Comparing Capitalism and Parecon

Comparing Capitalism & ParEcon Regarding Incentives

Economies operate in part via the incentives they give actors regarding production and consumption. This page compares Capitalist and Parecon vis a vis their use of incentives.

Next Entry: Comparing Regarding Productivity


“Dollar Sign”
by Andy Warhol


by M.C. Escher

Introducing Capitalist Regarding Incentives

In a capitalist economy, the incentive is almost always personal gain in the form of profits for a few and wages for most. The problem is that as a result of the dynamics of markets the pursuit of profits and/or wages is overwhelmingly contrary to the pursuit of social well being more generally.

For one, the incentive effect is often not as claimed. Thus, for example, offering higher wages or profits as an incentive means that bargaining power is rewarded, also dumping costs on others or manipulating purchases, and so too is innate talent or skill rewarded. Bargaining power has nothing to do with socially useful output so the impact of the payment is to cause people to seek bargaining power, not to produce socially valuable output. Dumping costs on others as in not paying for the damage of pollution and using ads to generate ill conceived purchases are both socially counter productive though there are high profit-centered incentives to do it. And rewarding innate talent or skill has no positive incentive effect. That is, we cannot, in fact, seek improved innate talent or skill in response to knowing there are rewards for it. We have whatever genetic endowment we have.

Introducing ParEcon Regarding Incentives

In a parecon, the only material reward offered in the economy is for duration and intensity of work offered and, when relevant, for its harshness or other adverse qualities that we endure. Non material rewards include the admiration of co-workers and consumers, and the fulfillment of one’s creative potentials. Materially remunerating duration, intensity, and the hardship we endure while working is precisely the correct formula to get people to do what needs doing without giving anyone rewards that are unearned or socially adverse. We can get more income by doing more work, longer, or harder, or taking up tasks people are uninclined to do (need incentive to do). But we do not earn rewards that create wide disparities of motive and/or outcomes uncorrelated to just cause.

With participatory planning generating accurate measures of social costs and benefits and apportioning self manging influence to all, remunerating effort and sacrifice gives each worker reason to do what the economy is requesting, which requests are chosen by those affected, and gives no one any reason to do anything that is not in the interests of themselves or others.

Evaluating Capitalist Regarding Incentives

Incentives under capitalism are perverse is viewed from the angle of trying to elicit the most socially beneficial activity but quite sensible if viewed from the angle of trying to elicit economic activity in accord wtih maintaining class divisions and elite advantages.

Evaluating ParEcon Regarding Incentives

Incentives under parecon are what is needed and no more than is needed to elicit appropriate levels and intensity of socially beneficial work. If that is our aim, they are excellent. If our aim is aggrandizing the few at the expense of the many, they are not.

 Next Entry: Comparing Regarding Productivity


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