There isn’t a reputable economist that I know, nor a student in my benefit-cost class at SFU (that wants to pass) that does not understand the difference between economic impacts and real economic benefits. Nevertheless, industry lobbyists and all-too-many government officials never cease to point to economic impacts — the number of jobs a project may generate or amount of investment that might be made — to justify whatever it is they want to do.
Last week it was the economic impacts of the recently approved Prosperity mine that were put forward to justify a project that will destroy a natural lake, significantly add to B.C.’s greenhouse gas emissions and impose a multi-million dollar cost on BC Hydro each year the mine operates.
Today, it was the economic impacts of independent power projects (IPPs) that were touted in an op-ed in the Vancouver Sun. By 2020, there could be $26 billion in investment and 90,000 person years of construction employment in the IPP industry. The numbers, one presumes, are meant to speak for themselves.
The problem, however, is that these impacts are not benefits. More than anything else, the jobs created by the Prosperity mine will attract mine workers from other provinces and countries. There will be some benefit for British Columbians, but it will be limited and offset by the costs imposed by the in-migration and especially the mine itself.
As for the IPPs, the impacts they generate aren’t benefits at all. Rather they are a reflection of how much money BC Hydro is being forced, by an ill-considered energy policy, to pay for projects it largely does not need.
The great British economist Lord Maynard Keynes did say that you can generate economic impacts by digging holes in the ground and filling them in. And the more holes you dig the greater the amount of impact you will have. And in times like the Great Depression, and if there is nothing better to be done, there could be some merit in that. But we aren’t in a great depression, or at least don’t expect to be over the next ten years, and in any event there are many better things that can be done than forcing BC Hydro to buy high cost, low value independent power projects we do not need.
If we want real economic benefit we need to stop thinking about impacts; rather we need to consider the value of whatever is produced in relation to the full economic and environmental cost of producing it.
In a carbon-constrained world we need to shift away from greenhouse gas and energy intensive industry like mining. We certainly shouldn’t be subsidizing new mines because of the jobs they may create. And if we are moving to greater dependence on electricity as we shift away from fossil fuels, we need to think about the most efficient ways of producing it — not the most expensive because of the larger investment and number of jobs it will entail.
It applies in economics as much as the rest of life: Less really is more!