This Changes Everything? OH Naomi Klein, NO

It's not capitalism that's broken here, it's publishing

Worstall @ the Weekend Given that I'm from the rational, classical end of liberalism, I'm obviously not going to be greatly taken by the spoutings of someone like Naomi Klein. But if an ideological difference were all it was, then I'd have left her new book, This Changes Everything alone after I'd read it.

Sadly, it's not actually as simple as that, for this weighty tome appears to contain precious little research or knowledge of what the experts have been saying.

The first indication that something was wrong with its reasoning was over the case of subsidies to solar panels in Ontario. Klein points out that there were feed-in tariffs provided by the government to boost adoption of solar energy, and also that to gain those tariffs it was necessary to use panels with a high local content (40 to 60 per cent – depending on various rules). So, a factory was started in Ontario to make those local panels. Then both China and the EU complain under World Trade Organisation rules about those local content requirements, and they are abolished (but the feed-in tariffs stay) and that factory sits idle and empty.

All of that is entirely true – it's the conclusion she draws from this story that I object to. She says that the WTO rules must therefore be changed – ie, that we must roll back those free trade laws in order to solve climate change.

Just run through that story again. So, in the absence of the local content rules, no one wants to purchase the locally made panels. The feed-in tariffs still exist, so the incentives to buy and install any at all are exactly the same as they always were before the WTO intervention. So: what can we assume from the behaviour of the consumers in not buying the Ontario-made panels, leaving that factory empty and dud? That those locally made panels are more expensive than the ones from China and or the EU. And, given generally observable human behaviour, we would expect more solar panels to be installed to take advantage of those feed-in tariffs if the panels are cheaper than if they are restricted to the more expensive locally made ones.

Klein is thus arguing that people must be restricted to more expensive panels, so that they install fewer of them, in order to beat climate change and that's why we have to change those trade rules.

Umm, yeah, whatever you say.

That's only a specific error, of course, but she also makes two very large and glaring theoretical errors. Ones which, from the viewpoint of an economist at least, entirely gut the basics of her arguments.

Who pays the pollution piper?

Klein quite rightly points out that something needs to be done and that someone, somewhere, should be paying for the emissions and pollution that's going on. Absolutely: the polluter pays is a very fine logical argument indeed. She then insists that we should go and nick all the profits of the fossil fuel companies in order to clean everything up. Now that is one of those "well, possibly, maybe" statements. But she then says we've got to nick those profits instead of a carbon tax that can be and is passed along to the consumer.

At this point, things get a bit hairy, for the author is making the assumption there that it's the fossil fuel companies that are the polluters: something which is only true in small part. Yes, Exxon was responsible for cleaning up Prince William Sound because the firm itself polluted it. BP similarly for the Gulf after Macondo. But Klein is going on to say that those companies are responsible for all the emissions from all uses of fossil fuels, which is simply nuts.

If I decide to drive to the shops, the emissions from my doing so are not the responsibility of BP or Exxon. They are my responsibility: I am the polluter here and I should be doing the paying about those emissions. Further, what we really want to do about climate change is change the fuel and transport choices of us 7 billion 'umans out 'ere, not the few million involved in providing us with what we desire and demand. Thus we definitively want to have that tax passed along to us, the consumers, precisely because it's consumer behaviour we're trying to change.

Klein has entirely missed the point about a carbon tax: that the oil companies don't pay it, consumers do, is not an error or mistake – it's the whole damn point.

And then there's the biggie, the ne plus ultra of the book's economic mistakes. Klein insists that we've got to reverse this globalisation stuff in order to beat climate change. In your correspondent's opinion, this betrays a complete ignorance of the basic subject under discussion: the economics of climate change.

As a first, theoretical, stab at it: the division and specialisation of labour plus the trade in the resultant production is going to provide us with a higher standard of living for whatever resource use we allow than not having those things. Similarly, for whatever standard of living we do desire, we'll achieve a lower resource use by utilising trade. Anyone who's ever seen a home-made bookcase will know that this is true: having the experts make it takes less time and fewer trees die as well (if the pile of offcuts from my own attempt are any guide, at least).

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