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Part IV
Criticism of Parecon 

First they ignore you. Then they laugh at you.
Then they fight you. Then you win.
— Mahatma Gandhi 

A Judge is a law student who marks his own papers.
—H.L. Mencken 

Any economy must allocate goods and resources. Different ways of accomplishing this will naturally differently affect who does what, who gets what, and what will be produced, consumed, and invested. 

Someone who believes that civilization is best served by pitting people against one another will opt for allocation via competitive markets. Someone who thinks complicated decisions are best made by experts who should be materially rewarded for their expertise will opt for central planning. In either case, according to most economists, these are the only feasible allocation procedures. We claim this “impossibility theorem” is little more than self-serving prejudice and to prove it we have described how consumers and producers could participate cooperatively in planning and coordinating their joint endeavors—without central planning and without markets. 

Can people take control over their own lives, care for one another, and act to enhance their own situations and the situations of their fellow citizens? Can we have an allocation system that promotes solidarity by providing information necessary for people to empathize with one another and by creating a context in which people have not only the means to consider one another’s circumstances but also the incentive to do so? Can we have an allocation system that promotes variety at the same time that it creates balanced job complexes and egalitarian consumption opportunities? Can we have an allocation system that promotes collective self-management by permitting every worker and consumer to propose and revise her/his activities? Can we develop an allocation system that promotes equity rather than class division and hierarchy? 

Other economists deny that all this is possible but advocates of parecon believe economic activity can be made equitable by ensuring that desirable and undesirable tasks are shared equally. Fulfilling and rote work can be mixed to create equitable work complexes. Consumption bundles can be balanced to ensure equal access to consumption opportunities. And decision-making authority can be assigned in proportion to how decisions affect people. Ironically, deep prejudices based on years of experience in oppressive circumstances make seeing that all this is possible the most difficult step in achieving a better economy. Those who hesitate to undertake the tasks of designing such an economy do so not because the tasks are so difficult, but because doing so challenges ingrained prejudices and undermines elite interests. 

At any rate, after reading this far, hopefully you agree that participatory economics is a well-conceived system which could be implemented and which would enhance equity, diversity, solidarity, and self-management. The big question, however, is whether we have overlooked some criticisms regarding these aims or whether parecon would have deleterious affects on other values people hold dear which would dramatically offset its virtues. 

We assumed many chapters ago that our choice of guiding criteria would suffice to define a truly inspiring and desirable economy. But were our guiding values as well chosen, as we claimed so that having met our goals, other problems will prove minor? For example, what if parecon is wasteful or doesn’t elicit sufficient effort to attain acceptable levels of productivity or yields damning reductions on output for other reasons? Or what if it stifles creativity? Or obstructs merit? Or prevents serendipitous discovery? Or what if it eliminates privacy, or makes our lives too frenzied by imposing excessive responsibilities? Or what if it disorients economic attention by exaggerating the importance of individuals as compared to collectives, or vice versa? Or what if it sacrifices quality, produces chaos, or is ecologically unsustainable? Or what if it conflicts with other non-economic institutions that we desire, or is too dull to inspire support, or is impossible to attain? 

Any of these problems might outweigh the virtues built into parecon and cause a potential supporter to decide that while parecon is in many respects better than capitalism (or market or centrally planned coordinatorism or bioregionalism), in some respects parecon it is so much worse that it would have to be rejected. Given that possibility, we need to address each possible criticism in turn as our focus for the remainder of this book. 



Chapter 14 


Do Parecon’s Incentives Motivate Optimally? 

Thus capitalism drives the employers to do their worst to the employed, and the employed to do the least for them. And it boasts all the time of the incentive it provides to both to do their best! You may ask why this does not end in a deadlock. The answer is it is producing deadlocks twice a day or thereabouts. The reason the capitalist system has worked so far without jamming for more than a few months at a time, and then only in places, is that it has not yet succeeded in making a conquest of human nature so complete that everybody acts on strictly business principles.
— George Bernard Shaw 


Efficiency means not wasting assets even as we pursue desirable ends. In economics, we do not want institutional arrangements that squander resources, time, labor, talents, or any other assets used to produce outputs to enhance people’s lives. That doesn’t mean we want to exploit all assets mercilessly with no concern for the values we hold dear. It means we want to meet needs, develop potentials, and foster preferred values, and also avoid wasting assets. 

The dictionary tell us an incentive is “something, such as the fear of punishment or the expectation of reward, that induces action or motivates effort.” The linkage between not wasting assets and good incentives is simple. The threat or reward of incentives is precisely meant to induce behaviors that utilize assets appropriately. Incentives contribute to the extent outcomes are efficient or not. 

Even among those who accept that rewarding effort/sacrifice is morally superior to other alternatives, many might reasonably wonder if there is an unfortunate trade-off between rewarding effort to attain equity and having appropriate incentives to attain efficiency. Is this a trade-off that we must navigate by adopting a reasonable system of rewards that strikes some kind of compromise? Does parecon do that? Do we need to moderate our desire to reward only effort/sacrifice by incorporating other incentives that less admirably promote our equity values but that better motivate laboring activities to avoid wasting assets? 

The question is fair but a little surprising because it turns out that the case for rewarding only effort/sacrifice on efficiency grounds is, if anything, more straightforward than the case for rewarding only effort/sacrifice on grounds of equity or morality. 

Differences in productive outcomes arise from differences in talent, training, job placement, tools, luck, and effort/sacrifice. Once we clarify that “effort” includes personal sacrifices incurred in training, and assuming training is undertaken at public rather than private expense, the only one of these factors influencing performance over which a person has any individual discretion is his or her own effort. By definition, a person cannot enlarge his or her innate talent or luck to get a reward. Rewarding the occupant of a job for the contribution inherent in the job itself or for the good tools employed in that job also does not enhance the occupant’s performance, so long as productive jobs and good tools are promoted by the economy more generally. Thus the only factor we need to reward to enhance individuals’ performance is their effort/sacrifice. This claim certainly turns common wisdom on its head. As we revisit below, not only is rewarding only effort/sacrifice consistent with efficiency (assuming appropriate accompanying methods exist to elicit good allocation of energies and tools and so on), but rewarding either talent, training incurred at public expense, job placement, or tools has no positive incentive effects. These rewards are literally wasted. We cannot change our genetic endowment because someone offers us a salary incentive for our output, nor can we change our luck, nor the quality of our workmates, nor the tools available. 

As a practical example, in a very inexact but nonetheless revealing analogy, suppose we wanted to induce the fastest race we could from runners in a marathon. Our goal is to get everyone in the race to run as fast as possible. Should prizes be awarded according to outcome, rewarding those who go fastest the most, and so on, down to those who go slowest, or according to effort, perhaps by examining 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. In fact, no one has any incentive to go much faster than the person they are barely beating, assuming they cannot beat the person finishing ahead of them. On the other hand, paying in accord with improvements in personal best time—that is, paying in accordance with effort as measured by this index—gives everyone an incentive to run as fast as they can and in that way produces the fastest overall time. So why, we might wonder, do so many people believe that seeking equity by rewarding only effort/sacrifice conflicts with attaining efficiency and productivity? Three reasons typically arise: 

1    People tend to believe that if consumption opportunities are equal other than for differences in effort expended, people will have no reason to work up to their full talents or capabilities. 

2    If payment is equal for equal effort, there is no incentive for people to train themselves to be most socially valuable. 

3    Effort is difficult to measure accurately, while outcome is not, so rewarding performance is the practical option. 

Responding to reason one, in situations where solidarity or pride in one’s work is insufficient to elicit effort without reward, and where greater consumption opportunities are the only effective rewards, it will be inefficient to award equal consumption opportunities to those exerting unequal effort. That much is correct. But that is not what we have proposed. We do not rule out correlating consumption opportunities with effort/sacrifice made at work, but precisely the opposite. The parecon approach is that everyone should have a right to roughly equal consumption opportunities because the parecon vision of production is that all should exert roughly equal effort/sacrifice in work. To the extent job complexes are balanced so no one is required to make greater personal work sacrifices than anyone else, effort is largely equalized and therefore consumption should be largely equalized as well. But this is not to say that variations cannot occur. Individual variations of effort and therefore consumption are perfectly acceptable and anticipated in a participatory economy. People can choose to work harder or longer, or perhaps to take up some onerous tasks that have not been allotted but need doing. Alternatively, people can choose to work less hard or less long to earn less. In short, people can work less and consume less, or work more and consume more, in each case in proportion to the effort/sacrifice involved. 

But if there is no sky to reach for, you may be asking—if there is no vast advantage in consumption opportunities to be sought and won—will people lift their arms to work at all? It is one thing to say it is morally proper to remunerate only effort/sacrifice. It is another to say that doing so will elicit enough effort to yield efficient productivity. Would effort incentives elicit efficient productivity? 

In a society that makes every attempt to deprecate the esteem that derives from anything other than conspicuous consumption, we shouldn’t be surprised that many people feel that great income differentials are necessary to induce effort. But to assume that only the accumulation of disproportionate consumption opportunities can motivate people because under capitalism we have strained to make this so is not only unwarranted, it is self-deceptive. In the first place, very few people attain conspicuous consumption in modern capitalist societies. And those that do not are, for the most part, among the hardest working in the level of effort/sacrifice expended. Normal working people currently work hard in order to live at a modest level of income, not to consume conspicuously. People can therefore obviously be moved to exert effort and endure sacrifice, even sacrifices greater than they ought to have to put up with, for reasons other than a desire for immense personal wealth. Moreover, family members make sacrifices for one another without the slightest thought of material gain. Patriots die to defend their country’s sovereignty. And there is good reason to believe that for non-pathological people wealth is generally coveted overwhelm- ingly as a means of attaining other ends such as economic security, comfort, useful artifacts for pursuit of desirable hobbies, social esteem, respect, status, or power. If economic security is guaranteed, as in a parecon, there will be no need to accumulate excessively in the present out of fear for the future. 

We need not debate the point at length, but wish merely to note that if accumulating disproportionate consumption opportunities is often a means of achieving the more fundamental non-material rewards, as we believe, then 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, there will be no need to employ the intermediary device of conspicuous consumption to get people to engage in areas of work where their talents are best displayed. If people participate in making decisions, as in a parecon, they will be more likely to carry out their responsibilities without recourse to excessive external motivation. If the allocation of duties, respon- sibilities, sacrifices, and rewards is fair, and is seen to be fair, as in a parecon, one’s sense of social duty will be a more powerful incentive than it is today. And if a fair share of effort/sacrifice is in any event demanded by workmates who must otherwise pick up the slack, and additional effort/sacrifice are appreciated by one’s companions, recognized by society, and also awarded commensurate increases in consumption opportunities, why should anyone doubt that incentives will more than adequately elicit needed involvement and effort? The fact that there won’t be motivation to undertake excessive production for useless or egotistical ends would be a gain, not a loss. 

But what about reason two? What incentive will people have to train themselves in the ways they can be most socially valuable if remuneration is only for effort/sacrifice, not output? 

Since Mozart could contribute more by composing than being an engineer, it would have been inefficient for society in terms of lost potentials had he studied engineering. And if Salieri would have made an even worse engineer than composer, the same holds true for him. Society benefits in accruing more valuable products if people develop the talents in which they have comparative advantages, and this means society benefits if its incentive systems facilitate rather than obstruct this outcome. If Mozart would be inclined to pursue engineering over composing by preference, it would be desirable that society provide enough incentives for him to compose concertos rather than design bridges so that he would happily follow that path. But the query embodied in issue two is how will a parecon do that if by composing Mozart would get the same rate of pay for the same effort/sacrifice as he would for designing bridges? Won’t we lose out on the remarkable compositions we could get from someone with the innate talents of a Mozart, with society suffering thereby? 

First, there is good reason to believe that people generally prefer to train in areas where they have more talent and inclination rather than less—unless there is a very powerful incentive to do otherwise. Does anyone truly think that offered the same pay for using a lathe or a piano, Mozart would choose the lathe unless someone threatened convincingly to make his life utterly miserable were he to opt for the piano? In other words, in most instances, incentives are not even needed to get people to utilize their greatest talents, we just have to avoid disincentives, and there are no such disincentives in a participatory economy. Those who could become wonderful composers, playwrights, musicians, and actors (or dentists, doctors, engineers, scientists, or what have you), will not pursue other avenues of work in which they are less apt to excel in pursuit of greater material reward because there is no greater material reward elsewhere. Nor will people in a parecon shun training that requires greater personal sacrifice since this component of effort will be fully compensated. Second, for those cases where a little extra benefit of some sort would be needed to propel a person into his or her most productive pursuits, a parecon increases direct social recognition of excellence as compared to other economies. In a participatory economy, indeed, the best, and in some sense, the only way to earn social esteem related to one’s economic activity is to make notable contributions to others’ well-being through one’s efforts. Since working in accord with one’s talents can best do this, there are powerful incentives to develop innate talents. The only thing a  parecon prohibits is paying ransoms to superstars. Instead, a parecon employs direct social recognition and thereby avoids violations of our deeply held values. Will some prospective Mozart or Einstein, knowing their potential, opt to become an engineer or a violinist rather than a composer or physicist? It could happen, but it seems unlikely. Would this happen more frequently than in class-divided economic systems which squash most people’s talents due to imposing on people harsh poverty and robbing them of dignity and confidence? To ask is to answer. Not to mention that in capitalism many people with great potential squander their talents anyway by opting for the huge rewards they can gain from doing things like becoming a corporate lawyer whose main function is to help big firms avoid paying taxes—an outcome that is socially harmful, though of course beneficial to those with money. 

What about reason three, the difficulty of measuring effort as compared to performance? While economic textbooks speak blithely of marginal revenue product in infinitely substitutable models, the real world of social endeavors rarely cooperates. There are many situations where assigning responsibility for outcome is ambiguous, and where determining who really contributed what to output is effectively unknown. As those who have attempted to calibrate contributions to team performance can testify, there are some situations where it is easier than others. Sports teams are certainly more suited to such calibration than production teams. But even there it is more difficult to calibrate individual contributions in football and basketball than in baseball. And even in baseball, arguably the easiest case of all, there are never ending debates over different ways of measuring direct contributions to victory in individual games, not to mention the difficulty of assessing a player’s impact on team chemistry. 

Nor is measuring effort always so difficult. Anyone who has taught and graded students knows there are two different ways—at least—to proceed. Students’ performances can be compared to each other (output), or to an estimate of how well the student could have been expected to do (effort). Admitting the possibility of grading at least in part according to personal improvement (grades are not, in fact, rewards, but also measure absolute attainment as in mastery of some subject matter) is tantamount to recognizing that teachers can, if they choose, measure effort—and they can do it even though they are not in the dorm rooms of their students, monitoring their hours of study. 

Now consider your workmates. They not only know your past productivity, which means they can compare your efforts to your past by comparing its product, they can actually see you exert each day. So co-workers are in a far better position to judge each person’s effort than a teacher is able to judge the effort of students. Indeed, who is in a better position to know if someone is only giving the appearance of trying than people working with him or her in the same kind of labors? It is actually not only more just to remunerate effort/sacrifice than output for all the reasons we have explored, but particularly in an economy with balanced job complexes, it is actually quite a bit easier. Errors will by definition be much smaller. Methods can be, and in a parecon would be, democratic and mutually acceptable. Entanglement of effects and factors is not a problem. And it is not nearly so easy to pull the wool over the eye’s of one’s workmates as it is to do so with a supervisor, as people do today.