Dictionary

deadweight loss en · NOUN

Meanings

1. (countable, uncountable) A loss of economic efficiency due to failure to achieve a free market equilibrium.
   • Basically, China does not want¹ [¹the Chinese government does not want] to exist in a trading system, where goods are traded for other goods. China wants to make all the goods, and have other countries pay for those goods with debt. […] Even if one country is better at making everything, it doesn’t have a comparative advantage in everything. That’s impossible. Every country has a comparative advantage at something! That’s why in the theory of comparative advantage, trade is balanced. In the real world, China’s massive trade surplus means that trade is not balanced; much of the time, China isn’t trading goods for other goods, it’s trading goods for IOUs. That kind of unbalanced trade is something that just doesn’t happen in the theory of comparative advantage. OK, so that was a bit of a rant. The real point here is that [a cited quotee's] preferred solution — that every country except China should focus on innovation, and leave the making of everything to the Chinese — is simply ridiculous. First of all, it doesn’t deal at all with the issue of supply chain vulnerabilities. Second of all, China has an industrial policy for innovation, too — in fact, it’s China’s most important industrial policy. The idea of “We’ll do the innovation while China makes everything” sounds straight out of 2002 — and it was obviously wrong even back then. […] Whether they realize it yet or not, Europe’s dependence on China for the manufacture of many key defense inputs puts it at China’s mercy. This is a downside to free trade that the folks who advocate a European retreat from manufacturing simply fail to engage with or acknowledge. It provides a strong rationale for putting up trade barriers against the import of certain intermediate goods — something that harms economic efficiency, but is necessary for defense. When invading armies are burning your country to the ground, you should worry less about deadweight loss than about being dead. 2026 June 6, Noah Smith, “Why Europe should put up trade barriers against Chinese goods. There are benefits far beyond protectionism”, in Noahopinion [Substack newsletter]:

Forms

Translations (4)

pl zbędna strata społeczna (Translations) · fi tehokkuustappio (Translations) · fr perte sèche (Translations) · fi hyvinvointitappio (Translations)