Robin Hahnel Answers Various Criticisms of Participatory Economics

>>"Nancy Folbre … said their vision of life was as one long student council meeting." (Doug Henwood)

If Nancy has said this, she has, to my knowledge, not published it. What she has said in writing (Z Magazine, July/August 1991) is she worries that a participatory economy would be susceptible to "the Dictatorship of the Sociable" and the "Let’s not Piss Anybody Off" principle. Albert and I responded to both her criticisms in that same issue of Z Magazine, and on re-reading, I’ll stand by our response. In a nut shell we said: 1) Better Dictatorship of the sociable than dictatorship of the wealthy, the mighty, or the intelligencia if it came down to that, but 2) We had incorporated features designed to combat this danger — balanced job complexes to name one — and we were very receptive to any and all suggestions about how the majority in our councils and federations might protect themselves from having their self-management usurped by a minority of the more sociable, and 3) We felt Nancy had extrapolated too strongly from some very particular personal experiences she mentioned as the basis for her fear (tenure committee meetings at UMass!) Regarding people not wanting to piss others off we pointed out: 1) Effort rating committees in our workers councils had as much if not more incentive to grade slackers down than personnel officers and supervisors in capitalist enterprises since higher effort ratings for one worker required lower effort ratings for other employees, 2) Anonymity for graders and due process to question one’s accusers are simply at odds. We rank the right to due process higher than the anonymity of the shy, 3) In general, participatory economics and planning had been carefully constructed so that those who approve or disapprove proposals had no incentive to be lenient, or "liberal" and a mild material disincentive to behave in this way.
Nancy Folbre aside, is a participatory economy like one long student council meeting? No. Admittedly direct democracy involves more people in more decisions than authoritarian decision making. But for those of us who support the goal of making economic life more democratic and allowing people to make the decisions that affect their lives it seems to me this a given. So the question reduces to: Has our model of a participatory economy facilitated participation so as (a) to allow people the fullest opportunity to influence decisions in proportion to the degree they are affected, (b) while making their participation consume as little of their time and energy as possible? There are a number of specific features of how we recommended that workers and consumers councils function that are designed to do both "a" and "b." But most importantly our participatory planning procedure is one that literally involves no meetings at all! Our model is quite different than others’ models of democratic planning in this respect. (Pat Devine’s model of negotiated coordination is one example.) I cannot tell that any of our critics have bothered to notice this feature. In light of more specific criticisms of where and why people would be required to spend too much "meeting time" I can make no further response. "It’s hard to imagine any society emerging out of [a ParEcon one] where people do so much face-to-face meeting" and in which "delegation and the division of labor" are lost. (Doug Henwood)
Neither delegation nor the division of labor are lost in a participatory economy. READ MY LIPS: An economy with delegation of authority and division of labor is nonsense. We did not design and propose a piece of nonsense. There is a division of labor because each individual’s job complex will contain a very few tasks — compared to the millions of total tasks. However, nobody’s mixture of tasks will be significantly more empowering than others, or significantly more desirable than others. If critics want to object to the idea of balancing work for desirability and empowerment, fine. We plead guilty. But it is incorrect to criticize us for abolishing the division of labor. We proposed no such thing. We also have delegated authority. There will be chair people of committees, there will be heads of work teams. There will be heads of departments and divisions who have authority to order those "under them." If I am the head of a work team and you do not obey my order in a work situation, I can put you on report and recommend you be dismissed. But what there will not be are some people who are always the order givers and others who are always the order takers in every work site in a workplace. Each person will experience both being in authority and being under anothers’ authority in different situations and at different times.
>> Max Sawicky found ParEcon "less alienating" than "soviet-based planning", but perhaps just as impractical, with "Continuous sessions of … committees debating the proper size of ball-bearings".
If Max can tell me who or what decides the proper size of ball bearings in a capitalist economy, I will tell him who or what decides this in a participatory economy. Then we’ll see if a participatory economy wastes more time than others debating the proper size of ball bearings. More seriously, I think Max has failed to seriously look at our system of participatory planning — that is, its actual procedures. Because I do not believe he would have made this claim if he had.
>> Justin Schwartz writes, raising several objections:
>> I have read both of the books carefully and I think Folbre’s criticism is dead on. Actually it’s worse than that, because instead of meeting face to face, A&H envisage everyone as typing in their shopping lists into computers, which data are then made into a sort of local community plan request after debate,
Notice here that we do not have people meeting about this. We have people simply requesting what they want.
>> the process is repeated at the regional and national levels, where several plans are evolved and finally voted on after more discussion.
Justin misrepresents our proposal here. In theory there is no need for any group to formulate alternative plans for all to voted on. The procedures of proposals from all workers and consumers councils and federations followed by revisions of indicative prices and revisions of proposals by those who would carry them out COULD be carried on until a feasible (and pareto optimal) plan was reached. But this might be an unnecessary waste of time. (Notice how we labor to save people’s time from being frittered away!) Once a sufficient number of iterations have defined the plan people want — in essence — there is no need to further waste people’s time by making all the councils and federations make more revisions. We proposed ONCE ALL BUT THE FINAL DETAILS WERE SETTLED, that THEN it would make practical sense for an iteration facilitation board to flesh out 3 or 4 ways to finalize the plan and make it fully feasible that all could then vote on. If big issues were still to be resolved the social iterative process (which Justin approves of???) would continue. Otherwise, participatory planning would resemble a democratic version of central planning which we have criticized, rejected, and suggested an alternative to.
>> This means that the input is certain to be inaccurate, since each person will both exaggerate her own needs at each level and also misestimate them
We have been very careful about incentive compatibility, and would appreciate if others would take like care when making criticisms. There is no incentive for consumers to misrepresent their preferences in a participatory economy. They would only cut off their own noses to spite their faces by doing so. This is even true regarding public goods where we have eliminated the free rider problem that plagues market economies. We do not believe there is any actor in a participatory economy who has an incentive to misrepresent their preferences, but welcome contrary opinions if they are specific. Regarding consumers’ ability to ask for what they want for a whole year, we made clear that we expect people to make changes, and that we have included procedures to accomodate changes that we do not believe impose any serious limitations on individual consumers. Might some consumer in a participatory economy who wants to make a dramatic change in their consumption request at the very last moment end up not getting all of what they want? Yes. But it wouldn’t happen often, and not everyone got the cabbage patch doll they wanted back a few Christmases ago, if I remember correctly.
>> (can _you_ shop accurately a week in advance?).
I shop for the week, and then end up going to the store every other day for more milk, or eggs, — or actually, cookies and ice cream that I tried to believe I was going to cut down on. I will be able to do just that in a participatory economy as well. The only difference is I will be asked to estimate my annual consumption of items in advance, and will receive a kind of pre-approval for that amount based on my effort rating. In the end I’ll be "charged" for what I actually consumed during the year which will differ to some extent from what I asked for.
>> And the outcome will give virtually nobody what they want.
Au contraire! People will get exactly what they want.
>> These problems are in addition to the time spent in front of a terminal guessing and lying about what one might want and engaging in strategic behavior to maximize one’s own, and one’s community’s, preference vis-a-vis others.
There is no incentive to lie about one’s individual preferences, as I stated above. Regarding public goods, people might consider engaging in "strategic behavior" in the following sense. If I think most of my neighbors will want more side walks while I want more swing sets in our neighborhood park, I might vote even more strongly for swings than I actually feel. Of course, my side walk loving neighbors might do the same. I know of no democratic system of public good provision that eliminates this possibility. If Justin knows one, he should tell us.
>> Then there are the publicity problems about announcing one’s preferences and having to justify them to the world.
Anyone who wants to make anonymous consumption requests — to a consumers council that is also anonymous and non-geographical based — is free to do so. We were under the impression that many people might appreciate feedback from their neighbors in a context where this can only be "take it or leave it advice." Peter Kilander, concurring with Justin Schwartz, claims that ParEcon "depends heavily on computers".
I think computers can reduce the time it takes to run a participatory economy and also allow for more refinements and adjustments than would be possible otherwise. But compared to other planning systems, participatory planning actually relies less on computers than others. The only calculations required are adding individual proposals into aggregate proposals and comparing aggregate supply and demand for each item. Based on the percentage excess supply or demand indicative prices could be adjusted without the aid of computers as well. No need to invert an economy matrix and solve a linear programming problem for the shadow prices of resources — as there is in central planning if it is to have any claim to efficiency. I have discussed participatory planning with Tamil Tigers, Sandinistas and Cubans. Lack of computers was not a problem in any of these cases. Justin Schwartz writes that coordinators "will have immense power in view of their ability to frame the alternatives from which people choose."
Hopefully I have explained that this is inaccurate. The members of the iteration facilitation board wield no power because they do nothing until the plan has already been essentially hammered out and agreed to. Most emphatically, they do not pose alternative plans that people choose from. They are there for an efficient mop up operation at the very end when the social iterative mechanism has already settled on the alternative people want. If anyone feared them, their role could be eliminated entirely.
As an aside, since Justin uses the word "coordinators" which is a word that Albert and I coined, he must be aware that we have been outspokenly critical of real world economies, and theoretical models that we believe will inevitably become dominated by the coordinator class — both centrally planned and market public enterprise economies in particular. Since we self-consciously designed a participatory economy to prevent such an occurrence, it would be either ironic (or moronic) if we had done just the opposite.
>> He claims that Albert and Hahnel have a "theory" of a "’coordinator’ class" which "is essentially Djilas’ "new class" theory warmed over with a healthy dose of good old Amerricun anti-gummint attitudes".
To make matters simple, I plead guilty.
>> Justin claims that Albert and Hahnel "exalt[] ‘democratic’ form over democratic substance"
Justin is likely to be correct here since I think democracy ultimately reduces to a system of decision making rules and that those who talk about "democratic substance" are playing with dynamite.
I have to send this to you piece meal. I’ll respond to the other points in the next email.
Please, if you post these replies, also add the following:
I have sent Bill Lear a much fuller response to these and other criticisms that I have authorized Bill to make available to any who have a serious interest in examining the pros and cons of participatory economics. Or, I would be happy to send the longer response as an attachment to an email message to any who request it from me at [email protected]
>> Justin claims that Albert and Hahnel "exalt[] ‘democratic’ form over democratic substance" because they see democracy "as a set of procedures, valuable for their own sake-indeed, more valuable than other things people might want to do with their time". Furthermore, according to Justin, ParEcon does not allow people to choose not "to spend all their time inputting their [preferences] into computers and debating which plans might maximize them".
Nobody has to spend any more time participating than they choose to. And if you do a sloppy job of estimating what you want to consume when you do your request, you will just make more adjustments afterwards with a slight probability that you might be told — just can’t make that adjustment at this late date. There are no "debates" in the planning procedures, just submissions of proposals, votes yea or nay on others proposals, and revisions of one’s own proposals. There will be debates including cable TV information sessions [is that too high tech too?? If so, then there might have to be actual meetings, horror!] for members of neighborhoods, cities, etc. to discuss what all members of these collectivities want to request as their public good consumption. But as soon as someone tires of participating or even hearing the debate, just don’t turn on the local public goods discussion channel, or don’t go to the neighborhood meeting. But notice that these meetings are not discussing personal consumption, they are discussing the consumption of public goods appropriate to each level. What this more democratic and participatory process substitutes for in capitalism is electing politicians who vote at County and City Council meetings what they want to spend local taxes on. I think our proposal is clearly superior to present practice that leads to corruption, disproportionate power for developers and the wealthy who manipulate elected representatives through their control of the bulk of campaign financing, and "rational apathy" for a majority of the citizenry. You know, all the usual lefty critique of so called capitalist political life! And while all get to vote directly on public good proposals in a participatory economy, nobody has to go to any more meetings or listen to any more cable TV information and debating programs than they want to.
>> There seemed to be some relatively unarticulated concerns about "trade-offs" between democratic control and efficiency. Perhaps a comprehensive definition of what efficiency is and how markets are (in)efficient would be good.
I don’t want to make general statements about the relationship between participation and efficiency except to point out that while there may be ways in which more participation reduces the efficiency of outcomes, there are also ways in which we know it enhances efficiency. Every study ever done has concluded that the more participation a group of workers have, the more productive they are. Usually even the pretense of giving workers participation raises worker productivity! Also, monitoring and enforcement is likely to be less costly the greater participation because you don’t have to police people as much to get them to do things they agreed to do in the first place, and the more participation the more extensive the opportunity for high quality free monitoring by workmates.
I have argued that markets are far more inefficient than mainstream (and market socialists) are willing to admit elsewhere. (Chapter 7 of Quiet Revolution in Welfare Economics, Princeton University Press, 1990, or an article in process called "Listen Marketeer!" I would be happy to email any interested.) So I don’t want to go into that here. As far as a definition of efficiency, while I have, and have expressed my reservations, for purposes of this debate I am more than willing to use the standard concept of pareto optimality for allocative efficiency, and the common sense definition of motivational efficiency. I don’t think that is what causes any of the disagreements expressed here.
>> Justin Schwartz claims "The problem of accurate data collection is … utterly fatal to the [ParEcon] project quite apart from the endless demands on our time that it would involve."
Justin is the only person who has made this charge that I am aware of. And there have been plenty who have stated their criticisms and doubts in writing. Parecon generates higher quality estimates of true social costs and benefits, more effortlessly than any economy ever designed! Most knowledgeable critics of participatory economics acknowledge this, [Herb Gintis, to name one, and he hates participatory economics! Tom Weisskopf to name another, and he respectfully prefers market socialism over participatory economics.] So until Justin can explain why he thinks the quality of the information — I assume he primarily means the quality of our indicative prices — is so inaccurate, I have no way to respond.
>> To Joseph Noonan, ParEcon "sounds an awful lot like Ross Perot’s ‘electronic democracy’ with referenda on everything. Yuck."
I like referenda. There is a long tradition among democrats with a small "d" and progressive economists that is favorably disposed to referenda rather than electing representatives to make our decisions for us. So this is not one of my more peculiar tendencies. I hate Ross Perot and do not believe he has any serious commitment to democracy. As long as he’s on the outs clamoring for democracy will suit his purpose. Once he’s in power, I doubt he would have much use for referenda. I don’t recall that he ran any of his companies as workers managed firms.
>> Justin Schwartz claims ParEcon would not "be able to generate accurate inputs of consumer demand without excessively burdening the consumers because people can’t make accurate estimates".
I think I’ve answered this as best I can without giving the long version that I did send Bill Lear.
>> Justin Schwartz claims ParEcon "is rigid, since it requires approval and debate up and [down] the line for changes."
Participatory economics tries to require approval by all those affected by a decision, where approval means decision making input in the degree to which one is affected. But that is during the planning process. We do not require approval and debate up and down the line for changes in individual consumption! Most changes can be accommodated within consumer councils or federations. Only changes that require changes in production require consultation with those who have to produce more. Even this is nothing that individuals picking up different amounts than they ordered need concern themselves with — it is handled by consumer and worker federations.
>> Further, because of "transactions costs in getting to … consensus …. [t]here will be tendency to avoid the debate and [to live] with a sub optimal set of choices."
We don’t require consensus. That often does take too long, isn’t worth it, and generates incentives to engage in strategic behavior. There are some decisions that will require varying degrees of super majorities, but for most decisions a majority vote does the trick.
>> Justin Schwartz is worried about privacy when specifying consumption needs. He claims that "even if there is no individual identification, there will be an understandable reluctance to enter your preferences for things of which your community disapproves."
Submit your request to a geographically dispersed anonymous consumption council. By the way, my students when discussing this issue have taken to calling it "the kinky underwear problem." We have discussed it ad nausea and now feel we have the problem licked.
Or, maybe Justin should either move or consider a little more struggle with his neighbors concerning their overly judgmental attitudes!
>> Justin Schwartz, discussing consumption requests, apparently believes that all requests must be approved at a local level before being sent "upward" (my term). He seems to believe that if a person desires a good that others at the local level do not want, it will be impossible for the person to purchase the good. He says "decisions about what is made have to be approved at the lower levels before being aggregated and sent on several times …. If my preferences for the works of Hayek never get past the local level, they will [not] be printed, and I will be unable to buy them with what I earn." This seems, to me, to confuse how consumption requests are made. I was not aware that particular consumption requests were approved, just the amount of "effort-money" that you had earned. Whether or not you get what you want depends only on your request being within the limits of your effort and a producer of the good you want able to supply it.
Bill correctly understands how consumption works. One’s local consumption council [neighborhood or anonymous] can only disapprove a consumption request if its social cost is greater than that warranted by the individual’s effort rating. They cannot disapprove particular items. If the request is not anonymous they can provide feed back and advice about particular items, but that is all. But once individual request are approved via this process, it is true that the local consumption council then sums the requests into an aggregate request for individual consumption from all those in the council, and forwards that aggregate on along with the average effort work effort rating of the members of the local council.
Whether Hayek will get published in a participatory economy depends on whether or not his work is approved for publication by the councils of writers and/or university councils. Of course they have to deal with consumer federations who provide information on what and who people want to read. Since this is an issue that transcends economics, I also would recommend special provisions to guarantee access to expression in the form of publication, radio, TV etc. for new and minority views. But once Hayek is in print, no council can keep someone from ordering copies.
>> Concerning rewards for work, Justin Schwartz claims Albert and Hahnel "do not explain their technique for determining what people have ‘earned’ in any plausible way. This leads back to the problem of abstract labor that Marx so unsatisfactorily finessed." Gar Lipow responded that Albert and Hahnel "explain exactly their technique: that is, "With variations … they pay everyone exactly the same wage per hour". Schwartz replies that "this is hopeless implausible. It’s exactly Marx’s treatment of abstract labor. It’s a hopeless irrational method of allocating labor, because it does[] not price labor according to its economic value or the value of producing it. Skilled machin[i]sts are just a lot more expensive than ordinary laborers, and [Albert and Hahnel] have no non authoritative method of allocating labor to where it’s needed."
First of all, I am very familiar with the problem of abstract labor and its measurement. But we do not have this problem in a participatory economy. This is an important issue, so let me be very precise. Consumption is according to effort. Effort is whatever the effort rating committee in one’s workplace says it is. The procedures effort rating committees go through to come up with their ratings are up to them and the workers council of the particular work place. Self evaluation, peer evaluation, observation, measures of output, changes in output from previous periods, grievance procedures, or tossing coins! — all of that is up to each workers council to decide. Our idea is that effort is not the same as the value of contribution because people have different talents and educations, and what is fair is to reward effort, or sacrifice, and that’s what the committees should do their best to accomplish. Will they get it perfect? No. Will there be complaining? Yes. But they’ll estimate effort as best they can and those who are sufficiently dissatisfied will go somewhere else where they’re more appreciated.
But this is key. When workers councils are assessed for the social cost of scarce productive resources they use — to be compared against the social benefits of the outputs they propose to produce with those inputs — they are "charged" for the work time of particular workers according to those workers’ actual social opportunity costs [which for some will be higher than their "effort wage" and for others will be lower than their "effort wage" but this is of no particular consequence.] Where do the estimates of the true social opportunity costs of different categories of labor come from? From the same place the social opportunity costs of all productive inputs come from. They are just one of the indicative prices generated by the participatory planning procedure. To explain how that works I’d have to reproduce a whole welfare theoretic treatise that evaluates the participatory planning procedure [See chapter 5 in The Political Economy of Participatory Planning, Princeton University Press, 1991 -- one of the two books Justin Schwartz read "carefully."] But none have denied our claim that under assumptions much less restrictive than those needed for market economies, our procedure will generate indicative prices that more accurately reflect true social opportunity costs than market prices do. And that list of indicative prices includes "social opportunity cost wages" for every category of labor. THAT is what those who use the scarce productive labor resources are charged. But what workers in any and all labor categories get paid, effectively, depends only on their effort.
>> Justin Schwartz claims that because of the burden of a ParEcon system, people would resort to a Black Market.
Why buy something on a black market when you can get it through legal procedures for the same price or less? The problem is NOT with consumers resorting to black markets because they can’t get something, or can’t get it cheaply through their normal consumption request procedures. There is a potential problem with highly talented or skill individuals who might try to sell their particular labor services on a black market where they might get paid more than they would based on the effort rating their workers council would give them. I have discussed this problem at length elsewhere. In short, economies of scale eliminate this possibility of gain for most people, and a general commitment to economic justice on the part of the populace would reduce the number of buyers in a black market since buying in a black market is participating in economic injustice. Beyond that, anyone who wants should ask me or Bill for the long version of answers to these questions.
>> Justin Schwartz claims that in ParEcon "the big decisions would be made by central planners".
There are no central planners. The big decisions are precisely made by the social iterative participatory planning process which is designed to give everyone self-management — decision making input to the degree they are affected. Iteration facilitation board members make minor adjustments to the plan that participatory planning yielded to fine tune its very last components to guarantee feasibility to save everyone a little time.
>> Justin Schwartz claims that "Coase and Williamson" argue "that at a certain point the transactions costs of planning make it more efficient to use market relations and vice versa."
I presume that would depend on exactly what kind of planning, no? Besides, those authors were thinking about market economies within which there were firms that made internal decisions by planning. In that context there is presumably an optimal size of the firm based on efficiency considerations alone. That was the tenor of their argument and point. They were not talking about comparing a whole economy based on some particular kind of planning with a market economy.
>> Justin Schwartz believes that the failure of Soviet planned is evidence that ParEcon planning will be, at best, difficult. My take on this is that to compare the Soviet system to ParEcon is to compare apples and oranges. ParEcon is first and foremost a democratic system, whereas the Soviet system was least of all a democratic system.
I agree with Bill Lear.
>> In addition to this, Schwartz claims that "all the changes that [Albert and Hahnel] make from Soviet planning add layers of complexity and additional[l] transaction costs. The Soviets system should work better than theirs." He claims, curiously, here that ParEcon is somehow derived from a Soviet-style system.
Our system is more democratic than the soviet system of central planning which served, by the way, as a negative example, or anti-model, not a positive model for participatory planning. I bet that means we have more transaction costs than the soviet system automatically according to Justin Schwartz and his interpretation of transaction costs. Is Justin saying anything beyond: democratic decision making has more transaction costs than autocratic decision making?
>> Gar Lipow claims that "you have 100% of the vote in your personal consumption, 1/tenth of the vote in your workplace team, 1/100th of the vote in your workplace." Justin Schwartz replies that "you don’t have 100% of the vote in your personal consumption. You get to apply for what you want made and then you get to receive the next nearest thing to what you asked for that comes out of the planning process."
Gar is correct (for work teams of 10 and workers councils of 100). Justin is simply wrong. And consumers have powerful consumer councils and federations to go to bat for them regarding quality and delivery hassles in a participatory economy as well. 

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