new deal” will generate jobs earns him an “F” in any introductory econ class, including his own. The concept of “general equilibrium” – a concept that Stiglitz uses all the time in his own research – makes it clear that you don’t increase or decrease employment by choosing to purchase any particular set of goods and services, be it Stingray torpedoes, glider surfboards, or solar panels. The real question is whether we WANT solar panels. The answer to that is yes – we do want solar panels, but it has nothing to do with jobs.
The actual consensus amongst policy people is: a modest carbon tax that will gradually be raised over time, along with investments on research into electricity storage, solar power, geothermal power, and nuclear power in order to bring the prices of these sources of power below the point that drives the “resource rent” (the value of the resource in the ground) to zero for coal and oil – something that looks increasingly possible in a 30-50 year time frame. Also, consider becoming a vegan or substituting chicken and turkey for beef and mutton. That is actually the cheapest way to reduce GHG emissions at both the national and the personal level.
Full disclosure: I had a run-in with Stiglitz a decade ago. Michael Greenstone of MIT had put out a ridiculous but very influential paper claiming that the “surge” in Iraq that was taking place back then was a failure, and I wrote a paper for “The Economist’s Voice” that tore apart his analysis. Stiglitz was editor of the “Voice” (and a vocal critic of war in Iraq) and sat on my submission for two years. Of course, in the meantime, the surge proved successful (though not for the reasons that DOD thinks, which is why the attempt to repeat the surge in Afghanistan failed). And I got a letter from Stiglitz telling me that he was rejecting my “well reasoned paper” (his words) because it was no longer relevant. I wrote back to him something not entirely complimentary about the requirements of ethical conduct in our profession.
- The part I like best is Jonathan’s point #2. The press in general has done a very bad job of this.
- Re the green new deal generating jobs, I agree with Jonathan’s general equilibrium point. To that I would add, though, another point that I talk about when I teach my Ten Pillars of Economic Wisdom: Creating jobs is not the same thing as creating wealth. Indeed, when someone brags that his policy proposal creates lots of jobs, he is bragging that his proposal is really expensive.
- The solar panel point is not as clear as Jonathan suggests, but that has nothing to do with Stiglitz’s bad reasoning. The fact is that we don’t know whether solar panels are the way to go—only market prices will tell us that. (Jonathan would, I’m sure, add that the market prices have to embody the negative externality caused by carbon usage.) What we can know is that directly subsidizing solar panels or even indirectly subsidizing them by forcing utilities to pay homeowners retail prices for the electricity that solar panels generate is a bad idea.
- I was against the surge in Iraq because I was against the Iraq war. Of course, that’s different from saying that the surge didn’t work.