Iowa Ag Connection
09-06-06
Economist Looks at Economic Impact of Corn-Ethanol Boom
There is no doubt that Iowa is in the midst of a corn-ethanol boom -- with 27
plants currently processing corn, mostly for ethanol, and 24 either under
construction, planned, or proposed.
But while ethanol will continue to be good for the Iowa economy, some
projections being reported by farm state politicians and industry advocates -- like
one in an essay this year by former South Dakota Senator Tom Daschle that the
current U.S. production of 3.1 billion gallons of ethanol created 200,000 jobs -look too good to be true. They are according to an Iowa State University
economist's recent study.
David Swenson, an associate scientist and lecturer in economics and
community and regional planning, authored a paper titled "Input-Outrageous:
The Economic Impacts of Modern Biofuel Production." He presented it earlier this
summer at the Mid-continent Regional Science Association and the Biennial
Implan National Users Conference in Indianapolis.
"This was not a paper that was written to be critical of the technology and efforts
in ethanol promotion. Mine was a criticism of the people who should know better
as regional scientists -- the people who do these modeling systems," said
Swenson. "The problem that I saw was that there was a combination of technical
and procedural errors in the way that modeling technology was being used to
analyze the economic impacts in this rapidly growing industry." A critical analysis
of ethanol economics
After describing the magnitude of overly-optimistic economic impact claims and
reviewing some of the more common errors in analysis, Swenson's paper
presented the findings of a modeled ethanol plant configuration in a hypothetical
three-county region of Iowa. He found that new ethanol plants employ, at most,
35 people. And every new ethanol job -- under average rural conditions -- can
possibly lead, on average, to three more jobs in a rural region.
"And we're not sure that's net (in terms of the economic gain of those three jobs).
We just know that it's gross," said Swenson. "And the problem is that ethanol
plants don't really create many new jobs relative to the investment, since there
are only 35 jobs in a modern 50 million gallons per year plant."
Swenson wrote that he doesn't believe the producers of the bloated impact
statistics -- or the uncritical conveyors of them -- are being intentional. "Instead it
looks like there is just a whole lot of input-outputting run amok going on," he
wrote.