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Henry Ford Would Dump California

Cap and trade one evil for another

William A. Levinson
Thu, 12/13/2012 - 16:14
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Henry Ford would have fired for incompetence any manager who tried to move jobs offshore for cheap labor. He believed—and more important, proved—that intelligent management can make most jobs sufficiently value-adding to justify high wages for American workers. If he was alive today, however, California’s enactment of a cap-and-trade law would disqualify the state from consideration as a Ford manufacturing venue under the following criteria.

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As noted in Today and Tomorrow, by Henry Ford (Doubleday Page & Co., 1926): The location of a new plant is largely determined by the cost of its power and the price at which it may make and ship goods to a given territory.

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Comments

Submitted by umberto mario tunesi on Wed, 01/02/2013 - 23:32

Value-Adding

Yes, Mr. Levinson, I share your point of view: from a non-teleological point of view, there is no such a thing as (totally) useful or useless, but it is a continuosly variable shade of Utility. Though I personally quite abhor how the word "utility" is commonly used and meant of, because it only implies aims but not origin, the psychological way of thinking "to what end?" is still deeply rooted in the western world culture, as opposite to an "as is" sight that would also make many things easier. Thank you, I look forward to your next columns.

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Submitted by gesvendor on Thu, 01/03/2013 - 06:50

Thumbs up on the Henry Ford/Cap and Trade article

I loved the article "Henry Ford Would Dump California". This needs to be required reading for every American.  It certainly will be for my class at the community college.

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Submitted by markb on Fri, 01/04/2013 - 12:44

In reply to Thumbs up on the Henry Ford/Cap and Trade article by gesvendor

Oops!

Posted to wrong area.

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Submitted by Denise Robitaille on Fri, 01/04/2013 - 09:29

Wonderful

Wonderful and insightful piece. Am always delighted to find sagacity from days gone by transcending to modern applicability. Thank you.
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Submitted by Ken Clayman on Fri, 01/04/2013 - 09:45

Henry Ford ....

Mr. Levinson,

 

Interesting thesis, and well written.  However, I am not fully convinced of the conclusions.  If cap and trade is not an incentive to drive either efficiency or, at least, reduce carbon emissions, what would be a preferred alternative?  For too long industry has not had to account for all aspects of their operations, particulalry carbon output.  Granted, the deleterious effects of carbon emissions is a more recently understood negative impact, but the point is that manufacturers everywhere need to account for all aspects of their operations, and wastes are certainly a part of that.  Would you support a carbon tax?  More direct regulations that require particular control technologies be applied?  Something else? 

Yes, in this case California has taken a lead role (again) with the cap and trade system, and certainly risks some negative consequences, but it is likely that other parts of the U.S., and eventually the world, will also begin to implement some kinds of carbon-controlling requirements.  The question remains, what would be the better approach?  With this action, at least we can learn if cap and trade will have greater positives or negatives.  Someone always must try new approaches first; this time it is a state that tends to lead in the arena of environmental management in this country.

Thanks for your thoughtful arguments - look forward to a response.

 

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Submitted by William A. Levinson on Mon, 01/07/2013 - 21:55

In reply to Henry Ford .... by Ken Clayman

Cost of carbon waste

Re: "If cap and trade is not an incentive to drive either efficiency or, at least, reduce carbon emissions, what would be a preferred alternative?" The cost of wasted energy is a sufficient incentive by itself. Any action taken to reduce this waste will reduce carbon emissions, if the energy comes from a carbon source. One would, of course, seek to eliminate the waste even if the energy is from a non-carbon source. Cap and trade will, on the other hand, not get rid of the waste, and may even make it worse. If there is a cheaper alternative to carbon fuels, businesses will adopt them regardless of carbon mandates. If there are not, businesses will deal with them by shipping all the carbon dioxide (and the associated jobs) offshore to countries that do not even regulate real pollutants like sulfur and nitrogen oxides. Then we will have the carbon dioxide, plus particulates, acid rain, and so on. Rudyard Kipling's "The Gods of the Copybook Headings" is highly instructive. The poem shows that we cannot have what we want simply by wishing for it, or legislating it.
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Submitted by markb on Fri, 01/04/2013 - 12:52

Cap & Trade

The cap & trade method is an attempt to capture an externality of the power generation process and feed it back into the costing function so that capitalism can correctly find the true cost/benefit balance.

It is clear that you do not find the cap & trade method an effective way to do this.

Skipping the whole question of "is excess carbon bad" - assume that is for this question - how do you propose to capture this externality so that capitalism can function correctly?

Is it even correct to anticipate a cost and feed it back into the process to reduce the final cost? Do you have to allow a reactor to melt down to find out how expensive it is to clean up afterwards? Waiting until the true costs are easily measurable (sea rises 2 meters, triggering another ice age, ...) is likely to make the eventual cost much higher.

Or are you proposing that the correct behavior of an organization is to foul the environment until someone makes you pay for the damage and them move on to some other place and repeat the process?

 

Mark

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Submitted by William A. Levinson on Tue, 01/08/2013 - 10:37

In reply to Cap & Trade by markb

Cap and Trade only moves the carbon dioxide

Climate change may well be inevitable, as shown by the fact that the world got itself into and out of several ice ages with no human intervention whatsoever. People who owned land in what is now the English Channel obviously had to relocate as a result. If the Dutch had founded New Amsterdam several hundred years before they actually did, a lot of New York would already be under water (or behind dikes).

Suppose the sea does rise another 2 meters, or 20 meters (it has risen over 100 since the last Ice Age). We could throw trillions of dollars at the problem in an attempt to emulate King Canute's futile command that the tide not come in, or we could use the money to mitigate the problem if it does happen.

The people in the Maldives are complaining that the industrialized world is causing climate change that might submerge their islands. Suppose it does; it would be far cheaper to relocate the Maldives' entire population, and buy new homes for them, than to squander money on an agenda that might not even prevent the problem. (In other words, we could easily pay now AND pay later.)

Now, suppose I'm a manufacturing employer in California, and have just been subjected to costly cap and trade mandates. I am not going to pay for state-imposed muda, and neither are my customers. I am therefore going to move the jobs to another state, or else offshore. That does not even get rid of the carbon dioxide; it just gets rid of the jobs.

A reactor is another matter entirely. Carbon dioxide is not poisonous (except in concentrations that far exceed anything we are talking about today), while the products of a nuclear meltdown are obviously hazardous to human life. The same goes for genuine pollutants like nitrogen and sulfer oxides--I support regulation of those, along with things like mercury. I like natural gas because it burns cleaner than coal and (incidentally) produces less carbon dioxide, and now it is becoming economical.

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