Monday, September 5, 2011

In the debate over job creation vs environmental regulations (see we sometimes lose sight of comparative advantage. If we eliminate environmental regulations (i.e., we eliminate higher environmental standards), then everyone competes based on the lowest price. That puts us at a competitive disadvantage with low-wage countries. When we set high standards, then the competition is not based on price alone but on quality as well (i.e., the ability to manufacture to those higher standards) where we can develop a comparative advantage. Now this is not a binary concept. But it is one factor to consider.

No comments: