Thinking Forward
Lecture 8:
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In this Lecture, 8, as in past ones, I would like to begin
by presenting my answers to questions raised last time. Then
we can move on to the allocation institutions discussion.
Answers
to Lecture 7 Questions
- What is an externality of a consumption choice you
may make, or action you may undertake?
Any effect of the choice or action whose consequences are
felt by other than solely the buyer and/or seller.
- What does the existence of consumption externalities
imply about the process of arriving at consumption decisions
given the desire for efficiency and given the desire
for self management?
The people affected by outcomes are supposed to be
proportionately involved in making them. If there is an externality
to some economic choice, then the decision must be made with
input from people other than just the buyer and seller.
If this is not done, then of course there will be no
participatory self management. But, likewise, if it is not
done decisions may be made which have harmful effects on
non-buyers and sellers that are much greater than any positive
effects buyers or sellers may enjoy. In other words, from the
broader perspective of all people’s well being and
development, many choices that buyers and sellers make in light
of only effects on themselves may be less than optimal, or
even horrible.
- Are there different levels of consumption decision-
making unit, as with separate workers, work teams, plants,
industries, etc.? If so, what implications does this
have for how consumption should be undertaken?
It seems to me that there is the individual, the smallest
living unit, the next larger size living unit (perhaps extended
family or commune, or whatever), the neighborhood, county,
etc.
There are certain consumption choices that are primarily
relevant to a single actor, or some larger collective. The decision
process needs to reflect this, both in terms of the impact we
have on choices, and in terms of charging people properly for
their fair share of costs.
So, if my family gets a lot of collective goods, or my
commune, each member is going to be charged a fair share, and
have less for individual goods.
- What determines, should determine, the volume of
stuff I can consume in a year?
I would say the overall social product, and then how much
above or below the average outlay of effort and sacrifice I
have contributed to its creation—unless I have some good
reason why I couldn’t contribute, in which case I get the average
by right, or some compelling reason why I should get more than average,
in which case, if granted, I get that.
What do I have to think about to decide what I want to
consume?
Certainly my own preferences. But also the effects of my
choices on other people, both immediately around me, and also
at a distance, such as the people who will have to produce
what I seek to consume. Partly this is straight solidarity
and empathy. Partly it is also self-interest. It is pointless
for me to say I want some commodity that involves onerous
work, if I really don’t care for it all that much. Why? It
reduces overall work quality for everyone, myself included,
to behave in such a way.
- Can I just determine my preferences, or must they be
agreed to by others? If so, who?
Of course I determine my preferences. Who the hell else
would?
- Can I consume stuff that is going to hurt others, if
not, what stops me from doing so? Suppose I am a
drunk, for example.
This is a very tricky matter. Everybody’s will is manifest
in the prices of items, via the social planning process.
Likewise, workers have a proportionate say in what they
will do, etc.
But a lot of this happens at the level of gross supply and
demand, and people’s individual reactions to it. What might
be a perfectly sensible order for Vodka, for the country, for
a region, even for a local neighborhood or commune, could conceal
a horrible order for some individual.
What happens?
Now we have two competing values at stake. Privacy and
proportionate self management. I have a right to privacy
regarding my desires, etc. But my community has a right to
step in when my personal consumption choices are threatening
the community or some or all of its members.
Suppose I like manufacturing bombs as a hobby, or, at a
lesser level, drinking myself into a violent state.
What Robin and I came up with when we were thinking about
parecon and asking just these types of questions was that
individuals could submit their consumption proposals
anonymously. This way the proposals are seen, and can be
challenged, yet the person’s privacy isn’t abridged. More,
except in the most extreme of cases, though an individual’s
private choices of how to spend their budget can be challenged,
if can’t be abridged. For the latter degree of intervention,
there would have to be special cause, etc.
So the answer is kind of mixed. If what I want is
produced, and available, and I have sufficient budget to
afford it (at its real price), I can have it. But, my neighbors,
etc., can also challenge consumption proposals that seem anti-social.
And, in special cases, even intercede.
- What protects personal rights and the privacy of the
consumer? What allows collective impact?
Well, with our answer above, this is pretty clear,
anonymity and freedom to spend up to your budget level as you choose,
on the one hand, and the right to intercession, on the other.
- How do you react to the following norms: To guarantee
equity there must be a measure of average per capita consumption
for individuals, neighborhoods, regions, and states,
and there must be a way to ensure that individuals,
neighborhoods, regions, and state don’t consume above the average
amounts unless they receive permission from others to
do so. Requests for goods and services that place an
above average burden on society’s productive
potentials may be rejected by consumer councils on equity
grounds.
This seems fair to me, obviously. But let me throw in a
thought provoking wrinkle.
Supposing we want equal outcomes, not in some crass
material sense, but in the sense of equal personal fulfillment
and development for all. Should everyone have the same
budget? If I am bigger, I need more food. If I get my fulfillment
and pleasure from playing violin, and you from playing harmonica, why
do I have to pay more of my total income for the same outcome (fulfillment
and pleasure) that you pay less for.
What do people think about this fly in the ointment? Is
it, or isn’t it.
To guarantee the right to privacy and personal control of
one’s purchases, average- and below-average requests must not
be subject to aggressive oversight, and should they want to
suffer the losses involved in forsaking the benefits of
collective consumption goods, individuals must be free to act
as their own one-person consumption councils.
In other words, as a last resort, you vote with your feet.
If you don’t like parecon, don’t take its offerings, don’t abide
its limitations, either in part, or in full.
- Should it be possible to borrow and save? What would
it mean in practice?
I can’t see any problem with allowing this. To think there
needs to be equity every minute is a fetish, to my mind, and
grossly inflexible, whether we are talking about roles or
income.
So why shouldn’t I be able to spend some of next year’s
income earlier, or to save some for the future, etc.?
But this does introduce tricky problems. For any durable
good I would ever buy, of course I would like to buy it now
rather than later, to get the pleasure of its use for a
longer time during my life. Well, everybody cannot do this.
We can’t all be working later for our hamburger today, to
quote the meat eating bozo in Popeye.
So something to think about is the exact norms and
mechanisms of saving and borrowing.
- Should one be able to increase one’s consumption
bundle above the social average? If so, how?
If I exert more effort and give more of myself
(sacrifice), sure, I ought to be able to receive more of the
social product back in return. It is hard to see how anyone
could do this to too great a degree, however. Suppose the average work
week is 30 hours. Could someone manage to get 30 extra hours of
labor at balanced job complexes consistently with everybody
else’s plans? Would anyone want this? I don’t know, but I
doubt it would cause any real problems for the system. If it
would, however, then there would have to be norms about how
much “overtime” people could work.
- What should be the relation between collective
consumption requests and individual ones?
Seems like the collective consumption requests that I
benefit from, I in part pay for. Also, it makes little sense
for me to arrive at individual requests before I know what my
collective units are getting. It could easily change my situation
and personal preferences. So it is entwined, in the budget
sense, and I think the collective request is prior, in the
planning sense.
- What about someone who can’t work, do they consume?
At what level?
Well, what else, they starve? It seems to me that they get
an average budget, that they can consume as they wish.
In fact, the way I like to think of parecon is that
everyone gets an average budget by right of being a person.
Everyone also has a responsibility to work an average job
complex an average length of time. The two things are separate
at the level of right and responsibility, but linked at the
level of “amount.” Anyone who wants to can, on top
of this normal situation, petition for some more income, less
work, or whatever.
What determines whether the petition is granted? Partly
its value and logic. Partly whether the person helps pay for
its implementation by additional effort and sacrifice.
This way labor and income are only operationally linked
for the part that diverges from average…
Comment on the following passage from Ursula Leguin’s The
Dispossessed…
What can I say. She understands things that 95 percent of
professional economists are 100 percent oblivious too. But
then, so does the average person on the street… Leguin
does, however, say it better.
- What reasons might influence your choice of a local
area to live, that is, of a local consumption collective
to become part of?
The personalities of people, of course, but also their
collective goods preferences. Depending on my preferences I
might like a group that spends a lot on musical instruments
and practice rooms, or on an observatory and lab, or on one
that has various kinds of athletic equipment, and so on…
In other words, it make sense to choose where one lives on
a variety of grounds including proximity to work, family and
friends, climate, etc. etc., but also the collective goods
preferences of people in various size living groups.
- Describe what you think might be a sane and orderly
and sensible routine that a person in a good economy might
go through to plan their consumption for a year, then
to update it periodically in light of changed preferences,
circumstances, expectations, etc.?
I’m going to leave this one, for now.
Information and Allocation
This time I decided to use a more textual lecture, and to
make it a slightly adapted version of Chapter Four from the
book Robin and I wrote published by Princeton University
Press. The chapter title is Allocation, and it is a statement
of what participatory allocation is, written for professional economists.
(There are a couple of related mathematical chapters too, but
this chapter appears here essentially as it appeared there.)
I think you will have little problem with the chapter but it
will help to indicate the difference between a conversational
lecture, and an effort to present similar content in a more
precise fashion. These types of “professional”
presentation actually have little to do with the process of
conceptualizing vision, or analyses, for that matter. They
are after the fact. In the rest of the lectures, I try to be
more true to the kinds of thinking and procedures typical of
conception, as compared to presentation. But this provides a
good contrast, I think, and also does manage to present the allocation
system in a succinct way. So…
Here we describe an alternative system of allocation,
called decentralized participatory planning. The system permits
consumers and workers councils to participate directly in
formulating a plan and has strong egalitarian properties. Because
workers and consumers councils propose and revise their own activities
prior to initiating those activities, the planning process is
a decentralized, social, iterative procedure.
We consider specifying this procedure and analyzing
its welfare theoretic properties our most important contribution
to developing a libertarian economic vision (along with
the idea of balanced job complexes, and its implications,
I think I would add). The idea of “associated
producers” democratically determining their own plan is
no more original to us than the vision of workers and consumers
councils. But whereas many before us have contributed to
the theory of the internal workings of democratic
councils, few have attempted to explain, in detail, how
those councils might jointly settle on a plan. In fact, most
economists agree no third procedure qualitatively different
from markets and central planning exists, or, if there is
another alternative, that it has not been articulated at
a level permitting meaningful comparison with markets and
central planning.
Alec Nove, for example, threw down the gauntlet in
unequivocal terms: “I feel increasingly ill-disposed
towards those who…substitute for hard thinking an image
of a world in which there would be no economic problems
at all (or where any problems that might arise would be
handled smoothly by the `associated producers’… In a
complex industrial economy the interrelation between its
parts can be based in principle either on freely chosen
negotiated contracts [i.e. markets], or on a system of
binding instructions from planning offices [i.e. central
planning]. There is no third way.” Allen Buchanan posed the
challenge in a somewhat more agnostic vein: “It is
impossible to show that a feasible non-market system at
least approaches the productivity of the market unless
(1) a rather well-developed theoretical model of the
non-market system is available, and (2) it is
demonstrated that a sufficiently productive approximation
of the ideal system described in the theoretical model is practically possible.
Unfortunately, [no one] has achieved even the first step—that
of providing a theoretical model for a non-market system.”
In this chapter and the next two we present a rebuttal
to Nove and a direct answer to Buchanan by providing a “rather
well-developed” theoretical model of a decentralized planning
procedure and offering a preliminary analysis of its
efficiency properties as well as arguing that “a
sufficiently productive approximation of the ideal…system described
in the theoretical model is practically possible,”
including description of a number of experiments through
which other economists might sensibly test this claim.
Participatory Information and Communication Our
description of participatory workers and consumers
councils (in prior chapters) assumed that the necessary
information about their relations with others would be
available. But what precisely do workers in a council
need to know to regulate their production activity
cognizant of the effects on themselves, other workers,
and consumers?
And what must consumers know to formulate their
consumption requests in light of their own needs as well
as the needs of other consumers and workers?
Participatory workers must be able to weigh the gains
from working less or employing less productive though more
fulfilling techniques, against the consequent loss of consumer
well-being. Participatory consumers need to be able to
weigh the gains of a consumption request against the sacrifices required
to produce it. Participatory workers must be able to
distinguish an equitable work load from one that is too
light or too heavy. And participatory consumers need to
be able to distinguish reasonable consumption demands from
ones that are unreasonable or overly modest. Finally, all
actors must know the true social costs and benefits of
things they demand or supply, that is, all the non-human
and human, quantifiable and non-quantifiable consequences of
their choices, if they are going to participate in
informed collective self-management.
First
Communicative Tool: Prices
Prices providing accurate estimates of the full social
costs and benefits of inputs and outputs are the most important
quantitative communicative tools we use. They arise in
the process of participatory planning and serve as guides
to proposals and evaluations. And this is an important
point.
All too often theoretical economists view
“efficiency” prices or “shadow” prices
as quantitative measures that can be found via technical
procedures. In the literature on central planning, for example,
shadow prices arise as the solution to the dual of the primal
planning problem that central planners “solve.”
And in neoclassical literature on market systems, an
equilibrium price vector is studied as something implied
by preferences and technologies taken as givens. While
these conceptions are useful in some regards, they are misleading
as well. Real people’s preferences arise in social communicative processes.
Not only do results depend on what those processes are
like, but the very preferences that lie at the basis of
the results depend on the processes as well. So, without engaging
in undue mystification, we should remember that estimates
of social costs and benefits with any claim to accuracy
must arise from social, communicative processes. The
trick is to organize these processes so people have no incentives
to dissimulate regarding their true desires, and all have
equal opportunity to manifest their feelings. It is precisely
because our participatory planning process is different
from the flawed communicative processes of market and
centrally planned allocation that the prices to which it
gives rise will be different as well.
In any case, prices are “indicative” during
the planning process in the sense of indicating the best current estimates
of final valuations. They are not binding but flexible in
the sense that qualitative information provides important additional
guidance. And they are not the product of competition or authoritarian
determinations, but of social consultation and
compromise. The idea is that qualitative information is
necessary if quantitative indicators are to be kept as
accurate as possible. But qualitative information is also necessary to
develop workers’ sensitivity to fellow workers’
situations and everyone’s understanding of the intricate
tapestry of human relations that determines what we can and cannot
consume or produce. So both to assure accuracy and to foster
solidarity we need a continual, social resetting of
prices in light of updated qualitative information about
work lives and consumption activity. Thus, the cybernetic
burden of a participatory allocation procedure is considerably
greater than for non-participatory economies.
Not only must a participatory economy generate and
revise accurate quantitative measures of social costs and benefits
in light of changing conditions, but it must communicate
substantial qualitative information about others’ conditions
as well.
Second
Communicative Tool: Measures of Work
As we explained earlier, job complexes are balanced in
each workplace, and in plants with above average work conditions
workers spend time doing more menial tasks elsewhere,
while in plants with below average work conditions, people
put time into more interesting pursuits elsewhere.
For an individual to work more or less than the social
average in a given period and not disrupt a humane
balance of work, she or he need only diminish or increase
her or his hours worked at all tasks in the same
proportion. Then, each individual could receive from her
or his workplace an indicator of average labor hours
expended as an accurate indicator of work contributed.
Over a sufficient period, whenever a person’s
indicator was high (or low) compared to the social average,
the individual would have sacrificed more (or less) for
the social good, and would be entitled to ask for proportionately more
(or less) consumption in return.
Unlike what emerges from the Marxist labor theory of
value:
- In our system job complexes are balanced by a
real social evaluation, and
- Our “hour counts” serve only as
guidelines for decisions since councils can grant exceptions
for higher (or lower) consumption requests as conditions
and needs warrant.
In short, participatory planning can obtain a
reasonable first estimate of effort expended by counting labor
hours because people’s job complexes have been balanced.
These estimates can then be revised in light of effort
intensity ratings by one’s work mates. In attempting to
gain consumption flexibility, only unbalancing job
complexes is prohibited.
Third
Communicative Tool: Qualitative Activity
To guard against “reductionist accounting”
each actor needs access to a list of everything that goes into
producing goods directly and indirectly, and a description
of what will be gained from consuming them. This means
those who produce and consume particular goods must try
to communicate the qualitative human effects that cannot
be captured in quantitative indicators. This does not
entail everyone writing Upton Sinclair length novels
about their work and living conditions. It does mean
generating concise accounts that substitute for the fact
that not everyone can personally experience every circumstance.
Of course, not every worker and consumer will use all
this qualitative information in all calculations. But
over time people will become familiar with the
“congealed” material, human, and social components
of products they use just as people are now familiar with the
products themselves. In this way, everyone can more
accurately assess the full effects of others’ requests in
a way that enhances solidarity. Both producers and
consumers must therefore receive not only quantitative
summaries of overall social costs and benefits, but detailed
qualitative accounts as well. Only this will ensure that the human/social dimension
of economic decision making is not lost and guarantee that
summary price data remains as accurate as possible.
Allocation
Organization
Every workplace and neighborhood consumers’ council
participates in the social, iterative procedure we call participatory
planning. But besides workplace councils, we also have
industry councils and regional federations of workers’
councils. And besides neighborhood consumers ‘ councils, we also have
ward, city, county, and state federations of consumers’
councils as well as a national consumers’ council. Moreover,
in addition to all these councils and federations of
councils, various facilitation boards assess collective
proposals and large-scale investment projects, regional and industry
boards assist workers changing places of employment, and
household boards help individuals and families find
membership in living units and neighborhoods. Finally, at
every level of the economy facilitation boards help units
revise proposals and search out the least disruptive ways of
modifying plans in response to unforeseen circumstances.
In our companion volume, Looking Forward, we provide comprehensive descriptions of planning
institutions and procedures, including hypothetical case studies for
particular kinds of workplaces and consumers’ councils intended to
illustrate the texture of participatory planning.
Here we present a summary of results sufficient for
theoretical purposes.
Participatory Planning
- Each consumption “actor” proposes a
consumption plan.
- Individuals make proposals for private goods.
- Neighborhood councils make proposals that include
approved requests for private goods as well as the neighborhood’s
collective consumption request. Higher level
federations make proposals that include approved requests
from member councils as well as the federation’s collective consumption
request.
- Similarly, each production “actor” proposes
a production plan. Workplaces enumerate the inputs
they want and outputs they will make available.
Regional and industry federations aggregate proposals
and keep track of excess supply and demand.
- Every actor at every level proposes its own plan,
and, after receiving information regarding other
actors’ proposals and the response of other actors to
its proposal, each actor makes a new proposal.
- As every actor “bargains” through
successive “iterations,” the process converges.
Preparing First Proposals
The real world always has a “just completed
year.” If production and consumption of the just completed
year was recorded, we would have information about last
year’s plan for each actor. If the prices used to calculate social costs,
benefits, and income last year were recorded, we have a set
of “indicative prices” that could be used to begin
this year’s estimates as well. By storing last year’s full plan
in a central computer, access to relevant parts including
indicative prices could be made available to all actors in
the planning process. Additionally, each unit knows what its
own proposals were in each iteration last year.
So, how do workers’ and consumers’ councils plan.
- They access relevant data from last year.
- They receive information from facilitation boards
estimating this year’s probable changes in prices and income
in light of existing knowledge of past investment
decisions and changes in the labor force.
- They receive information from higher level production
and consumption councils regarding long-term investment
projects or collective consumption proposals already
agreed to in previous plans that imply commitments
for this year.
- By reviewing changes in their own proposals made
during last year’s planning they assess how much they had
to scale down their consumption desires or their
plans to improve the quality of work life, and look
to see what increases in average income and
improvements in the quality of average work complexes
are projected this year over last.
- Using last year’s final prices as indicators of
social costs and benefits they develop a proposal for
the coming year, not only enumerating what they want
to consume or produce—and implicitly what they think society’s total
output should be—but also providing qualitative
information about their reasons.
This does not mean units must specify how many units of
every single good they need down to size, style, and color.
Goods and services are grouped into classes accordingly as
they are roughly interchangeable regarding the resources,
intermediate goods, and labor required to make them. For
planning purposes we need only request types, even though
later everyone will pick an exact size, style, and color. Individuals
present consumption requests to neighborhood councils where
they are approved or disapproved. Once approved, individual consumption requests
are summed and added to the neighborhood collective
consumption request to become the neighborhood consumption
proposal. These in turn are summed with consumption requests
from other neighborhoods into ward proposals, which are
summed along with consumption requests from other wards into city
proposals. Having the next higher level council review, approve,
or contest lower level requests until they are ready to be passed
on saves a great deal of planning time.
In the same way, a firm’s iteration board provides all its
workers with summaries of last year’s production schedule,
including what was initially proposed, changes made during
planning iterations, and what was (finally) approved, as well
as a prediction of this year’s requests based on extrapolations
from new demographic data and the trajectory of last year’s iterations.
Individual workers consider this information, discuss ideas
for improving the quality of work life, and enter proposals
which are averaged into the firm’s first proposal for
“inputs” and “outputs.” After some number
of iterations, firm proposals are discussed, negotiated, and
decided as a unit rather than each individual making his or
her own proposal and these being averaged.
Besides quantitative proposals for each production and
consumption unit, a qualitative addenda including descriptions
of changes in circumstances and conditions is also entered
into the computerized planning system. At any point any
council can access the data banks of any facilitation board
and any other council.
Proceeding from One Proposal to Another
The first proposals are in. We have all answered how much
we want to work and consume in light of our own presumably
over-optimistic assessments of possibilities.
Do the proposals constitute a plan, or must we have
another round? To decide, it is only necessary to sum all proposals
and compare total demand and total supply for every class of
final good and service, intermediate good, and primary input.
In a first iteration, where consumers propose in part a “wish list”
and workers propose substantial improvements in their work
lives, while some goods may be in excess supply, for most
goods initial proposals should generate excess demand. In
other words, initial proposals are not supposed to sum to a
feasible plan.
As the next step, every council receives new information
indicating which goods are in excess supply or demand by what
percentage, and how its proposal compares to those of other
relevant units. Most important, iteration boards provide new
estimates of indicative prices projected to equilibrate supply and
demand.
At this point, consumers reassess their requests in light
of the new prices and most often “shift” their requests
for goods in excess demand toward goods whose relative prices
have fallen because they were in excess supply or less in
excess demand than others. Consumers’ councils whose overall requests were
higher than average would also be under pressure to
“whittle down” their requests in hopes of winning
approval. Equity and efficiency emerge simultaneously. The
need to win approval from other similar councils forces councils
whose per capita consumption request is significantly above
the social average to reduce their overall requests. But the
need to reduce can be alleviated by substituting goods whose
indicative prices have fallen for those whose prices have risen.
Attention focuses on the degree to which units diverge from
current and projected averages, and on whether their reasons
for doing so are compelling.
Similarly workers’ councils whose ratios of social
benefits of outputs to social costs of inputs were lower than average
would come under pressure to increase either efficiency or
effort, or to explain why the quantitative indicators are
misleading in their particular case. Before increasing their
work commitment, workers would try to substitute inputs whose
indicative prices had fallen for inputs whose indicative
prices had risen, and substitute outputs whose indicative
prices had risen for outputs whose indicative prices had fallen.
Each iteration yields a new set of proposed activities for
all economic actors. Once summed, these yield new data
regarding the status of each good and the average consumption
per person and production “benefit cost ratio” per
firm. All this allows calculation of new price projections
and new predictions for average income and work, which in
turn lead to modifications in proposals until excess demands
are eliminated and a feasible plan is reached.
Flexible Updating
Converging and updating are related because both can
benefit from algorithms that take advantage of the large scale
of the planning process. Assume we have settled on a plan for
the year. Why might we need to update it during the year, and
how might this be done with least disruption.
Consumers begin the year with a working plan including how
much of different kinds of food, clothing, meals at restaurants,
trips, books, records, and tickets to performances they will
consume. What if someone wants to substitute one item for a
slightly different one? Or what if she wants to delete or add
entries? Or what if she changes her mind and wants to save or
borrow more than planned? She belongs to a neighborhood
consumers ‘ council which in turn belongs to a ward council, a
city federation, and so on. Some changes will cancel out
among all the consumers within the neighborhood, others will cancel
out at the ward level, and so on. As long as adjustments by
many consumers cancel at some consumption federation level,
production plans need not change. Indeed, making adjustments
without disrupting production plans is one function of
consumer federation boards.
But what happens if aggregate demand rises for some good?
Suppose individuals record their consumption on “credit
card” computers that automatically compare the
percentage of annual requests “drawn down” with the fraction
of the year that has passed, taking account of predictable irregularities
such as birth dates and holidays.
This data can be processed by planning terminals which
communicate projected changes to relevant industry councils
which in turn communicate changes to particular firms. The
“technology” involved is little different from the
now common system of computerized store inventories where
cash register sales are automatically subtracted from
inventory stocks. In any case, what would then happen is that consumer
federations, industry councils, and individual work units
would engage in a dialog to negotiate adjustments. Such dialogues
may lead to work diminishing in some industries and increasing
in others, including possible transfers of employees, but
there need be no more moving about than in other types of
economies. In any case, the need for workers to change jobs
or increase or diminish work loads would be a factor considered
in the dialogue over whether to meet changed demands.
However, since each firm’s activities have implications
for other firms, if planned matches between supply and demand
are calculated too closely, any change in demand could
disrupt the whole economy. For this reason a “taut” plan
would prove unnecessarily inconvenient since it would require
excessive debating and moving. To avoid this and to simplify
updating, the plan agreed to should include some excess
supply for most goods. A practical knowledge of those
industries most likely to be affected by non-averaging
alterations would facilitate this type of “slack
planning.”
Converging to a Plan
A little thought reveals that convergence can be a
complicated matter. Adjusting indicative prices to reduce excess
supplies and demands is more complicated in practice than in
economists’ theoretical models with all their convenient
assumptions. For example, a product in excess demand in one iteration
could overshoot equilibrium and be in excess supply in the
next iteration as workers offer to produce more and consumers
offer to request less in response to a price increase. Worse
still, considering that each product’s status affects the
status of many others, progress in one industry could disrupt equilibrium
in another. Theoreticians’ solutions to these headaches always assume
away the troublesome phenomena. Whether the issue is market equilibrium
and stability or convergence of iterative planning
procedures, it is well known that convexity and gross
substitutability assumptions are good aspirin for these
theoretical headaches. But simplifying assumptions are no aspirin
at all for practitioners operating in the real world.
To make our participatory planning
procedure more efficient, specific economies will incorporate flexible
rules that facilitate convergence in a reasonable time but do not
unduly bias outcomes or subvert equity. Procedures can range from
rote algorithms carried out by computer that take short cuts toward
equilibrium, to rules that prohibit actors’ responses that would yield
time consuming loops, to adjustments fashioned and implemented by
specialized workers experienced in facilitating convergence when particular
situations arise. Devising and choosing from among these and other
possibilities is a practical issue in implementing any actual participatory
economy. Assuming the procedures chosen do not violate principles
essential to participatory planning, considerations include:
- The extent to which iteration workers could bias
outcomes
- The extent of reductions in the number of iterations
required to reach a plan
- The amount of planning time saved through
compartmentalizing subsets of iterations, and
- How much less onerous to producers and consumers
their calculations could be made.
A Typical Planning Process
Since the procedure we have described is dramatically
different from traditional market and central planning allocation,
it is useful to summarize by describing what a typical
planning process might look and feel like to its participants.
The first step is for each individual to think about her
or his plan for the year. Individuals know they will end up working
in a balanced job complex, and can expect to consume an
average consumption bundle unless their work effort is above
or below normal or special needs dictate otherwise. The first decision
is whether they want to “save” by working longer or
consuming less than average, or “borrow” by working
less or consuming more than average. Facilitation boards
provide an initial estimate of what average consumption and
average work loads will be for the year based on last year’s
levels, last year’s investments in equipment and training,
and adjustments that occurred during last year’s iterations.
When you make your first proposal you are not only proposing
to do specific work and consume specific items, but you are proposing
a level of work contribution and consumption request for
yourself, and, implicitly, at least on average, for everyone
else as well. To be realistic you must coordinate your work
and consumption proposals, though you need not agree with
facilitation board growth estimates.
In other words, what you propose is: “I would like to
work so much at my job complex and to consume so much broken
down in the following way.” And this proposal is based
on last year’s experience, your prediction of economic growth,
and your individual decision about saving and borrowing.
Everyone makes such a choice, trying to optimize given their
particular preferences and within the constraint that the
overall amount consumed must be produced and that
responsibilities and rewards in this endeavor will be
distributed equitably.
After first proposals are summed, new indicative prices
are calculated and new projections of social averages estimated.
Note that it would not even be possible to implement most
initial production proposals since in most firms one person
in a team may have proposed working more hours than another person
in the same team, even though they can only work together.
Moreover, most goods will be in excess demand so the initial
plan is infeasible as well.
Again every individual would formulate a new response.
You compare your proposed work load and proposed
consumption to the average proposals of others. You might also
consider more localized averages, for example in your firm or
industry, and in your council or neighborhood. You certainly
consider the status of each item you ordered or proposed since
excess demands and supplies will be reflected in changes in indicative
prices.
That is, you will be faced with summaries of the statuses
of goods as well as new estimates of social opportunity costs
and benefits. After you consult descriptive explanations for
what seems odd to you, like large changes in worker
productivity or consumer choice, and after you consult with
whomever you like and whatever data you are interested in,
you then make any desired changes before entering your second
proposals.
And, once again, all these new proposals are summed and
the new information made available for the third iteration.
So far there have been no rules or limits on workers’ or
consumers’ responses. Now, however, there could be a change.
Instead of being able to change proposals in any direction by
any amount, limits might be imposed. For example, consumers
might be prohibited from increasing their demand for certain
goods beyond some maximum percentage above projected averages
for the economy.
Or producers might be prevented from lowering output
proposals by more than some percent in this and subsequent
rounds.
The point is simply that it is possible to impose rules
limiting changes to specific ranges to keep the status of goods
from varying excessively from round to round. Any particular
implementation of participatory planning settles on socially
desirable and mechanically efficient rules to guide the behavior
of producers and consumers in different iterations.
In the third or fourth iteration, proposals might be
limited to councils instead of individuals. Consumers meet in their
local neighborhood councils and workers in their workplace
councils to settle on council-wide proposals so that work
proposals are no longer abstract unimplimentable averages but consistent
work plans that could be enacted if inputs requested were
made available.
Note that nothing about our procedures pushes different
actors to consume the same amounts of different goods.
Individual consumers and producers can hold pat on
proposals that are far from average. On the other hand, workplaces
do feel pressure to measure up to average “benefit cost
ratios,” and consumers will be pressured to keep their overall
requests from exceeding average income. Indeed, at this stage production
councils that persist, after allowance for acknowledged
different circumstances, in proposals with benefit cost
ratios below their industry ‘ s average, might have to
petition their industry for permission not to be disbanded.
And, similarly, although again with sensible allowances, local consumers’
councils with above average proposals might have to petition higher
federations explaining special circumstances to warrant their
requests.
The fifth iteration in our hypothetical procedure might
deploy still another rule to accelerate planning. This time facilitation
boards extrapolate from the previous iterations to provide
five different final plans that could be reached by the
iterative process. What distinguishes the five plans is that
each entails slightly different total product, work expended,
average consumption, and average investment.
All actors then vote, as units, for one of these five
feasible plans. Each plan is a consistent whole and implimentable.
Once one of the five is chosen as the base operating plan,
units adjust requests in subsequent iterations in conformity
with the base plan until individual agreements are also
reached.
Conclusion
While we must still address important aspects of
participatory allocation, it is useful to summarize here
where our argument stands. We have argued earlier that
hierarchical production and consumption, markets, and central planning are
individually and in combination incompatible with efficient,
egalitarian, economies in which people control their own
lives and enjoy solidarity. We have also presented a
description of participatory, nonhierarchical production and
a description of participatory, equitable consumption. In
this chapter/lecture we have described a planning procedure that
promotes participation, equity, solidarity, and diversity and
supports rather than undermines participatory production and
consumption within units.
What remains is to demonstrate that a participatory
economy can yield desirable outcomes efficiently. To do that we
examine the convergence and efficiency properties of a
mathematical model of participatory planning in chapter 5,
and propose various simulation and other social experiments regarding
its “practical feasibility” in chapter 6.
[This latter stuff is done mathematically, in the
technical book, but here we will settle for cogent argument,
I think.]
So, for what it is worth, this is what the same type of
material as the other lectures is like, when written without mathematics,
but for professional economists.
Questions about Allocation
And here are some questions taking off from the material
presented above.
“Participatory workers must be able to weigh the
gains from working less or employing less productive though more
fulfilling techniques, against the consequent loss of
consumer well-being. Participatory consumers need to be able
to weigh the gains of a consumption request against the sacrifices required
to produce it. Participatory workers must be able to
distinguish an equitable work load from one that is too light
or too heavy. And participatory consumers need to be able to distinguish
reasonable consumption demands from ones that are unreasonable
or overly modest. Finally, all actors must know the true
social costs and benefits of things they demand or supply,
that is, all the non-human and human, quantifiable and
non-quantifiable consequences of their choices, if they are
going to participate in informed collective self-management.”
- Is this acceptable? Does this seem like an accurate
accounting of what is needed to have a good allocation communications
system? Do you have different ideas for an economy
you would like?
- What are prices for, in any economy? What do we do
with them? When are prices useful and worthwhile? What
attributes make some prices harmful? Why do we call
our prices “indicative prices” instead of
simply prices?
“So, without engaging in undue mystification, we
should remember that estimates of social costs and benefits
with any claim to accuracy must arise from social,
communicative processes. The trick is to organize these processes so
people have no incentives to dissimulate regarding their true desires,
and all have equal opportunity to manifest their feelings. It
is precisely because our participatory planning process is
different from the flawed communicative processes of market
and centrally planned allocation that the prices to which it
gives rise will be different as well.”
- What the hell does the above paragraph mean?
“The idea is that qualitative information is
necessary if quantitative indicators are to be kept as accurate
as possible. But qualitative information is also necessary to
develop workers’ sensitivity to fellow workers’ situations
and everyone’s understanding of the intricate tapestry of
human relations that determines what we can and cannot
consume or produce. So both to assure accuracy and to foster solidarity
we need a continual, social resetting of prices in light of
updated qualitative information about work lives and consumption
activity. Thus, the cybernetic burden of a participatory
allocation procedure is considerably greater than for
non-participatory economies. Not only must a participatory economy
generate and revise accurate quantitative measures of social costs
and benefits in light of changing conditions, but it must
communicate substantial qualitative information about others’ conditions as
well.”
- What is different about this view, and the one
typical of our own society? Is the above view okay
with you?
“In short, participatory planning can obtain a
reasonable first estimate of effort expended by counting labor
hours because people’s job complexes have been balanced.
These estimates can then be revised in light of effort intensity ratings
by one’s work mates. In attempting to gain consumption
flexibility, only unbalancing job complexes is
prohibited.”
- And what does that mean, in practice? And is it
acceptable to you?
“To guard against `reductionist accounting’ each
actor needs access to a list of everything that goes into
producing goods directly and indirectly, and a description of
what will be gained from consuming them.”
- Why? And under what conditions do we need this? How
often? What does this information look like and how
is it to be communicated? What is going on here,
methodologically, in trying to figure out a vision?
- What is a council? Of what use are they? What kind do
I propose we have in a good economy? Do you agree or
not, and why? How diverse can they be in their
structure? What constraints operate on them? Are councils part
and parcel of real participation and democracy, or an obstacle
to it?
- What is a facilitation board? What do they do? Why?
Are these functions necessary? Is there a better way
to get them done? What requirements do we need to
place on institutions that facilitate planning? Who
would work in them? With what perks and problems?
“Each consumption actor proposes a consumption
plan.”
- Fine. Who are the “actors” and what
constitutes such a proposed plan? IS there a better
way to go?
“Similarly, each production actor proposes a
production plan.”
- Again, who are the actors, and what constitutes such
a proposed plan? Does it make sense?
- How do the consumers’ first proposals likely compare
with the producers’ first proposals? Why? What would
we think if what was proposed as output was greater
than what people said they wanted for input? What is
to be done about discrepancies? Does participatory planning
seem like a sensible approach? Would it be better to
circumvent the hassle via a central planning approach,
or a market approach?
- What does it mean to say that to start planning for
this year, workers and consumers councils “access relevant
data from last year”? Why? How does this help?
What pitfalls are involved with taking this approach?
- Why do they next “receive information from
facilitation boards estimating this year’s probable changes
in prices and income in light of existing knowledge
of past investment decisions and changes in the labor force”?
Are there problems with this?
- And why do “they receive information from higher
level production and consumption councils regarding long-term
investment projects or collective consumption
proposals already agreed to in previous plans that imply
commitments for this year”? Also, does this mean
there is some center making decisions for everybody
else?
- What are they learning when “by reviewing
changes in their own proposals made during last year’s
planning they assess how much they had to scale down
their consumption desires or their plans to improve
the quality of work life, and look to see what
increases in average income and improvements in the
quality of average work complexes are projected this
year over last”?
- How do the actors develop proposals for the coming
year? What do they take into account? What calculations
and judgments do they engage in?
- What degree of detail does a proposal embody?
“In the same way, a firm’s iteration board provides
all its workers with summaries of last year’s production schedule,
including what was initially proposed, changes made during
planning iterations, and what was (finally) approved, as well
as a prediction of this year’s requests based on extrapolations
from new demographic data and the trajectory of last year’s iterations.
Individual workers consider this information, discuss ideas
for improving the quality of work life, and enter proposals
which are averaged into the firm’s first proposal for
“inputs” and “outputs.” After some number
of iterations, firm proposals are discussed, negotiated, and
decided as a unit rather than each individual making his or
her own proposal and these being averaged. Besides
quantitative proposals for each production and consumption
unit, a qualitative addenda including descriptions of changes
in circumstances and conditions is also entered into the
computerized planning system. At any point any council can
access the data banks of any facilitation board and any other
council.”
- Either defend or critique this from the point of view
of some set of values you believe in. Does it
facilitate the values I have been touting?
- With the first proposals in, how do we know whether
they constitute a plan or not?
- What is the next step for each actor—consumers,
producers, and facilitation boards?
“The need to win approval from other similar councils
forces councils whose per capita consumption request is significantly
above the social average to reduce their overall requests.
But the need to reduce can be alleviated by substituting
goods whose indicative prices have fallen for those whose prices have
risen. Attention focuses on the degree to which units diverge
from current and projected averages, and on whether their
reasons for doing so are compelling.”
- Is this good? Why or why not?
- “Similarly workers’ councils whose ratios of
social benefits of outputs to social costs of inputs were
lower than average would come under pressure to
increase either efficiency or effort, or to explain
why the quantitative indicators are misleading in
their particular case. Before increasing their work
commitment, workers would try to substitute inputs whose
indicative prices had fallen for inputs whose
indicative prices had risen, and substitute outputs
whose indicative prices had risen for outputs whose
indicative prices had fallen.”
- What does this mean? Does it seem positive or
negative to you?
- What is a planning iteration, and explain why parecon
does or doesn’t converge (a) to a plan, (b) to outcomes
that are desirable? Suppose in practice it seems to
converge too slowly. What would be your reaction?
- To what extent is society bound by the plan it
initially establishes? To what extent can final outcomes diverge
from those planned, for individuals, collectives,
etc. How does this happen?
- What is the role of slack planning? What kinds of
things do we know in advance that enable us to be prepared
for deviations between what people say they want, and
what, in fact, they likely will want?
“A little thought reveals that convergence can be a
complicated matter. Adjusting indicative prices to reduce excess
supplies and demands is more complicated in practice than in
economists’ theoretical models with all their convenient
assumptions. For example, a product in excess demand in one iteration
could overshoot equilibrium and be in excess supply in the
next iteration as workers offer to produce more and consumers
offer to request less in response to a price increase. Worse
still, considering that each product’s status affects the
status of many others, progress in one industry could disrupt equilibrium
in another. Theoreticians’ solutions to these headaches always assume
away the troublesome phenomena. Whether the issue is market equilibrium
and stability or convergence of iterative planning
procedures, it is well known that convexity and gross
substitutability assumptions are good aspirin for these
theoretical headaches. But simplifying assumptions are no aspirin
at all for practitioners operating in the real world.”
- So what is to be done about this?
- Please summarize in your own words what a typical planning process might
look and feel like to its participants. And please comment on whether you
think this is a good use of the individual’s energies or not, a good way
to allocate or not? And, if you think not, please note if you have any ideas
for improvements, or for an alternative approach.
- What is the relation between balanced job complexes and particpatory planning
and remuneration according to effort and sacrifice? Are these independent
options, or do they relate to one another in some deeper way?
- What do you like about parecon? What worries you about it?
