The Broken Window on Chesapeake Bay

The Bay News today is full of stories clearly emanating from a press release by Chesapeake Bay Foundation attempting to refute the idea that the upcoming "Bay Diet" program, which will cost quite literally billions of dollars (an estimated billion alone in my county, Calvert), will also cost thousands of jobs.  The Foundation, in turn alleges that rather, the Bay cleanup with produce literally hundreds of thousands of good, full time jobs:

The report, called “Debunking the ‘Job Killer’ Myth,” relies on a variety of industry experts such as engineers, reports and other sources to assess the impact of water pollution projects within the six states and the District of Columbia that comprise the bay’s 64,000-square-mile watershed. It also reviews job-killing threats dating back to 1976 and Henry Ford II claimed that clean air and fuel efficiency standards would “shut down” Ford Motor Co. to illustrate historic claims that environmental efforts are bad for the economy.

The report found instead that sewage and storm water projects could provide work for 240,000 full-time jobs across the bay region — engineering jobs, construction and other employment for new pollution-control projects.

The job projections include the so-called multiplier effect, or jobs created as a result of economic activity because of those upgrades.

“Those jobs are going to be concentrated in the large metropolitan areas because that’s where the greatest concentration of sewage and storm water occurs,” Baker said.

Two key bay states, Virginia and Maryland, plan to invest a total of $3 billion to upgrade sewage treatment plants over more than a decade. That activity alone would create an estimated 60,000 jobs, the report said.

It cites as an example a $305 million storm water pollution control project in Maryland’s Montgomery County that will create 3,300 construction and engineering jobs.

What the report fails to consider, of course, is where the money to create those jobs for the cleanup will come from.  In some cases, it comes from tax funds, so either those needs will squeeze out other worthwhile (or not) governmental programs, or more taxes will have to be increased to cover the new costs.  In other cases, the costs are put directly on the private sector, in the form of new regulatory burdens (in effect, making people do something costly they would not do without the law), decreasing their ability to do some other economic activity.  This shows that much of the "increased jobs" cited by the Bay Foundation are created by the "Broken Window Fallacy."

Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—"It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"

Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.

Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.

But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen."

It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.

Thus, the funds for many of the 240,000 or so jobs the Bay Foundation claims will be created come by taking the same, or even more funds out of the economy, and while you may not be able to identify the individual jobs lost as a result, they are very real.  This is not to necessarily say that none of the goals of the Bay cleanup plan are good or worthy; but lying to us about the real costs is not the way to make your point.