The Economist is probably the smartest newsweekly going, so it’s pretty stunning how bad this editorial is. It shows an almost willful disengagement with Obama’s proposals.
The editorial argues that the newly popular idea of a Green New Deal is misguided. Yes, we need to address climate change. Yes, we need public spending to stimulate the economy. But we shouldn’t direct public spending toward addressing climate change.
WTF, you ask? Well, according to Economist editors, there are only two ways to reduce greenhouse gas emissions, price signals or subsidies, and of those two, only the first work, because ethanol subsidies were bad policy and German renewable subsidies made silicon more expensive for other countries. Picking winners something something! Ergo, no Green New Deal.
That’s really the whole argument.
Let us count the ways that’s dumb.
First, a big chunk of the proposed Green New Deal spending is on green infrastructure: public transit and electrical grid. Does that count as "picking winners"? It will benefit everyone who travels or uses electricity and lay the foundation for future carbon-constrained economic growth. And infrastructure is widely viewed as one of the most effective forms of stimulus spending.
Second, another part of the Green New Deal is regulatory standards and targets — efficiency standards, fuel economy standards, a carbon cap, the kinds of market-shaping parameters that drive innovation. Contra Economist, these are not alternatives to a New Deal but an intrinsic part of it.
Third, how about spending on R&D? Does that count as picking winners?
Fourth, during WWII you can be damn sure they picked winners — they didn’t have time to let the market settle on the the maximally efficient maker of tanks and bombs. They just dumped money into making the stuff. And the massive ramp-up of industrial capacity produced economic benefits that vastly outweighed whatever inefficiencies came from "bureaucrats" "picking winners" among, say, steel smelters.
Is this kind of free market jerk of the knee all we can expect The Economist to contribute to the important ongoing dialogue over green stimulus? Disappointing.
(As I speak: The Economist‘s own Free Exchange blog pushes back against the op-ed. Nice job, nameless Economist blog writer.)