Date sent: Thu, 26 Feb 2009 18:38:36 -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>
Gar Liow wrote: > 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 It seems one of the issues concerns whether exchange-value can represent the true social cost of something. > 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. I realize your time, like mine, is limited, and I thank you for the time you have already put into this. But if you ever have some additional time, you might look at my series of articles on the labor-hour. It doesn't just apply to the labor-hour. It actually hits against the use of the dollar or franc or ruble as well, and essentially goes into the issue of true cost pricing and of whether there are alternative ways of economic calculcation and planning other than prices. In doing so, it refers to the history of such planning. > 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 But Marx envisioned the possible use of labor certificates not for industrial planning, but simply to help distribution of goods (at a certain stage of society). They aren't the same question. Of parrticular interest is Marx's discussion in vol. II of Capital of the relationship between the different department of production: consumer goods and means of production. The point is that, as far as the balance of an economy goes, these goods are incommensurable: no amount of consumer goods can replace the means of production (except of course for things that function both as consumer goods and means of production), and vice versa. It doesn't matter whether x amount of consumer goods has the same exchange value of y amount of means of production. They are still qualitiatively and materially different, and play different roles in the economy. Based on this, Marx develops certain numerical relationships that must hold. This type of issue comes up in planning. (Of course, one has to deal with more than simply the division between consumer goods and means of production.) > 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. This is the point. Is pricing really a sufficient approximation of social costs, especially ecological costs? In order to produce something, one needs a certain amount of each of a number of raw materials; a certain amount of each of a number of different types of labor; one needs tools; one generally needs a factory or workshop; etc. Moreover, the production process also produces various waste products of various types. All these things are qualitatively different: one cannot replace another. Yet a financial figure is based on the idea that they all can be measured on the same scale, and the figures added together, and the result is supposed to something reasonable. > 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, But some very cheap things may be regarded much more fondly by people than some very expensive ones. It is true that people have to want something for that object to have an exchange value, but in the most cases the exchange value measures something else. But that aside, it's unlikely that any numerical scale can adequately reflect people's subjective preferences. Indeed, from the mathematical point of view, Arrow's impossibility theorem shows that, in general, there is no way to measure these preferences on a single numerical scale. Indeed, Arrow's theorm undermines some key foundations of neo-liberal economics, and I found it somewhat amusing to find various papers on the internet written in yet another vain attempt to drive a spike into the heart of Arrow's theorem. >From a practical point of view, the direct investigations of certain researchers verifies that people's preferences can't be ranked in a simple numerical scale. For example, I believe I recall it being pointed out that, in practice, one may find a person may perfer A to B, and B to C, and yet prefer C to A. >From an ecological point of view, I think the problem is even more serious, since our main concern would be with people's preferences, given that various serious changes are made. But ranking things on a single scale via exchange value pretty much implicitly assumes that the current structure of production remains the same. > nor do either of us have time to pursue it. So I offer it only to make This may be true. I very much understand that, and my own reply is very late. But if you ever do have time to pursue this further, I do think that the issue of whether there is a natural unit of economic calculation is worth considering. I actually try to show that there is *no* such natural unit -- no single numerical scale, whether in labor-hours or dollars -- for rational economic calculation. This doesn't mean the end of all calculcation, but the use of a different kind of calculation. Yes, for a whole series of routine decisions, one can often approximate things on a simple single numerical scale. But for the major decisions on the structure of production, such as on what major changes should be made for environmental purposes, such a scale won't work. And reasonable decisions would always grossly violate what would seem rational on such a scale. Indeed, even the economic planning of the last century shows that overall economic planning requires going beyond the use of such a numerical scale. (True, in capitalism, the bottom line is that not only must the material goods be available, but the money better be available. But given that a certain course of action is financially possible, there is still the question of evaluating whether it will achieve this or that goal.) Decisions over how to change the structure of the economy require a different way of planning. > 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 It's hard for me to imagine exchange-value in a non-market economy. I think our picture of such an economy must be different. This might lead to the issue of how we conceive of planning, and it might be quite interesting, but it would take us too far afield at this point, when our discussion is just about to conclude. > 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 i Yes, precisely, it is essential to know the relationship of any one output to the other product. It is precisely for this purpose that exchange value isn't very good. For example, $100 worth of steel equals $100 worth of wood, as far as exchange value goes, and $100 worth of steel can be exchanged for $100 worth of wood and vice versa (neglecting transactions costs, whether the market is open on Sunday, and other such things). But the relationship of the steel and wood to each other (and to different raw materials, tools, necessary labor etc.) is another story. And the ecological impact of the steel and wood is still a further story. Any serious examination of these things shows that the relatiionship of steel and wood to the rest of the economy and to the ecology are incommensurable -- they can not be compared on a single, simple numerical scale. In judging the relationship of the steel and the wood, one simply can't rely on such equivalences as x amount of steel = y amount of wood. A Pigovian tax will probably change the cost of steel and wood by different amounts, and result in so much steel being worth a different amount of wood, but this change can't adequately reflect the overall relationships of steel and wood to other outputs and to the environment. Exchange value hides all these maerial things. So long as markets are functioning adequately, a person with $100 worth of steel can really regard this steel as identical to anything else that costs $100. That steel *really* is identical (with respect to the market) to other things, as one can convert it to anything else by buying and selling. Exchange value abstracts away from all the physical or material qualities of steel, and hence from all its material relationships to other outputs and to the environment. It covers over all these things. But as far as economic and environmental planning , these physical and mateiral qualities are crucial. For example, even with a carbon tax, the price of the steel can't properly reflect its the carbon content. That's because it also has to reflect the relationship of the steel to the necessary raw materials, to the labor needed, etc. A single number can only represent one thing -- it cannot adequately reflect a lot of different things. A single number can, for example, tell us an individual person's height. But if we try to use a single number to measure the height of a whole group of people, there's a problem. When we add together the heights of a whole group of people, the result no longer tells us the height of any one person. This gives rise to another problem. It is assumed, with respect to the Pigovian tax, that an increased price means that something will be produced less. This seems completely obvious. Unfortunately, the economists also assure us, when talking about supply and demand, that an increased price results in more production of a product. And this too seems completely obvious. Well, it might be argued that if the price is increased due to a tax, then there will be no extra profit in producing something, and so the supply won't be increased. But then there's that typical feature of the market -- unexpected consequences. For example, when a Pigovian tax drove up the price of cigarettes in Canada, it resulted both in the reduction of some people's smoking -- and in large-scale smuggling of cigarettes into Canada, that smuggling being extremely profitable due to the high tax on cigarettes. True, the smuggling was illegal, but the market gave rise to it -- and we can expect that high prices of other products may also have illegal or unexpected results. n 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. True enough, and I too have found this exchange informative and useful, as you have replied seriously and elaborated your views. Moreover, I have enjoyed the sparkle and wit of your material against cap and trade, Regards, Joseph _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
