In Defense Of Participatory Economics

In the shadow of the collapse of Communism, and very far from the public eye, a debate over what is a desirable economy has rekindled among a few who cannot convince themselves that human beings are not deserving and capable of better than capitalism. In the past decade a small torrent of books, articles, and symposiums have been published. Conferences of academics and activists have hosted the debate on panels in numerous cities. And the debate erupts periodically on a number of forums sprinkled over the Internet. As defenders of central planning fade into the dust bin of history, anti-capitalists have divided into two camps proponents of some version of market socialism versus proponents of some kind of democratic planning. One model of democratic planning, that we call "participatory economics" has received considerable attention, and by now a great deal of criticism from the market socialist camp. The defining institutions of a participatory economy are: 1) democratic councils and federations of workers and consumers, 2) job complexes balanced for desirability and empowerment, 3) remuneration according to effort or personal sacrifice, and 5) allocation or coordination by means of a social, iterative, decentralized planning procedure we call "participatory planning." A participatory economy is a non-hierarchical, non-market economy in which worker and consumer councils propose and revise their own activities through a procedure designed to achieve both equity and efficiency. We take this opportunity to clarify misconceptions about our model and defend participatory economics against the most common criticisms.


Too Unfree?

Critics claim participatory economics sacrifices personal freedom to attain other goals: In the words of Tom Weisskopf: "The issue is how much value we should attach to libertarian rights such as freedom of choice, privacy, and the development of one’s own specialized talents and abilities — as compared to the more traditional socialist goals of equity, democracy and solidarity…. Replacement of markets with a participatory economic system would arguably contribute to a more egalitarian, democratic and solidaristic society, but would appear to do so at a cost in terms of libertarian objectives." (Weisskopf 1992: 21-22)

Participatory economics was the result of a self-conscious attempt to designing an economy that allows people to control their own economic lives in a context of equitable cooperation with others. Consequently, if we were convinced that our model failed to serve libertarian goals, we would be the first to disavow it no matter how well it served equity, democracy, and solidarity. But we find criticisms that participatory economics is "unfree" to be based on either a misreading of our proposal, or a shallow and indefensible conception of libertarianism. Besides putting major economic decisions in the hands of the citizenry rather than in the hands of an elite, freedom of choice of consumption, employment, career, and residence, as well as personal privacy are fully guaranteed in a participatory economy — contrary to critics’ claims.

·         People in a participatory economy are free to consume whatever goods and services they wish, and consumer preferences determine what will be produced.

Everyone is free to consume whatever goods or services she wants. Of course an individual’s overall consumption is constrained in a participatory economy, by her effort or sacrifice, just as an individual’s overall consumption is constrained in a market economy, by her income, which is usually not the same as her effort or sacrifice. But there is complete freedom of choice in a participatory economy regarding what one wishes to consume. Moreover, consumers’ preferences determine what will be produced in a participatory economy, just as they supposedly do in a market economy. The difference is that markets bias people’s choices by overcharging for goods whose production or consumption entail positive external effects, undercharging for goods with negative external effects, and by over supplying private goods relative to public goods. Participatory planning is carefully designed to eliminate these important infringements on "consumer sovereignty." People in a participatory economy are also free to choose more consumption and less leisure, or visa versa, simply by working more or fewer hours, and are free to distribute their effort and consumption over their lives as they wish. To accomplish this in market economies people must deal with banks and loan officers, whereas borrowing and saving is handled by consumer councils and federations in participatory economies.

Critics misinterpret our proposal that consumers submit their consumption requests to their neighborhood consumption councils which we believe has several advantages and none of the disadvantages critics fear. 1) It affords people an opportunity to get feedback from their neighbors if they wish. (After all, not everyone is estranged from her neighbors, and many value their advice.) 2) It permits people to present a case to their "peers" that special needs warrant relaxing the rule that a person’s effort ratings must be sufficient to cover the social cost of her consumption request. For all who do not work and have no effort ratings, there must be consumption allowances determined democratically for the entire economy. But besides regular consumption allowances for the young and retired, and for students and the disabled, our procedure allows for consideration of individual’s special needs. And 3) it permits the entire economy to reap the efficiency gains of a coordinated plan and avoid inefficiencies that arise from market disequilibria.

Critics charge that neighbors’ opinions will prove intrusive, that consumers cannot foresee what they will want for a whole year, and that making changes in consumption will prove frustrating. But neighbors can only offer suggestions. They are not permitted to reject consumption requests on grounds of content — only if social cost exceeds effort. And if anyone does not wish to hear her neighbors’ opinions, she can submit an anonymous consumption request to a consumption council composed of anonymous members who are not her neighbors. We are well aware that all consumers will misestimate what they ask for and need to make changes during the year, and that some will prove more reliable and others more fickle. The easiest way to think about this is to imagine each consumer with a swipe card that records what they consume during the year, and compares their rate of consumption for each item against the amount they asked for. If rates of consumption deviate by say 20% from the rate that was requested, consumers could be "prompted" and asked if they needed to request a change. If at the end of the year the total social cost of someone’s actual consumption differed from the social cost of what they had asked for they would be credited or debited appropriately. One of the functions of consumer councils and federations is to coordinate changes in consumption, if possible with other consumption federations, and if unsuccessful, with workers federations as well. To whatever extent consumers do foresee their needs, a participatory economy is constituted to capture the efficiency gains of planning over market disequilibria. To the extent that consumers cannot accurately gauge their desires, councils and federations will have to negotiate mid-course adjustments. No doubt there will be less fluctuations in indicative prices than market prices since adjustments in production will be negotiated directly between the national consumer federation and industrial federations. But a participatory economy is certainly not powerless to respond to changes in consumer desires. Is it possible that some consumer may not receive some particular item exactly when they want it if it was not in their original order? Yes. But that is highly unlikely, and, memory serves not every child found a cabbage patch doll under her Christmas tree a few years back.

We should also point out that consumer councils and federations afford consumers much greater clout vis a vis producers over quality and defects than consumers have in market economies. Critics of participatory economics mistakenly assume it is no different from Soviet style command planning in this regard. It is true the consumer was even more disenfranchised in the centrally planned economies than in market economies. The individual Soviet (Chinese, Cuban, Polish, etc.) consumer not only confronted huge state enterprises aided by the state distribution system alone, but faced a "take it or take nothing" proposition. In market economies the individual consumer faces powerful corporations alone, most of whom devote significant resources to manipulating her. The advantage is she can walk away from one corporate behemoth and buy from another which mouths the double speak mantra "the customer is always right" with equal insincerity. But in a participatory economy neighborhood consumer councils and larger federations put consumers on an even playing field with producers and each consumer has freedom of exit. Instead of relying on advertisements of profit seeking producers, consumers in a participatory economy will get information from their consumer councils and federations. It is the difference between getting information about the likelihood of washing machines breaking down from GE or from Consumer Reports. It is the difference between GM having to hoodwink Robin Hahnel or Ralph Nader and his research associates about automobile safety. Workers councils don’t get credited for goods returned. And every neighborhood consumer council should have a "quality committee" that monitors deliveries and returns questionable merchandise before it is picked up by individual consumers. If a consumer is unsatisfied with a product she only has to refuse it and have it returned as unacceptable by the consumer council. Then it is between the consumer council, or federation, and the worker council, or federation to settle the issue of whether the product was up to standards or not. In either case, the individual consumer in a participatory economy bears none of the burden of any hassle. She has organizational muscle behind her as well as an immediate exit option. Finally, for those who enjoy the pleasures of "malling it," there can be malls and expos where consumers roam and place orders for delivery or take out. The difference is "displays" will be run by consumer federations responsible to consumers rather than producers.

·         People in a participatory economy are free to apply to work wherever they want, free to bid on any job complex at their work place they want, free to organize a new enterprise to produce whatever they want, by any means they want, in cooperation with whomever else they want, and free to live wherever they want.

Of course, workers councils are also free to hire whomever they want from those who apply; fellow qualified workers are also free to bid on any job complex they want; and new workers councils must be certified by their industry federation as "competent" to deliver what they promise in the planning procedure. But constraints on individual work choices are necessary in any social division of labor, and analogous constraints are present in market economies. Whether job complexes balanced for empowerment and desirability, and restriction of private enterprise comprise violations of libertarian values, we take up below.

·         Students are free to apply to any educational institution and degree program they want, and if accepted, pay no tuition and receive a living stipend appropriate to their age and needs. Workers are free to bid on any training program offered outside or inside their workplace all of which are free of charge.

In a participatory economy educational opportunities are allocated by merit with no chance that a more promising but less affluent applicant will be passed over by one who is less qualified but better able to pay. But equal educational opportunities will not lead to equal amounts of education for all. Isn’t it inequitable if some receive more education at public expense than others? In a market economy it would be since education is correlated with income. However, since consumption is based on effort in a participatory economy, rather than one’s marginal revenue product, consumption opportunities will not be unfairly affected by the fact that some receive more education than others, just as they will not be unfairly affected by morally arbitrary differences in human capital due to the genetic lottery.

·         People are free to live wherever they choose.

There are no "internal passes" that restrict movement in a participatory economy as there were in the Soviet Union under Stalin, in China under Mao, and in South Africa under apartheid. Neighborhoods will probably be more important to people in a participatory economy because the neighborhood consumption council is an important institution where preferences regarding individual and collective consumption are expressed and debated. So if one is disappointed often by being out voted in such matters, there may be a greater incentive to find neighbors whose collective consumption values are closer to one’s own. One moves to a new neighborhood simply by requesting living space in a different neighborhood instead of renewing the option on your current address. Federations of neighborhood councils without the hidden agendas of realty companies will assist those searching for more compatible neighborhoods. Moreover, people can relocate in a participatory economy without fear of negatively affecting their wealth or income. There are no worries about changing property values that might adversely affect long-run economic security or ability to finance children’s education in a participatory economy, because there is no housing market and education is entirely at public expense. And even if moving requires changing one’s work site this does not affect the expected value of one’s effort rating and therefore one’s consumption opportunities.

The view that "certain libertarian objectives associated with personal freedom of choice can best be satisfied only if individuals have the kind of opportunities for choice and for exit that a market system alone can provide" (Weisskopf 1992:22) is simply untrue. Choice of consumption, work, and residence, as well as opportunities for exit, are as great or greater in a participatory economy than market systems. In capitalist economies what can workers do who don’t like their boss? In market socialist economies what can workers do who don’t like the majority decisions of their work mates? Switching work places or starting up a new enterprise is the exit option in those economies. In a participatory economy, workers are free to resign from one workers council and apply for work in another. Iteration Facilitation Boards in a participatory economy would make finding a more compatible work site far easier than finding one in capitalism, and at least as easy as finding one in a market socialist economy aided by a Swedish style Labor Market Board that takes retraining and relocation seriously. As far as starting a new enterprise is concerned, convincing an industry federation of the usefulness of a new enterprise is similar to convincing loan officers at a bank and managers of financial institutions crucial to the success of any initial public stock offering that a new enterprise will prove profitable. And, as we have seen, consumer sovereignty is better served, and residential relocation less problematic in participatory economies than market economies.

We wish to address a related concern head on: "A participatory system is likely to require people to justify many of their choices to some kind of collective decision-making body, which in turn is bound to limit the extent to which people can really get their choices accepted — no matter how democratically decision-making bodies are constituted. By enabling individuals to make most choices without reference to what others think about their decisions, a market system provides much greater freedom of this kind." (Weisskopf 1992: 19)

In a participatory economy only people affected by decisions have influence over those decisions, and only to the degree they are affected. Since life style, social identity, and what goods to consume are decisions that mainly affect an individual, individuals will have control over those decisions in a participatory economy. But there are many decisions individuals make in a market system that affect other people as well, who are effectively disenfranchised. A participatory economy is designed to correct this infringement on people’s freedom by providing the appropriate degree of decision making authority to those affected by what are externalities in a market system. It is predictable that this would seem intrusive to people in market systems who are in the habit of making decisions without regard for the opinion of others who are also affected by the outcome. Businesses used to being "free" to pollute in market economies predictably chafe under environmental regulations they find intrusive. And employers accustomed to making changes in the work place without consulting their employees balk when unions insist on a say. Those who enjoy disproportionate power in market systems are used to being "free" from the opinions and influence of others, and predictably object to a system that would no longer permit them to be so. But those affected by decisions in a market system who have neither voice nor influence are the ones whose freedom is curtailed. Market systems are necessarily accompanied by a particular property rights system to determine whose freedom takes precedence over whose when multiple parties are affected. A participatory economy addresses the issue directly by attempting to achieve self-management decision making authority in proportion to the degree one is affected in all situations.

So why do some persist in believing participatory economies sacrifice libertarian values? Misconceptions about what we have actually proposed aside, the issue reduces to different conceptions of libertarianism. What is a libertarian economy? If people are not free, for example, to buy another human being, is the economy not libertarian? Surely there are circumstances that would lead people knowingly and willingly to sell themselves into slavery, yet few would refuse to call an economy libertarian because slavery was outlawed. If people are not free to hire the services of another human being in return for a wage is the economy not libertarian? There are familiar circumstances that lead people knowingly and willingly to accept what "traditional socialists" called "wage slavery." Does this mean that market socialism is not libertarian because the employer/employee relation is outlawed? In our view equating libertarianism with the freedom of individuals to do whatever they please is a shallow interpretation that robs libertarianism of the merit it richly deserves. Similarly, equating economic freedom with the freedom to buy or sell anything and everything is a distortion of the idea of economic freedom.

It is, of course, a good thing for people to be free to do what they please but only if what they choose to do does not infringe on more important freedoms or rights of others. I should not be free to kill you because that would be robbing you of a more fundamental right to life. I should not be free to own you because that robs you of a more fundamental right to decide how to live your own life. Socialists of all varieties once believed that I should not be free to employ you because my freedom of enterprise, or property right, robs you of a more fundamental human right to manage your own laboring capacities. Most socialists and some liberals once believed I should not be free to bequeath substantial inheritance to my children because that robs the children of less wealthy parents of their more fundamental right to an equal economic opportunity in life. We can formulate a general principle: Restrictions on the right of some individuals are justified when they are necessary to protect more fundamental rights of others, and since such restrictions do not reduce, but increase individual freedom en toto, they are fully consistent with libertarian values. But besides the right to life, the right to manage our own labor, and the right to equal economic opportunity, are there additional rights that others should not be free to violate when choosing to do what they please?

Let’s go straight to heart of the matter. Suppose I’m intellectually gifted, score high on standardized tests, do well in my undergraduate studies, attend medical school, followed by a specialty in brain surgery — all paid for at public expense. Should I be free to sell my talents and skills to whomever I wish? In a free market economy there would be others willing to pay me a great deal for my services. But the high value of my contribution is not based on my effort alone. It is the joint product of genetic talent and education at public expense, in conjunction with my effort. So if remuneration is according to the value of contribution I will receive more than my efforts warrant, and other less talented and educated people will receive less than their efforts, or personal sacrifice warrant. There is no way around it: If all are free to sell their services: 1) Remuneration will be based on the market value of contribution, and some will receive more than their efforts warrant while others receive less than their efforts warrant. 2) Those who receive less than justified by their efforts do so because others receive more than justified by their efforts. And 3) this means those who receive more than their efforts warrant whether they intend to or not are exploiting those who receive less than their efforts warrant. Not a pleasant thought for capital rich proponents of market socialism!

Apparently we must decide if people who participate in economic cooperation with others have a right to a fair outcome, a right to an equitable distribution of the burdens and benefits of social cooperation, a right be free from exploitation. And we must decide if this right is more fundamental than the right of individuals to charge what the market will bear for the exercise of their human capital. Freedom of choice over the roles people play in the division of labor is not the issue here. The issue is how people free to choose their economic roles should be compensated. We think a good case can be made that people have a right to equitable compensation. But we see no reason why people should have a "right" to the compensation the market would award them. (What would be the basis of such a "right?") In sum, we believe people should be free to do what they want. But this does not mean they should be free to exploit others. That is why the freedom to pursue education and employment according to one’s preferences is protected in a participatory economy, but the freedom to exploit morally arbitrary advantages in human capital by consuming more than others who made equal sacrifices is not.

Or, suppose I’m particularly competent and energetic, and more than willing to spend all my work time analyzing and evaluating different options for my workers council. Should I be free to work in a job complex where I am engaged full time in analytical and decision- making activities? As Weisskopf puts it: "Many people are likely to prefer doing more specialized work activities than would be permitted under a balanced job-complex requirement which means that enforcement of the requirement might well involve implicit or explicit coercion." (Weisskopf 1992: 20) But if I am permitted to work at a job complex significantly more empowering than others, then others must work in job complexes that are less empowering, and before long my work mates’ formally equal opportunities to participate in economic self-management will not be effectively equal to mine. I will exert more influence over economic decisions than the degree to which I am affected because my work life was particularly empowering, and others will exert less influence because their work life disempowered them relative to me.

Advocates of participatory economics think everyone should have opportunity to participate in making economic decisions in proportion to the degree they are affected by those decisions. As explained above, we think this is the only way to interpret what "economic freedom" means without having one person’s freedom conflict with another’s, and we call this goal economic "self-management." We think self-management, in this sense, is a fundamental right of people who engage in economic cooperation with others. So when people are free to do what they want, this does not mean they should be free to infringe on the self-management rights of others.

Moreover, notice who balances the job complexes. They are not balanced by some national bureaucracy and imposed on workers councils. Each workers council has a job balancing committee, just as they have an effort rating committee and a host of other "standing" and temporary committees responsible for particular concerns. Membership and policy of the job balancing committee, like every other committee, is determined democratically, and time any individual spends on this committee is treated as one task in their job complex. A participatory economy is simply an economy in which the vast majority of its members have agreed to try to organize their economic affairs so as to promote economic self-management understood as decision making input in proportion to the degree affected and equity understood as payment according to effort or sacrifice as well as efficiency. Moreover the vast majority have agreed that the institutions of workers and consumers councils, participatory planning, and balanced job complexes are the best ways they know to achieve these goals. But precisely how to group tasks into job complexes in each workplace is entirely up to those serving on the job balancing committee in that workplace under the general supervision of the entire workers council. There is no outside agent who oversees this operation with power to dictate or veto outcomes. No doubt different workers councils, particularly in the same industrial federation, will find reason to share experiences and information. But job complexes in each enterprise are created by the job balancing committee of that enterprise. And no doubt complexes will be different in different work places something prospective employees will take into account when deciding where they want to apply to work in a participatory economy.

What appear to be "simple" personal freedoms are not always so simple. Whenever a decision affects more than one person, allowing a single person to make the decision as a matter of exercising their "personal freedom" amounts to disenfranchising all other affected parties. But there is another way to see the logic of participatory economics: from the bottom up. The first priority is to guarantee economic justice for those who have never enjoyed it by making sure that people’s consumption is commensurate with their sacrifices; and to make sure that people’s work experience equips them to be able to participate in economic decision making should they want to do so. And there is another way to look at talent and education. A participatory economy encourages every person to develop and use her talents as she sees fit, and awards ample social recognition to outstanding abilities that create great social benefits. But there is no material reward for anything other than effort and sacrifice since this would be inequitable. And while those with greater talent and education may perform the role of expert to analyze complicated consequences, or may have their opinion more highly regarded than others in discussions because historically their opinions have proven more valuable, they are not given greater decision making authority in a participatory economy because this would infringe on the self-management rights of others.


Too Many Meetings? Cybernetic Overload?

"Wouldn’t the allocation of resources in a complex economy by means of participatory decision-making institutions place impossible demands on information processing and inordinate demands on people’s time? The mere listing of the requirements for decision- making in a participatory economy is enough to generate skepticism about whether and how they can possibly be met. Even if, in principle, institutions and processes can be developed to accomplish the necessary tasks (and Albert & Hahnel and Devine have advanced some ingenious ideas to do so), one is bound to wonder whether the whole system would actually function in practice. Assuming that computer technology could be relied upon to process and disseminate the enormous amount of information needed to make the system work, how would people be persuaded to provide the needed information in an unbiased and disinterested manner? And even if all the needed information could be accurately compiled, wouldn’t participatory planning require each individual to dedicate so much time, interest and energy to assessing the information and participating in decision-making meetings that most people would get sick and tired of doing it?" (Weisskopf 1992: 14-17)

Information processing and meeting time is far from zero in existing economies, which critics of participatory economics conveniently ignore. But for a participatory economy we can break the issue down into meeting time in workers councils, meeting time in consumers councils, meeting time in federations, and meeting time in participatory planning.

Conception and coordination is part of the organization of production under any system. Under hierarchical organizations of production relatively few employees spend most, if not all of their time thinking and meeting, and most employees simply do as they’re told. So it is true, most people would spend more time in work place meetings in a participatory economy than a hierarchical one. But this is because most people are excluded from work place decision making under capitalism and authoritarian planning, as they would be under market socialism. It does not necessarily mean the total amount of time spent on thinking and meeting rather than producing would be greater in a participatory work place. And while it might be that democratic decision making requires more "meeting time" than autocratic decision making, it should also be the case that less time is required to monitor and enforce democratic decisions than autocratic ones. Moreover, meeting time is part of the normal work day in a participatory economy, just as it is for managers and supervisors in existing economies, not an infringement on people’s leisure.

Regarding the organization of consumption, we plead guilty to suggesting that these decisions be arrived at with more social interaction than in market economies. In our view one of the great failures of market systems is that they do not provide a suitable vehicle through which people can express and coordinate their consumption desires. Social consumption is disadvantaged compared to individual consumption in market economies precisely because appropriate institutional vehicles to make social choice easy and efficient are lacking. It is through a layered network of consumer federations that we propose overcoming alienation in public choice joined with isolated expression of individual choice that is the hallmark of market systems. Whether this will take more time than the present organization of consumption depends on a number of trade offs.

Presently economic and political elites dominate local, state, and national public choice. For the most part they operate relatively free from restraint by the majority, but periodically time consuming campaigns are mounted by popular organizations in attempts to rectify matters when they get grossly out of hand. In a participatory economy people would vote directly on matters of public choice. But that doesn’t require a great deal of time, or require attending meetings. Expert testimony and differing opinions would be aired through a democratic media. Individuals with strong feelings on particular issues would participate in such forums, but others would be free to pay as much or little attention to these debates as they wished.

But how much meeting time is required by participatory planning, which we proudly call a "social, iterative, procedure?" Contrary to critics’ presumptions, we did not propose a model of democratic planning in which people, or their elected representatives, meet face to face to discuss and negotiate how to coordinate their activities. Instead we proposed a procedure in which individuals and councils submit proposals only for their own activities, receive new information including new prices indicative of social costs, and submit revised proposals only for their own activity Nor did we suggest meetings of constituents to define feasible overall options and plans to be voted on. Instead we proposed that after a number of iterations had already settled the major contours of the plan, the professional staffs of iteration facilitation boards would define a few feasible plans within those contours for constituents to vote on without ever meeting and debating with one another at all. Finally, we did not propose face to face meetings where different groups would plead their cases for consumption or production proposals that did not meet normal quantitative standards. Instead we proposed that councils submit qualitative information as part of their proposals so that higher level federations could grant exceptions should they choose to. Moreover, the procedure for disapproving proposals is a simple up, down vote of federation members rather than a rancorous meeting.

But while we do not find the criticism "too many meetings" compelling, neither do we want to be misleading. Informed, democratic decision making is different than autocratic decision making. And conscious, equitable coordination of the social division of labor is different than the impersonal laws of supply and demand. Supporters of participatory planning obviously think the former, in each case, is much preferable to the latter. But this is not to say we do not understand this requires, almost by definition, more meaningful social intercourse.

But Weisskopf also asked "how would people be persuaded to provide the needed information in an unbiased and disinterested manner?" implying we had no answer to this question and had naively assumed everyone would behave truthfully in a participatory economy. Quite the contrary. At least in this respect, our proposal and presentation were much more thorough than our critics give us credit for. In market economies the most serious "incentive incompatibility" regards consumers’ expression of preferences for public goods known as the free rider problem. In central planning the most serious "incentive incompatibility" regards enterprise management deceiving central planners about the true productive capabilities of the enterprise. We do not repeat here our explanation why neither of these incentive compatible problems that plague other economies exists in a participatory economy. Suffice it to say that in a participatory economy individual consumer’s would rationally expect to lose well being (as they define it) by misrepresenting their preferences for public goods, and workers councils would rationally expect to diminish the likelihood of being allocated the productive resources they want by misrepresenting their true productive capabilities. If critics have more specific criticisms about any incentive incompatibilities they believe they have detected in participatory economies, we would be most interested in hearing them.


Misfocused Priorities? Dictatorship of the Sociable?

"Isn’t the practice of participatory democracy sufficiently difficult, time-consuming and emotionally draining that it would in practice have to be limited to a relatively small range of decisions? In practice such a system might well enable some people to exercise much greater influence over decisions than others. Disproportionate influence would not arise from disproportionate wealth or income, but from disproportionate interest in and aptitude for the relevant decision-making processes. These kinds of concerns about the operation of democratic decision-making processes should not of course be read as a condemnation of democracy…. Rather, such concerns suggest that democratic political institutions ought to focus on a critical and manageable range of decision-making areas, rather than be used for all kinds of economic as well as political decisions." (Weisskopf 1992: 15-16)

Obviously, we do not want our economic system to divert people’s participatory energies from more to less important issues. But our procedures facilitate participation in local and national economic decisions, and in short-run and long-run planning. Regarding long-run planning the options are: 1) relegate long run planning to the vagaries of the market place, 2) entrust long run planning to a political or technical elite, or 3) permit federations of workers and consumers to propose, revise, and reconcile the different components of the long run plan. There is an extensive literature suggesting that laissez faire market systems are least appropriate for long run development decisions. Traditional socialist critics of capitalism such as Maurice Dobb and Paul Sweezy were most convincing when arguing the theoretical advantages of planning over markets to achieve growth and development. And even the terribly flawed Soviet version of planning demonstrated significant advantages over market economies in this regard. Moreover, every historical case of rapid economic growth by a "late comer" has been testimony to the efficacy of planning as compared to laissez faire — the "Asian Tigers" being no exception — despite what itinerant preachers for the free market faith proclaim. If the planning elite is not chosen democratically, the dangers and disadvantages are obvious. But even if those who are entrusted to conceive and coordinate the long term plan are chosen democratically, there would be far less room for popular participation than under the procedures of participatory planning. Since we agree that choosing between: (1) transforming coal mining so as to dramatically improve health and safety, (2) replacing highway travel with a high-speed rail system, or (3) transforming agriculture to conform to ecological norms — not all of which can be done at once — has an important impact on people’s lives, we are anxious that popular participation be maximized in these matters. And the best way to do that is to use participatory planning procedures for developing the long-run plan.

The issue boils down to how can ordinary people best become involved in a particular kind of decision making? In our view the federations of coal miners, of rail workers, of automobile workers, of agricultural workers, and the transportation, food, and environment departments of the national federation of consumers should all play a prominent role in formulating and comparing the above alternatives. Even regarding major, long term choices, we think people participate best in areas closest to their personal concerns, and participatory planning is designed to take advantage of this. This is not to deny that everyone would vote on major alternatives. Nor do we deny there is an important role for expertise. But besides the professional staffs of the IFBs, professionals in R&D units working directly for the above federations would play an active role in defining long term options for their members to consider. And with the aid of accurate estimates of social costs and benefits, we believe workers and consumers through their councils and federations can play a prominent role in long term planning as well as annual planning and managing their own work and consumption.

Finally, Nancy Folbre worries that making the economy more participatory will only give rise to a new class of oppressors: "One perverse incentive could be labeled ‘The Dictatorship of the Sociable.’ Some people really like meetings. They like to talk, to negotiate, to debate. As a result, they often attend meetings enthusiastically, and they often prevail at them." (Folbre 1991: 69) We have agreed "the Dictatorship of the Sociable" is a potential problem in any participatory social arrangement. That is why we suggested procedures for protecting the less sociable, such as BJCs, and educational campaigns around the democratic virtues of closure and quorum rules. No majority need permit itself to be railroaded or manipulated by a minority of "sociables" if the majority is armed with sufficient protection. But we are sympathetic with concerns that economic change might only replace one ruling class with another. As a matter of fact, participatory economics began as a thought experiment to design an economy that would be truly classless in response to the realization that public ownership and central planning had only replaced capitalists with commissars. But if it came down to it, we would shout "Long Live the dictatorship of the sociable!" — if it were the only way to avoid the dictatorship of the wealthy, or the mighty, or the knowledgeable. Fortunately, we do not believe in the "iron law of oligarchy" and are confident the sociable can be prevented from usurping power in a participatory economy.


Inefficient? Insufficient Incentives?

Motivational incentives: Critics worry that effort is impossible to measure and that rewarding effort rather than contribution is inefficient:

"Albert & Hahnel propose that the consumption opportunities available to individuals be linked to an individual’s input into the production process — in the form of personal effort made or personal sacrifice endured… Albert & Hahnel’s proposal would surely lead to greater equity in the reward for labor than the market-based alternative, but their claim of greater efficiency is misguided…. First of all, it is very difficult to observe and measure an individual’s sacrifice or work effort…. And any input-oriented incentive scheme would tend to encourage the substitution of quantity for quality of effort. Moreover, people would have an interest in understating their natural talents and abilities…. Second, while it would presumably elicit greater work effort and sacrifice on the part of individuals, it would do nothing to assure that such effort and sacrifice were expended in a desirable way. The social good is best served by encouraging activities the results of which are highly valued relative to the cost of undertaking those activities. In order to motivate people to expend their efforts in a desirable way, it is therefore necessary to reward activities according to the value of work output rather than according to the quantity of work input." (Weisskopf 1992: 16-17)

"Because success, even in a non-capitalist order, may easily turn on talent, luck, and other morally undeserved factors, it is easy for the authors to show that equity favors distribution according to effort. My question, however, is whether they succeed in showing that distribution according to effort achieves efficiency alongside equity…. A society seeking optimum production needs to discourage clumsy effort and encourage proficient effort so as to avoid waste. Otherwise, the less successful have no material incentive to modify bungling methods or to seek work where their comparative advantage in contribution is greater. For efficiency, one must at least reward efforts to improve the success of efforts, and rewarding contribution may be the only feasible way to do so." (Hagar 1991: 71)

A participatory economy is designed to maximize the motivating potential of non-material incentives. First, there is reason to hope jobs designed by workers will be more enjoyable than ones designed by capitalists or coordinators. Second, there is reason to believe people will be more willing to carry out tasks they have proposed and agreed to themselves than assignments handed them by superiors. Third, there is reason to believe people will be more willing to perform unpleasant duties conscientiously when they know the distribution of those duties as well as the rewards for people’s efforts are equitable. But this is not to say there are no material incentives in participatory economies. People’s efforts will be rated by their peers who have every interest in seeing that their work mates work up to their potentials. And people’s effort ratings in work directly affect their consumption rights.

Notice that in a participatory economy, while individuals consume according to their work effort, users of scarce labor resources — the workers councils — are charged in the participatory planning procedure according to the opportunity costs of employing different kinds of workers. This avoids the contradiction between equity — wages based on sacrifice, or effort — and allocative efficiency — labor costs that reflect social opportunity costs — that plagues market economies. But what about the concern expressed above by Weisskopf and Hagar that only reward according to the value of contribution provides efficient personal incentives while reward according to effort does not?

Differences in the value of people’s contributions are due to differences in talent, training, job placement, luck, and effort. Once we clarify that "effort" includes personal sacrifices incurred in training, the only factor influencing performance over which an individual has any discretion is effort. By definition, neither talent nor luck can be induced by reward. Rewarding the occupant of a job for the contribution inherent in the job itself does not enhance performance. And provided that training is undertaken at public rather than private expense, no reward is required to induce people to seek training. In sum, if we include an effort component of training in our definition of effort, the only discretionary factor influencing performance is effort, and the only factor we should reward to enhance performance is effort — which certainly turns common wisdom on its head! Not only is rewarding effort consistent with efficiency, but rewarding the combined effects of talent, training incurred at public not private expense, job placement, luck, and effort, is not.

Suppose we wanted to induce maximum effort from runners in a 10 kilometer race. Should prize money be awarded according to place of finish, or according to 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. Paying in accord with improvements in personal best times gives everyone an incentive to maximize her effort.

And notice who is charged with measuring efforts a committee of work mates. Is there any incentive for one’s work mates to reward "clumsy" or "bungling" effort rather than proficiency? Wouldn’t the workers serving on the effort rating committee have every incentive to reward "effort to improve the success of efforts" since this would rebound to their advantage as well? Why would one’s fellow workers have any less incentive to discourage ineffective and encourage effective effort on the part of coworkers than capitalist employers? So why do many like Weisskopf and Hagar believe that equity conflicts with efficiency? There are three concerns that merit response.

(1) If consumption opportunities are essentially equal, people will have no reason to work up to their capabilities.

Where solidarity is insufficient to elicit effort without material reward, it would be inefficient to award equal consumption opportunities to those exerting unequal effort. But, as already explained, this is not what happens in a participatory economy. People receive effort ratings from their peers in their work place and are awarded consumption rights in their neighborhood consumption councils according to their effort ratings. However, differences in peoples’ efforts will certainly not lead to the extreme income differentials characteristic of market economies today. So the question arises, with no sky to reach for, will people lift their arms?

In a society that deprecates esteem deriving from anything other than conspicuous consumption, it is not surprising that large income differentials are seen as necessary to induce effort. But to assume that only conspicuous consumption can motivate people because under capitalism we have strained to make this so is unwarranted. There is plenty of evidence that people can be moved to great sacrifices for reasons other than a desire for personal wealth. Family members make sacrifices for one another without the slightest thought of material gain. Patriots die to defend national sovereignty. And there is good reason to believe that for non-pathological people, wealth is generally coveted only as a means of attaining other ends such as economic security, comfort, social esteem, respect, status, or power If accumulating disproportionate consumption opportunities is often a means of achieving more fundamental rewards, as I believe, 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, as it will be in a participatory economy, there will be no need to employ the intermediary of conspicuous consumption. If economic security is guaranteed, for everyone and for their children, as it will be, there will be no need to accumulate out of fear for the future. If people participate in making decisions, as they will in a participatory economy, they will carry out their responsibilities with less recourse to external motivation. If the distribution of burdens and benefits is fair, and seen to be fair, as will be the case, sense of social duty will be a more powerful incentive than it is today. In sum, if a fair share of effort and personal sacrifice are demanded by work mates who must otherwise pick up the slack, if additional effort is appreciated by one’s companions, recognized by society, and awarded commensurate increases in consumption opportunities, and if people planned and agreed to their tasks themselves, as they all will be in a participatory economy, we see no reason incentives will be lacking.

(2) If payment is equal on average in all professions, there is no incentive for people to train themselves in the ways they can be most socially useful.

It is true we do not recommend paying those with more education and training higher wages since it would be inequitable to do so. But that does not mean people would not seek to enhance their productivity. The cost of education and training would be born publicly, not privately. So there are no material disincentives to pursuing education and training. And since a participatory economy is not an "acquisitive" society where people are judged by their belongings, but rather a society in which esteem and respect are based on "social serviceability," there are strong incentives to develop one’s most socially useful potentials through education and training.

(3) Effort is difficult to measure while outcome is not, so rewarding performance is the best system in practice.

Neither half of this proposition is as compelling as usually assumed. Assigning responsibility for outcome in group endeavors is not always unambiguous. Sports teams are more suited to such calibration than production teams. And it is more difficult to

Leave a comment