2025 Books - Correction
The discussion of The Price Is Wrong in the previous post got badly garbled in a couple of places. Here is a corrected version.
Brett Christophers, The Price is Wrong: Why Capitalism Won’t Save the Planet. I originally picked this up with the intention of writing something about it, which I did not end up doing. It was a frustrating read to me — I like the author and am very sympathetic to his broader worldview, and there’s a lot of specific information in this book that is valuable and compelling. But I am unconvinced by the book’s central argument.
A proper critique of the book deserves far more space, which I still hope to give it at some point. But here’s the short version.
The core of Christophers’ argument is that while the cost of renewable energy is falling rapidly, that does not mean that the private power companies will adopt it. They are motivated by profit, and renewables, despite being cheaper, are not more profitable. So a transition away from fossil-fuel based electricity generation will also require a transition to public ownership, or to a non-capitalist economy more broadly.
I believe down to my bones that moving away from the pursuit of profit as the organizing principle of social life is possible, and necessary, and matters for almost everything. But I don’t think Christophers’ argument gets you there.
There are a couple basic problems with his argument. First, profit is the difference between the sale price of a commodity and its cost of production. So to say anything about differences in profit, across technologies or industries or over time, one needs to analyze the determination of cost and price independent of each other. But Christophers doesn’t do this. He instead frames his analysis in terms of the awkward portmanteau “cost-price.”
If you wanted to take this analysis seriously, you would focus on the fact that in a competitive market, price tends toward marginal cost. If marginal cost is constant or falls with the level of production, and if fixed costs are substantial, then producers in a competitive market will face losses; such an industry won’t be viable in the long run. This was the situation of railways, for instance, in the late 19th century, which experienced repeated episodes of vicious price wars ending in general bankruptcy.
But capitalism is, of course, capable of producing railroads; this is because capitalism, despite some of its defenders’ claims, does not in general involve competitive markets. What we can say is that an industry like renewable energy, or railroads, requires a sufficient degree of monopoly power to enable it to recover its fixed costs. This is less of a problem for fossil fuels, where costs of production are a larger part of overall costs.
This problem is exacerbated by the specific way that electricity is priced in many markets, where the price is determined by the costs of the marginal producer. This was fine in an era where high-cost facilities would come online only when demand was high, raising profits for the rest of the industry. But when the marginal producer is a solar or wind facility, the price won’t cover fixed costs and the industry will make a loss. Christophers lays this out very well, and there’s no question it’s a real problem. But we should be clear: It’s a problem with how electricity prices are currently regulated. Not with clean energy or capitalism as such.
Second, let’s suppose that price-setting is such that a lower-cost production method will definitely lead to lower profits. Does that mean that profit-seeking capitalists will not adopt that method? Well no. Because there’s a critical distinction here between the individual enterprise, where production techniques are chosen, and the industry as a whole, where prices are set. If I can produce the same commodity at a lower cost than my competitors, then my profits will definitely increase. Perhaps, once the new method is generally adopted, everyone’s profits will be lower. But so what? I’m a capitalist! My own profits, now, are what I care about.
I admit that I am a little surprised that someone writing in the Marxist tradition doesn’t seem to have considered this possibility. This sort of collective-action problem among capitalists is the whole story of the tendency of the rate of profit to fall in Volume III of Capital. And it’s been a central subject of debate for Marxist economists ever since. I don’t necessarily expect Brett Christophers to have a settled view on the validity of the Okishio theorem. But I would kind of hope that he knows this conversation exists.
This is all very critical; but, to be clear, there’s a great deal in the book that is useful and insightful. The problem is, the conclusion that the concrete material points to is that we need better rules for regulating electricity prices. If you want to get to an argument against organizing production on the basis of profit, you would need to start from somewhere else.
I am a little confused. Christophers actually shows the history of how we got here and why it is structured the way it is so he clearly is aware that it could be has been and should be structured differently, including in a capitalist context. Christophers main thrust isn't an anti capitalist exactly one but emphasizes for public ownership or the need for heavy subsidizing of clean energy by states. We should change how the power industry is organized and if we can't do that then we need to subsidize. In fact he argues that capitalism isn't inherently environmentally destructive, it just is because it is profitable to do so at the moment which doesn't fit with how your framing him. Secondly he isn't saying there aren't willing entrants into clean energy production due to erratic and low profits but that erratic and low profits mean they aren't attractive to the financial firms they need for funding since unlike legacy operators they can't start with retained earnings. And he is careful to point out the results aren't the same in different market structures and why there is excess competition in power generation as opposed to other segments of the power industry. Its a fascinating study in the degree to which states produce markets in fact. I'd look forward to longer critique that gets more into the weeds. I think its hard to do so purely on the basis of theory.
Thanks for fixing this, Josh. I thought the argument in this book was incoherent too. As you know, I think there's a two-part reason for the opposition of capital to serious climate action. First, the "energy transition" frame is inaccurate, since increasing use of renewables, as beneficial as it is, does not automatically mean a corresponding decrease in fossil fuels. The fossil stuff needs to be directly limited. Then second, limiting fossil fuels to the extent needed to meet, say, Paris goals would lead to much higher energy prices, and there's an immense amount of capital stock that would be stranded in that case. For some reason people have focused on only fossil capital as subject to being stranded, whereas *on the demand side* tons of stuff would be stranded under higher energy prices. I made that case in the book, and, while I have shifted position a little on some things, that judgment still seems right. Unfortunately, my argument never made it to the wider world, and I realize I could have done a better job in foregrounding it.