An entire country making the Naomi Klein mistake. Sigh.

We’ve been making fun of Naomi Klein’s ignorance of trade for well over a decade now. For she claimed, in one of her books, that banning cheap solar panels from a country aids the fight against climate change by making solar panels more expensive.

Yes, aids.

But how we’ve an entire country going down that path to madness:

The Biden administration touts solar energy as one of its big success stories, a booming new industry that is curbing the effects of the climate crisis and creating high-paying jobs across the country. But the more complicated truth is that the United States is mired in a long-running trade war with China, which is flooding the market with artificially cheap solar panels that carry an uncomfortably large carbon footprint and threaten to obliterate the domestic industry.

At which point they’re adding tariffs to stop those dastardly Chinese sending cheap solar kit which will aid in the fight against climate change. Abject nonsense, obviously. Either we want cheap solar so as to beat climate change or we don’t. If we don’t then no subsidies, no push, no regulations are required. If we do then getting them from anyone sellin’ ‘em cheap is a great idea. And that’s all there is.

As to why there’s this problem it’s because people simply don’t understand trade. Yes, it’s true, comparative advantage is indeed the only theory in the social sciences that is not trivial or obvious. But even then we’d hope for a better understanding of it than this:

“Chinese companies don’t have any comparative advantage, only artificial advantages. They rely on government subsidies, and on lack of enforcement of labor and environmental laws.”

That’s not comparative advantage in the slightest. That’s absolute advantage. Comparative means what is, given those advantages, China least bad at doing? Absolute is that those advantages mean that China is better than US companies at solar panels.

Sigh.

Either climate change is some vast problem that we need to subsidise our way out of - in which cheap solar from anyone at all is just what we want - or it isn’t and therefore no subsidy from anyone is desirable. Insisting it’s a very big problem that needs hundreds of billions in subsidy but that we must reject the cheap kit someone’s knocking on the door with is to be, well, it’s to be Naomi Klein. That way madness lies.

Tim Worstall