Over at Econbrowser, James Hamilton argues that environmental regulation may be a job-killer after all. There are two themes: the first is that US trade is weighted toward natural resources, and regulation is raising costs and reducing capacity in these tradables, and the second is that, in recessionary times, jobs lost due to regulations are not regained elsewhere. I think he overstates his points, but he clarifies important issues that tend to get muddied in economic debates.Lets take the second first. I had argued that regulations tend to lower the measured productivity of workers in regulated industries, leading to some combination of more employment to restore output and expenditure-switching, as consumers shift to different products. Hamilton’s examples—California agriculture, Texas oil and lignite, Alabama cement kilns—do not dissuade me. We will continue to eat, power and pave, and if we do a bit less of some of this (especially the powering and paving), we can shift to more benign activities.
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