2025/10/15 by Benjamin H. Bradlow · 1 voice
Business, Management and Accounting · Economics, Econometrics and Finance · #State Capitalism and Financial Governance #Sustainable Finance and Green Bonds
paper · pdf · doi:10.1111/1468-4446.70052
One of the most enduring challenges for development theory has been 19th century economist David Ricardo's (1817) concept of “comparative advantage.” That is, countries should focus on exporting the things in which they have the greatest “comparative advantage” in making and exporting. The problem is that some countries make things that are valued more in the global marketplace than others. As a policy prescription, “comparative advantage” appears to entrench “comparative disadvantage.” Except for a few East Asian cases, most notably Japan, South Korea, Taiwan, and China, this has largely been the picture of the post-World War II world. The growth of technologies for decarbonizing the planet, conventionally dubbed “green,” has created a new technological frontier, the sine qua non of developmental projects. When a new frontier appears on the horizon, it calls into a being a competition to establish a new “comparative advantage.” As such, the magnitude of efforts to mitigate human-induced warming of the atmosphere carries the promise of a global social and economic transformation at least on the order of the Industrial Revolution. Brett Christophers' The Price Is Wrong argues that, when it comes to renewable energy sources — wind and solar power — the growth of this technological frontier rests on shaky economic fundamentals. Namely, that wind and solar power projects are not seen as cost effective enough by the primary developers who are pursuing their deployment. As a consequence, renewable energy is not growing sufficiently to displace fossil fuels-based power. Christophers' argument begins from the premise that the global community, to the extent that it exists as a coherent actor, has chosen to fight climate change through a transition to renewable sources of energy, namely solar and wind. His motivating puzzle is that despite all the effort and funds that have been expended, this transition is not actually occurring at a sufficient scale. That is, we are “failing on electricity decarbonization” (p. xii). The scale of investment needed for such a transition would be on the order of US10 trillion, according to the International Energy Agency (IEA). Christophers takes these figures and notes that the regular ratcheting up of annual investment rates required in successive IEA reports suggests that the world is consistently getting further from this target. The immediate question raised by Christophers' book is why the transition is not happening. Christophers' answer boils down the economistic one explicit in the book's title: the profits available for developing renewables are not sufficient to incentivize a market-based response. The subtitle of Christophers' book has received a fair amount of attention, and he has noted in interviews that it is not a precise representation of a work that is not about capitalism tout court, but rather about a specific, highly consequential sector for decarbonization. The book makes an important interdisciplinary contribution here, describing the financing rules and accounting techniques that undergird electricity markets. These rules and techniques are the scaffolding for Christophers' explanation of why renewable sources of energy too often fail to pencil out; that is, to be sufficiently profitable. As a conceptual matter, it is the main title that may actually be more revealing of the limits of Christophers' argument. The role of central banks is critical here for two reasons. First, because it shapes market conditions through the pricing of money. As economist Alice Amsden (1992) once put it in describing a critical ingredient of “catch-up” development strategy in South Korea, the key is to “get the prices wrong” — precisely what Christophers tells us is the developmental obstacle. If the current market design makes renewable energy projects not profitable enough for private sector-led deployment at scale, then other market designs might very well make this possible. Second, the fact that an institution for price setting exists suggests that reducing an analysis of the structure of investment in a sector to its market dynamics may obscure just as much as it reveals. For example, led by the US Federal Reserve, central banks across the globe are beginning to emerge from a historic cycle of rapid interest rate hikes, driving the prices of investment in all sectors higher. For sectors not yet established as “bankable,” the rise in interest rates pushed many formerly attractive investments, including in renewable energy, off of financial order books. Put simply, the institutions matter. And this means that the politics matter. Early in the presidential administration of Joe Biden, names were floated for nomination to the board of the US Federal Reserve who advocated incorporating climate considerations into the central bank's policy setting and regulatory roles. For this sin, these nominations were never confirmed by the Senate. Had these figures been in charge, might the Fed have enabled discounted lending to renewable energy projects? As Christophers notes briefly, this is certainly something that has been tried in more state-led renewable energy roll-outs in cases like China and Japan. And therein lies the rub: a relatively light touch for the state in Western energy and financial markets designs may not be producing sufficient deployment. An alternative role for the state — and different rules for market actors — would likely make a big difference. To his credit, Christophers does mention these alternatives in the latter parts of the book, thereby making clear that this is the logical extension of his argument. But readers miss a detailed exploration of what those alternatives look like. I would not be surprised if this is where he orients his next book. Christophers is a remarkably prolific and astute critic of contemporary institutional forms of capitalism, with a body of work that deserves much closer attention from economic sociologists. To be clear, The Price Is Wrong is a major contribution to interdisciplinary climate social science. It uncovers, with remarkable clarity and narrative logic, the dynamics of price setting for renewable energy and why this shapes the growth curves of deploying renewable energy technologies. This is a fundamentally sociological project, to the extent that it denaturalizes the operations of the market and exposes prices as derived from a set of human-made rules. To the extent that Christophers' argument treats the signals of prices as a fait accompli for the future operations of the market, I have to wonder if the sociological impulse is ultimately getting lost. That is, without a sense of the conflict that produces the rules — and the possibility that alternate institutional arrangements might rearrange these rules — we are left without a social agent behind what is socially constructed. While I ended the book convinced by Christophers' description of the current state of affairs, I was also left wondering about the indeterminacy of our epochal energy transition moment. We live in times that have produced a growing sociological literature on the theme of “events” and “crisis” (see Sendroiu, OnlineFirst). The discourse of the global intellectual and business elite is increasingly peppered with reference to a “polycrisis” (see Tooze 2022). Christophers' characterization of energy markets at a moment in time risks naturalizing the state of those markets. It seems at least as likely that we are in a time of profound transformation of the markets that Christophers is analyzing in his book. In the concluding chapter of The Price Is Wrong, Christophers invokes Karl Polanyi's notion of a “fictitious commodity.” This concept helps undergird Christophers important argument that the social construction of electricity markets matters deeply. As he puts it, “various props, rules, regulations and norms must be fashioned and applied” (p. 362). It is therefore surprising that Christophers concludes that the problem is prices. The price may be wrong, but the price can be changed. With Christophers' major contribution in describing and analyzing why prices matter, we can now turn to how they change. He suggests that state ownership may be one way to do this. Certainly, public power ownership is an approach being explored through various governance experiments across authoritarian and democratic contexts, from China (the world's largest deployer of renewable energy) to the State of New York in the United States. Efforts to transition publicly-owned fossil fuel companies to renewable energy production and deployment in Global South contexts, such as South Africa, Brazil, and Mexico, would also be worth putting into this conversation to have a better understanding of the fundamentally global stakes of the problem. State ownership may very well create different pricing conditions, but they also enable different coalitions of fossil fuel-based incumbents to be overcome. In this light, Christophers' The Price Is Wrong should be seen as opening up rich new sociological terrain for further research. The scope of the book underscores just what a world-changing prospect an energy transition is becoming for understanding social change. The social coalitions, organizations, and institutions, across the subnational, national, and transnational scales, that will shape “projects” (see Araos et al. 2024) for technological development and deployment to mitigate climate change are at the heart of a new global sociology of climate change. The field is certainly uneven, but the struggles for a new comparative advantage are all very much in play. The Price Is Wrong is an excellent guidebook with which to begin making sense of this terrain. Data sharing not applicable to this article as no datasets were generated or analyzed during the current study.