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PART 4 OF PARTICIPATORY ECONOMICS: ADDRESSING CRITICISMS

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By  (CONTINUED FROM PARTS 1,2 & 3)

 

Participatory Planning Will Destroy Efficiency

This critic says having a participatory economy will cause our economic lives to involve too much waste of effort. We will either fail to produce what we want, or we will produce it, but with too much waste, utilizing capacities poorly, etc. This is a very fair concern which, however, does overlap with some we have already addressed. If an economy wastes our talents, energies, resources, that is a flaw. If it happens systematically, not simply by mistakes in judgment, and excessively, it is a damning flaw. Thus, at the risk of some repetition from of early commentary, we would like to deal in some depth.

Efficiency means not wasting assets even as we pursue desirable ends. In economics, we do not want institutional arrangements that squander resources, time, labor, talents, or any other assets used to produce outputs to enhance people’s lives. That doesn’t mean we want to exploit all assets mercilessly with no concern for the values we hold dear. It means we want to meet needs, develop potentials, and foster preferred values, and also avoid wasting assets.

The dictionary tells us an incentive is “something, such as the fear of punishment or the expectation of reward, that induces action or motivates effort.” The linkage between not wasting assets and good incentives is simple. The threat or reward of incentives should be precisely meant to induce behaviors that utilize assets appropriately. Good incentives will yield efficient actions. Bad incentives will cause perverse results.

Even among those who accept that rewarding duration, intensity, and onerousness of socially valued labor is morally superior to other alternatives, many might reasonably wonder if there is an unfortunate trade-off between rewarding effort to attain equity and having appropriate incentives to attain efficiency. Is this a trade-off that we must navigate by adopting a reasonable system of rewards that strikes some kind of compromise? Does parecon do that? Do we need to moderate our desire to remunerate only equitably by incorporating other incentives that less admirably promote our equity values but that better motivate laboring activities to avoid wasting assets?

The question is fair but a little surprising because it turns out that the case for rewarding only duration, intensity, and onerousness on efficiency grounds is, if anything, more straightforward than the case for rewarding only effort/sacrifice on grounds of equity or morality.

Differences in productive outcomes arise from differences in talent, training, job placement, tools, luck, and effort. Once we clarify that “effort” includes personal sacrifices incurred in training, and we stipulate that training is undertaken at public rather than private expense, the only one of these factors influencing performance over which a person has any individual discretion is his or her own effort.

By definition, a person cannot enlarge his or her innate talent or luck to get higher income. Rewarding the occupant of a job for the contribution inherent in the job itself or for the good tools employed in that job also does not enhance the occupant’s performance, so long as productive jobs and good tools are promoted by the economy more generally. Thus the only factor we need to reward to enhance individuals’ performance is their effort.

This claim certainly turns common wisdom on its head. As we revisit below, not only is rewarding only duration, intensity, onerousness consistent with efficiency (assuming appropriate accompanying methods exist to elicit good allocation of energies and tools and so on), but rewarding either talent, training incurred at public expense, job placement, or tools has no positive incentive effects. These rewards are literally wasted. We cannot change our genetic endowment because someone offers us a salary incentive for our output, nor can we change our luck, nor the quality of our workmates, nor the tools available.

As a practical example, in a very inexact but nonetheless revealing analogy, suppose we wanted to induce the fastest race we could from runners in a marathon. Our goal is to get everyone in the race to run as fast as possible so the total time spent by all runners taken together is as low as possible. Should prizes be awarded according to outcome, rewarding those who go fastest the most, down to those who go slowest, or according to effort, perhaps by examining improvements in personal best times?

Rewarding outcome provides no incentive for poor runners with no chance of finishing “in the money” and no incentive for a clearly superior runner to run faster than necessary to finish first. In fact, no one has any incentive to go much faster than the person they are barely beating, assuming they cannot beat the person finishing ahead of them. On the other hand, paying in accord with improvements in personal best time—that is, paying in accordance with effort as measured by this or any suitable index—gives everyone an incentive to run as fast as they can and in that way produces the fastest overall time. So why, we might wonder, do so many people believe that seeking equity by rewarding only duration, intensity, and onerousness conflicts with attaining efficiency and productivity? Three reasons typically arise. People tend to believe that:

 

  1. If consumption opportunities are equal other than for differences in effort expended, people will have no reason to work up to their full talents or capabilities.
  2. If payment is equal for equal effort, there is no incentive for people to train themselves to be most socially valuable.
  3. Since effort is difficult to measure accurately, while outcome is not, rewarding performance is the practical option.

Responding to reason one, in situations where solidarity or pride in one’s work is insufficient to elicit effort without inflated reward, and where greater consumption opportunities are the only effective rewards, it will be inefficient to award equal consumption opportunities to those exerting unequal effort. That much is correct. But that is not what we have proposed.

We do not rule out correlating consumption opportunities with effort made at work, but precisely the opposite. The parecon approach is that everyone should have a right to roughly equal consumption opportunities because the parecon vision of production is that all should exert roughly equal effort in work. To the extent job complexes are balanced so that no one is required to make greater personal work sacrifices than anyone else, effort is largely equalized and therefore consumption should be largely equalized as well. But this is not to say that variations cannot occur.

Individual variations of effort and therefore consumption are perfectly acceptable and anticipated in a participatory economy. People can choose to work harder or longer, or perhaps to take up some onerous tasks that have not been allotted but need doing. Alternatively, people can choose to work less hard or less long to earn less. In short, people can work less and consume less, or work more and consume more, in each case in proportion to the effort/sacrifice involved.

But if there is no sky to reach for, you may be asking—if there is no vast advantage in consumption opportunities to be sought and won—will people lift their arms to work at all? It is one thing to say it is morally proper to remunerate only duration, intensity, and onerousness. It is another to say that doing so will elicit enough effort to yield efficient productivity. Would effort incentives elicit efficient productivity?

In a society that makes every attempt to deprecate the esteem that derives from anything other than conspicuous consumption, we shouldn’t be surprised that many people feel that great income differentials are necessary to induce effort. But to assume that only the accumulation of disproportionate consumption opportunities can motivate people because under capitalism we have strained to make this so is not only unwarranted, it is self-deceptive.

In the first place, very few people attain conspicuous consumption in modern capitalist societies. And those that do not are, for the most part, among the hardest working in the level of effort expended. Normal working people currently work hard in order to live at a modest level of income, not to consume conspicuously. People can therefore obviously be moved to exert effort and endure sacrifice, often even sacrifices greater than they ought to have to put up with, for reasons other than a desire for immense personal wealth. Moreover, family members make sacrifices for one another without the slightest thought of material gain. Patriots die to defend their country’s sovereignty. And there is good reason to believe that for non-pathological people wealth is generally coveted overwhelmingly as a means of attaining other ends such as economic security, comfort, useful artifacts for pursuit of desirable hobbies, social esteem, respect, status, or power. If economic security is guaranteed, as in a parecon, there will be no need to accumulate excessively in the present out of fear for the future.

We need not debate this point at length, but wish merely to note that if accumulating disproportionate consumption opportunities is often a means of achieving the more fundamental non-material rewards, as we believe, then there is every reason to believe a powerful system of incentives need not be based on widely disparate consumption opportunities. If expertise and excellence are accorded social recognition directly, there will be no need to employ the intermediary device of conspicuous consumption to get people to engage in areas of work where their talents are best displayed. If people participate in making decisions, as in a parecon, they will be more likely to carry out their responsibilities without recourse to excessive external motivation. If the allocation of duties, responsibilities, sacrifices, and rewards is fair, and is seen to be fair, as in a parecon, one’s sense of social duty will be a more powerful incentive than it is today. And if a fair share of effort is in any event demanded by workmates who must otherwise pick up the slack, and additional effort is appreciated by one’s companions, recognized by society, and also awarded commensurate increases in consumption opportunities, why should anyone doubt that incentives will more than adequately elicit needed involvement and effort? The fact that there won’t be motivation to undertake excessive production for useless or egotistical ends would be a gain, not a loss.

But what about reason two? What incentive will people have to train themselves in the ways they can be most socially valuable if remuneration is only for effort/sacrifice, not output? And, for that matter, what is the real issue lurking in this concern?

Since Mozart could contribute more by composing than being an engineer, it would have been inefficient for society in terms of lost potentials had he studied engineering. And if Salieri – a less successful composer from the same period – would have made an even worse engineer than composer, the same holds true for him. Society benefits in accruing more valuable products if people develop the talents in which they have comparative advantages, and this means society benefits if its incentive systems facilitate rather than obstruct this outcome. If Mozart would be inclined to pursue engineering over composing by preference, it would be desirable that society provide enough incentives for him to compose concertos rather than design bridges so that he would happily follow that path. But the query embodied in issue two is how will a parecon do that if by composing Mozart would get the same rate of pay for the same effort as he would for designing bridges? Won’t we lose out on the remarkable compositions we could get from someone with the innate talents of a Mozart, with society suffering thereby?

First, there is good reason to believe that people generally prefer to train in areas where they have more talent and inclination rather than less—unless there is a very powerful incentive to do otherwise. Does anyone truly think that offered the same pay for using a lathe or using a piano, Mozart would choose the lathe unless someone threatened convincingly to make his life utterly miserable were he to opt for the piano? In other words, in most instances, incentives are not even needed to get people to utilize their greatest talents, we just have to avoid disincentives, and there are no such disincentives in a participatory economy. Those who could become wonderful composers, playwrights, musicians, and actors (or dentists, doctors, engineers, scientists, or what have you), will not pursue other avenues of work in which they are less apt to excel in pursuit of greater material reward because there is no greater material reward elsewhere. Nor will people in a parecon shun training that requires greater personal sacrifice since this component of effort will be fully compensated.

Second, for those cases where a little extra benefit of some sort would be needed to propel a person into his or her most productive pursuits, a parecon increases direct social recognition of excellence as compared to other economies. In a participatory economy, indeed, the best, and in some sense, the only way to earn social esteem related to one’s economic activity is to make notable contributions to others’ well-being through one’s efforts. Since working in accord with one’s talents can best do this, there are powerful incentives to develop innate talents. The only thing a  parecon prohibits is paying ransoms to superstars. Instead, a parecon employs direct social recognition and thereby avoids violations of our deeply held values. Will some prospective Mozart or Einstein, knowing their potential in their optimal pursuit, opt to become an engineer or a violinist rather than a composer or physicist? It could happen, but it seems unlikely. Would this happen more frequently than in class-divided economic systems which squash most people’s talents due to imposing on people harsh poverty and robbing them of dignity and confidence? To ask this is to answer it. Not to mention that in capitalism many people with great potential squander their talents anyway by opting for the huge rewards they can gain from doing things like becoming a corporate lawyer whose main function is to help big firms avoid paying taxes – or a doctor whose main function is to provide liposuction treatment to rich people who can pay for it – choices that are socially harmful, though of course beneficial to those with money.

What about reason three, the difficulty of measuring effort as compared to performance? While economic textbooks speak blithely of marginal revenue product in infinitely substitutable models, the real world of social endeavors rarely cooperates. There are many situations where assigning responsibility for outcome is highly ambiguous, and where determining who really contributed what to output is effectively unknown. As those who have attempted to calibrate contributions to team performance can testify, there are some situations where it is easier than others. Sports teams are certainly more suited to such calibration than production teams. But even there it is more difficult to calibrate individual contributions in football and basketball than in baseball. And even in baseball, arguably the easiest case of all, there are never ending debates over different ways of measuring direct contributions to victory in individual games, not to mention the difficulty of assessing a player’s impact on team chemistry.

Nor is measuring effort always so difficult. Anyone who has taught and graded students knows there are two different ways – at least – to proceed. Students’ performances can be compared to each other (output), or to an estimate of how well the student could have been expected to do (effort). Admitting the possibility of grading at least in part according to personal improvement (grades are not, in fact, rewards, but measure absolute attainment as in mastery of some subject matter) is tantamount to recognizing that teachers can, if they choose to, measure effort – and they can do it even though they are not in the dorm rooms of their students, monitoring their hours of study.

Now consider your workmates. They not only know your past productivity, which means they can compare your efforts to your past by comparing its product, they can also actually see you exert each day. So co-workers are in a far better position to judge each person’s effort than a teacher is able to judge the effort of students. Indeed, who is in a better position to know if someone is only giving the appearance of trying than people working with him or her in the same kind of labors? It is actually not only more just to remunerate effort than output for all the reasons we have explored, but particularly in an economy with balanced job complexes, it is quite a bit easier. Errors will by definition be much smaller. Methods of assessment can be, and in a parecon would be, democratic and mutually acceptable. Entanglement of effects and factors is not a problem. And it is not nearly so easy to pull the wool over the eye’s of one’s workmates as it is to do so with a supervisor, as people do today.

 

Participatory Planning Will be Too Inflexible to Succeed

Our last critic accepts that parecon is a fine idea. She accepts that markets and central planning are horribly flawed. She accepts the desirability of councils, balanced job complexes, self-management norms and procedures, as well as remuneration for duration, intensity, and onerousness of socially valued labor. She accepts that participatory planning fosters all those features and has additional virtues as well, and she supports it for those reasons. But, even with all that celebration, she worries about parecon being too doctrinaire.

Okay, markets for all our allocation is a horrible idea, says this critic, but why not just for some of it? Why not try to capture the benefits markets have for those items where its benefits will be greatest and where we can curtail accompanying debits? The critic claims markets are responsive. They react to shocks quickly and they can update weekly, daily, or even hourly. In contrast, participatory planning cannot re-plan repeatedly, so can’t we therefore benefit by using markets to augment or along with or even in place of pareconish approaches, at least for the items where speed of reaction is needed?

In other words, can’t we have a somewhat mixed economy? Can’t we take the essence of participatory economics and strengthen it by adding some limited attributes of other approaches and, in particular, some market mediation of exchange?

Consider some product that you know will have frequent innovation. When you plan it in the participatory planning process at the outset of the year, you get a very good assessment of its true costs and benefits (or exchange value) at the start of your year. The procedures support the economy’s broad values. They respect and foster self- management, and so on. But what happens when innovations occur for the item in question well before the next planning period comes around, say only two or three months into the year?

I know the system handles modest typical preference changes fine, says the critic, including those arising from changes in the product, but what if there is a really large change because an innovation makes the product really much easier to produce or perhaps due to a massive fire destroying lots of production potential, and, as a result, many more people want the product than planned to get it (well beyond what slack planning can handle)? Wouldn’t it be good to let the consumers and producers of the item operate as they would via a market, so that the price would move quickly and in the correct direction, and so that demand would properly fall? Wouldn’t this improve on having to re-plan the whole economy?

Our answer to this very fair question comes in two parts.

First, if in such cases the only option was to persist with the plan as conceived in the initial planning period or to incorporate market features, we would favor the former. The loss in efficiency induced by having to wait to adjust until the next planning period would be quite modest compared to the debits of ushering market allocation back into the system. The short of it is that moving quickly by markets from wrong prices to still wrong prices by methods that subvert all the values we hold dear is not improving matters.

But, second, this is not the actual situation. There is no reason why parecon consumers should have to sit tight with the initially planned exchange rates and allocations rather than correct for surprising innovations or calamities, even for large ones such as the critic hypothesizes. To compare, suppose an innovation or a calamitous destruction of productive potential occurs in a market economy. The conditions prevailing have changed. Old prices would no longer clear markets properly. How do prices and material choices by actors respond?

With markets, buyers and sellers try to get as much benefit for themselves, regardless of the effect on others, of the new situation, just as they did in the old situation. The market response, in other words, will likely go in the right direction, but the motive driving the correction, as at all times with markets, will be pursuit of profit/surplus and advance of competing actors via enlarging market share. The process will ignore the will of agents not directly involved in the exchange. It will impose antisocial motives and other failings, as with markets in general.

Additionally, the idea that markets respond well to shocks and changes is, in any event, only a mathematician’s assumption. In fact, the rippling changes percolating from an unexpected major change in demand or supply take time to unfold and the assertion that they will inevitably occur quickly and accurately (even if we set aside other reasons for market prices diverging from true costs and benefits and market outputs diverging from accurate representations of people’s unbiased preferences) conveniently ignores a host of disequilibrating dynamics that actually afflict market systems and that may mean that the initial markets affected by the shock do not re-equilibrate quickly, or at all; and/or that interactions between interconnected markets produce a disequilibrating dynamic that pushes all markets farther from a new equilibrium.

Thus re-equilibration in a market economy typically requires a change in some initial market affected by the unforeseen event followed by changes in any markets where supply or demand is affected by the change in the first market, followed by changes in other markets where supply and demand is affected by changes in the second tier affected, and so on. How much of this re-equilibration takes place how quickly is anybody’s guess. Market enthusiasts assume it all happens very quickly, and that market prices are good in the first place and good after re-equilibration as well. Of course in reality only some of it happens. None of it happens instantly. And worst, market prices diverge from accurate valuations of true social costs and benefits both before and after any shock. In sum, to the extent that re-equilibration does not reach all markets, and to the extent that markets which do eventually re-equilibrate do not do so instantaneously, market systems will perform inefficiently and inequitably in response to the unforeseen event even if its prices were efficient before and wound up efficient after the shock. Of course, when its prices aren’t efficient before and don’t wind up efficient afterward, things are that much worse.

For such reasons, we would not want to have some items handled by market processes in a parecon even if it were an otherwise plausible option, but more, we really could not sensibly do so even if we wanted to. Having a little markets in a participatory economy is a bit like having a little slavery in a democracy, though even less tenable. The logic of markets invalidates the logic of participatory planning and of the whole participatory economy, and it is also imperial. Once markets operate they try to spread as far and wide as they can. You cannot have some workplaces seeking market share, trying to induce purchases regardless of impact on consumers and society, ignoring external effects, trying to elevate remuneration according to power or output or surpluses, and expect those firms to interface congenially with the rest of the participatory economy. So, in contrast to markets, if we have to live or die with it in full, what about participatory planning’s responsiveness?

Again an innovation occurs, this time in a parecon. Suppose the unforeseen event significantly affects demands and valuations so that the original plan—which was efficient and equitable before the shock—would be no longer efficient and equitable. The optimal solution, considering only the choice of material inputs and outputs and their valuation and thus distribution, is to redo the entire planning process and arrive at a new plan perfectly efficient and equitable in light of the new conditions. Doing so is in that sense the analog of a market system jumping from allocations before the shock all the way to allocations after all of the interconnected markets re-equilibrate, without any misallocations in the interim.

But wait says the critic, this answer won’t do because re-planning is impractical except in cases of huge unforeseen events with large enough impact to merit that big an undertaking, even if I will admit that in such cases nothing would prevent redoing the plan. My point is, says the critic, most of the time deviations are important yet not worth cranking up the entire planning process involving all workers and consumers councils, federations, and so on. To appease me regarding parecon’s flexibility, you need to have something more convenient, even if a little less perfectly efficient and equitable, than entirely re-planning the whole economy.

In short, when a shock requires significant adjustments, how do we tide over with appended alterations until the next scheduled planning period fixes things “perfectly” – never more than 12 months away? The answer is that different instances of parecon might have different approaches to doing this. Here is one.

Workers in an industry notice markedly changed demand or valuations. Many more people than planned come to want some product. The easiest adjustment is if the original plan allowed for production of a certain amount extra of the good in question, so that unexpected increased demand can be met by actualizing this extra potential. The name for a plan with no extra potential built in is a “taut plan,” and the name for a plan with extra potential built in is a “slack plan,” with the amount of “slack” varying for the economy and its industries. This is exactly analogous to business inventories in a market system, whether kept on hand, or able to be generated.

But suppose workers notice that the increased demand will take them beyond the available slack. As a result, they begin to contact facilitation boards seeking extra workers and begin consulting suppliers for additional inputs. If this can be had to the extent needed, they report the results and the facilitation boards calculate the effect on final prices. The predictions are made available to all consumers. If assets for the desired production can’t be had, supply won’t rise sufficiently and, instead, decisions will have to be made regarding allocation of the limited available products. Of course all the usual methods and motives of parecon operate at each step, whatever specific approaches a particular parecon might employ.

Let’s pick a simple unforeseen event. An unprecedented warm spell dramatically increases people’s desires for air conditioners beyond what was planned plus available slack.

An easy possibility is to ration the existing supply of air conditioners at the level set by the original plan. This could be done in a variety of ways. (1) Give everyone seeking air conditioners only X percent of the what they they asked for, where X equates demand with available supply. Of course, this is not possible for items that are not divisible. So (2) give air conditioners only to those who asked for one in the original plan and only in the quantity they asked for. Do not accommodate new demanders or increased demands until th next period. But another option is (3) raise the price of air conditioners until the excess demand disappears, i.e. employ increased prices to ration air conditioners. In this case, we would have to have an IFB in place to adjust indicative prices during the year. Or we could have the national consumer federation and the national air conditioner industry federation make the price adjustments. If we adjust the price of air conditioners to eliminate the excess demand we have to charge users the higher price or their demand will not fall to the existing level of supply. Those who get the air conditioners and are charged the higher price now must either reduce the amount of some other goods they consume—not picking up all they ordered in their original plan—or they must increase borrowing which is monitored in a participatory economy by their consumer federation.

But of course as this example intentionally makes evident, a more desirable adjustment to the unforeseen event would be increasing production of air conditioners. We now know that more of society’s scarce productive resources should be devoted to air conditioners than the original plan called for, and therefore, by implication, less of society’s scarce productive resources should be devoted to producing other goods and services.

Adjusting production of air conditioners is in this event more complicated than simply rationing the existing supply in any of the above ways, but to do so also better meets real needs and is therefore ultimately more efficient.

The simplest way to increase production is to ask the air conditioner federation to increase output via overtime. If the workers can produce more by working more hours without needing significantly more inputs, the only remaining issue is an equity matter—how much to compensate them for their extra sacrifice. They will re-rate themselves and presumably claim sacrifices equal to the extra hours plus extra sacrifice they consider the after hours nature of their work to entail.

But what if more air conditioners cannot be produced without more non-labor inputs which must be obtained from other workers’ federations? Then a fuller and more efficient mid-plan adjustment requires renegotiation between the air conditioner federation and the workers’ federations who supply them. This is just the percolating and spreading implication of a shock in an entwined economy, the same as would occur were allocation handled by markets. And in all cases of all involved parecon firms the choices about (1) rationing and (2) adjusting production schedules, simply repeat themselves. How much mid-term adjusting to do—rather than just waiting for the new planning period to get inputs and outputs all “perfect” again; and then how much of that mid-term adjusting to do simply by rationing, i.e. adjusting consumption only; how much to do by adjusting production of the initial item affected and/or of other items that are inputs, etc.; and which of the various options to use in any part of an adjustment, including whether or not to recalibrate prices, are all practical issues to be decided by those who work and consume in a participatory economy following general norms and procedures applicable in specific cases, though not via one single right norm or procedure that must be followed always in all cases and in all parecons, we would guess.

In any event, there is no reason to think that the proliferating adjustments in a participatory economy are any more difficult or cumbersome than analogous adjustments in market economies—unless one makes the unrealistic assumption that markets adjust infinitely quickly to arrive at new equilibria. And so the overall difference from a market system is increased rather than diminished flexibility, in that options can be consciously chosen, the elimination of various (competitive) causes of spiraling divergence from equilibrium can be respected, plus, of course, that the procedure’s guiding motives are social rather than profit seeking, the valuations are accurate rather than distorted, and the influence of actors is proportionate to the degree they are affected rather than enormous for ruling classes and minuscule for subordinate classes.

Thus, with a large change in desirability of a product or some other major shock in a parecon that goes beyond what slack can accommodate, everyone who wants some affected good could be supplied, or only those who originally placed orders could be, or only those willing to pay a new higher price could be. In any of these events, there would be some change in the real price, rising above or falling below the planning period’s indicative price. A parecon can handle all these matters in numerous ways.

 

Indeed here is another angle from which to think of the whole situation. Think in terms of the year’s end. Suppose you got everything you sought, exactly as you sought it. But suppose the total value assessed at year’s end was less than the total you allotted from your budget—final prices for the year changed from planned prices so that the total cost of all that you consumed was less in final fact than it was in your initial planning. Then you would be entitled to a refund, or else you would have unfairly lost out. Or suppose the total value of what you consumed in final prices turned out higher than originally indicated in planned prices. Then you would owe some, or would have received more than you deserved. But parecon has no trouble correcting in regard to either result. It can properly allot credit or debit to your account for the next period.

The only difficulty in the above trivially simple approach is that you would not have had a chance to reassess your choices based on the accurate prices. But a parecon can meet this problem too. It need only provide monthly updated price estimates based on the year’s unfolding patterns, so that you can, in fact, continually reassess your remaining choices against slightly altering price projections. With slack and the averaging of different consumers’ choices, the amount of re-planning would likely be very modest.

The main point of all this, however, is that speed of response is not all that much of a virtue in the first place, nor do markets possess as much speed as people think, nor do they speedily arrive places where people should knowingly wish to go in any event – and certainly that speed of response should never be “bought” by incurring costs that are way more damning than the modest gains achieved.

 

Strategic Flaws?

Parecon fetishizes the idea of a third class.

This critic says participatory economics worries way too much about avoiding a socialism that isn’t really socialism. Parecon’s commitment to balanced job complexes generates sectarian negativity about potential allies. Parecon gets class wrong.

The idea of a third class between labor and capital actually has a long anarchist and libertarian lineage leading back to Bakunin and even a bit further to others less famous. Of course that doesn’t make the idea right, but it is interesting to note.

Yes, advocates of participatory economics worry about mistakenly winding up with something called socialism which isn’t classless, self managing, etc. We don’t want to give our lives to efforts to improve society only to wind up with results we would rather never have ushered in – something all too familiar from history. We do not want a new society that is not classless, that lacks free association, that is less than we desire.

What parecon says in these regards is that between labor and capital in a capitalist economy and still operating above labor when the owners are eliminated but real classlessness is not achieved, there exists a third class – which we call the coordinator class.

The participatory economic claim is that while capitalists are defined by having a monopoly on productive property – which is to say they own it all and others don’t own any – the coordinator class is defined by monopolizing empowering work. They do that type of work, and others don’t. Further, the work this third class does educates and elevates them in such ways that they are well prepared to develop and argue for agendas within workplaces and in the broader economy whereas workers, operating below, are not.

In other words, those who do rote and repetitive tasks each day lack essential information, confidence, and social skills – which are all blasted out of them by the disempowering work they do – to participate effectively in decision making, and are even disinclined to do so. Those who instead do empowering tasks learn in the process about the overall work situation, engage with others, and have time and energy to apply to decision making, all of this being enhanced each day by the work they do. Coordinator class members, as a result, are able to participate effectively and are also inclined to do so.

Twenty percent of the workforce, roughly, are coordinator class and they dominate 80 percent, roughly, who are working class. In capitalism owners reside above the coordinators. In what has been called market and centrally planned socialism, owners are gone and coordinators are on top.

The pareconist says:

 

1. The institutions of a classless economy need to replace whatever causes class divisions.

 

2. Whatever in past efforts to win a new society has caused the old coordinator class to retain its position above workers has to be avoided, as well.

 

Its visionary commitment to avoiding coordinator class rule contributes to parecon’s reason for adopting its preferred institutions. Parecon avoids private property to remove the capitalist class from dominating and even from existing. That doesn’t mean there are no workplaces and resources, it just means workplaces are not owned by a few. But parecon goes further, realizing that to eliminate the basis for an owning class is not the same as to eliminate all basis for all classes, it has two more key steps to take. First, it must change the division of labor so that empowered tasks are not monopolized by a few. And second, it must change allocation so that it does not pressure actors by its roles into recreating that same division of classes even if initially it was replaced. Thus, as noted earlier, parecon advocates balanced job complexes and participatory planning.

Now, what about the criticism? Well, yes, it is quite true that parecon is concerned about avoiding a “false socialism” that is really better named coordinatorism. But in this pursuit, parecon doesn’t get class wrong. Rather, it is typical Marxist formulations that emphasize only property as a basis for class division and thus arrive at only two centrally important classes, that gets class wrong. Yes, of course capital and labor are important. But no, they are not alone important. The coordinator class matters as well – not just because its particular structurally imposed motivations complicate capitalist existence (though they certainly do), but because this third class between labor and capital can have its own agenda, contrary to capital but also contrary to labor, leading to what we might usefully call coordinatorism.

Now, does aiming for balanced job complexes generate negative sectarian attitudes about a potential ally – empowered workers, which is to say, members of the coordinator class – as the critic claims? Yes, applied mechanically it can certainly do so. But it doesn’t have to be applied mechanically. We have an analysis that tells us a group is likely to have certain attitudes, values, habits, that are harmful, not generetically, but due to their circumstances. First, we don’t have to treat each member of the group, apriori, as if the insight necessarily applies to him or her. It doesn’t. And second, even if it does, there is no need to treat the person as some kind of enemy, we just don’t want to cater to the harmful views, values, habits. This is all quite analogous, say, to how social movements relate to or in any event ought to relate to, say, men, or members of a cultural majority, and so on.

But doesn’t seeking balanced job complexes mean that some members of the coordinator class will be more or less horrified by a pareconist project, and that they will deem it utopian nonsense, and try to seriously oppose it? Yes, we know it does, indeed it already has. The position and circumstance of members of the coordinator class will certainly lead many coordinator class members toward such a stance. However, is it also possible for people doing empowered work to feel that a change to balanced job complexes and classlessness is morally right, socially desirable, economically necessary, or all three? Of course it is possible. And in fact this also often happens.

Even when that does happen, however, is there still a set of habits and dispositions associated with the coordinator past that can dominate movement efforts and drag them, even against everyone’s will, toward old patterns? Of course there is.

So what needs to be done is not crass and mindless name calling but to be clear about the issues and to seek balanced job complexes to overcome coordinator rule and attain conditions of classlessness, and, as well, to seek those new relations in ways welcoming coordinator class members to participate, but without their dominating the process and results. This means organizing methods and movement organizations should not replicate old coordinator worker arrangements but should instead overcome the classist assumptions and attitudes characterizing and continually abetting and reproducing coordinator domination of working people. The analogy to dealing with racism and sexism without becoming mechanically opposed to whites and men per se is rather strong. These are strategic issues, but centrally important ones.

An analogy can help. Workers by their position daily succumb to owners and coordinators including carrying out policies and acts that are heinous in their results. When an anti capitalist opposes wage slavery, it doesn’t mean he or she must have sectarian hostility toward working people who are not yet rejecting their plight. Indeed, to the extent it drifts into such a stance, it becomes self defeating. So an anti capitalist should oppose private property, yes, but not the people compelled by its existence to act harmfully. Some of their actions will have to be opposed at times, but not the people themselves, and especially not workers.

Well, the same logic broadly holds for the coordinator/worker relation. The parecon advocate should reject and seek to replace corporate divisions of labor. But the parecon advocate should not argue that having had the benefits of being born and raised or otherwise occupying coordinator class slots makes one the devil. Rather, it most likely gives one some classist habits, mannerisms, and beliefs that need to change, but also some skills, talents, and knowledge that can be used very helpfully, if the other changes are occurring.

 

Parecon Is Economistic

This critic says that participatory economics puts too much emphasis on the economy and too little on everything else. Parecon will sublimate or violate needs and potentials born outside the economy.

If the only thing parecon advocates were seeking was a participatory economy, this criticism would have real merit. In fact, even if one was seeking mainly a participatory economy while desiring gains in other parts of life as well, but while assuming they would follow pretty much automatically from economic gains, this criticism would be damning. However, the reality is that Parecon was conceived via an approach that takes for granted that not only economics, but also kinship, culture, and polity – as well as ecology and international relations – are all paramount. A serious societal vision will address all these dimensions of social life, not just one or another. Indeed, I don’t know of a single parecon advocate who isn’t also a participatory society advocate, seeing parecon as just one part of a larger undertaking. In short, as with quite a few other concerns about participatory economics, the reality is nearly the reverse of what critics claim.

 

Claim: Parecon is economistic.

Reality: Parecon advocates, perhaps more than any other activist constituency one might name, are explicitly scrupulous in their commitment that any singular conceptual attitude – whether it is a radical feminism, or a cultural nationalism, or a mainly political anti authoritarianism, or a mainly economic anti capitalism – which elevates one aspect of life above all others – is a recipe for visionary and strategic disaster.

So how does this particular concern that parecon advocates are economistic arise, if it is so clearly off base?

The answer is that there are certainly books and talks and presentations that are overwhelmingly or even very nearly entirely about parecon, and just parecon – with little reference to other spheres of social life. This is true in part because it is pretty much impossible to simultaneously address all sides of life fully in one work – though some works at least do so in an overarching way – such as the book Realizing Hope – and in part because of the aspects of life so far addressed, much more work has been done on economics than on other aspects. This asymmetry is little more than an artifact of creation and the times and history and mainly who got started first, and so on. Certainly it is not a statement about importance. If the authors of kin vision, or political vision, or cultural vision, had come first, and if those domains lent themselves as easily to a fuller presentation, then one or more of those would have the bulk of coverage to date, and not economy.

Still, I agree that so far the participatory society effort has had too little attention given to the non economic aspects of society. This is not built into its concepts or values, however. Quite the contrary. Rather, so far folks best able to extend the insights in many other domains have been too busy with other pursuits or perhaps made skeptical of vision, or of this overall approach, etc., by false concerns. At least some folks with a prior economics focus, have had time to pursue that domain more fully.

 

Parecon Is Gradualist/Reformist

This critic says participatory economics does not advocate an essential break in the here and now. Parecon is not revolutionary but will lead to a never ending limited pursuit ultimately going nowhere significant. Parecon is reformist.

However, to say one wants a new economy that is fundamentally transformed in its defining features is certainly saying one wants an essential break – even before talking about breaks in other dimensions of life as well. That others say they want a break, so to speak, but say nothing about what it would mean, and that parecon advocates say they want a break, so to speak, and say exactly what they mean, somehow diminishes the latter?

Do participatory economy advocates fight for and hope to win diverse reforms? Yes. Absolutely. Does that make them reformist? No. Absolutely not.

The point is trivial and has been repeated over and over. That it is still contentious seems to parecon advocates quite strange. Their response goes like this. Reforms are changes in the here and now which don’t fundamentally alter society’s defining relations, which means as well, they don’t usher in a participatory economy or society. So far, so true.

But, if one wants to usher in a participatory economy, should one be against higher pay for striking workers, a raise in minimum wages, a change in government spending, an end to a war, and so on? Of course not. One should be for these gains and countless others that people pursue, but also for winning a new economy, and, more broadly, a new society. So one should fight for those gains and others, but should do so in a way conceived not only to win the short run changes for their immediate benefits, but in a way conceived to increase the likelihood of further struggles that win further benefits. We should fight for reforms in a non reformist manner that creates organization, consciousness, and desires that ensure that upon winning reforms people want to win more and are in better position than earlier to do so.

 

Conclusion

I don’t believe the above reactions will satisfy all who register the claims and concerns indicated. In fact, to be honest, in some cases I don’t think anything would suffice to reduce concerns since in some cases I don’t think the concerns are held based primarily on reasoning or evidence, but, instead, merely as a means to defend some other long favored view or heritage, or to dismiss this one for reasons of distaste or defense of current relations, not dispute. This type of intellectual rigidity is not unique even to political dispute but occurs in every field, at least at times. It is, however, why it is particularly important for debate to engage more than just initial advocates and critics. It is the discipline that multiple serious participants can bring that can facilitate disputes being resolved – that, and history.

Hopefully this second part of the three part exploration of participatory economics will induce some more participation in these matters. As frustrating as I and some participatory economic advocates find some critics’ thinking, far more frustrating and disturbing is the response of others – bored aloofness or overt dismissal of matters that are, ultimately, of profound importance.

If Parecon is determined unworthy or un-implementable, okay – it should be dismissed as a vision and used only as a source of possible partial insights. But if it is both worthy and viable, it should be shared widely as a vision, and, in that capacity, help movements to win a better world. We should all be prepared to carry on if the former proves true, in that case working to find new vision. We should all also be prepared to carry on if the latter proves true, in that case building consistent m

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PART 4 OF PARTICIPATORY ECONOMICS: ADDRESSING CRITICISMS

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By  (CONT 1,2 & 3)

 

Participatory Planning Will Destroy Efficiency

This critic says having a participatory economy will cause our economic lives to involve too much waste of effort. We will either fail to produce what we want, or we will produce it, but with too much waste, utilizing capacities poorly, etc. This is a very fair concern which, however, does overlap with some we have already addressed. If an economy wastes our talents, energies, resources, that is a flaw. If it happens systematically, not simply by mistakes in judgment, and excessively, it is a damning flaw. Thus, at the risk of some repetition from of early commentary, we would like to deal in some depth.

Efficiency means not wasting assets even as we pursue desirable ends. In economics, we do not want institutional arrangements that squander resources, time, labor, talents, or any other assets used to produce outputs to enhance people’s lives. That doesn’t mean we want to exploit all assets mercilessly with no concern for the values we hold dear. It means we want to meet needs, develop potentials, and foster preferred values, and also avoid wasting assets.

The dictionary tells us an incentive is “something, such as the fear of punishment or the expectation of reward, that induces action or motivates effort.” The linkage between not wasting assets and good incentives is simple. The threat or reward of incentives should be precisely meant to induce behaviors that utilize assets appropriately. Good incentives will yield efficient actions. Bad incentives will cause perverse results.

Even among those who accept that rewarding duration, intensity, and onerousness of socially valued labor is morally superior to other alternatives, many might reasonably wonder if there is an unfortunate trade-off between rewarding effort to attain equity and having appropriate incentives to attain efficiency. Is this a trade-off that we must navigate by adopting a reasonable system of rewards that strikes some kind of compromise? Does parecon do that? Do we need to moderate our desire to remunerate only equitably by incorporating other incentives that less admirably promote our equity values but that better motivate laboring activities to avoid wasting assets?

The question is fair but a little surprising because it turns out that the case for rewarding only duration, intensity, and onerousness on efficiency grounds is, if anything, more straightforward than the case for rewarding only effort/sacrifice on grounds of equity or morality.

Differences in productive outcomes arise from differences in talent, training, job placement, tools, luck, and effort. Once we clarify that “effort” includes personal sacrifices incurred in training, and we stipulate that training is undertaken at public rather than private expense, the only one of these factors influencing performance over which a person has any individual discretion is his or her own effort.

By definition, a person cannot enlarge his or her innate talent or luck to get higher income. Rewarding the occupant of a job for the contribution inherent in the job itself or for the good tools employed in that job also does not enhance the occupant’s performance, so long as productive jobs and good tools are promoted by the economy more generally. Thus the only factor we need to reward to enhance individuals’ performance is their effort.

This claim certainly turns common wisdom on its head. As we revisit below, not only is rewarding only duration, intensity, onerousness consistent with efficiency (assuming appropriate accompanying methods exist to elicit good allocation of energies and tools and so on), but rewarding either talent, training incurred at public expense, job placement, or tools has no positive incentive effects. These rewards are literally wasted. We cannot change our genetic endowment because someone offers us a salary incentive for our output, nor can we change our luck, nor the quality of our workmates, nor the tools available.

As a practical example, in a very inexact but nonetheless revealing analogy, suppose we wanted to induce the fastest race we could from runners in a marathon. Our goal is to get everyone in the race to run as fast as possible so the total time spent by all runners taken together is as low as possible. Should prizes be awarded according to outcome, rewarding those who go fastest the most, down to those who go slowest, or according to effort, perhaps by examining improvements in personal best times?

Rewarding outcome provides no incentive for poor runners with no chance of finishing “in the money” and no incentive for a clearly superior runner to run faster than necessary to finish first. In fact, no one has any incentive to go much faster than the person they are barely beating, assuming they cannot beat the person finishing ahead of them. On the other hand, paying in accord with improvements in personal best time—that is, paying in accordance with effort as measured by this or any suitable index—gives everyone an incentive to run as fast as they can and in that way produces the fastest overall time. So why, we might wonder, do so many people believe that seeking equity by rewarding only duration, intensity, and onerousness conflicts with attaining efficiency and productivity? Three reasons typically arise. People tend to believe that:

 

  1. If consumption opportunities are equal other than for differences in effort expended, people will have no reason to work up to their full talents or capabilities.
  2. If payment is equal for equal effort, there is no incentive for people to train themselves to be most socially valuable.
  3. Since effort is difficult to measure accurately, while outcome is not, rewarding performance is the practical option.

Responding to reason one, in situations where solidarity or pride in one’s work is insufficient to elicit effort without inflated reward, and where greater consumption opportunities are the only effective rewards, it will be inefficient to award equal consumption opportunities to those exerting unequal effort. That much is correct. But that is not what we have proposed.

We do not rule out correlating consumption opportunities with effort made at work, but precisely the opposite. The parecon approach is that everyone should have a right to roughly equal consumption opportunities because the parecon vision of production is that all should exert roughly equal effort in work. To the extent job complexes are balanced so that no one is required to make greater personal work sacrifices than anyone else, effort is largely equalized and therefore consumption should be largely equalized as well. But this is not to say that variations cannot occur.

Individual variations of effort and therefore consumption are perfectly acceptable and anticipated in a participatory economy. People can choose to work harder or longer, or perhaps to take up some onerous tasks that have not been allotted but need doing. Alternatively, people can choose to work less hard or less long to earn less. In short, people can work less and consume less, or work more and consume more, in each case in proportion to the effort/sacrifice involved.

But if there is no sky to reach for, you may be asking—if there is no vast advantage in consumption opportunities to be sought and won—will people lift their arms to work at all? It is one thing to say it is morally proper to remunerate only duration, intensity, and onerousness. It is another to say that doing so will elicit enough effort to yield efficient productivity. Would effort incentives elicit efficient productivity?

In a society that makes every attempt to deprecate the esteem that derives from anything other than conspicuous consumption, we shouldn’t be surprised that many people feel that great income differentials are necessary to induce effort. But to assume that only the accumulation of disproportionate consumption opportunities can motivate people because under capitalism we have strained to make this so is not only unwarranted, it is self-deceptive.

In the first place, very few people attain conspicuous consumption in modern capitalist societies. And those that do not are, for the most part, among the hardest working in the level of effort expended. Normal working people currently work hard in order to live at a modest level of income, not to consume conspicuously. People can therefore obviously be moved to exert effort and endure sacrifice, often even sacrifices greater than they ought to have to put up with, for reasons other than a desire for immense personal wealth. Moreover, family members make sacrifices for one another without the slightest thought of material gain. Patriots die to defend their country’s sovereignty. And there is good reason to believe that for non-pathological people wealth is generally coveted overwhelmingly as a means of attaining other ends such as economic security, comfort, useful artifacts for pursuit of desirable hobbies, social esteem, respect, status, or power. If economic security is guaranteed, as in a parecon, there will be no need to accumulate excessively in the present out of fear for the future.

We need not debate this point at length, but wish merely to note that if accumulating disproportionate consumption opportunities is often a means of achieving the more fundamental non-material rewards, as we believe, then there is every reason to believe a powerful system of incentives need not be based on widely disparate consumption opportunities. If expertise and excellence are accorded social recognition directly, there will be no need to employ the intermediary device of conspicuous consumption to get people to engage in areas of work where their talents are best displayed. If people participate in making decisions, as in a parecon, they will be more likely to carry out their responsibilities without recourse to excessive external motivation. If the allocation of duties, responsibilities, sacrifices, and rewards is fair, and is seen to be fair, as in a parecon, one’s sense of social duty will be a more powerful incentive than it is today. And if a fair share of effort is in any event demanded by workmates who must otherwise pick up the slack, and additional effort is appreciated by one’s companions, recognized by society, and also awarded commensurate increases in consumption opportunities, why should anyone doubt that incentives will more than adequately elicit needed involvement and effort? The fact that there won’t be motivation to undertake excessive production for useless or egotistical ends would be a gain, not a loss.

But what about reason two? What incentive will people have to train themselves in the ways they can be most socially valuable if remuneration is only for effort/sacrifice, not output? And, for that matter, what is the real issue lurking in this concern?

Since Mozart could contribute more by composing than being an engineer, it would have been inefficient for society in terms of lost potentials had he studied engineering. And if Salieri – a less successful composer from the same period – would have made an even worse engineer than composer, the same holds true for him. Society benefits in accruing more valuable products if people develop the talents in which they have comparative advantages, and this means society benefits if its incentive systems facilitate rather than obstruct this outcome. If Mozart would be inclined to pursue engineering over composing by preference, it would be desirable that society provide enough incentives for him to compose concertos rather than design bridges so that he would happily follow that path. But the query embodied in issue two is how will a parecon do that if by composing Mozart would get the same rate of pay for the same effort as he would for designing bridges? Won’t we lose out on the remarkable compositions we could get from someone with the innate talents of a Mozart, with society suffering thereby?

First, there is good reason to believe that people generally prefer to train in areas where they have more talent and inclination rather than less—unless there is a very powerful incentive to do otherwise. Does anyone truly think that offered the same pay for using a lathe or using a piano, Mozart would choose the lathe unless someone threatened convincingly to make his life utterly miserable were he to opt for the piano? In other words, in most instances, incentives are not even needed to get people to utilize their greatest talents, we just have to avoid disincentives, and there are no such disincentives in a participatory economy. Those who could become wonderful composers, playwrights, musicians, and actors (or dentists, doctors, engineers, scientists, or what have you), will not pursue other avenues of work in which they are less apt to excel in pursuit of greater material reward because there is no greater material reward elsewhere. Nor will people in a parecon shun training that requires greater personal sacrifice since this component of effort will be fully compensated.

Second, for those cases where a little extra benefit of some sort would be needed to propel a person into his or her most productive pursuits, a parecon increases direct social recognition of excellence as compared to other economies. In a participatory economy, indeed, the best, and in some sense, the only way to earn social esteem related to one’s economic activity is to make notable contributions to others’ well-being through one’s efforts. Since working in accord with one’s talents can best do this, there are powerful incentives to develop innate talents. The only thing a  parecon prohibits is paying ransoms to superstars. Instead, a parecon employs direct social recognition and thereby avoids violations of our deeply held values. Will some prospective Mozart or Einstein, knowing their potential in their optimal pursuit, opt to become an engineer or a violinist rather than a composer or physicist? It could happen, but it seems unlikely. Would this happen more frequently than in class-divided economic systems which squash most people’s talents due to imposing on people harsh poverty and robbing them of dignity and confidence? To ask this is to answer it. Not to mention that in capitalism many people with great potential squander their talents anyway by opting for the huge rewards they can gain from doing things like becoming a corporate lawyer whose main function is to help big firms avoid paying taxes – or a doctor whose main function is to provide liposuction treatment to rich people who can pay for it – choices that are socially harmful, though of course beneficial to those with money.

What about reason three, the difficulty of measuring effort as compared to performance? While economic textbooks speak blithely of marginal revenue product in infinitely substitutable models, the real world of social endeavors rarely cooperates. There are many situations where assigning responsibility for outcome is highly ambiguous, and where determining who really contributed what to output is effectively unknown. As those who have attempted to calibrate contributions to team performance can testify, there are some situations where it is easier than others. Sports teams are certainly more suited to such calibration than production teams. But even there it is more difficult to calibrate individual contributions in football and basketball than in baseball. And even in baseball, arguably the easiest case of all, there are never ending debates over different ways of measuring direct contributions to victory in individual games, not to mention the difficulty of assessing a player’s impact on team chemistry.

Nor is measuring effort always so difficult. Anyone who has taught and graded students knows there are two different ways – at least – to proceed. Students’ performances can be compared to each other (output), or to an estimate of how well the student could have been expected to do (effort). Admitting the possibility of grading at least in part according to personal improvement (grades are not, in fact, rewards, but measure absolute attainment as in mastery of some subject matter) is tantamount to recognizing that teachers can, if they choose to, measure effort – and they can do it even though they are not in the dorm rooms of their students, monitoring their hours of study.

Now consider your workmates. They not only know your past productivity, which means they can compare your efforts to your past by comparing its product, they can also actually see you exert each day. So co-workers are in a far better position to judge each person’s effort than a teacher is able to judge the effort of students. Indeed, who is in a better position to know if someone is only giving the appearance of trying than people working with him or her in the same kind of labors? It is actually not only more just to remunerate effort than output for all the reasons we have explored, but particularly in an economy with balanced job complexes, it is quite a bit easier. Errors will by definition be much smaller. Methods of assessment can be, and in a parecon would be, democratic and mutually acceptable. Entanglement of effects and factors is not a problem. And it is not nearly so easy to pull the wool over the eye’s of one’s workmates as it is to do so with a supervisor, as people do today.

Participatory Planning Will be Too Inflexible to Succeed

Our last critic accepts that parecon is a fine idea. She accepts that markets and central planning are horribly flawed. She accepts the desirability of councils, balanced job complexes, self-management norms and procedures, as well as remuneration for duration, intensity, and onerousness of socially valued labor. She accepts that participatory planning fosters all those features and has additional virtues as well, and she supports it for those reasons. But, even with all that celebration, she worries about parecon being too doctrinaire.

Okay, markets for all our allocation is a horrible idea, says this critic, but why not just for some of it? Why not try to capture the benefits markets have for those items where its benefits will be greatest and where we can curtail accompanying debits? The critic claims markets are responsive. They react to shocks quickly and they can update weekly, daily, or even hourly. In contrast, participatory planning cannot re-plan repeatedly, so can’t we therefore benefit by using markets to augment or along with or even in place of pareconish approaches, at least for the items where speed of reaction is needed?

In other words, can’t we have a somewhat mixed economy? Can’t we take the essence of participatory economics and strengthen it by adding some limited attributes of other approaches and, in particular, some market mediation of exchange?

Consider some product that you know will have frequent innovation. When you plan it in the participatory planning process at the outset of the year, you get a very good assessment of its true costs and benefits (or exchange value) at the start of your year. The procedures support the economy’s broad values. They respect and foster self- management, and so on. But what happens when innovations occur for the item in question well before the next planning period comes around, say only two or three months into the year?

I know the system handles modest typical preference changes fine, says the critic, including those arising from changes in the product, but what if there is a really large change because an innovation makes the product really much easier to produce or perhaps due to a massive fire destroying lots of production potential, and, as a result, many more people want the product than planned to get it (well beyond what slack planning can handle)? Wouldn’t it be good to let the consumers and producers of the item operate as they would via a market, so that the price would move quickly and in the correct direction, and so that demand would properly fall? Wouldn’t this improve on having to re-plan the whole economy?

Our answer to this very fair question comes in two parts.

First, if in such cases the only option was to persist with the plan as conceived in the initial planning period or to incorporate market features, we would favor the former. The loss in efficiency induced by having to wait to adjust until the next planning period would be quite modest compared to the debits of ushering market allocation back into the system. The short of it is that moving quickly by markets from wrong prices to still wrong prices by methods that subvert all the values we hold dear is not improving matters.

But, second, this is not the actual situation. There is no reason why parecon consumers should have to sit tight with the initially planned exchange rates and allocations rather than correct for surprising innovations or calamities, even for large ones such as the critic hypothesizes. To compare, suppose an innovation or a calamitous destruction of productive potential occurs in a market economy. The conditions prevailing have changed. Old prices would no longer clear markets properly. How do prices and material choices by actors respond?

With markets, buyers and sellers try to get as much benefit for themselves, regardless of the effect on others, of the new situation, just as they did in the old situation. The market response, in other words, will likely go in the right direction, but the motive driving the correction, as at all times with markets, will be pursuit of profit/surplus and advance of competing actors via enlarging market share. The process will ignore the will of agents not directly involved in the exchange. It will impose antisocial motives and other failings, as with markets in general.

Additionally, the idea that markets respond well to shocks and changes is, in any event, only a mathematician’s assumption. In fact, the rippling changes percolating from an unexpected major change in demand or supply take time to unfold and the assertion that they will inevitably occur quickly and accurately (even if we set aside other reasons for market prices diverging from true costs and benefits and market outputs diverging from accurate representations of people’s unbiased preferences) conveniently ignores a host of disequilibrating dynamics that actually afflict market systems and that may mean that the initial markets affected by the shock do not re-equilibrate quickly, or at all; and/or that interactions between interconnected markets produce a disequilibrating dynamic that pushes all markets farther from a new equilibrium.

Thus re-equilibration in a market economy typically requires a change in some initial market affected by the unforeseen event followed by changes in any markets where supply or demand is affected by the change in the first market, followed by changes in other markets where supply and demand is affected by changes in the second tier affected, and so on. How much of this re-equilibration takes place how quickly is anybody’s guess. Market enthusiasts assume it all happens very quickly, and that market prices are good in the first place and good after re-equilibration as well. Of course in reality only some of it happens. None of it happens instantly. And worst, market prices diverge from accurate valuations of true social costs and benefits both before and after any shock. In sum, to the extent that re-equilibration does not reach all markets, and to the extent that markets which do eventually re-equilibrate do not do so instantaneously, market systems will perform inefficiently and inequitably in response to the unforeseen event even if its prices were efficient before and wound up efficient after the shock. Of course, when its prices aren’t efficient before and don’t wind up efficient afterward, things are that much worse.

For such reasons, we would not want to have some items handled by market processes in a parecon even if it were an otherwise plausible option, but more, we really could not sensibly do so even if we wanted to. Having a little markets in a participatory economy is a bit like having a little slavery in a democracy, though even less tenable. The logic of markets invalidates the logic of participatory planning and of the whole participatory economy, and it is also imperial. Once markets operate they try to spread as far and wide as they can. You cannot have some workplaces seeking market share, trying to induce purchases regardless of impact on consumers and society, ignoring external effects, trying to elevate remuneration according to power or output or surpluses, and expect those firms to interface congenially with the rest of the participatory economy. So, in contrast to markets, if we have to live or die with it in full, what about participatory planning’s responsiveness?

Again an innovation occurs, this time in a parecon. Suppose the unforeseen event significantly affects demands and valuations so that the original plan—which was efficient and equitable before the shock—would be no longer efficient and equitable. The optimal solution, considering only the choice of material inputs and outputs and their valuation and thus distribution, is to redo the entire planning process and arrive at a new plan perfectly efficient and equitable in light of the new conditions. Doing so is in that sense the analog of a market system jumping from allocations before the shock all the way to allocations after all of the interconnected markets re-equilibrate, without any misallocations in the interim.

But wait says the critic, this answer won’t do because re-planning is impractical except in cases of huge unforeseen events with large enough impact to merit that big an undertaking, even if I will admit that in such cases nothing would prevent redoing the plan. My point is, says the critic, most of the time deviations are important yet not worth cranking up the entire planning process involving all workers and consumers councils, federations, and so on. To appease me regarding parecon’s flexibility, you need to have something more convenient, even if a little less perfectly efficient and equitable, than entirely re-planning the whole economy.

In short, when a shock requires significant adjustments, how do we tide over with appended alterations until the next scheduled planning period fixes things “perfectly” – never more than 12 months away? The answer is that different instances of parecon might have different approaches to doing this. Here is one.

Workers in an industry notice markedly changed demand or valuations. Many more people than planned come to want some product. The easiest adjustment is if the original plan allowed for production of a certain amount extra of the good in question, so that unexpected increased demand can be met by actualizing this extra potential. The name for a plan with no extra potential built in is a “taut plan,” and the name for a plan with extra potential built in is a “slack plan,” with the amount of “slack” varying for the economy and its industries. This is exactly analogous to business inventories in a market system, whether kept on hand, or able to be generated.

But suppose workers notice that the increased demand will take them beyond the available slack. As a result, they begin to contact facilitation boards seeking extra workers and begin consulting suppliers for additional inputs. If this can be had to the extent needed, they report the results and the facilitation boards calculate the effect on final prices. The predictions are made available to all consumers. If assets for the desired production can’t be had, supply won’t rise sufficiently and, instead, decisions will have to be made regarding allocation of the limited available products. Of course all the usual methods and motives of parecon operate at each step, whatever specific approaches a particular parecon might employ.

Let’s pick a simple unforeseen event. An unprecedented warm spell dramatically increases people’s desires for air conditioners beyond what was planned plus available slack.

An easy possibility is to ration the existing supply of air conditioners at the level set by the original plan. This could be done in a variety of ways. (1) Give everyone seeking air conditioners only X percent of the what they they asked for, where X equates demand with available supply. Of course, this is not possible for items that are not divisible. So (2) give air conditioners only to those who asked for one in the original plan and only in the quantity they asked for. Do not accommodate new demanders or increased demands until th next period. But another option is (3) raise the price of air conditioners until the excess demand disappears, i.e. employ increased prices to ration air conditioners. In this case, we would have to have an IFB in place to adjust indicative prices during the year. Or we could have the national consumer federation and the national air conditioner industry federation make the price adjustments. If we adjust the price of air conditioners to eliminate the excess demand we have to charge users the higher price or their demand will not fall to the existing level of supply. Those who get the air conditioners and are charged the higher price now must either reduce the amount of some other goods they consume—not picking up all they ordered in their original plan—or they must increase borrowing which is monitored in a participatory economy by their consumer federation.

But of course as this example intentionally makes evident, a more desirable adjustment to the unforeseen event would be increasing production of air conditioners. We now know that more of society’s scarce productive resources should be devoted to air conditioners than the original plan called for, and therefore, by implication, less of society’s scarce productive resources should be devoted to producing other goods and services.

Adjusting production of air conditioners is in this event more complicated than simply rationing the existing supply in any of the above ways, but to do so also better meets real needs and is therefore ultimately more efficient.

The simplest way to increase production is to ask the air conditioner federation to increase output via overtime. If the workers can produce more by working more hours without needing significantly more inputs, the only remaining issue is an equity matter—how much to compensate them for their extra sacrifice. They will re-rate themselves and presumably claim sacrifices equal to the extra hours plus extra sacrifice they consider the after hours nature of their work to entail.

But what if more air conditioners cannot be produced without more non-labor inputs which must be obtained from other workers’ federations? Then a fuller and more efficient mid-plan adjustment requires renegotiation between the air conditioner federation and the workers’ federations who supply them. This is just the percolating and spreading implication of a shock in an entwined economy, the same as would occur were allocation handled by markets. And in all cases of all involved parecon firms the choices about (1) rationing and (2) adjusting production schedules, simply repeat themselves. How much mid-term adjusting to do—rather than just waiting for the new planning period to get inputs and outputs all “perfect” again; and then how much of that mid-term adjusting to do simply by rationing, i.e. adjusting consumption only; how much to do by adjusting production of the initial item affected and/or of other items that are inputs, etc.; and which of the various options to use in any part of an adjustment, including whether or not to recalibrate prices, are all practical issues to be decided by those who work and consume in a participatory economy following general norms and procedures applicable in specific cases, though not via one single right norm or procedure that must be followed always in all cases and in all parecons, we would guess.

In any event, there is no reason to think that the proliferating adjustments in a participatory economy are any more difficult or cumbersome than analogous adjustments in market economies—unless one makes the unrealistic assumption that markets adjust infinitely quickly to arrive at new equilibria. And so the overall difference from a market system is increased rather than diminished flexibility, in that options can be consciously chosen, the elimination of various (competitive) causes of spiraling divergence from equilibrium can be respected, plus, of course, that the procedure’s guiding motives are social rather than profit seeking, the valuations are accurate rather than distorted, and the influence of actors is proportionate to the degree they are affected rather than enormous for ruling classes and minuscule for subordinate classes.

Thus, with a large change in desirability of a product or some other major shock in a parecon that goes beyond what slack can accommodate, everyone who wants some affected good could be supplied, or only those who originally placed orders could be, or only those willing to pay a new higher price could be. In any of these events, there would be some change in the real price, rising above or falling below the planning period’s indicative price. A parecon can handle all these matters in numerous ways.

 

Indeed here is another angle from which to think of the whole situation. Think in terms of the year’s end. Suppose you got everything you sought, exactly as you sought it. But suppose the total value assessed at year’s end was less than the total you allotted from your budget—final prices for the year changed from planned prices so that the total cost of all that you consumed was less in final fact than it was in your initial planning. Then you would be entitled to a refund, or else you would have unfairly lost out. Or suppose the total value of what you consumed in final prices turned out higher than originally indicated in planned prices. Then you would owe some, or would have received more than you deserved. But parecon has no trouble correcting in regard to either result. It can properly allot credit or debit to your account for the next period.

The only difficulty in the above trivially simple approach is that you would not have had a chance to reassess your choices based on the accurate prices. But a parecon can meet this problem too. It need only provide monthly updated price estimates based on the year’s unfolding patterns, so that you can, in fact, continually reassess your remaining choices against slightly altering price projections. With slack and the averaging of different consumers’ choices, the amount of re-planning would likely be very modest.

The main point of all this, however, is that speed of response is not all that much of a virtue in the first place, nor do markets possess as much speed as people think, nor do they speedily arrive places where people should knowingly wish to go in any event – and certainly that speed of response should never be “bought” by incurring costs that are way more damning than the modest gains achieved.

Strategic Flaws?

Parecon fetishizes the idea of a third class.

This critic says participatory economics worries way too much about avoiding a socialism that isn’t really socialism. Parecon’s commitment to balanced job complexes generates sectarian negativity about potential allies. Parecon gets class wrong.

The idea of a third class between labor and capital actually has a long anarchist and libertarian lineage leading back to Bakunin and even a bit further to others less famous. Of course that doesn’t make the idea right, but it is interesting to note.

Yes, advocates of participatory economics worry about mistakenly winding up with something called socialism which isn’t classless, self managing, etc. We don’t want to give our lives to efforts to improve society only to wind up with results we would rather never have ushered in – something all too familiar from history. We do not want a new society that is not classless, that lacks free association, that is less than we desire.

What parecon says in these regards is that between labor and capital in a capitalist economy and still operating above labor when the owners are eliminated but real classlessness is not achieved, there exists a third class – which we call the coordinator class.

The participatory economic claim is that while capitalists are defined by having a monopoly on productive property – which is to say they own it all and others don’t own any – the coordinator class is defined by monopolizing empowering work. They do that type of work, and others don’t. Further, the work this third class does educates and elevates them in such ways that they are well prepared to develop and argue for agendas within workplaces and in the broader economy whereas workers, operating below, are not.

In other words, those who do rote and repetitive tasks each day lack essential information, confidence, and social skills – which are all blasted out of them by the disempowering work they do – to participate effectively in decision making, and are even disinclined to do so. Those who instead do empowering tasks learn in the process about the overall work situation, engage with others, and have time and energy to apply to decision making, all of this being enhanced each day by the work they do. Coordinator class members, as a result, are able to participate effectively and are also inclined to do so.

Twenty percent of the workforce, roughly, are coordinator class and they dominate 80 percent, roughly, who are working class. In capitalism owners reside above the coordinators. In what has been called market and centrally planned socialism, owners are gone and coordinators are on top.

The pareconist says:

1. The institutions of a classless economy need to replace whatever causes class divisions.

2. Whatever in past efforts to win a new society has caused the old coordinator class to retain its position above workers has to be avoided, as well.

Its visionary commitment to avoiding coordinator class rule contributes to parecon’s reason for adopting its preferred institutions. Parecon avoids private property to remove the capitalist class from dominating and even from existing. That doesn’t mean there are no workplaces and resources, it just means workplaces are not owned by a few. But parecon goes further, realizing that to eliminate the basis for an owning class is not the same as to eliminate all basis for all classes, it has two more key steps to take. First, it must change the division of labor so that empowered tasks are not monopolized by a few. And second, it must change allocation so that it does not pressure actors by its roles into recreating that same division of classes even if initially it was replaced. Thus, as noted earlier, parecon advocates balanced job complexes and participatory planning.

Now, what about the criticism? Well, yes, it is quite true that parecon is concerned about avoiding a “false socialism” that is really better named coordinatorism. But in this pursuit, parecon doesn’t get class wrong. Rather, it is typical Marxist formulations that emphasize only property as a basis for class division and thus arrive at only two centrally important classes, that gets class wrong. Yes, of course capital and labor are important. But no, they are not alone important. The coordinator class matters as well – not just because its particular structurally imposed motivations complicate capitalist existence (though they certainly do), but because this third class between labor and capital can have its own agenda, contrary to capital but also contrary to labor, leading to what we might usefully call coordinatorism.

Now, does aiming for balanced job complexes generate negative sectarian attitudes about a potential ally – empowered workers, which is to say, members of the coordinator class – as the critic claims? Yes, applied mechanically it can certainly do so. But it doesn’t have to be applied mechanically. We have an analysis that tells us a group is likely to have certain attitudes, values, habits, that are harmful, not generetically, but due to their circumstances. First, we don’t have to treat each member of the group, apriori, as if the insight necessarily applies to him or her. It doesn’t. And second, even if it does, there is no need to treat the person as some kind of enemy, we just don’t want to cater to the harmful views, values, habits. This is all quite analogous, say, to how social movements relate to or in any event ought to relate to, say, men, or members of a cultural majority, and so on.

But doesn’t seeking balanced job complexes mean that some members of the coordinator class will be more or less horrified by a pareconist project, and that they will deem it utopian nonsense, and try to seriously oppose it? Yes, we know it does, indeed it already has. The position and circumstance of members of the coordinator class will certainly lead many coordinator class members toward such a stance. However, is it also possible for people doing empowered work to feel that a change to balanced job complexes and classlessness is morally right, socially desirable, economically necessary, or all three? Of course it is possible. And in fact this also often happens.

Even when that does happen, however, is there still a set of habits and dispositions associated with the coordinator past that can dominate movement efforts and drag them, even against everyone’s will, toward old patterns? Of course there is.

So what needs to be done is not crass and mindless name calling but to be clear about the issues and to seek balanced job complexes to overcome coordinator rule and attain conditions of classlessness, and, as well, to seek those new relations in ways welcoming coordinator class members to participate, but without their dominating the process and results. This means organizing methods and movement organizations should not replicate old coordinator worker arrangements but should instead overcome the classist assumptions and attitudes characterizing and continually abetting and reproducing coordinator domination of working people. The analogy to dealing with racism and sexism without becoming mechanically opposed to whites and men per se is rather strong. These are strategic issues, but centrally important ones.

An analogy can help. Workers by their position daily succumb to owners and coordinators including carrying out policies and acts that are heinous in their results. When an anti capitalist opposes wage slavery, it doesn’t mean he or she must have sectarian hostility toward working people who are not yet rejecting their plight. Indeed, to the extent it drifts into such a stance, it becomes self defeating. So an anti capitalist should oppose private property, yes, but not the people compelled by its existence to act harmfully. Some of their actions will have to be opposed at times, but not the people themselves, and especially not workers.

Well, the same logic broadly holds for the coordinator/worker relation. The parecon advocate should reject and seek to replace corporate divisions of labor. But the parecon advocate should not argue that having had the benefits of being born and raised or otherwise occupying coordinator class slots makes one the devil. Rather, it most likely gives one some classist habits, mannerisms, and beliefs that need to change, but also some skills, talents, and knowledge that can be used very helpfully, if the other changes are occurring.

Parecon Is Economistic

This critic says that participatory economics puts too much emphasis on the economy and too little on everything else. Parecon will sublimate or violate needs and potentials born outside the economy.

If the only thing parecon advocates were seeking was a participatory economy, this criticism would have real merit. In fact, even if one was seeking mainly a participatory economy while desiring gains in other parts of life as well, but while assuming they would follow pretty much automatically from economic gains, this criticism would be damning. However, the reality is that Parecon was conceived via an approach that takes for granted that not only economics, but also kinship, culture, and polity – as well as ecology and international relations – are all paramount. A serious societal vision will address all these dimensions of social life, not just one or another. Indeed, I don’t know of a single parecon advocate who isn’t also a participatory society advocate, seeing parecon as just one part of a larger undertaking. In short, as with quite a few other concerns about participatory economics, the reality is nearly the reverse of what critics claim.

 

Claim: Parecon is economistic.

Reality: Parecon advocates, perhaps more than any other activist constituency one might name, are explicitly scrupulous in their commitment that any singular conceptual attitude – whether it is a radical feminism, or a cultural nationalism, or a mainly political anti authoritarianism, or a mainly economic anti capitalism – which elevates one aspect of life above all others – is a recipe for visionary and strategic disaster.

So how does this particular concern that parecon advocates are economistic arise, if it is so clearly off base?

The answer is that there are certainly books and talks and presentations that are overwhelmingly or even very nearly entirely about parecon, and just parecon – with little reference to other spheres of social life. This is true in part because it is pretty much impossible to simultaneously address all sides of life fully in one work – though some works at least do so in an overarching way – such as the book Realizing Hope – and in part because of the aspects of life so far addressed, much more work has been done on economics than on other aspects. This asymmetry is little more than an artifact of creation and the times and history and mainly who got started first, and so on. Certainly it is not a statement about importance. If the authors of kin vision, or political vision, or cultural vision, had come first, and if those domains lent themselves as easily to a fuller presentation, then one or more of those would have the bulk of coverage to date, and not economy.

Still, I agree that so far the participatory society effort has had too little attention given to the non economic aspects of society. This is not built into its concepts or values, however. Quite the contrary. Rather, so far folks best able to extend the insights in many other domains have been too busy with other pursuits or perhaps made skeptical of vision, or of this overall approach, etc., by false concerns. At least some folks with a prior economics focus, have had time to pursue that domain more fully.

Parecon Is Gradualist/Reformist

This critic says participatory economics does not advocate an essential break in the here and now. Parecon is not revolutionary but will lead to a never ending limited pursuit ultimately going nowhere significant. Parecon is reformist.

However, to say one wants a new economy that is fundamentally transformed in its defining features is certainly saying one wants an essential break – even before talking about breaks in other dimensions of life as well. That others say they want a break, so to speak, but say nothing about what it would mean, and that parecon advocates say they want a break, so to speak, and say exactly what they mean, somehow diminishes the latter?

Do participatory economy advocates fight for and hope to win diverse reforms? Yes. Absolutely. Does that make them reformist? No. Absolutely not.

The point is trivial and has been repeated over and over. That it is still contentious seems to parecon advocates quite strange. Their response goes like this. Reforms are changes in the here and now which don’t fundamentally alter society’s defining relations, which means as well, they don’t usher in a participatory economy or society. So far, so true.

But, if one wants to usher in a participatory economy, should one be against higher pay for striking workers, a raise in minimum wages, a change in government spending, an end to a war, and so on? Of course not. One should be for these gains and countless others that people pursue, but also for winning a new economy, and, more broadly, a new society. So one should fight for those gains and others, but should do so in a way conceived not only to win the short run changes for their immediate benefits, but in a way conceived to increase the likelihood of further struggles that win further benefits. We should fight for reforms in a non reformist manner that creates organization, consciousness, and desires that ensure that upon winning reforms people want to win more and are in better position than earlier to do so.

Conclusion

I don’t believe the above reactions will satisfy all who register the claims and concerns indicated. In fact, to be honest, in some cases I don’t think anything would suffice to reduce concerns since in some cases I don’t think the concerns are held based primarily on reasoning or evidence, but, instead, merely as a means to defend some other long favored view or heritage, or to dismiss this one for reasons of distaste or defense of current relations, not dispute. This type of intellectual rigidity is not unique even to political dispute but occurs in every field, at least at times. It is, however, why it is particularly important for debate to engage more than just initial advocates and critics. It is the discipline that multiple serious participants can bring that can facilitate disputes being resolved – that, and history.

Hopefully this second part of the three part exploration of participatory economics will induce some more participation in these matters. As frustrating as I and some participatory economic advocates find some critics’ thinking, far more frustrating and disturbing is the response of others – bored aloofness or overt dismissal of matters that are, ultimately, of profound importance.

If Parecon is determined unworthy or un-implementable, okay – it should be dismissed as a vision and used only as a source of possible partial insights. But if it is both worthy and viable, it should be shared widely as a vision, and, in that capacity, help movements to win a better world. We should all be prepared to carry on if the former proves true, in that case working to find new vision. We should all also be prepared to carry on if the latter proves true, in that case building consistent movements and organizations, and winning that better world.

http://www.iopsociety.org/blog/participatory-economics-part-2-addressing-criticisms

http://www.iopsociety.org/blog/part-2-of-participatory-economics-part-2-addressing-criticisms

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