The Environmental Protection Agency concedes that its recently finalized Mercury and Air Toxics Standards rule, also known as the Utility MACT, would cost $10 billion annually. Industry estimates are much, much higher. Even EPA’s (likely lowball) figure makes the MATS rule one of the most expensive direct regulations ever.
Despite these evident costs, EPA claims that the regulation will not only save the environment, but also benefit the economy. EPA Deputy Administrator Robert Perciasepe testified, for example, “Our analysis shows, particularly on these utility rules, that it will create jobs.” Head Administrator Lisa Jackson has repeated the same claim. “Every model that we run,” she said last year, “shows… that it would actually create jobs.”
But these claims are entirely disingenuous. EPA analysis does not show that the Utility MACT will result in net job creation, only that it will create jobs in the coal industry and those industries that produce pollution abatement equipment. The wider economic implications are ignored. As EPA’s Regulatory Impacts Assessment (RIA) states, “the Agency has not quantified the rule’s effects on all labor in other sectors not regulated by the [mercury standard].” In other words, “every model” Jackson ran cooked the books in favor of EPA’s conclusion.
In economics, such analysis is known as a “broken-window fallacy,” which views only a narrow range of effects of a particular action. “There is only one difference between a bad economist and a good one,” wrote 19th century economist Frederic Bastiat. “The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.” EPA focuses on the “seen”—the workers required to install pollution controls—while it ignores the unseen—the workers who lose their jobs or are forced to take pay cuts due to higher electricity prices.
