Of course opportunity costs are not restricted to economic value alone, and it’s entirely possible that higher non-economic value from production of green energy technology would be higher than that of whatever product is affected by the reallocation of resources away from its production to green technology, thereby reducing or eliminating the (alleged) difference in the economic opportunity costs of the current allocation of resources.

But for the sake of argument, let’s stick to economic value alone. The point of my first post is that even if the current allocation of resources is more efficient in today’s market, the expansion of American production of green technology (to meet increased foreign and domestic demand) is likely to alter the difference in the opportunity costs of green technology and whatever product is affected by the reallocation of resources to green technology. I’m saying this would occur because the absolute cost of producing green technology would fall as production increased as a result of economies of scale and the innovation advantage of US producers.

Now, it’s been many years since my last economics course, but humor me and tell me what’s wrong with this argument. AAnd just saying it’s sophistry doesn’t cut it.

If you have ever studied geometry, you remember that by a course of reasoning, Euclid proves that all the angles in a triangle are equal to two right angles. Euclid has shown you how to work it out. Now, if you undertake to disprove that proposition, and to show that it is erroneous, would you prove it to be false by calling Euclid a liar? Political Debates Between Lincoln and Judge Douglas. Fourth Joint Debate at Charleston, 1858.

Moreover, Steven’s argument ignores the fact that foreign demand for clean energy technology is also growing and that Ameerican producers may win a portion of this market as well, further contributing to job growth and the overall expansion of American wealth.

And whose to say where the long-term competitive advantage lies in this market? This technology is not static, but advancing very rapidly. Isn’t in at least plausible that the U.S. has a comparative advantage in technological innovation that could offset the foreign producers’ labor cost and economies of scale advantages. In fact, if U.S. producers successfully exploit an innovation advantage and expand their foreign and domestic markets, the economies of scale advantages of the foreign producer will shrink and perhaps even reverse.

Finally, Gibbs’ statement is probably as much (or more) a political statement as an economic statement. It not only encourages U.S. producers to compete more aggressively in this market but it also implicitly supports the administration’s spending and tax proposals before Congress encouraging the development and expanded use of clean energy technology.

Ah, you may say, that’s where the objection lies. Government intervention in the economy distorts the market signals that ensure economic efficiency. Too late. The energy markets are already hugely distorted by multiple forms of government support for oil, natural gas, coal and nuclear, from direct financial aid programs to tax breaks to the enormous sums we spend on the military to protect our access to Middle Eastern oil. (Not to mention the hidden subsidy inherent in the government’s failure to limit fossil fuel emissions, thereby allowing producers to externalize these costs to the rest of us.) This all amounts to many multiples of the modest support provided to clean energy.

So before you target government support for clean energy, go after the much bigger target of support for traditional energy technologies.