Friday, August 19, 2011

Friday Posts: Spanish Jobs Program Bombs, so Does American*

Doug and I were at one of the first conferences in which an academic report (Calzada et al.) on the bursting of the Spanish "Green Jobs Bubble" was presented, and we've been using the results in our Economics of Sustainability class. I don't know what effect that evidence has had on American students with an initial inclination to follow the Spanish model. (Full disclosure: I recently bought a set of solar garden lights, and so far I am very happy with them).

But, the transferability to the U.S. of the problems with promoting "green" technology as fundamentally a "jobs" program is now evident, as these three media articles from this week demonstrate: my previous post from Seattle on their cash for caulkers program, this from the Boston Herald on the bankruptcy of a "star" Massachusetts solar firm, and even this from the New York Times . Venture capital firms constantly make guesses about which firms are making new products or offering new services that are going to have profitable markets. Many, many times those start-up firms fail to pan-out. That's the nature of the business, but the risks are absorbed for the small chance of investing in the next Apple or Facebook. Survival for a VC firm will include having staff with a good nose for good investments and, as Alchian so famously pointed out in the 1950's, good or bad luck. We need to fundamentally rethink the models, popular with both "liberal" and "conservative" politicians, of the government acting like a venture capital firm: what works, what are the costs and distortions, and what is the ultimate goal? ("Number of jobs" is not necessarily a good indicator of long term success,as the Spanish bubble demonstrated).

*Hat tip to Hotair on the New York Times article. And, yes, the title is a musical reference.

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