Mises Wire

Hooray! The Green New Deal Will Make Us Happier—By Shrinking the Economy

Sometimes you have to congratulate the progressive left on their ability to turn that frown upside down. When the laws of economics hand them socialist lemons, they turn right around and make leisure lemonade. Specifically, Kate Aronoff at the Intercept has written an article that says the Green New Deal will make us all happier—in part because who needs all that work and economic output anyway?

To show I’m not putting words in her mouth, here are some excerpts from the Aronoff piece:

But could a plan to curb emissions also make us happier? Could the things we cut back also be the things that make us miserable?

…A growing body of research, though, points to some more unexpected reasons why a Green New Deal could make us more cheerful.

…Fremsted and Paul find that people who work less also emit less carbon dioxide.

The punchline here isn’t novel; economist Juliet Schor has been drawing connections between work hours and climate change for well over a decade, stemming from her work in the 1993 best-seller “The Overworked American,” delineating how Americans have come to work more and what effect that has on how people spend their dwindling leisure time. Namely, by doing more shopping, a habit spurred on by copious corporate advertising. “Many potentially satisfying leisure skills are off limits because they take too much time: participating in community theater, seriously taking up a sport or a musical instrument, getting involved with a church or community organization,” she wrote then. “We have gotten ourselves entrenched in a cycle of work and spend — a cycle of long hours and consumer mentality as a way of life.”

The piece goes on to point out that “the average German worker toils 23 percent fewer hours than their American counterpart” and other factoids that ostensibly show how much better the European model is.

But hold on a second. When right-wingers complain about the overblown European welfare state, and how it cripples economic growth and incentives to hire, progressives typically dismiss this talk as so much fear-mongering. They can’t then in the next breath point out with glee how much more vacation time Europeans enjoy. Yes, even though they are on the metric system over there, there’s still the same number of hours per week: If the critics of the European model are right, and the overbearing regulations and taxes stifle labor markets and penalize work, then it only vindicates them to point out that Europeans tend to work fewer hours than Americans.

We saw a similar rhetorical pivot a few years ago with the debates over the Affordable Care Act (aka ObamaCare). In the midst of the Great Recession, with Keynesian economists decrying the tightwad fiscal hawks who refused to run up even bigger budget deficits to stimulate the economy and create jobs, along came University of Chicago economist Casey Mulligan. He pointed out that because the ObamaCare subsidies for insurance premiums were means-tested, for certain households the ACA implicitly imposed a much higher marginal tax rate. (In other words, low-income households had less of an incentive to earn more income, because not only would they pay explicit income taxes but they would lose their ObamaCare subsidies.)

The estimated effect was quite large. Indeed, the CBO incorporated Mulligan’s analysis and, in one of its periodic updates on the effects of the Affordable Care Act, explained: “The reduction in CBO’s projections of hours worked represents a decline in the number of full-time-equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024.”

Now since defenders of the ACA had, up until that moment, been touting it as a measure to (among other things) help stimulate the economy, one might think the above news was bad. But nope: Progressive wonks spun it as a great thing, that now people had the freedom to leave their dead-end jobs and take care of a sick relative or write the great American novel.

Casey Mulligan replied at the time in a WSJ story quoting him on the flip-flop, noting the huge about-face on whether government policy should be encouraging or discouraging the incentive to boost employment. You can see the pro-ACA economists like Jonathan Gruber and Paul Krugman in full-defense mode here, acting like they’d been telling Americans all along that ObamaCare would cause significant reductions in employment, especially among low-income households.

Coming back to the so-called Green New Deal, there is now little doubt that it would impose massive disincentives on work effort and economic output. I can at least applaud those interventionists who admit openly that it will be painful, but still claim that the bitter medicine is necessary to save humanity. Obviously I disagree with their prognosis, but at least they’re being consistent.

In contrast, people who are trying to spin the GND as something that is beneficial on its own terms, even putting aside the ostensible existential threat to humanity, are deceiving the public. If Americans are caught up in a rat race where they work too much in order to afford to buy fancy toys and take exotic vacations, then they should be convinced through persuasion to break out of this “keeping up with the Joneses.” You don’t make people better off by artificially making energy more expensive.

For example, suppose your friend Bill is about to waste (in your mind) $35,000 on a new car, when the more modest $15,000 car is much more responsible, since he has a lot of credit card debt and young kids to support. Fine, then maybe—if you’re close enough friends—you should delicately urge Bill to buy the cheaper vehicle and use that $20,000 to pay off his credit cards. But what wouldn’t make any sense at all would be to tax away $20,000 from Bill, so that he no longer even had the option of buying the expensive car. Sure, that would make him “do the right thing” narrowly conceived, but it wouldn’t actually help him because of the means by which you made him change his plan.

The Green New Deal works in a similar fashion. By making electricity and gasoline artificially more expensive, and (through its “job guarantee”) by wrecking the incentive to work, any version of the GND would make private-sector labor effort far less productive per hour. This would have the effect of reducing US GDP for sure, but it wouldn’t be nearly as beneficial in terms of “less consumerism” as would be the case, if Americans merely changed their shopping habits without having the government artificially wreck the economy.

Originally published at the Institute for Energy Research
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