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A Green Expansion?


This New York Times article by Paul Krugman asks the question “can we build a green economy?”, the answer is a resounding yes. As a society, we often look at environmentally friendly investment as economically inefficient. A gas tax or carbon tax has been labeled by casual onlookers as a dead weight loss to the economy. Many economist including Tyler Cowen of George Mason University and Jim Casey of Washington and Lee University, believe that the added social benefit of a carbon tax will minimize the deadweight loss of the tax. In this article, Krugman states that a shift towards renewable resources may hurt a few industries in the short run, but overall green research and development will create more jobs in the future.

The coal industry is an industry that could be wiped off the map with a shift in government subsidies. Facts show that the coal industry is already vastly inefficient and produces many health costs. The coal industry “receives more in state tax dollars than they pay into the system.” In terms of jobs, technology has replaced the jobs of numerous coal miners, thus the amount of coal jobs is severely on the decline. I can already hear the argument about West Virginia and eastern Kentucky’s fragility and their need for the coal industry. I was born and raised in eastern Kentucky and I can personally attest that coal is killing that area of the country. Less than 1% of the region is employed by a coal company, and everyone pays the cost of their existence. The state subsidies are extreme, the air quality is poison, and the natural habitat/eco systems of many species have been murdered by the controversial “mountain top removal” process. One can see the impact that the coal industry has on Huntington, West Virginia, Beckley, West Virginia or Harlan, Kentucky with a simple drive through these downtrodden towns. The overlaying smog and economic disparity is evident even as you drive through the area. Krugman recognizes that these cost exist, and he hypothesizes that these externalities are only going to grow over time. The bottom line is, the long run cost of doing nothing may be greater than the cost of investing our resources in green initiatives today.


  1. Environmental policy can attempt to shift the “price” that decision-makers face towards the alleviation of negative externalities (and where public use is involved, the enhancement of positive ones). If successful (large enough), that will shift the structure of the economy, but as long as such policies aren’t disruptive (sudden) then there is no particular reason to think that it will lead to unemployment or otherwise have negative macro effects. Of course that depends on how output is valued. If cleaner electricity is more expensive electricity, then measured GDP will (ceteris paribus) be lower. After all, if environmental benefits were priced appropriately by markets, policy wouldn’t be needed, but since it carries a low or zero price, we only see the higher at-the-meter electricity price, not the lower net-of-pollution price.
    Regulation can enhance demand, and add to employment; that’s the priority for most of the world in 2013, and for the next couple years to come. But because GDP is measured at market prices, the impact at “full employment” is negative. So there’s a tension depending on the metric used.
    In any case, see the environmental portion of the World Bank China 2030 study. It argues that in the Chinese context “green” growth generates jobs. But it also argues that in the Chinese context the potential for wind and solar energy is large, and hence it will perhaps prove cost effective, too, because China will have to add to capacity one way or another. (The increments in the US and Europe will be small to nil.)

  2. Maggie Maggie

    The issue is getting people on board with new policies. No politician wants to be the one who proposes an emissions tax. People weigh the short run much more heavily when considering decisions. Even if a tax is in the best interest, people are more concerned about the extra cost now, than the benefits they will receive in the future. But more importantly, Professor Casey has explained how just having one country cut back on pollution will not be enough. Countries need to work together and cut back on pollution across the world. It will be difficult to get all these nations to work together and agree on a plan of action. Would the time spent doing this even be worth it economically, or would the lost time be too costly?

    • perkins perkins

      Generally speaking the Right’s argument is that no matter what regulations we place on America at this point, the highly industrializing and highly populated countries of China and India will produce enough pollution to offset any progress Americans make. Furthermore, the lack of effective public transportation in America makes it seem gas-guzzling automobiles will always be necessary, and a societal shift towards clean cars seems impossible.

      This can’t be the argument that people make. Sure, the hole in the ozone layer may still grow at the same rate due to “other countries” continuing to pollute, but what will it take for Americans to be open to clean(er) energy and the benefits that come with it? Yes, there will be costs, but will it take the terrible pollution and health concerns that Chinese cities are experiencing to get Americans to open their eyes to other energy methods? I hope not.

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