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GND economics better than advocates’ analysis suggests?

January 31st, 2020 · No Comments

Fossil-fools attack Green New Deal (GND) proposals by focusing on (exaggerated and unrealistic) cost analysis without any serious assessment of the benefit streams. As with any investment, looking at the price paid without any examination of return secured is an absurdity and such analysis shouldn’t be taken seriously, should be rejected out of hand.

Regretfully, though not as seriously, proponents of (clean-energy, climate-addressing) action often are cautious and circumspect in responding to fossil-foolish propaganda. And, such caution can lead to understating benefit streams and weaken the case (public support) for action.

Assessing Republican GND Cost Assertions: an example

Douglas Holz-Eakin’s (DHE) exaggerated description of GND costs, quoted and leveraged by such intellectual luminaries as Donald J Trump, represented such an absurdity. As economist Jim Barrett put it in an introduction to a discussion providing a context for assessing Holz-Eakin’s work (not appropriately described as analysis)

Economists and other cynics are said to know the cost of everything and the value of nothing. It’s one of those clichés that persist because it is so often true. And if we are ever going to improve people’s perceptions of economists, we’re going to have to do better than this. I’m not trying to argue that the Green New Deal is a good idea or a bad one. Instead, I’m trying to point out that these cost estimates are so unrealistic that they can’t possibly help anyone decide

Barrett provides a discussion that makes clear, on areas like health care and full employment, DHE focus on costs without consideration of benefit streams seriously misrepresents the situation.

When it comes to universal health care (such Medicare For All (MFA)), DHE promotes a $36 trillion cost over ten year. Okay, that is a big (not, a BIG) number. However, without MFA — even in DHE’s assessment — the actual economic costs for US medical care would be much more and, as Barrett emphasizes:

This means that the net cost of switching to universal healthcare, according to CMS and Holtz-Eakin himself would be a net savings of over $16 Trillion over 10 years.

Thus, the GND’s universal health care provision might create a ‘cost’ column of $36T but lead to directly avoided/reduced cost column of $52T with a total benefit of $16T. $16T in savings certainly sounds better than $36T in costs.

When it comes to full employment provisions, the situation is similar where DHE twists himself into illogical assertions to create an absurdly unreasonable $44T cost assertion when more reasonable (sensible) analysis suggests a cost of roughly ten percent of that figure.

Combine these two arenas and we see a ‘net’ cost (from cost-benefit analysis) of perhaps $2T in savings rather than DHE’s roughly $90T in asserted costs. As Barrett concludes his post

DHE’s assumptions are obviously intended to scare rather than enlighten. For them to be remotely accurate, one must be willing to ignore reality on the one hand and to believe in an impossible reality on the other.

Rolling back all these silly assumptions reduces the low-cost estimate to a net savings of about $2 trillion and the high-cost estimate to a cost of $2 trillion, less than the cost of the recent Trump tax cuts. All while delivering jobs and health care to every person who wants it, achieving a low-carbon electricity system, a net-zero carbon transportation system, and guaranteeing housing and food security to all Americans. If Trump really wanted to live up to his campaign promises of fixing health care and creating jobs for working class families, the GND might actually be a great place to start.

Sounds pretty good, no?

However, Barrett falls short

While DHE takes a deceitful approach (lay out exaggerated costs without calculating benefits), Barrett takes an overly stove-piped methodology by comparing like with like rather seeking to assess the total cost/benefit structure by seeking to account for secondary/tertiary impacts.

For example, when it comes to Health Insurance, simply focusing on the costs/avoided costs within the insurance and medical system does not account for co-benefits and multi-solving implications like:

  • Unpaid for costs/inefficiencies  
    • Even when provided with insurance, how many hours/year does the average person spend wading through paperwork/otherwise?
    • On receiving end, the costs for inefficiencies due to complex nature of dealing with dozens of different insurance policies/rule sets.
  • Health improvement (mental and otherwise) due to reduced stress and concern over medical costs (bankruptcies and otherwise).
  • A potential economic boom from creativity (business creation and otherwise) by reducing the weight of health insurance ball & chain.
  • Improved productivity/economic benefits through a healthier public (students, workers, …)

As to a job guarantee, consider these benefit streams:

  • How many fewer people in prison? Lowered crime rate?
  • Reduced homelessness/evictions
  • Reduced mental/physical health impacts (not just to employed person, but family)
  • Boosted economic activity (especially within poorer communities)

While Barrett understands these sorts of benefits and impact streams, his discussion within the battleground that DHE constructed and allowed DHE’s framing to constrain his own assessment. Extending into and considering additional domains would have shifted Barrett’s conclusion from a ‘minor benefit/minor cost’ end result summary to a ‘moderate to significant benefit’ end result.  And, having analysis that lays out ‘moderate to significant benefit’ would not just be more accurate, it would also be more useful in public and policy debates as we seek to move to a more sensible path forward.

Stove-piped cost-benefit assessment a long-standing problem

This has been a problem, essentially forever, when it comes to ‘environmentalists’ making the case. Almost always, assessments understate (for whichever set of reasons) the benefit streams and thus weaken the strength in public arguments. (See, for example, how proponents undervalued the Waxman-Markey American Clean Energy (ACE) bill and ho more robust analysis would have made benefit streams far clearer.)

  • Many “why explanations” have passed by:
  • We don’t want to seem too extreme.
  • We don’t want to open ourselves up to attack.
  • Those benefits are too soft and too hard to calculate, we didn’t have the resources to include them.
  • The limited analysis is enough to make the case.
  • And …

As an analyst, these explanations (excuses) have left me wanting every time.

And, bad analysis kills and weakens us all too often. 

And, it continues apace …

In Virginia, the major energy bill (the Virginia Clean Economy Act, championed by many on this list) is far too weak and unambitious. (See, for example, as to why 2035-40 makes more sense than 2050 for 100% clean electrons and more broadly its shortcomings from a long-time Virginia climate/energy activist/analyst.) Part of the reason for this: fundamentally (fatally might be a better term) flawed analysis that has been used to justify less ambitious targets (‘to protect ratepayers‘).

Almost everywhere across the clean-energy spectrum, remaining ‘stove-piped’ weakens the argument for action. This has been true essentially forever and remains so today. A number of things have been changing:

  • Plummeting clean energy costs (solar, wind, batteries, efficiency) have reduced (even eliminated) the requirement to consider ‘co-benefits’ to show that going clean is the better financial option.
  • Continuing and evolving analysis is providing ‘hard numbers’ as to co-benefit/multi-solving value streams which eases including them into cost/benefit analyses.

In any event, analysts assessing climate action economic implications are deceitful (and not doing analysis) if they address solely costs, are falling short if their cost-benefit analysis remains stove-piped within defined domains, and should strive to provide robust, system-of-system assessment of full cost-benefit streams.

Tags: analysis · economics

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