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‘Intellectual Bankruptcy’, Dr. Krugman?

By: Steve Maley (Diary)  |  March 18th, 2012 at 08:40 PM  | 

RESIZE: AAA

Paul Krugman’s op-ed, “Natural Born Drillers” (New York Times, March 15), purports to show with a hard look at the numbers why no thinking, perceptive person could possibly believe that “Drill, Baby, Drill” is a solution to the nation’s energy and economic woes:

[G]iving the oil companies carte blanche isn’t a serious jobs program. Put it this way: Employment in oil and gas extraction has risen more than 50 percent since the middle of the last decade, but that amounts to only 70,000 jobs, around one-twentieth of 1 percent of total U.S. employment. So the idea that drill, baby, drill can cure our jobs deficit is basically a joke.

Hmmm. Shall I take the strawman, or the phony statistics first?

{Coin flip}: It’s heads. Strawman!

In this op-ed, Dr. Krugman beats the “carte blanche” strawman bloody. I defy him to name a single industry leader who has called for unrestricted drilling. (Enron doesn’t count, Paul.) Oil and gas people live and play in the same environment where they work. We want clean water and pristine beaches, too. We also know that responsible development is compatible with environmental protection.

Historically, groundwater protection and other well-construction matters have been left to the States. That makes sense because geologic and climatic conditions vary widely from Pennsylvania to Louisiana to California to Alaska. Self-appointed experts outside the industry push for more Federal regulation. I know that the EPA can smother industry with regulation, but I don’t trust them to protect my groundwater.

As for the employment statistics, “lazy” and “inept” are two words that come to mind. Although he doesn’t cite a source, Dr. Krugman has apparently relied on the database of the Bureau of Labor Statistics. Indeed, the industry subsector called “Oil and Gas Extraction: NAICS 211″, (part of the Mining, Quarrying, and Oil and Gas Extraction sector) shows the gain in jobs he describes, from roughly 120,000 jobs in 2004 to about 190,000 now. And he apparently stopped there.

190,000 jobs? Doesn’t that seem kinda low for an industry that comprises 8% or so of the economy?

Well, of course it is, because lots of oil industry jobs are counted in other categories. Most notably, the related subsector “Support Activities for Mining: NAICS 213″.

In NAICS 211, you find geologists, draftsmen and petroleum engineers like me, employed directly by the oil companies. NAICS 213 contains people that work for the “service companies” who work for the oil companies. These companies would include Halliburton, Transocean and Schlumberger, the companies that drill, frack, service and equip the wells. Job titles include roughnecks, roustabouts and service pump operators.

NAICS 213 is twice as big as NAICS 211: 379,100 at last count. NAICS 213 is where you find the really explosive job growth: nearly 200,000 jobs since 2004, including almost 70,000 just in the last year.

Neither category includes the jobs in pipelines, refineries, petrochemicals or steel mills that are directly supported by oilfield activity. Or the trucking and construction jobs that aren’t in the oil industry per se, but nonetheless depend on oilfield activity. [The American Petroleum Institute estimates that there are 2.2 million jobs in the upstream sector alone; more statistics (& backup!) at the end of the diary.]

I guess Dr. Krugman either didn’t know, or didn’t think it was important.

He concludes his piece with this remark:

…[I]ntellectual bankruptcy, I’m sorry to say, is a problem that no amount of drilling and fracking can solve.

On that we can agree, Dr. Krugman. On that we can agree.

Cross-posted at stevemaley.com.

From American Petroleum Institute’s State of American Energy (pdf link), January 2012.

The oil and natural gas industry currently supports 5.3 percent of total U.S. employment. To put this in perspective, the number of jobs supported by the upstream oil and natural gas industry segment alone in 2010—2.2 million—is larger than the populations of 15 states.

In addition:

  • One out of every five new jobs created between 2003 and 2011 was in the oil and natural gas industry;
  • A Gallup poll found that energy-producing states ranked among the highest in terms of job creation in the first half of 2011, as they did in 2010; and
  • By 2030, the upstream oil and natural gas industry segment could support an additional 500,000 jobs under current U.S. energy policies.

Now consider the projections of a recent Wood Mackenzie study, which found that the industry could add nearly 1.4 million jobs by 2030—or almost three times the number of new jobs currently projected—if the United States adopts policies that encourage development of domestic oil and natural gas resources and facilitate Canadian oil sands production, including construction of the necessary pipeline infrastructure and other related projects.

[Emphasis added. Disclosure statement here. H/T Jxn's Mom.]

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  • http://www.plumbbobblog.com Plumb_Bob

    I tire of the routinely dishonest garbage from leftist shills like that imbecile, Krugman.

    Even if the proposed energy “solutions” from the left, like wind and solar, were viable energy sources for the 20% of US energy they’re proposed to meet — and truly, they’re not even close — there is no reason on God’s green earth why we should not drill as much oil as possible. Why send our dollars to Canada, Mexico, and Saudi Arabia when we can pay them to US workers? Even if it were only 70,000 workers, that’s 70,000 Americans with better jobs than they would have otherwise. What’s the reason they hate these companies so much that they’ll spite American workers to deny them any profit? It’s completely irrational.

    Sane energy policy would allow the market to produce whatever energy sources it can. The left genuinely believes that nobody but them REALLY understands how dangerously short we are of fossil fuels. They are insane; America’s industries have no great love for oil companies, and are not sitting by idly letting things run out. They’ve been working on alternative sources of fuel for decades. They don’t need a bunch of subsidies to do it; they’ve got their own incentives. All they need is for the government to keep its hands off them so they can do what they do.

    What the left really needs to figure out is that they’re not really so very smart. In fact, they’re insanely stupid. Those whose livelihoods depend on reliable sources of energy will make far better choices than the self-anointed Saviors of the Planet.

    • 6eorge Jetson

      The Statists know this and will try to deny any initiatives that threaten their power.

    • renl57

      I’ve heard this exact same argument from the Left about high-tech too:

      “We can’t put a dent in unemployment with high-tech! We’ve got millions unemployed, but Apple Computer only employs less than 50,000 people in America!”

      And it’s wrong for the same reason: They forgot the ripple effect.

      It’s not just the people who work for Apple. It’s the entire personal computer INDUSTRY that was created. You now have millions of people working as IT specialists, website designers, app designers, vendors of add-on cards and accessories, etc.

      So if the Left doesn’t think that the fossil fuel sector provides plenty of jobs, and they don’t think that high-tech provides plenty of jobs, then what jobs DO they advocate?

      Answer: Green jobs and government jobs.

      • Repair_Man_Jack

        When your time horizon extends no further than Nov. 2012.

        • uselogic

          n/t

    • briteness

      It is true that the people of the left are not as much smarter than those on the right as you would think they would be based on their rhetoric. But neither are they are they all “imbeciles” or “insanely stupid”. Nor is it by any means certain that there is absolutely “no reason on God?s green earth why we should not drill as much oil as possible.” There are environmental consequences to unrestrained actions, and it is pretty silly to argue otherwise.

      Environmental issues are complex, as are economic ones. I doubt that Krugman was in any way intentionally lying, as you accuse him of doing. I am not of the left, but I believe that abuse such as yours is unjustified and only hardens the divide and prevents honest conversation.

      • http://stevemaley.com Steve Maley

        Professor Krugman is presumably an intelligent man.

        An intelligent person with a modicum of intellectual curiosity should have questioned the reasonableness of his answer. Is it reasonable that 190,000 American jobs run 8% of the economy?

        The answer is, no, it is not. My wife, who is not particularly engaged in the political arena, caught that howler.

        The best spin you can put on it is that it is “confirmation bias” — Krugman looked for data to confirm his preconceived notion, then he stopped and wrote his crappy op-ed.

        It took me about 30 minutes on the BLS database to figure out his mistake.

        So is it sloppiness, or intellectual dishonesty?

        In either case, the man’s ideology trumps his pursuit of the truth.

        • YnotNOW

          which leave the alternative: “intellectually dishonest.”
          (something about ” ___ pants on fire”)
          Because his ideology trumps his pursuit of the truth. Who needs truth when you have an agenda to push?

      • funwithknives

        and yet’ Vlad ‘ rips him in a heartbeat. Issues are as complex, or not, as your agenda makes them.

        Once-Over-Lightly Pauly commits these errors in judgement and fact so often it becomes “His Normal.” His errors are errors of omission and either show:
        1) poor research and summation, or…
        2) an agenda ,and hope the masses eat this stuff up. (Could be a blend, but that gives him too much credit}
        Since it’s really hard to find any company/institution of note that brags they use his advice and he ain’t talkin’ about same , what’s a guy to think?

        B T W ,” as much as possible” seems to imply what Is Possible, not drilling anywhere you please, unregulated.
        Putting proposed actions where they were not advocated looks goofy ,Agreed?

    • Flagstaff

      Why send our dollars to Canada, Mexico, and Saudi Arabia when we can pay them to US workers?

      Why indeed? This aspect of expanding our domestic oil industry is raely mentioned. Not only does a domestic oil supply reduce our dependence on foreign oil (isn’t that a “duh”? And isn’t it the true reason behind the DOE?), but it means that some of the money currently being paid to foreigners will be paid to domestic workers and companies. This also means an increased tax base, along with increased tax revenues.

      Even the Keystone pipeline, pumping Canada’s oil to our southern refineries improves our economy. Without trying to quantify it, it’s obvious that US workers will be paid to work on it and with it, and our refineries will be paid to refine it, and all that money stays here and is taxed here. And the money paid to the Canadian producers goes to a friendly country, not one that hates us (yet). How can that be bad? And from a security standpoint, it’s the next best thing to producing our own oil.

  • carolina

    The NYT should have fired Krugman years ago. He is always wrong, and full of socialist propaganda. He is way up near the top of my “disgusted with” list.

  • carolina

    The NYT should have fired Krugman years ago. He is always wrong, and full of socialist propaganda. He is way up near the top of my “disgusted with” list.

    • demsaresatanic

      Christian-hating liar such as Krugman? A leftist liar with a Nobel is pure gold for them, it gives the lies a credential.

  • quill67

    Another amazing point about this piece is that Krugman conveniently forgets he is a Keynesian for this piece. Keynesians believe that increased income and employment for one group will increase their demand for goods and services. The people who produce those goods get an increase in income so they buy more. The process repeats (in Keynesian view) and creates what they call the Keynesian multiplier effect.

    In this way, a small increase in income might cause national output to increase 10 times in theory (Although Keynesians testing this have found multipliers up to 5 but usually almost 2) Using a multiplier of 5, if oil and gas jobs created $20 billion in wages, this would result in an increase of $100 billion in national output. creating income for those people is that here he is

    I would add (as a non-Keynesian) that small changes in the supply of oil make for large changes in the price of oil. So not only do we get the benefit of jobs producing the oil, we also get the benefit of lower oil prices which lower the cost of producing other goods. This increases national output, employment, and improves the quality of life.

    But Krugman is blinded to opposing views. It is really a shame. I have read his old work and he was not always….a….well…a nut. It may be hard to imagine but his early work really was brilliant. To me, it shows that liberals will say or do anything— even drop any professional ethic to promote their viewpoint.

    I try when I write about economics to be very careful about my analysis. Only on non-economic political analysis am I not as guarded with my words.

    • demsaresatanic

      Do you have any links to his early brilliant work, by any chance. Anybody who still buys Keynes after dismal failure upon failure in application doesn’t sound too brilliant.

  • romeg

    so knowledgeable as regards the Energy Industry as Krugram that he was chosen by Enron as an adviser would not be so sloppy with his research. Perhaps Krugman has more accountability with the demise of Enron than previously thought.

  • http://www.theantliberalzone.com gunnyg

    is little more than a useful idiot for the NY Obama Times. He has been wrong so many times he would not know what it is to be right!

    • renl57

      …he just ignores it.

      I’ve lost track of how many times Krugman has claimed that the post World War II era in America was prosperous *because of* 90% marginal tax rates.

      Each time he made that claim, many readers (including myself) have replied that America was prosperous because World War II had devastated nearly every other industrial nation on earth, while America’s industrial plant emerged from the war virtually intact.

      Those other nations couldn’t compete with us, but they needed our goods and services to rebuild from the devastation of the war. Plus our victory in World War II entitled us to favorable treatment in the Bretton-Woods Agreement of 1946. That agreement made the U.S. dollar the world’s reserve currency and pegged many other nation’s currencies to our dollar.

      Every time, Krugman just ignores these rebuttals, and comes right back again claiming that America was prosperous because of 90% marginal tax rates.

      Economics is supposed to be a science. But in science, when someone shows you’re wrong, you’re supposed to stand corrected, not stay on message like a political activist.

  • dajeeps

    Even if he had his data correct, it’s really stupid argument to be making with persistently high unemployment.

    I don’t think it really matters how many jobs there *might* be if we liberalize drilling. Even if it were just 70k, it’s 70k more than we had and we have people who need to feed their families who can’t see the light at the end of the unemployment tunnel. We need domestic oil. We have people who need work. Go get the oil, and put the ones who can do the job to work. It’s that simple.

  • http://pocketchangeproductions.net/ anotherindyfilmguy

    it is moral bankruptcy from those who would ignore the real way of the world when it does not forward their political agendas.

  • kipling

    Thanks Steve for correcting Paul Krugman. I always enjoy reading your posts on the energy sector.

    Recently I was in a small town near the Eagle Ford Shale area and stopped to eat at what used to be a sleepy Mexican restaurant. The place was packed and all but a few of the cars in the parking lot were company trucks belonging to various service companies connected to the oil fields. Other communities have experienced a housing boom as new workers flood into the fields. Many of the interior towns are using the new tax revenue for needed repairs and infrastructure developments. Even the gulf towns have experienced a boom as the oil flows via pipelines and trucks to the various coastal cities.

    The only role Mr. Obama has played in the oil business around here is the loss of drilling in the gulf, which has hit us hard.
    What Obama needs to do – and will not – is to set the oil and gas industry free from the excessive regulations.

  • jiminga

    And gives the practice of economics a bad name…if it ever had a good name. Some think “economist” is a science but it really is a belief system (if you’re a Keynesian), while Krugman has appointed himself the pope.

  • eheassler

    When looking at Krugman’s background one salient characteristic stands out, he is a highly accredited, well published and respected academic whose world experience is that of an economic theorist. Note, I said theorist. The problem with many theories is that they don’t square with reality. Where in Dr. Krugman’s experience have his theories helped banks, large corporations, or small business succeed and survive in the marketplace? No, he exists in the insular world of academia and becomes increasingly less influential by writing for the NYT which smugly considers itself the intellectual leader of the American Press. Other than the elite, effete swells in NYC, nobody gives a crap about the NYT and even fewer think that Dr. Krugman’s economic theories are helpful to U.S. economic policy.

    • Repair_Man_Jack

      by staying in that theoretical world. He went into advocacy, and now he gets stuck like this everytime the side he advocates runs roughshod over his theoretical world.

    • Ausonius

      Socialism/Communism was tried for most of the 20th century in a variety of countries – with Death as the penalty for not co-operating in many of them – and it still failed.

      Yet, we have Krugman ignoring the evidence and still pontificating about socialist “solutions” to our problems.

      And even when Dems get practical experience, they blow the opportunity:

      Jack: How did Jon Corzine lose over a billion dollars of investors’ money?
      Zack: He trained for years as a Democrat politician in New Jersey!

  • citizenoftheworld

    Someone should tell the guy that drilling our own resources is not for jobs only. He should also be told that these industries are not labour intensive for they are technologically very advanced. Is he an economist or what ? Does he have enough brain cells to understand that drilling is not about jobs, but about national independence, sovereignity. That means breaking the shackles with which the Muslim world holds us hostage. If he were a real economist he would think about how to break the OPEC monopoly on oil prices, he would have developed already a plan how to do that. I know, that takes intelligence. We cannot expect from an intellectually bankrupt person like his Nobel Prize decorated highness to understand what it means to be a real American patriot,, to love your country and not have the need to bow in front of those who want to see you fully submitted to their creed, and their way of life by giving in to full blown Dhimmitude. They sell us oil, take our money and demand our submission.

    • eheassler

      Krugman is an academic who lives in fantasyland. He gets paid whether his theories work or not. In the real world of business, if your ideas fail repeatedly, you get canned. But, if you’re an academic at Princeton and write for the NYT, your failed left-wing, socialist ideas are politically correct job security.

  • edintexas

    I wondered how Krugman could possibly have won the 2008 Sveriges Riksbank Prize in Economic Sciences, usually called the Nobel Prize in Economics. But then there was the 2009 Nobel Peace Prize and I no longer had to wonder.

  • travis690

    I would be curious how the Phony Doctor Krugman explains away an industry that exhibited positive job growth for this past decade, while many others experienced declines? Oh, there were a few other industries that also exhibited job growth, like education and government pencil-pushers, but those of us that live in the real world know that the first group represents teachers that don’t know how to teach (like our aforementioned Phony Doctor), and the second group encompasses people whose net impact on the economy is that of subtraction.

    One concept I hope the Phony Doctor learned during his wasted years of so-called education is that “figures don’t lie, but liars sure can figure.”

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