index of 2006 workshop papers

Libertarian Socialism: Participatory Planning

by Robin Hahnel, U.S.A.

"[Capitalism] is not a success. It is not intelligent, it is not beautiful, it is not just, it is not virtuous -- and it doesn't deliver the goods. In short, we dislike it, and we are beginning to despise it. But when we wonder what to put in its place, we are extremely perplexed."
-- John Maynard Keynes

Introduction

In the 1970s, when Michael Albert and I were young New Left activists studying for our PhD in economics, we came to the conclusion that the vision of a self-managed economy shared by many anarchists, council communists, syndicalists, and utopian socialists was essentially sound, but, unfortunately, these economic visionaries had failed to provide a coherent model explaining precisely how their alternative to capitalism could work. Our libertarian socialist predecessors provided moving comparisons of the advantages of worker and community self-management over capitalism and authoritarian planning. But all too often they did not respond to difficult questions about precisely how necessary decisions would be made, how the democratic procedures they championed would yield a coherent plan, why there was any reason to believe the plan that emerged would be efficient, or how people would be motivated to work and innovate. These theoretical weaknesses were particularly debilitating because while real world experiments did prove that central planning and market socialist alternatives to capitalism were feasible, there were no real world examples libertarian socialists could point to and prove that our vision was also possible. Self-management by factory committees in the early days of the Russian Revolution, worker takeovers in Northern Italy in the aftermath of WWI, anarchist led communes and factories in Spain during the Spanish Civil War, and the challenge to central planning by worker councils in Hungary in 1956 all demonstrated that a strong desire for economic self-management simmered bellow the surface and occasionally boiled over. But unfortunately none of these brief episodes of self-management lasted long enough to demonstrate that worker and consumer councils could not only competently manage their own affairs, but could also coordinate their inter-related activities efficiently on a long term basis through a system of democratic planning without relying on market forces or authoritarian directives. Michael Albert and I did not believe this meant economic self-management was impossible. It simply meant more work was required to flesh out the vision and demonstrate its feasibility and desirability theoretically until a coherent set of libertarian socialist procedures could be tested in practice.

In the 1980s many progressive economists joined conservative critics who had long claimed it was impossible to coordinate the activities of separate groups of producers and consumers except via markets or authoritarian planning. These new skeptics proclaimed there was no "third way," and accused those, such as ourselves, who called for planning by producers and consumers themselves of deluding ourselves and others. The famous British economist Alec Nove was one who threw down the gauntlet in no uncertain terms: "In a complex industrial economy the interrelation between its parts can be based in principle either on freely chosen negotiated contracts [i.e., markets], or on a system of binding instructions from planning offices [i.e., central planning.] There is no third way."

In two books published in 1991 Michael Albert and I set out to rectify intellectual weaknesses in the case for participatory planning by spelling out precisely how worker and consumer councils could coordinate their joint endeavors themselves -- consciously, democratically, equitably, and efficiently. In The Political Economy of Participatory Economics (Princeton University Press) we presented a theoretical model of participatory planning and carried out a rigorous analysis of its properties. In Looking Forward: Participatory Economics for the Twenty First Century (South End Press) we examined the intricacies of participatory decision making in a variety of realistic settings, and addressed practical issues conveniently ignored by theoretical models. After publication, critics suddenly dropped the objection that participatory planning is technically impossible, and raised new objections. Some argued that a participatory economy was undesirable in any case. Others argued that it was incompatible with human nature. This chapter outlines the essential features of participatory economics and responds to the most important objections that have been raised over the past fifteen years.

Part 1: Participatory Economics

The model of a participatory economy is designed to promote: (a) economic justice, defined as economic reward commensurate with effort, or sacrifice; (b) economic democracy, or self-management, defined as decision making power in proportion to the degree one is affected by a decision; and (c) solidarity, defined as concern for the well being of others — all to be achieved without sacrificing economic efficiency while promoting a diversity of economic life styles. The major institutions used to achieve these goals are: (1) democratic councils of workers and consumers, (2) jobs balanced for empowerment and desirability, (3) remuneration according to effort as judged by one’s work mates, and (4) a participatory planning procedure in which councils and federations of workers and consumers propose and revise their own activities under rules designed to yield outcomes that are efficient and equitable.

Work : In a participatory economy production is carried out by worker councils where each member has one vote. Everyone is free to apply for membership in the council of his or her choice, or form a new worker council with whomever he or she wishes. There is an ample literature documenting the advantages of employee management. Evidence is overwhelming that people with a say and stake in how they work not only find work more enjoyable, they are more productive and efficient as well. So rather than dwell on the advantages of self-management -- which should be beyond question -- I focus here on the more unusual and controversial proposals to expand self-management through balancing work assignments for desirability and empowerment and to reward people according to effort, or the sacrifices they make in their work.

Balanced Job Complexes: Every economy organizes work tasks into “jobs” which define what tasks an individual will perform. In hierarchical economies most jobs contain a number of similar, relatively undesirable, and relatively unempowering tasks, while a few jobs consist of relatively desirable and empowering tasks. But why should some people’s work lives be less desirable than other's? Does not taking equity seriously require balancing jobs for desirability? And if we want everyone to have equal opportunity to participate in economic decision making, if we want to ensure that the formal right to participate translates into an effective right to participate, does this not require balancing jobs for empowerment? If some people sweep floors all week, year in and year out, while others review new technological options and attend planning meetings all week, year in and year out, is it realistic to believe they have equal opportunity to participate in firm decisions simply because they each have one vote in the worker council? Proponents of participatory economics believe that taking participation seriously requires balancing jobs for empowerment, just as taking equity seriously requires balancing jobs for desirability.

This does not mean everyone must do everything, nor an end to specialization. Each individual will still do a small number of tasks, but some of them will be more enjoyable and some less, and some will be more empowering and some less. Some people will still specialize in brain surgery, others in electrical engineering, and others in high voltage welding. But those who perform some tasks that are more empowering than tasks are on average will also perform some tasks that are less empowering. And those who perform some tasks that are more desirable than tasks are on average will also perform some less desirable tasks – unless they wish to work more hours or accept a lower effort rating. The balancing can be done over reasonable time periods, and is done by committees of workers in each work place as they see fit – not imposed by an external bureaucracy. There is every reason to expect worker committees to accommodate technological and psychological considerations when balancing job complexes while eliminating large, persistent differences in empowerment and desirability. The proposal is to reap the productivity rewards of a high degree of specialization while eliminating the undesirable effects of permanent hierarchies which give rise to permanent concentrations of power.

Critics raise a valid concern about balanced job complexes on grounds that talents are often scarce and training is socially costly. For example, it is true not everyone has the talent to become a brain surgeon, and there are social costs to training brain surgeons. Therefore, there is an efficiency loss whenever a skilled brain surgeon does something other than perform brain surgery. Roughly speaking, if brain surgeons spend X% of their time doing something other than brain surgery, there is an additional social cost of training X% more brain surgeons. But virtually every study confirms that participation increases worker productivity. If balancing jobs for empowerment enhances effective participation, as it is intended to, efficiency losses from failing to economize fully on scarce talent should be weighed against productivity gains from increasing overall worker participation. Moreover, equity gains from having surgeons share in less pleasant hospital tasks must be weighed against efficiency losses, should there be any.

Reward for sacrifice, or effort: Effort, or sacrifice, is rewarded in a participatory economy because any other system of compensation is unfair. In capitalism people are rewarded according to the value of the contribution of the productive capital they own as well as the value of the contribution of their labor. At least that is how people would be rewarded in an idealized version of capitalism. In real world capitalism discrimination, market power, asymmetrical information, and luck distribute income and wealth much more unfairly. But even under ideal circumstances, in capitalism a Rockefeller heir who inherits large amounts of productive capital but never works a day in his or her life enjoys an income hundreds of times greater than that of a skilled brain surgeon. U nless those with more productive property acquired it through some greater personal sacrifice of their own, proponents of participatory economics believe the income they receive from ownership of this property is unjustifiable. While "capitalist injustice" may be eliminated in market socialism, people would still be rewarded according to the market value of the contribution of their labor in market socialist economies. Since the market value of the services of a skilled brain surgeon will be many times greater than the market value of the services of a garbage collector no matter how hard and well the garbage collector works, remuneration will be unjust in market socialism as well. People will always have different abilities to benefit others, so those with lesser abilities will always be disadvantaged in market socialism regardless of how hard they try and how much they sacrifice. The problem is that m any differences in people's “productivity” cannot be traced to differential sacrifices. No amount of training will give an average individual the skills of a professional soccer player. Yet players in the top divisions of professional soccer leagues around the world receive hundreds of times more than an average worker salary because their rare and wonderful talents make their contributions to the enjoyment of soccer fans very high. The famous progressive British economist, Joan Robinson, pointed out long ago, that however “productive” a machine or piece of land may be, that hardly constitutes a moral argument for paying anything to its owner. Similarly, however “productive” a high IQ, or a talent for manipulating a ball at break neck speed may be, that doesn't mean the lucky owner of this trait deserves more income than someone less gifted who works as hard and sacrifices as much. Only if people are rewarded according to sacrifices they make will the distribution of burdens and benefits in the economy be equitable. Only if someone works longer or harder, or at more dangerous, strenuous, or unpleasant tasks, does economic justice require greater remuneration. Unlike capitalism or market socialism, a participatory economy rewards people according to the effort, or sacrifice they make in work. But can effort be reasonably measured, and does rewarding effort conflict with efficiency?

It is commonly held that effort is difficult to measure while outcome is not, so rewarding performance is the best system in practice. But neither half of this proposition is as compelling as usually assumed. Assigning responsibility for outcome in group endeavors is frequently unambiguous. Sports teams are more suited to such calibration than production teams. But even in a team sport like soccer the endless debates over the relative "value" of pure strikers, versus clever midfielders, versus solid defenders, not to speak of factors like "team chemistry," attest to the difficulty of assigning individual responsibility for group outcomes. Nor is measuring effort always so difficult. Anyone who has taught and graded students for long knows there are two different ways to proceed. Teachers can compare students' performances to each other, or to how well they expect a student to do in light of that student's ability and previous training. Admitting the possibility of grading according to “improvement” is tantamount to recognizing that teachers can, if they choose, measure effort. Given a student's level of preparation when s/he entered the class, given a student's natural ability, is this an A, B, or C effort, are not questions teachers find impossible to answer.

And remember who is judging effort in a participatory economy – a committee of one’s workmates. Is there any incentive for workmates to reward clumsy effort rather than proficient effort? Why would fellow workers have any less incentive to discourage ineffective effort on the part of co-workers than capitalist employers do? Who is in a better position to know if someone is only giving the appearance of trying than the people working beside them? While teachers don't watch their students study, workers do see their co-workers work. It should not be as easy to disguise ability and fake effort by pulling the wool over the eyes of co-workers as it is to deceive supervisors (or teachers.) Of course there will be disagreements among co-workers about the relative sacrifices people make, and effort rating committees will inevitably make mistakes. But if procedures -- including grievance procedures -- are fair, and if dissatisfied workers are free to move to a new workplace where they feel they will be evaluated more fairly, there is no better way to try to achieve economic justice.

It is commonly assumed that rewarding people according to the value of their contribution is the only efficient incentive system. But once we stipulate that “effort” includes personal sacrifices in training as well as in work, the only factor influencing performance over which an individual has any discretion is their effort. So if we include an effort component of training in our definition of work effort, the only discretionary factor influencing performance is effort, and therefore the only factor we should reward to enhance performance is effort! Suppose we want 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.

Consumption: Every individual, family, or living unit belongs to a neighborhood consumption council. Each neighborhood council belongs to a federation of neighborhood councils the size of a precinct. Each precinct federation belongs to a city ward, or rural county federation. Each ward belongs to a city consumption council, each city and county council belongs to a state council, and each state council belongs to the national consumption council. The major reason for "nesting" consumer councils into ever larger federations is to allow for the fact that different kinds of consumption affect different numbers of people. Some decisions affect only local residents, while others affect all who live in a city, county, state, or nation. Failure to arrange for all those affected by consumption activities to participate in choosing them not only implies a loss of self-management, but, if the preferences of some who are affected by a choice are disregarded or misrepresented, it also implies a loss of efficiency as well. One of the serious liabilities of market systems is their systematic failure to allow for expression of desires for social consumption on an equal footing with desires for private consumption. Having different levels of consumer federations participate on an equal footing with individual worker and neighborhood councils in the planning procedure described below prevents this bias from occurring in a participatory economy.

Individual members of neighborhood councils present their consumption requests accompanied by the effort ratings they receive from their co-workers. Using "indicative prices" generated by the participatory planning process described below, the social cost of each consumption proposal is calculated to determine if a person's consumption request cost to others is commensurate with the sacrifices he or she made for the benefit of others in work. While no consumption request justified by a work effort rating can be denied by a neighborhood consumption council, neighbors can express their opinion that a request is unwise, and neighborhood councils can also approve requests on the basis of need in addition to merit. Someone can borrow or save by consuming more or less than warranted by her effort level for the year, and anyone wishing to submit an anonymous request to protect his or her privacy can do so. It should be noted that while individuals consume according to their work effort in a participatory economy, users of scarce labor resources -- worker councils -- are "charged" according to the opportunity costs of employing different kinds of workers, as described below. This avoids the contradiction that plagues market economies between equity -- wages which should be based on sacrifice -- and allocative efficiency -- charging users of labor services according to their social opportunity costs.

Participatory Planning: The participants in the participatory planning procedure are the worker councils and federations, the consumer councils and federations, and an Iteration Facilitation Board (IFB). Conceptually, the planning procedure is quite simple. (1) The IFB announces current estimates of the social opportunity costs for all goods, resources, categories of labor, and capital stocks, or what we call their "indicative prices." (2) Consumer councils and federations respond with consumption proposals. Worker councils and federations respond with production proposals listing the outputs they propose to make and the inputs they need to make them. (3) The IFB then calculates the excess demand or supply for each final good and service, capital good, natural resource, and category of labor, and adjusts the estimate of the opportunity cost for the good up, or down, in light of the excess demand or supply. (4) Using the new estimates of opportunity costs, consumer and worker councils and federations revise and resubmit their proposals. Individual worker and consumer councils must continue to revise their proposals until they submit one that is accepted by the other councils. The planning process continues until there are no longer excess demands for any goods, any categories of labor, any primary inputs, or any capital stocks -- in other words, until a feasible plan is reached.

The IFB has no discretionary power to set prices, much less to dictate what workers or consumers can do. The IFB bears no resemblance to GOSPLAN in the former Soviet Union which was a central planning bureaucracy that did have power over who would produce what, and how they would produce it. But in participatory planning workers and consumers propose and revise their own activities in a process that reveals the social costs and benefits of their proposals. Not only does each worker and consumer council make its own initial proposal, they are responsible for revising their own proposals as well. The planning procedure is designed to make it clear when proposals are inefficient or unfair. And other workers and consumer councils can disapprove of proposals when they are unfair or inefficient, but revisions of individual proposals are entirely up to each individual worker and consumer council. This aspect of the participatory planning procedure distinguishes it from all other planning models I know, and is a critical means of providing workers and consumers with the opportunity for self-management. Participatory planning gives individual groups of workers and consumers power over their own activities. They are only constrained by the legitimate interests of others whom they affect. As long as what a group proposes to do is fair to others and does not misuse scarce productive resources it will be approved by the other worker and consumer councils because it is beneficial to their interests to do so.

The planning procedure whittles overly optimistic, unfeasible proposals down to a feasible plan in two ways: Consumers requesting more than their effort ratings warrant are forced to either reduce their requests, or shift their requests to less socially costly items if they expect to win the approval of other consumer councils who have no reason to approve consumption requests whose social costs are not justified by the sacrifices of those making the requests. Similarly, worker councils are forced to either increase their efforts, shift toward producing a more desirable mix of outputs, or shift toward using a less costly mix of inputs to win approval for their proposals. By multiplying outputs by their indicative prices, and dividing by inputs multiplied by their indicative prices, it is possible to calculate the ratio of social benefits to social costs of any worker council proposal. Worker councils whose proposals have lower than average social benefit to social cost ratios will be forced to increase either their efforts or their efficiency to win approval from other worker councils. Efficiency is promoted as consumers and workers attempt to shift their proposals and avoid reductions in consumption or increases in work effort. Equity is promoted when further shifting is no longer effective and approval of fellow consumers and workers can only be achieved through consumption reduction or greater work effort. Each new round of revised proposals moves the overall plan closer to feasibility, and moves the indicative prices closer to true social opportunity costs. No participant in the planning procedure enjoys any advantage over any other, and the procedure generates equity and efficiency simultaneously.

The participatory planning procedure protects the environment in the following way. Federations of all affected by a particular kind of pollutant are empowered in the participatory planning process to limit emissions to levels they deem desirable. A major liability of market economies is that because pollution is what economists call a "negative externality" -- i.e. pollution adversely affects those who are "external" to the market transaction -- market economies permit much more pollution than is efficient even by the standards of mainstream economics. The participatory planning procedure, on the other hand, guarantees that pollution will never be permitted unless those adversely affected feel that the positive effects of permitting an activity that generates pollution as a byproduct outweigh the negative effects of the pollution on themselves and the environment. Moreover, the participatory planning procedure generates reliable quantitative estimates of the costs of pollution and benefits of environmental protection whereas markets generate no quantitative estimates whatsoever, giving rise to the need for makeshift surveys in market economies that polluters and environmentalists argue over endlessly.

Part 2: Responding to Legitimate Concerns

Too Many Meetings? Thomas Weisskopf asked: "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? 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?"

There is good reason to be concerned that democratic economic decision making might bog down in endless debate. Anyone who has not attended meetings where discussion took up more of people's time than it was worth needs to attend more meetings -- or meetings of more idealistic and radical organizations! We also have little experience with democratic economic planning on a national scale where so many things must be coordinated before a plan is put into motion. Perhaps the only reason national planning was feasible under communism was because it was autocratic and undemocratic. Finally, our limited experience with political democracy at the national level, where decisions are arguably fewer than economic decisions, has invariably ended by delegating decision making to elected representatives. No wonder when Alec Nove, a life-long student of the Soviet economy and planning system, confronts people with an endless list of decisions that must be coordinated in a modern economy, many are inclined to agree with him that there is no choice but to embrace the market as the only feasible alternative to authoritarian planning. But is decision making in a participatory economy really as daunting as Nove, Weisskopf and others assume it must be?

First of all, information processing and meeting time is far from zero in capitalist economies, which critics of the idea of democratic planning conveniently ignore. As Pat Devine pointed out: "In modern societies a large and possibly increasing proportion of overall social time is already spent on administration, on negotiation, on organizing and running systems and people. In existing societies much of this activity is concerned with commercial rivalry and the management of the social conflict and consequences of alienation that stem from exploitation, oppression, inequality and subalternity. One recent estimate has suggested that as much as half the GDP of advanced western countries may now be accounted for by transaction costs arising from increasing division of labour and the growth of alienation associated with it." But would a participatory economy waste even more of our time in decision making? We can break the issue down into meeting time inside worker councils, meeting time in consumer councils, meeting time in federations, and meeting time in the participatory planning process itself.

Conception and coordination is part of the organization of production in any economic system. Under hierarchical organizations of production relatively few employees spend most, if not all of their time thinking, meeting, coordinating and monitoring others while 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 in a hierarchical one. But this is because most people are excluded from work place decision making under capitalism and authoritarian planning, as they largely would be under market socialism as well. 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. Moreover, autocratic meetings and procedures can waste time and be inefficient just as democratic meetings and procedures can be. Whether or not the decision making process regarding production is efficient and streamlined need not be related to whether or not it is democratic. Finally, while it might prove to be the case that democratic decision making about production 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 about work than autocratic ones. When workers participate in making a decision they are more likely to require less oversight to carry it out. In any case, meeting time in worker councils is part of people's balanced job complexes, i.e. it is part of the normal work day in a participatory economy, just as it is for managers and supervisors in existing economies. It is not an infringement on workers' leisure time.

We plead guilty to suggesting that more social interaction go into making consumption decisions than is the case in market economies. 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 desires for collective as well as individual consumption. 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 and isolated expression of individual choice that is the hallmark of market economies. Whether this will take more time than the present organization of consumption depends on a number of trade offs.

Presently political and economic elites dominate local, state, and national public choice. For the most part they operate relatively free from restraint by the affected 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, nor require attending any meetings at all. Expert testimony and differing opinions would be aired through a public service media. Individuals and interest groups with strong feelings on particular issues would participate in these fora, but others would be free to pay as much or little attention to these debates as they wished. The key is that expressing one's preferences regarding local and national public good consumption is just as easy for individuals in a participatory economy as expressing one's preferences for beef vs. chicken, vs. fish, vs. tofu. At each level of public good consumption the options are formulated by delegates chosen democratically, then voted on by all those affected in economic referenda within consumer federations rather than voted on by delegates. It is true consumers will vote more in a participatory economy than in market systems. But this does not mean consumers spend more time in meetings.

The big issue, however, is how much meeting time is required by participatory planning itself -- which we do proudly advertise as a "social, iterative, procedure." Contrary to the presumptions of critics, we did not propose a model of democratic planning in which different groups of workers and consumers, or their elected representatives, meet face to face to discuss and negotiate how to coordinate their activities. Instead we proposed a procedure in which councils and federations submit proposals only for their own activities, receive new information including revised estimates of social costs, and resubmit proposals, again, only for their own activities. There is no meeting. Councils and federations submit their own proposals and vote thumbs up or down on the proposals of others. Nor did we propose meetings of delegates to define different feasible, comprehensive plans to be voted on. Delegates to particular federations will formulate public good consumption options for those in their federations to vote on, but there are no meetings of delegates from different councils and federations to negotiate changes in the proposals coming from different councils and federations until they are mutually feasible. The participatory planning procedure we proposed is precisely an alternative to the "big meeting" notion of how to democratically plan a national economy. We agree with critics who think the "big meeting" version of national, democratic, economic planning is impractical, and would prove more a nightmare than a dream -- which is why we proposed the participatory planning procedure instead.

We did suggest one time saving procedure that could be used if people in a participatory economy want to. After a number of iterations had already settled the major contours of the plan -- without meetings between delegates from different councils -- the professional staff of the Iteration Facilitation Board could define a few feasible plans within those contours for all to vote on without ever meeting and debating at all. The purpose would be to save the time otherwise required to go through further iterations to whittle proposals down to a feasible plan when there is very little left to be decided in any case. For example, if 97% of the plan is already settled in the first 7 iterations, people may decide it is not worth another 7 iterations to resolve the remaining 3%. If they wish, they could ask the IFB staff to formulate, say, 5 different ways to settle the remaining 3% of the plan and submit them to a referendum. In any case, this option reduces planning time rather than increases it. It could be used, or not, depending on how participants felt about the diminishing productivity of further iterations and how much people were willing to trust the IFB to formulate different "end game" options. Finally, it bears pointing out that we did not even propose face to face meetings where people from different councils or federations could plead their cases for unusual consumption or production proposals. Instead we proposed that councils submit qualitative information as part of their proposals so that higher level federations could grant exceptions in unusual cases should they choose to. Moreover, the procedure we proposed for approving or disapproving unusual proposals is a simple up, down vote rather than a rancorous meeting.

While I also think many concerns about endless meetings do not apply to our proposal, I do not 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 leaving economic choice to the impersonal laws of supply and demand. Supporters of participatory planning obviously think the advantages of self-management and equitable cooperation are well worth any extra inconvenience. But this is not to say we do not understand this requires, almost by definition, more meaningful social intercourse, which is why every effort should be made to minimize the trouble people must go to when we engage in collective economic self-management. Many of the procedures we recommended were motivated precisely to avoid pitfalls in the naïve illusion that "the people" can make all economic decisions that affect them in what amounts to "one big meeting." No doubt other procedures will be discovered by people living in participatory economies with rich and busy lives to reduce the time and energy required to manage their economic affairs.

Dynamic efficiency: David Kotz asked: "Proponents of new models of a socialist economy which seek to combine economic planning with wide participation in decision-making emphasize the potential superiority of their systems over other systems at meeting human needs. However, the claim of superiority has been typically cast in a static framework that largely overlooks the performance of participatory planning in the most important dynamic aspect of economic life: technical change and the process which brings it about -- innovation. Does the system provide strong incentives for innovation? Does the system provide substantial means for carrying out innovation? Does the system generate innovative effort that contributes effectively to the improvement of human welfare?" These are important questions since even when people come to recognize that environmentally and socially destructive growth is no longer in their interests, raising living standards for today's disadvantaged, reducing everyone's work time, improving the quality of everyone's work lives, and restoring the natural environment will require a great deal of innovation.

Supporters of participatory economics do not support rewarding those who succeed in discovering productive innovations with vastly greater consumption rights than others who make equivalent personal sacrifices in work. Instead we recommend emphasizing social recognition of outstanding achievements for a variety of reasons. First, successful innovation is often the outcome of cumulative human creativity for which a single individual is rarely responsible. Second, an individual's contribution is often the product of genius and luck as much as effort, which implies that recognizing innovation through social esteem rather than material reward is superior on ethical grounds. Third, we are not convinced that social incentives, when tried, will prove less powerful than material ones. It should be recognized that no economy ever has, or could pay innovators the full social value of their innovations. If it did, there would be no benefit left to those who apply them! This means if material compensation is the only reward, innovation will be under stimulated in any case. Moreover, often material reward is merely an imperfect substitute for what is truly desired -- social esteem. How else can one explain why those who already have more wealth than they, their children, and their children's children can possibly consume continue to strive to accumulate more? In any case, these are the opinions of those who advocate replacing capitalism with participatory economics. Actual policy in a participatory economy would be settled democratically by its members in light of results.

Nor do we see why critics believe there would be insufficient incentives for enterprises to seek and implement innovations -- unless they measure a participatory economy against a mythical and misleading image of capitalism. Sometimes supporters of capitalism presume that innovating capitalist enterprises capture the full benefits of their successes, while it is also assumed that innovations spread instantaneously to all enterprises in an industry. When made explicit it is obvious these assumptions are contradictory. Yet only if both assumptions hold can one claim that capitalism provides maximum material stimulus to innovation and achieves technological efficiency throughout the economy. In reality innovative capitalist enterprises temporarily capture "super profits" which are competed away more or less rapidly depending on a host of circumstances including industry structure, barriers to entry, patent laws, and how vigorously intellectual property rights are enforced. Which means that in reality there is an unavoidable trade-off in capitalist economies between stimulus to innovation and the rapid spread of innovations.

In a participatory economy all innovations will immediately be made available to all enterprises, so there is never any loss of static efficiency. And while non-material incentives for innovative firms are emphasized, material incentives are available if necessary without sacrificing static efficiency. There are strong incentives for worker councils to search for innovations that increase the social benefits of their outputs, or reduce the social costs of their inputs since this increases the worker council's social benefit to social cost ratio. Raising this ratio makes it easier for the council to get its proposals accepted in the participatory planning process, can allow workers to reduce their efforts, can permit them to improve the quality of their work lives, and can raise the average effort rating the council can award its members. However, it is true that the rapid spread of innovations in a participatory economy will render these advantages temporary. As the innovation spreads to other enterprises, estimates of social opportunity costs will change, job complexes will be re-balanced across enterprises and industries, and the social benefits of innovations as they are realized will be spread to all workers and consumers. So what will curb the incentive to "free ride" on the innovations of others if material benefits to innovating enterprises disappear so quickly in a participatory economy?

First, recognition of "social serviceability" is a more powerful incentive to innovation in a participatory economy where acquisition of personal wealth is both less necessary and less likely to elicit social esteem. Second, a participatory economy is better suited to allocating sufficient resources to research and development because R&D is largely a public good which is predictably under supplied in market economies but not discriminated against by the participatory planning procedure. Third, while we recommend it only as a last resort, there are no reasons in a participatory economy that the re-calibration of work complexes for innovative work places cannot be delayed, or extra consumption allowances for workers in innovative enterprises cannot be granted for some period of time if members of a participatory economy decide greater material rewards for innovative enterprises are necessary to achieve desirable rates of technical progress.

Too Unfree? According to Thomas Weisskopf, a participatory economy sacrifices libertarian goals to achieve traditional socialist goals: "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. 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."

Participatory economics was the result of a self-conscious attempt to design an economy that allows people to control their own economic lives in a system of equitable cooperation with others. 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, and career, as well as personal privacy, are fully guaranteed in a participatory economy. The presumption that libertarian objectives can only be satisfied by a market system is just that -- a presumption -- which proves untrue on careful examination. Choice of consumption and work, opportunities for exit, and "producer and consumer sovereignty" are as great, or greater in a participatory economy than in market economies. 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 workmates? 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 worker council and apply for work in another. Iteration Facilitation Boards in a participatory economy can make finding a more compatible work environment far easier than finding one in capitalism. 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 venture capitalists that a new enterprise will prove profitable. Moreover, workers have far more control over how they work, and consumers have greater influence over what is available for them to consume in a participatory economy than they do in market economies where the myth of "producer and consumer sovereignty" is largely a lie.

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 socialists have traditionally called "wage slavery." Does this mean that market socialism is not libertarian because the employer/employee relation is outlawed? Equating "economic democracy" with the freedom of individuals to do whatever they please is a shallow interpretation that is fraught with contradictions. Similarly, equating a libertarian economy with the freedom to buy or sell anything robs libertarianism of the merit it richly deserves.

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. Socialists and most 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 for whatever price I can negotiate? 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 sacrifices warrant in free market exchanges, and other less talented and less educated people will receive less than they deserve based on their sacrifices. Apparently we must decide if people who participate in economic cooperation with others have a right to expect a fair outcome, i.e. a right to an equitable distribution of the burdens and benefits of social cooperation. 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 different roles people play in the division of labor is not the issue at all. The issue is how people free to choose their economic roles should be compensated. I think a good case can be made that people have a right to equitable compensation when they enter into a system of economic cooperation with others. On the other hand, I can think of no reason why people have a "right" to the whatever compensation the market would award them. What would be the basis of such a "right?" In sum, I believe people should be free to do what they want. But this does not mean they should be free to appropriate more than their fair share from social cooperation. 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 take unfair advantage of morally arbitrary differences in human capital to consume 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 worker 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 put 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." But if I am permitted to work at a job complex significantly more empowering than others, then some of my co-workers must work in job complexes that are less empowering, and before long the fact that my workmates have the same formal opportunity to participate in economic self-management as I do will not mean that they have the same effective opportunity to participate. Before long I will exert more influence over economic decisions than the degree to which I am affected because my work life is particularly empowering, and my co-workers will exert less influence because their work life disempowered them relative to me.

Supporters of participatory economics think everyone should have the opportunity to participate in making economic decisions in proportion to the degree they are affected by those decisions. We think self-management is a fundamental right of people who enter into economic cooperation with one another. 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. Therefore, we do not believe when a group of workers design job complexes in their workplace to make sure that all of them have the information and abilities needed to engage effectively in self-management they are engaging in "implicit or explicit coercion." It is true that when workers balance job complexes for empowerment in their workplace, none of them will be able to "choose" jobs that are significantly more empowering than the jobs of their co-workers. But why should they be able to do so? Why would those who work in more empowering job complexes -- if they were available -- not be guilty of coercing and oppressing their workmates?

Humanly Unfeasible? George Scialabba asked: "Assuming Albert and Hahnel's model of participatory economics is technically feasible, is it humanly feasible? Does it presuppose a degree of solidarity and of indifference to comfort, status, privacy, and mobility that it would be unreasonable to expect? Concerns that a participatory economy assumes people are altruists are usually the last line of defense against participatory economics. Many who declare that they like the idea, and find it a welcome relief from the cut-throat world of competition and greed, hesitate nonetheless because they think a participatory economy presumes people are more generous than most of us really are, and therefore, while a lovely idea, that it simply won't work.

In chapter 5 of The Political Economy of Participatory Economics we defined a formal model of a participatory economy and asked what individually rational behavior would be in that context. After deducing what rational people would do when faced with the rules and procedures of a participatory economy, we analyzed that behavior to see if it coincided with socially efficient behavior, and demonstrated that it did. We did not engage in the pointless exercise of assuming individuals are revolutionary saints who always act in socially responsible ways, and then tautologically proclaim that in a participatory economy the social interest would, indeed, be served -- as many critics apparently have assumed. Instead, we designed institutions, procedures, and rules so when people act out of self interest their behavior would prove socially efficient and equitable as well. Jason Pramus, who criticized participatory economics for other reasons, at least acknowledged our conservative methodology in this regard: "Looking Forward is not a naïve book. It is not even a utopian book. In its own way it is quite practical. It does not expect people in its hypothetical economy to behave like revolutionary saints. It lays out a system where people's self-interest will very closely coincide with the interests of the larger society they are a part of. It does not expect greed and dishonesty to disappear, but it does present safeguards that should minimize the damage such tendencies would present.

In brief, the principle mechanism that compels a worker council pursuing its own self interest to behave in a socially responsible way is that it must demonstrate to other worker and consumer councils that its proposal generates an acceptable excess of social benefits over social costs. Consumer councils are induced to behave in socially responsible ways because they must demonstrate to other councils that the social cost of the goods they request is consistent with the average work effort ratings of their members. The principle mechanism that compels individually responsible behavior are effort ratings by one's co-workers and consumption allocations based on effort ratings. So we most emphatically did not assume people would be motivated by solidarity and indifferent to their individual comfort and status.

This is not to say that we do not dare to hope that many years of practicing the kind of socially responsible behavior the rules and procedures of a participatory economy promotes, and observing that others have done likewise, will increase peoples' trust and concern for one another. There is plenty of evidence that people do display solidarity toward others even today -- toward family members, friends, and various communities where members trust and care for one another. So this is not behavior foreign to the human species when we are not mistrustful of one another. But we were very careful not to assume that people in a participatory economy would behave in the social interest if this conflicted with their self interest -- for that would have been utopian in the bad sense of the word.

Conclusion

The "model" of a participatory economy was never intended to be a “blue print” for others to follow when they are ready to abandon capitalism. The model was initially created to demonstrate that efficient, equitable cooperation between “associated producers" (and consumers) is theoretically possible via a participatory system of democratic planning, and therefore, that opponents of capitalism are not limited to choosing between (1) authoritarian planning, (2) “market socialism,” or (3) some version of "community economics" which forfeits the considerable advantages that specialization allows for and fails to explain how communities will interact when it turns out they are only "semi-autonomous" rather than entirely self-sufficient. The model of a participatory economy is comprehensive and concrete, rather than merely a list of values and goals, not to dictate how things must be done, but to provide doubters with something concrete to criticize. Specifics are provided not to rob those who will live in the economy that replaces capitalism of their right to choose how they will organize their affairs, but to force all of us who believe that equitable cooperation is humanly possible to explain how conflicts could be resolved, and how incentives could be arranged so that when people do act in their own interest they will not do so contrary to the social interest. Proponents of participatory economics seek dialogue with others about these matters because we believe the anti-capitalist movement must constantly be thinking about how things can be done better, rather than leave the question of what we would replace capitalism with to the post-capitalist future. We believe we need to address the questions raised by participatory economics while we struggle against the inequities and inefficiencies of capitalism so that a majoritarian, anti-capitalist movement will know what to do when capitalism is finally replaced.

NOTES

  Alec Nove, The Economics of Feasible Socialism (George Allen and Unwin, 1983): 44.

Since 1991 Michael Albert and I have elaborated on the model, defended it from a variety of criticisms, and discussed strategies for moving from the economics of competition and greed to the economics of equitable cooperation in numerous publications. See Albert and Hahnel: “Socialism As It Was Always Meant to Be,” Review of Radical Political Economics (1992), “Participatory Planning,” Science & Society (1992), "Yes, Socialism Without Markets," Socialist Review (1992), and "In Defense of Participatory Economics," Science & Society (2002). See Michael Albert: Moving Forward: Program for a Participatory Economy (AK Press, 2001), and Parecon: Life After Capitalism (Verso, 2003). See Robin Hahnel: "Participatory Economics and the Environment," Synthesis/Regeneration (2004), "The Limits of Community Based Economics," Greenpepper Magazine (2004), "When Is Small Beautiful and When Is Small Simply Small?" Green Horizon Quarterly (2004), "Economic Vision and Participatory Economics," The Scottish Left Review (2005), and Economic Justice and Democracy: From Competition to Cooperation (Routledge, 2005).

  For an excellent survey of a large literature evaluating the effect of participation on worker productivity see "Participation, Productivity, and the Firm's Environment" by David I. Levine and Laura D'Andrea Tyson in Paying for Productivity: A Look at the Evidence, Alan S. Blinder, Editor. (Brookings Institution, 1990.)

We call them "indicative prices" not only because in early rounds of the planning procedure these "prices" are inaccurate estimates of social opportunity costs, but also because we do not want to give the impression that even the prices from the last round of planning -- which are the best estimates of opportunity costs possible -- are any more than "indications" of what the true social opportunity costs really are.

See chapter 8 in Economic Justice and Democracy for a fuller discussion of how the annual planning procedure, the long-run planning procedure, and other features of a participatory economy combine to protect the environment without loss of economic efficiency.

Thomas Weisskopf, "Toward a Socialism for the Future, in the Wake of the Demise of the Socialism of the Past," Review of Radical Political Economics (24, 3&4), 1992: 14 -17.

Pat Devine, Democracy and Economic Planning (Westview, 1988): 265.

Formulating and revising proposals is part of the conceptual work of councils and federations. So meetings to decide on proposals and revisions regarding one's own activities are meetings within, not between councils and federations.

David Kotz, "Socialism and Innovation," Science & Society 66, 1, 1992: 94-96.

In capitalist economies the only way to permit innovators to capture a larger share of the benefits from their innovations is to permit them to deny others access to the innovation, even if only temporarily. This necessarily entails a loss of static efficiency. A participatory economy can deploy material incentives to promote dynamic efficiency if deemed necessary with no loss of static efficiency whatsoever.

Weisskopf, Ibid. 21-22.

Weisskopf, Ibid: 20.

George Scialabba, "A Participatory Economy," Dissent, May 1992: 282.

Jason Pramus, "Looking Forward: A Roundtable on Participatory Economics," Z Magazine , July-August, 1991: 74.

Matt Ridley provides an accessible synthesis of recent developments in mathematical game theory and evolutionary biology that provide a deeper understanding of the genetic and behavioral basis of human instincts and the evolution of cooperation in The Origins of Virtue, (Penguin Books, 1996.)

index of 2006 workshop papers

To leave comments on this paper: click here.

To read comments already contributed: click here.