HI. Sorry this reply is so belated. Your reply got buried in that weird threading Gmail sometimes does. At any rate this last wont be a long reply, because I think we have got down to areas where our disagreements are fundamental. I think we have found the roots of where we disagree. I think there was a lot of productive discussion to get to that stage, but once you get there - discussion becomes much harder. In some ways discussion at this level could be VERY productive, but only if we put in a lot of hard work which probably could be directed in more productive directions. There is one point where you came to a very reasonable but noneless wrong conclusion on a factual point.
You took > For example since the majority of industrial energy consumption is used to > power industrial boilers, we could set rules mandating a minimum ratio of > heat delivered to heat input to mean that such rules would drive the majority of possible savings in these processes. But there are limits to boiler efficiency, and there are all sorts of ways to save energy even in a process driven by boilers that don't involve increases in such efficiency. For example, one can substitute filtration for heating in a lot of processes, making tomato paste for example. Cleaning processes can use use mechanical wringers (like old-fashioned wringer-washers but automated, and not requiring the manual labor such washers needed). You can reduce the need for products produced - reducing the use of wood, paper, steel, glass, plastic and so forth. You can reduce scrap, for example creating steel in a form roughly approximating the final product to be made rather than ingots, thus reducing scrap steel during the actual shaping process. (This is know ans near net shape.) The fact that most emissions are from boilers does not mean that regulation OF boilers can drive most savings. Such regulations are a useful supplement, not a main driver. OK the only other point is not a correction or an argument, but a clarification of where we agree and disagree. I agree that the labor dollar is not of much value in this kind planning. I mentioned it only as an example that Marxist and even Marx have supported the use of pricing. There are really only two types of pricing I think useful. One is an approximation of social costs, as a kind of rough reinforcement, like emissions pricing - basically Pigouvian pricing. The other is a way of measuring how people actually value things compared to other things. And this is a measure of subjective values - in short exchange values. I'm not expecting to convince you on this, nor do either of us have time to pursue it. So I offer it only to make clear one point where we disagree. I think it important enough to move to a separate paragraph. I think we can't escape exchange value, that even in a non-market planned socialist economy, exchange value has to remain an important part of planning, and of the accounting that has to be done for planning. And that is in part because what exchange value measures something very important that we want to know. How important is this output of the production process relative to all the other outputs of the production process at this moment? We don't want that to drive and distort everything. But we want to know it and always take that into consideration in our planning, I think that summarizes nicely what you most fundamentally disagree with in my views. And really, the next best thing to agreeing is finding where the roots of a disagreement lie. On Wed, Feb 18, 2009 at 11:22 PM, <[email protected]> wrote: > Hi Gar, > > Thank you for the references to your articles on Gristmill. Those two > articles and your note provide a serious and useful elaboration of your views > on the distinction between what has to be done in industry (other than, as > you point out "agriculture and forestry, plus water and air transport") and > other fields of the economy, and for your views on pricing. I have just got > around to looking at your reply, and would like to make some comments. > However, I'm sure I will pondering your articles more later. > >> To answer your minor point first. Once you have an emissions price for >> manufacturing it makes sense to have it everywhere. Too much leakage >> otherwise, and price will serve as reinforcement in other sectors. In >> short you spotted a key point. > > I presume that the idea is the that carbon price would come either > through a carbon tax, or a modified cap and trade (with, say, auctioned > permits) or some similar scheme. This would be throughout the entire economy. > It seems strange, though, to impose the tremendous difficulties and problems > of carbon pricing, if it is just to deal with a small part of the emissions. > > Indeed, according to your figures in "When did 'public' become a four- > letter word?", industry amounts to other 20-30% of the emissions. As you > say: > > "The exceptions represent 20-30 percent of U.S. emissions: industries other > than agriculture and forestry, plus water and air transport." > > Moreover, according to you article "How much should we spend to green the > U.S.? Public investment and regulation can be main means to green", the > majority of emissions even in industry could be dealt with by regulation. You > write: > > "There are some areas where rule-based regulation of the type I described can > lead to improvements in industrial efficiency. For example since the majority > of industrial energy consumption is used to power industrial boilers, we > could set rules mandating a minimum ratio of heat delivered to heat input. We > could also mandate efficiency standards for pumps and motors which consume > most industrial electricity." > > So in these articles, you make a powerful case for regulation, which is an > important thing to do. You then point to industry, and say even that the > majority of emissions comes from industrial boilers, which could be subject > to regulation. That leaves less than 10-15% of emissions at the most. And for > this minority of emissions that's left, well, even there you point out > various regulations that could be used. > > So by these figures, it seems that, at most, only 5 to 10% of emissions would > be outside the regulations you envision. Even these emissions could be under > some sort of regulation, but it seems you think it would be too complex to do > this efficiently. And so you look to carbon pricing for these emissions, > which, however, has to be imposed on the whole economy. > > This makes me think I may be missing something in your views. Your article > "When did 'public' become a four-letter word?" is subtilted "Regulation and > public investment are more efficient means to reduce GHGs than emissions > pricing". So its main point is to argue for regulation and public investment. > Yet isn't it a contradiction to say that regulation and public investment is > more efficient, and then also support carbon pricing, the less efficient > method, because you think it would be more efficient for a tiny fraction of > the emissions? > > Well, part of the issue is that you think that carbon pricing, and pricing in > general, even if not as efficient as regulation in most situations, is still > helpful. But these systems won't simply provide some additional help, but > they also lead to fiascos of their own. For myself, I think it's no accident > that carbon pricing helped give rise to the biofuel catastrophe. Nor is it an > accident that the period of $4 a gallon gasoline pricing gave rise, in some > places, to cutting back on mass transit -- despite the increased demand for > it -- because the local governments went into financial crisis from gasoline > pricing and didn't have the money to even continue the existing mass transit. > Pricing will always give rise to unexpected consequences, when pricing is the > fundamental control or planning method. Unexpected consequences are a natural > result of pricing and markets, and are both one of their main sources of > motion and one of their main sources of tragedy. Pricing and markets without > unexpected consequences is beer without alcohol: one may regard root bear as > better or worse than beer, but surely it is something else entirely. > > More generally, you set forward arguments in favor of pricing as a general > method of economic calculation, and as something indispensable in our modern > economy, and that will remain indispensable even under socialism. I, on the > contrary, think that the use of pricing as the fundamental planning method > means subjecting planning to the law of value under capitalism. Moreover, I > think that it pretty much means the same thing under socialism, even if the > pricing is expressed in labor-hours, or some other unit than dollars or > francs or roubles. And the law of value isn't a friend of the environment. > > You refer to the calculation debate, saying >> When you question price, you seem to be taking the losing side in the >> calculation debate. > > No doubt it is widely believed today, among market socialists as well as > outright capitalists, that prices won in the calculation debate. This is one > of the fundamental ideological bases of neo-liberalism, and it has penetrated > deeply into those seriously seeking reform and not just market flacks. But > let me raise one eensy, weensy problem: > > When one calculates with prices, what exactly is it that one is calculating? > The fact is that the index problem or aggregation problem is theoretically > insoluble. It is impossible to find a natural, fully satisfactory way to > aggregate together the figures for fundamentally different categories. To be > sure, there are many ways to do this, but there is no way to decide which way > is best. There is even controversy over such a simple thing -- one would > think it is simple, but it really is quite complex -- as how to construct an > inflation index. All such indices are, by their nature, only approximate, and > they become less and less useful as one compares economies differing more and > more in time, or in structure, or even in price level. > > You write: > >> As to prices being a capitalist phenomena, I >> seem to remember Marx thinking a labor currency was a good example of a >> tool that would be useful in a socialist society. > > You have a good memory: Marx *did* talk about the possible use of labor > certificates in an early stage of socialism. However, these labor > certificates (the labor currency, as you say), were not to be exchanged > between factories or used for planning the industrial economy. Marx > restricted their use to the distribution of consumer goods: workers would get > labor certificates in exchange for work, and use the labor certificates to > purchase various goods. But the labor certificates would *not* then > accumulate in stores, be exchanged with the factories for goods, be exchanged > by the factories for raw materials, etc. > > With money and pricing, the money proceeds through a cycle, and finally gets > back to the factory which then pays the worker with it. Under Marx's idea of > socialism, the labor certificates ends its role when the worker cashs it in > for goods. The goods are produced through a separate planning system. And the > labor certificates appear again later when workers are paid (or pensioners > get their pension, etc.). This may seem startling, and indeed it is, because > Marx's idea of socialism involves a revolutionary change from the market. > > But is it possible to conceive of economic planning without the prices? You > write: > >> Now one thing about the calculation debate is that >> on many issues you can argue who won. Is a planned economy feasible? >> One side says that if planners use shadow prices it is quite feasible. >> Another says, no, you need to use market prices; accept no imitations. >> But what both sides agree on is that you have to use some form of >> pricing if you want to run an industrial society. Those who want to do >> without price are the undisputed losers of that debate. > > Well, Kantorovich -- the father of shadow prices -- may have been a brilliant > mathematican, but as far as I know, shadow prices have only had a shadowy > existence in economy theorizing, rather than there being that much experience > with them in actual planning. Meanwhile, on the contrary, planning that takes > essential note of the material difference between different goods has a long > history in the last century. From the Soviet version of "material balances" > to the original idea behind Leontiev's "input-output methods", calculcations > were made that's simply couldn't be made using prices or shadow prices, any > more than you can replace vector calculations with measuring vectors by a > scalar (a single number). This is seen in the various attempts at overall > economic planning in the last century. To avoid misunderstanding, let me > state that the economies involved didn't do without prices, and some were > Western market economies. But insofar as they needed to have overall economic > planning, they had to also use planning methods that rubbed to an extent > against normal financial planning. This included both planning in various > state-capitalist countries, and even planning in some countries in Western > Europe after World War I. Indeed, war-time planning, when capitalist > countries need to ensure sufficient supplies of different goods in order to > be able to massacre their rivals on the battlefield, is another place when > shadow prices just wouldn't do. > > As I see, environmental planning has to be overall economic planning, and > therefore -- based not on the theoretical conclusions of market > fundamentalist economists, patting themselves on the back for having won, to > their own satisfaction at least, the calculation debate, but on the actual > experience of economic planning for the last century -- it cannot be assured > by pricing, or shadow prices, or any market scheme. It must be based on a > system of material balances (albeit not necessarily implemented in the same > way as the Soviet Union did), and it must subordinate pricing to itself. > > In regard to this, I wrote a series of articles on the issue that "the labor- > hour is not the natural unit of socialist calculation", and more generally, > on that there is no such natural unit of calculation. If you are interested > in seeing my elaboration of this point, look at the links at > www.communistvoice.org/00LaborHour.html. > > By the way, in arguing this I did take account of the point you raise that > >> Pricing is a tremendous computation saver." > > At the end of part three of my article on the labor hour and socialist > planning (www.communistvoice.org/27cLaborHour3.html), I have a section > entitled "Approximate assessments" that points out that reducing things to a > single numerical scale may well be useful for certain things. It is fast, but > not exact. So, to oversimplify what I explain in that section, a huge mass of > minor decisions could be made with a simple numerical scale, but major > decisions would be made in a more accurate way. And these major decisions > would routinely be different from what would be decided if they were > calculated on a simple numerical scale. > > Meanwhle, part two of the article goes into the issue of material planning > (www.communistvoice.org/26cLaborHour2.html), although from the theoretical > angle, rather than illustrating practically how such planning is carried out. > It explains how it requires material planning, rather than reducing things to > a single numerical indice (whether a price or the abstract labor-hour), to > take account of the material diversity of things, including the environmental > effects of production. > > There's more that could be said about planning, but this has been a long > note. I wish to conclude by raising one further issue about planning. > > The triumphalism over the calculcation debate is one of the the things behind > the idea that environmental consequences can be calculated through the use of > various financial indices, in particular, various elasticities (such as the > elasticity of energy use with respect to carbon price). You have a review of > this ("Short Literature Review: Energy Demand Own-Price Elasticity"), and you > point out a lot of the inadequacies of these calculations and make a number > of interesting points. You state that: > > "In my view, elasticity values are best considered in qualitative terms or > as broad ranges." > > Indeed, you end up wryly skeptical about various of these elasticity > calculations, saying: > > "The broader point is that elasticity is not fixed in any case. The > reason elasticities vary across so many cross-sections is that they are > determined not by the energy form but by institutions. Availability of > information about alternatives is one determinant. Another is the propensity > of other priorities to out-compete energy considerations for attention. > > " 'What is the price-elasticity of energy demand today?' will be an > important question whenever it is asked. But I think we need to add to it the > punch line of an old joke: 'What would you like it to be?' " > > But many authors don't have this skepticism. They apparently believe that the > use of these elasticities allow them to make serious calculations that ignore > the need to see what material changes are going to take place in power > generation and manufacturing methods and agriculture, what discoveries will > take place, how the climate will actually change, what major changes will > take place in the economy, etc. Instead, all one has to do to see what going > to happen to the environment and the economy for decades or more into the > future, according to Prof. William Nordhaus, is to make spreadsheet > calculations with elasticities. This is one of the reasons that his book, "A > Question of Balance: Weighing the Options on Global Warming Policies", is > market fundamentalist lunacy. And it's perhaps not quite such an accident > that he ends up with an anti-environmental position. > > I think that your review on elasticities provides a lot of information that > would help puncture the Nordhaus-type of spreadsheet nonsense, just as your > criticism of cap and trade and your discussion of regulation plans are also > valuable. But I think that a more thorough repudiation of pricing schemes, > and a recognition that there's life after prices, would provide the basis for > a more consistent struggle against neo-liberalism. > > Well, I'm going to stop here for tonight. > > Regards, > > Joseph Green > > > Date sent: Sat, 14 Feb 2009 18:01:41 -0800 > Subject: Re: [Pen-l] European carbon market crashing > From: Gar Lipow <[email protected]> > To: Progressive Economics <[email protected]> > Send reply to: Progressive Economics <[email protected]> > <mailto:[email protected]?subject=unsubscribe> > <mailto:[email protected]?subject=subscribe> > >> Hi Joseph, I'm cutting what I'm replying to down to this, because it >> seems to be the key paragraph. >> >> > What it seems to come down to, is that you look toward price-driven or >> In market-driven system for emission control in manufacturing.You refer to >> real and shadow prices, depending on weather the system is capitalism, >> market- >> socialism (the system which would be socialism except that it's not), or >> socialism. I think this is the same type of belief in prices that leads other >> environmentalists to talk about establishing the "true price" of things. In >> my opinion, even if this is restricted to the manufacturing sector (and a >> system of prices might not make much sense if it is restricted to the >> manufacturing center), this caves in to neo-liberal illusions about the >> market. Prices are not really a rational system of planning: they are the >> agency for the law of value under capitalism, and shadow prices are a way of >> introducing the shadow of capitalism into any system they dominate. >> >> To answer your minor point first. Once you have an emissions price for >> manufacturing it makes sense to have it everywhere. Too much leakage >> otherwise, and price will serve as reinforcement in other sectors. In >> short you spotted a key point. Now I'll give you the reference you >> requested, but I also don't think these links address your point >> directly or in sufficient detail, so will provide a reply below. >> >> Here is a short post. >> http://gristmill.grist.org/story/2008/12/31/22430/356 >> >> This is longer and more detailed, but the detail is mainly technology. >> http://gristmill.grist.org/story/2008/11/25/17212/723 >> >> So now to answer your key question: why is manufacturing different? >> >> The answer is that manufacturing is diverse, but to get there we need >> to start with the other sectors. In most sectors you can plan via >> setting general requirements without having to decide the details, In >> regulating building efficiency, you don't have decide what to with >> this building over here and worry how it varies from that one over >> there. In regulating buildings you want to say something along the >> line of so many emissions per square foot, so many emissions per >> person (resident or full time employee equivalent) and building must >> main a minimum air quality and comfort level. The per square foot is >> avoid miserably small inefficient buildings. The per person is to >> avoid buildings with low emissions per square foot that waste huge >> amounts of space driving up emissions per person. And the air quality >> and comfort level rule is to avoid builders, landlords and operators >> complying with rule at the expense of human health and comfort. Now >> you also probably want public programs to use public investment to >> meet these requirements with known technology. But the rules don't >> specify how much of each means get used; nor they prohibit clever >> discoveries that mean requirements by some other method. But the >> former is more important than the latter. They are leaving to the >> people on the ground level, the people who would know, to determine >> the balance between efficient appliances and insulation and weather >> sealing, and heat pumps, and efficient lighting, and solar generation >> and what have you. So there is a good balance between central >> planning, and bottom up planning by those who have to actually >> implement the improvements. Top down planning sets standards. Bottom >> up planning determines how to implement those standards. >> >> And most economic sectors have a basis for striking this balance. In >> transport the top down can set rules for emissions per passenger and >> per freight ton. (We need to also do extensive public planning and >> investment in rail systems, bike and pedestrian paths and electric >> cars.) In electric power we can set standard of emissions per kWh, and >> public investment in transmission, storage, smart grids, and in wind >> and solar generation. >> >> But manufacturing, there is no good top down way to set standards. >> There are over 10,000 facilities covered under the EU ETS. Many of >> them are power plants. But thousands are industrial facilities. More >> important are the tens of thousands not covered under the current ETS. >> These facilities are in a multitude of industries. Each of those >> industries is in turn a multitude sub-industries. (For example, the >> paper industry includes pulp and paper. Paper includes newsprint, >> office paper, cardboard, many different grades and sizes for packaging >> (packaging including anything from packing paper to butcher paper, to >> wrapping paper for gifts and so.) All these sub-industries have >> differing ability to use recycled input. And the same thing is true >> for every type of metal, every type of plastic, every type of glass. >> And again it is not just raw materials. There are different ways of >> fabricating the same material for use as input in making various >> products. There are the factories that use these raw materials to >> actually make products, many of which are inputs to other products. >> >> Further, there are some products where the raw materials are a small >> fraction of environmental impact, where most impact is at actual >> fabrication. But for many others you reduce impact drastically, just >> by selecting raw materials that took fewer emissions to make. So >> while you don't have to set a standard for each facility, a planning >> driven process would require you setting standards for many thousands >> of different types of facility. If you wanted to actually set >> technology requirements rather efficiency standards, if you wanted to >> regulated on a per process basis than then you multiply your >> complexity even more. And I'm not even scratching the paint on the >> complexity of our industrial system. Pricing is a tremendous >> computation saver. I think someone calculated that to plan our >> industrial economy in detail without use of prices (or some other >> common factor to weigh everything against everything else along a >> single dimension) would require more computing power than can >> physically exist in the universe as we know it. >> >> And its not necessary. Even in a planned economy you could set a >> shadow price on emissions high enough that your planning process would >> automatically eliminate them. As to prices being a capitalist >> phenomena: I seem to remember Marx thinking a labor currency was a >> good example of a tool that would be useful in a socialist society. >> Now there are, in my opinion, serious flaws in the idea, but leaving >> those aside, a labor currency is definitely a way of using price in >> planning. For that matter capitalists did not invent pricing. Hell, >> paper currency was invented by the Chinese by 140 B.C. Ancient >> Sumer probably invented commodity money; at any rate their culture is >> the earliest we know used it. But finding some common basis on which >> to value disparate goods is probably something that comes about as >> soon as the number of people in frequent touch with each other arises >> beyond the number in a single village or troupe. I mean a lot of >> hunter gatherer cultures found reason to do this. >> >> When you question price, you seem to be taking the losing side in the >> calculation debate. Now one thing about the calculation debate is that >> on many issues you can argue who won. Is a planned economy feasible? >> One side says that if planners use shadow prices it is quite feasible. >> Another says, no, you need to use market prices; accept no imitations. >> But what both sides agree on is that you have to use some form of >> pricing if you want to run an industrial society. Those who want to do >> without price are the undisputed losers of that debate. If you find >> the term "price" too problematic, then think of it as a lowest common >> denominator. It is one thing to say that exchange value should not >> trump use value. It is another to say that exchange value is not an >> important component of use value in an industrial society. As soon as >> we have enough specialization that most of what we use is made by >> people we don't know personally, and most of what we produce is used >> by people we don't personally, (and that is true of most people) the >> only way to coordinate all this disparate production is to include >> pricing (maybe under another name) as part of the planning process. >> Alienation can be reduced, but it can't be eliminated in a production >> system of more than a certain complexity. >> >> Che Guevara made the point that if you want to eliminate exchange >> between socialist enterprises on the basis of commodity pricing that >> is all the more reason to keep track of costs. If, for good socialist >> reasons, you want to provide something at less than the cost of >> production then you damn well need to keep track of what that cost >> was: the cost doesn't disappear just because it is not passed along >> directly. >> >> An emissions price IS a shadow price. In manufacturing as far as I >> can tell it is the only means available for deciding how to reduce >> greenhouse gases. In all other sectors it still makes a useful >> reinforcement. If it would have to be used under non-market socialism >> it certainly has to be used under capitalism. >> >> >> On Fri, Feb 13, 2009 at 9:36 PM, <[email protected]> wrote: >> > Hi Gar, > . . . . . . ,. > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
