ParEcon Questions & Answers
Planning, Facilitation Boards and Class Relations
Is a parecon really a non-market economy? It seems to me that the heart of it, the iterative negotiation process would actually end as a market process. This question has been raised as well by a couple of economists, three or four years ago, if I remember right, in Socialist Review magazine. It only happened once because most economists are so horrified by what we propose that they would never see it this way, or because they perceive just how different it is – I don’t know which. Anyhow, we replied at some length, and I am looking for that to give you a reference. Your comments are quite sensible – though, ultimately, I do think they misperceive the system in critical ways. You (and those two economists) look at participatory planning and see:
And when you use the term markets in that very encompassing way, which many people do, there is a big problem. It makes folks think that what we have is essentially inevitable. Suppose you looked at the Soviet Union some time back. You would see the same thing as what has caused you to identify parecon as some type of market system. Everything had a price. Supply and demand came into proximity or a mesh, and it happened via a process that in large part took note of responses of actors to prices. Indeed, any economy beyond direct personal barter includes some kind of mechanism for people to make comparisons among options (some kind of prices perhaps accompanied, as in our parecon case, by qualitative information of a certain sort as well – and even capitalism has ads along with prices) and if it isn’t horribly wasteful, any such system also involves supply and demand coming into proximity of one another, as did the Soviet economy. But no one would mistake the old Soviet economy for a market economy, nonetheless. Why? Well, because the institutional framework and its components, and in particular the roles for each actor in allocation established by these institutions, were quite different than those that define what we call market exchange. In the SU the prices were ultimately set by planners (who did, however, consult people’s reactions to those prices). The workers had only to respond regarding their ability to fulfill instructions and to convey information about available resources, etc., as well as to obey instructions; the planners had only to calculate and set prices and issue marching orders; managers had to administer as well as obey; and consumers had to go to the store and pick what they wanted to consume, paying the established price and keeping within their budget – seemingly quite like at Stop and Shop). And so on. My point is that, yes, parecon has, among other features, a kind of prices, a kind of budgeting, a meshing of supply and demand. But, nonetheless, it is not a market system because it not only doesn’t have the basic defining features of markets (buyers and sellers each motivated to maximize their own advantage at the cost of the other; competitively determined prices; profit or surplus maximization; remuneration to labor according to its bargaining power or its output) but because it has other features that are entirely contrary to these. We can try to go through the differences in some degree of detail, depending on your interest, but it would entail, I think, trying to get a bit clearer on what markets are, and then on what participatory planning is. In a sense, to do it comprehensively requires reproducing the content of the vision here…it would be easier to take on smaller issues, I think, here, and read about the whole vision in the presentations of it, online or in print. How does participatory planning take place accurately and without inefficiency? It is an iterative (round by round) process in which what consumers want to receive matches up to what producers are ready to offer and each side steadily expands or diminishes its preferences until there is a mesh. The interchange is facilitated by comprehensive information concerning social costs and benefits of all production and consumption, both in text form (qualitative) and in what are called indicative prices (for calculation purposes). There are also various facilitating institutions that capsulate and relay information, etc. As to its efficiency properties (does it waste anything people value) no economist has challenged these, perhaps because of the proofs we offer in the Princeton volume.
Individuals partake as well as other size units, but not monthly. It is done for a year, and, as you imagine, it is largely based on past years, and on projections for changes in overall output and in each individual’s share for the year, etc. Any system that has any connection to actual humans must, of course, respond to human’s choices. Markets do this day by day, week by week… Parecon shuffles totals that way, so to speak, but gets an indication of totals, a good one, during the yearly planning period. There are many many reasons for this. Suppose you are in a local community which could, for example, as a collective buy a new park, or new joint music equipment or large computers for a kids center, or whatever. Such collective consumption is charged against the incomes of all the members of the community, of course. So more means less individual consumption, and less means more individual consumption. So, one reason is to decide on this ratio. Another issue is changes in output, and thus income… Another is changes in taste, particularly for new outputs. And so on. How transparent is the whole consumption and facilitation process. Is individual privacy maintained? All the calculations and sorting, etc., done by such boards would be on record and easy to check–not simply the data sorted and summarized information plugged back into the planning process. This isn’t very important, I think, as a guard against ill-doing, not only because parecon would have gentle people, but because in a parecon it is virtually impossible even for someone intent on it and with no qualms about it to misuse their role at a facilitation board. What the availability of facilitation boards work would be useful for, however, is learning about past algorithms to make improvements in the future… Personal consumption requests, however, are presumably private, for example, though the requests can be accessed without the accompanying names. (This choice of privacy, like many other choices one might make about a parecon, isn’t somehow intrinsic to being a parecon, though – at least in my thinking. That is, I think one could have a parecon that had all requests publicly accessible, or not, with no effect on the defining economy and basic institutions per se. But I think privacy is preferable.) Given the complexity of the medical industry and the qualitative difference between books and the provision of medical services, allocation of health care on a societal level, seems to be much more involved than other industries. Could you sketch out how health care would be allocated in a parecon system? People, except for unusual instances, can’t say this year I want such and such health care. It is not something which is planned on the basis of preferences espoused by individuals in the way that books are. Rather, the “demand side” is essentially a calculation for society. We know from past history, and trends, and so on, roughly how much health care will accomplish what in a coming year. So depending on what we want to accomplish, weighed against the cost in resources and effort and so on for doing it, we settle on a plan for health care. While health care goes to individuals, mostly, it is, nonetheless, we can see, a social and completely public good re the demand side. It is paid for by everyone – in the form of a reduction of available goods precisely equal to what is allotted to health care. It goes to those who need it, however. I don’t think it raises any problems for parecon, that I can see… Health producers propose supply, citizens organized at the societal level request what they want – these come into balance, as with other products and industries. Of course, the providers all do their health work in balanced job complexes, like everyone. Under the model, would participatory economics allow for small-time marketing? If you mean would there be smaller production units and larger ones, sure… There is no marketing in the sense it exists now, however. That is, no sales aimed at volume/profits rather than fulfillment/use. No one has any interest whatever in having someone consume something they produce other than if the consumer benefits thereby.
Why? If you mean one can’t know in advance know that one will want a product that only arrives as an option six months later – say a book not yet published, for example – sure. But you can know that last year you got x books and your prediction, flexible and updateable as the year proceeds, is that this year you will want y more or less than last. And similarly for other choices; sometimes precise, sometimes general. Individuals don’t know the clothes they will want (new designs, etc.) but can say, pretty closely (with up and down fluctuations across many people averaging to near zero change for the total request) what overall clothes expenditures they anticipate making. All this kind of thing is dealt with in detail, considerable detail, in the books on the model, of course. Of course one doesn’t plan for the personal purchase, during the year, of items that are whim-like, or just not known about in advance (say responses to illness, for example), for that matter. But one can in broad terms indicate the parts of one’s income that will go to this and that area – sometimes only broadly, sometimes in detail (as wanting a new vehicle or other large items). When averaged over communities and societies, this data becomes powerful information that translates into requests for products that exists alongside offers of production from the workplaces, which then must be brought into alignment by a back and forth modifying of desires in light of continually updated information. Could one person sell (which means, essentially, trade) items to another? Sure. But that is just barter, not for-profit production and sale and is effectively outside the planning process, anyhow. Suppose we have the equivalent of Mozart in our community. Can she sit in her abode and write music and then go outside and auction it off to the highest bidder? No. And the same holds, and more relevantly I guess, for if we had a Picasso. He can’t make paintings and then sell them off privately, becoming fantastically wealthy. This is not an option…. These individuals get the benefit of society’s roads, infrastructure, and so on and so forth. They abide its role offerings like other folks. They work and get income like others. Parecon is not anything goes… Remuneration is not according to the social value of one’s product/contribution (in which case this contemporary Picasso or Mozart would grow rich) but according to the effort and sacrifice expended in producing valued product/contributions. And folks must also work at balanced job complexes (so even the contemporary art or other genius has to do their fair share of different tasks in their job complex) because those are the only kinds of jobs available, the only ones that exist within the economy. How do the “facilitation institutions” work? The planning process, and thus the role of “Facilitation boards” is more or less like this… Each actor (which is sometimes an individual, sometimes a unit – such as a workplace or a community council, etc.) enters a proposal for their economic activity, that is, what they wish to take in (consume or in any event receive) and what they wish to give out, if anything (that is to produce). These proposals obviously don’t mesh into a workable plan right off. In all likelihood, that is, for most goods there is more desired than offered – even when people are trying to make sensible proposals based on projections of the likely average income for the coming period (which is just the total product over the number of recipients) and awareness of their past period’s actual results, etc. The demands are brought into touch with the supplies and vice versa by a decentralized process of refining proposals in light of data from prior rounds of proposals, technical data about capabilities, etc. Facilitation Boards are just workplaces like any others in the economy. They have various tasks, combined into job complexes. If the facilitation board’s average job complex is better than the average for society – people working there part of their time will have to work at sub-average options outside. If it is worse than for the rest of society, then they would have to work at better than average tasks outside the board itself, some time each week. What does a board do? Well, there are different kinds with different purposes, but basically they accumulate proposals and information more generally, work on the data to prepare it for access by others and sometimes with various algorithms socially agreed upon to cull insights from it, and pass back into the process the resultant information. That is it. No decisions. Also, everything they do can be checked and evaluated by anyone, in fact. All info is accessible. Moreover, as far as we can tell, virtually everything they do could be largely and perhaps completely automated, at least in theory. Surely you are starting to imply a coordinator class, if a small one, just by having people working in an institution whose role is to decide who is affected by a certain decision and to what degree? No, not as regards the economy. I think you have to look a bit at the model, taking into account what it addresses and doesn’t address. The planning process has no need of anyone to play such a role as you indicate – the proportionate impacts emerge organically not by being decreed by someone or some group. However, suppose such estimates did have to be made. That does not inexorably mean there is a coordinator class in an economy any more than does there being a managerial function in some industries, or an engineering function, or a surgical one, or a need to have agencies that do calculations, summarize information, etc., mean that folks involved in those activities will be a separate and privileged class. If everyone has a balanced job complex, then no one has disproportionately more empowering work than others…so no one does only this type work. Moreover, if there are no ways to make aggrandizing decisions for oneself or one’s class, then abuse of even temporary powers is virtually impossible, certainly in any systematic way. This is all dealt with in great detail in the books, with examples, etc., but I think the idea is clear enough.
And what is this institution that you have in mind? And what advantages does it bestow upon you, and others like you working in it, such that you are a class with advantages to defend and enlarge? The conception is valid enough in the abstract, of course, but then we to see whether in any particular kind of economy we have to see if this thing you are concerned about exists in practice. For example, if you were a central planner, in a centrally planned economy, able to bend and massage economic outcomes to serve your class by further enlarging the advantages it enjoys due to promoting investment patterns that enhance information centralization and thus the further aggrandizement of intellectual workers – coordinator class members – your claim would be quite right. But, this doesn’t exist in parecon. Yes, there are bureaus in parecon that disseminate and even summarize information, but there is no way for anyone working in one of these to benefit themselves, in isolation or some group collectively, by doing anything other than what is also in everyone else’s interest, ie. doing the work as well as they can. For one thing any deviation would be obvious. But, even more important, aside from trivia no deviation could be self-serving. It is precisely this kind of attribute that is rather striking about parecon, in fact. It is really pretty simple – to improve one’s economic lot one needs more income or better circumstances (more power does it too, by allowing the other two aims to be met). But, in parecon, everyone gets a share of income based on the effort and sacrifice they expend in work (and on need if they can’t work) which means there is no way to aggrandize self or a group without, in fact, benefiting everyone. For me to get ahead, the total product must grow or I have to expend more effort and sacrifice, which is fair enough. I can’t get ahead at the expense of others. Similarly, since we all have balanced job complexes, my work situation only improves if the society’s average job complex improves, that is, if everyone’s situation at work benefits. I suppose you could make some kind of case that a class of fakers could arise – who make believe they can’t work, consume the average bundle, but don’t work….but it is quite far fetched, to say the least. And they would not be ruling anyone, and since they would have to show all the signs of a work preventing ailment, they would gain nothing. How would a new venture could get started under ParEcon? Would an (or a group of) entrepreneur(s) make a proposal to a production council or group of councils and hope to be granted the resources to start up their company? A group of “enterprising” workers – not entrepreneurs as the word is literally defined would apply to the federation of workers councils for the industry they want to start up a workers council in for the federations “approval” to be a workers council and submit proposals in the participatory planning process which is how one asks for, and perhaps receives resources and inputs. The federations would OK the group as having requisite competency, experience – essentially as a “serious” group that should be allowed to make work proposals. In capitalism banks asked to lend money to an entrepreneur ask for business plans, credentials, etc. In parecon it would be the industry federation that would do something similar. The industry federation would also sometimes try to stimulate or organize groups of workers to start up new enterprises – always run as parecon workers councils. If the enterprise fails, does the entire group suffer the consequences or only the original participants? A workers’ council “fails” if it cannot get a work proposal approved during the participatory planning process – or if it fails to deliver promised outputs and those who were supposed to get deliveries convince the industry federation that this is a chronic and irredeemable problem. This would usually only happen after the industry federation had already arranged for some key workers from successful workers council to visit and work temporarily at the failing enterprise, and/or workers at the failing enterprise had been sent to work at successful ones – in an attempt to get the failing enterprise “up to snuff.” Since the best techniques are available and free for all to use, there is no reason one council could not duplicate the efforts of others. But…. if the enterprise does fail, then all the workers have to look for jobs elsewhere – aided by an even more robust and slicker version of training, retraining, and job search than the Swedish and Norwegian systems today. If companies are group owned, and a worker owns a portion of any company, does that complicate mobility between jobs and industries, or does it actually make it easier? Does a worker take the portion they own with them? Two simple answers: Nobody owns any part of any enterprise. You own only your consumption goods and belongings. You can’t take “it” with you. [Because you don’t “own” “it”] I understand in terms of consumption each person is remunerated in proportion to sacrifice – that is hours worked and unpleasantness of work compared to average. For the most part there is very little variance from average. Effort and sacrifice, yes. We work at balanced job complexes, therefore, if you work at one for 4 hours, and I work at one for 4 hours, and we both work at an acceptable non-shirking pace, we are each going to get the same pay despite our jobs complexes having different components. But as I understand it, the workplace pays someone (the labor facilitation board?) the marginal value of the labor. No. In calculations this is taken into account so that the workplace has to utilize its assetts well. But people are not paid marginal products. This is quite technical having to do with the details of the planning process. If you really want to delve into it, I suggest the Princeton book, Political Economy of Participatory Economics. The broad point is that labor receives pay for effort and sacrifice in balanced job complexes. At the same time, you don’t want workplaces having highly productive workforces or other assets putting in proposals to generate output that would take way less effort (due to their greater productive human or other resources) than other workplaces are proposing, thus leaving the workers to loaf or otherwise underutilizing assets. Thus, the planning process has to “charge” workplaces at the productive capabilities of all its assets, including its workers (not at what it pays them…). This is one of the more arcane (actually, one of the only arcane) aspects of the parecon model and logic…. Technically it is quite important to outcomes, but politically and socially uninstructive.
The key is that what the worker – of whatever education and skill level and therefore productivity – receives and what the enterprise where s/he works is charged are completely unrelated and presumably will be different for almost all workers. The worker receives more or less than other workers based entirely on her/is effort rating. That is the complete answer to the how much will different workers receive question? They receive according to their effort rating since this is what they take to their consumption council which then uses individual’s workplace effort ratings as the basis of deciding if an individual’s consumption request is reasonable or greedy. Now, to the part you are more concerned with: How are enterprises charged for using different kinds of “direct labor?” The goal is to charge users of labor according to the social opportunity cost of using different kinds of labor inputs – just like we want to charge users of any other kind of scarce productive resource the social opportunity cost of using those resources. When they participate in the participatory planning process all worker councils must ask for all the inputs they want. Effectively that is where the demand for scarce productive resources comes from – including the demand for different kinds of direct labor. So when workplaces submit their proposals they are demanding both intermediate (produced) and primary (non-produced) inputs. Among the primary inputs are different categories of land, for example, and also different categories of labor – so many hours of master carpentry labor, so many hours of experienced civil engineering labor, so many hours of unskilled cleaning labor, etc. Just like acres of arable land with a 3 month growing season and 25” of rainfall, there are only so many hours of master carpentry labor available in the whole economy in a given year. The less of either there is, and the more useful either is in producing goods and services, the higher the indicative price of that primary input will become as workplaces essentially bid to use those inputs when they make, and revise their proposals. This means that enterprises will end up getting charged according to the scarcity and productivity of different kinds of direct labor just like they will be charged according to the scarcity and productivity of different kinds of land. NOTE: THAT HAS NOTHING TO DO WITH WHAT THE ACTUAL MASTER CARPENTER WILL BE PAID. Now, that is as much as was dealt with in either of the two books: People are paid according to effort as determined by a jury of their workmates, i.e. peers. Enterprises are charged for different kinds of labor according to the scarcity/productivity – i.e. opportunity cost of that kind of labor.But labor is not like land – labor cares how it is used whereas, presumably, an acre of land does not. Besides scarcity/productivity there is an additional element that enters into the social opportunity cost of different kinds of labor – the disutility of doing different kinds of work. So when we “charge” an enterprise for using a particular kind of labor we want to charge more not only if the labor would be more productive in an alternative use, and not only if the labor is more scarce, but also if doing the particular kind of work is more unpleasant than doing some other kind of work. We want to combine productivity, scarcity, and disutility into an overall social opportunity cost for each kind of “direct labor” as you put it – not because we need to know any of this in order to figure out how much to pay the workers, but we need to do this to know how much we should charge enterprises for using the different kinds of labor. But in the process of balancing job complexes for desirability we have a procedure that determines how much more or less desirable different kinds of work are. Committees make informed guesses about differential desirability when they package tasks into complexes initially, but since people are free to bid on job complexes as long as they are technically qualified for all the tasks, the balancing committees find out when they have guessed wrong. If the applicant list for a complex is longer than average, it must be more desirable than average meaning the less desirable tasks are not as undesirable as the committee thought and/or the more enjoyable tasks are more enjoyable than the committee thought. This information allows the balancing committees to adjust their estimates of the relative disutility of different kinds of “direct labor.” In this way we get a disutility rating for each kind of labor. Say master carpentry has a disutility rating of .84 where 1.00 is the average disutility of labor in general. [Any labor category with less than 1.00 is more pleasant than average, any with more than 1.00 is more unpleasant than average] Then the indicative price of master carpentry labor would be calculated as follows: Take the indicative price that emerges from the planning process – which will be the analogue of the price of arable land with 20 inches of rain and a 3 month growing season, and just like the indicative price for that land reflects productivity and scarcity as determined by supply and demand through bidding from all potential users in the economy – and multiply that price for master carpentry labor by .84 [More unpleasant kinds of labor would be multiplied by a number larger than 1.00] In this way disutility can be combined with scarcity and productivity to give us an overall assessment of social opportunity costs of using different kinds of labor. Now that I’m thinking about this it occurs to me that one further adjustment would have to be made. As described above we are assuming, in effect, that average labor has no disutility at all. We have adjusted for differential disutility, but not the average disutility of working rather than using our time in leisure. One way of handling this is setting the average work week at a particular number of hours. If we choose 30 rather than 40 we have effectively said that work on average compared to leisure is more unpleasant. So the national decision on the average work week is effectively a decision on the average disutility of work. Another way is to have a national vote on what number [greater than 1.00] should be used to multiply the indicative prices emerging from the planning procedure for all labor, prior to the differential adjustments, i.e. .84 for master carpentry. That vote would end up determining the average work week. I’ll be interested in your thoughts.
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Well, it all depends on what we mean by “a market system.” If we mean a system in which there are some kind of prices and supply and demand come into accord, then, yes, you would be right. But then all non-trivial allocation systems would be “some kind of market system” (including central planning) and instead of markets being a kind of allocation mechanism, the word market would be a synonym for allocation and we would need a new word for what economists more typically call a market system…
One issue that seems to worry a number of people is the submission of individual expenditures months in advance. Uggh. Would this really have to be a feature of parecon? Why the necessity for individuals to take part in detailed planning?
There are a lot of things that could never be bargained or planned for on a yearly basis. Wouldn’t some kind of market system work to distribute those items?
But if I work in a institution which controls some of the critical levers of the economy, even if I have a balanced job complex within that institution, I may still not have a balanced job complex with regard to economic power and the broader community, right?
As you make clear, producers MUST be charged for actual marginal utility of labor input, not member sacrifice. How is this determined? An increased charge for labor might cause you to reduce your own hours (though not much, since your material standard of living depends upon hours worked). Why work overtime in response to a measured INCREASE in your workplaces social efficiency?