ParEcon Questions & Answers

Next Entry: Workers Councils?

Central Planning and Parecon?

ccSocialists have most often favored central planning – though that has changed recently. What is it?

Central planning is a conceptually simple solution to the problem of economic allocation. Within this system, a group of planners accumulates massive information in various ways, massages it, imposes some broad values on it, and emerges with a list of instructions for producers and prices for consumers. They then send this out to the rest of society to implement.  

In short, the planning system gathers data and sets economic priorities that planners then use to determine how best to achieve society’s goals with society’s limited productive resources. The system consists of a relatively small group of planners in a central planning apparatus communicating with managers in enterprises. The planners decide what to produce, where workers should work, what income levels consumers will have, and by determining prices also what they can consume. The information goes from planners to managers and on to workers. This can all occur with less or more input allowed to the broad public, and while central planning is a non-market system, highly truncated markets can certainly be used to distribute goods to consumers once they are produced, to gather data, or even to assign particular workers to particular enterprises. But the broader decisions of how much of each product to produce, how many workers of different skills should work where, and how much they should be paid, are all determined overwhelmingly by the central plan, even when limited markets exist to assist lesser determinations. 

What do people like it? What have you got against it?

Many advocates of centrally planned public-enterprise economies such as the old Soviet Union viewed their goal as a classless economy and saw central planning as an approach to allocation consistent with eliminating classes. Everyone in such a system will be workers and consumers, they argued. All workers and consumers will be on an equal footing because none will own the means of production. The nightmare of private appropriation of scarce social resources along with the inequity, alienation, and inefficiency fostered by the accumulation of profits by narrow elites is replaced, their prognosis continues, by a rational use of productive resources to best achieve society’s economic goals. In this view, central planners and managers knowledgeably translate workers’ and consumers’ desires about consumption and about work into the most efficient possible assignment of productive assets. In reality, of course, this is not what occurred in the Soviet Union, Eastern Europe, China, Cuba, or anywhere else that the system has been deployed, nor is it what we would predict from modeling the system’s institutions. Instead, in history and in our predictions, classes emerge even in the least corrupt and least authoritarian centrally planned economies. Moreover, this is not due solely to non-democratic political influences nor to betrayals by corrupt leaders, but is instead an intrinsic outcome of central planning. 

That is, instead of having a capitalist ruling class, in centrally planned economies we see a coordinator class of planners and managers inexorably becoming the ruling class. The idea that the coordinators who monopolize positions of decision-making influence are simply there to carry out the will of workers and consumers is a doublespeak myth, of course. Instead it is workers who labor at the behest of the coordinator class of planners, managers, and other empowered economic actors. The coordinators consume more than ordinary workers, work under more pleasant conditions, and make all the important economic decisions—whether at the broad plan- ning level or as managers in separate firms. Ordinary workers are alienated from decision-making and have inferior work conditions and consumption opportunities. This is not to say that all workers are equally exploited or alienated in all centrally planned systems, or that all workers are more exploited in any centrally planned economy, however enlightened, than in any capitalist system, however barbaric. But even at its best, central planning is plagued by class division, exploitation, oppression, and alienation. 

ggBut how well does central planning do its allocative job? Do its operations result in undue waste, miscommunication, gluts, short- ages, and so on?

The answer is well known and a bit different than publicly assumed. Central planning cannot be efficient unless central planners know the quantities of available resources and equipment, know the ratios in which production units can combine inputs to yield desired outputs, are informed of the relative social worth of final goods, have sufficient computing facilities to carry out quantitative manipulations, and can impose incentives that will induce managers and workers to carry out their assigned tasks. 

But, if we generously grant these assumptions—which is no less reasonable than granting the assumptions economists typically make about markets—then we must agree that central planners could, in fact, calculate an efficient production plan and then choose intelligently from a variety of options to decide how to assign workers to jobs and how to distribute goods to consumers. In such circumstances, that is, central planners can successfully solve a giant, economy-wide problem of how to maximize the social value of final output by calculating how much of each product to produce via each technique that can be used to make the product. The planners choose from among all the production plans that satisfy the various constraints operating in their economy the one plan that yields the greatest value of final output as judged by the planners’ valuations of the worth of products. The assumptions above guarantee that the planners will calculate an optimal plan and will be able to get the “optimal plan” they calculate carried out. 

But even if central planning can theoretically function this smoothly and effectively, will it facilitate each actor having appropriate proportionate decision-making influence, or will it place excessive power in a few hands and diminished power in everyone else’s? In all versions of central planning:  

1    The famous “down/up down/up” process is down-go- questions, up-come-answers; down-go-orders, up-comes- obedience. 

2    Qualitative information that is essential to evaluating human outcomes is never generated, much less dis- seminated. 

3    Elite conceptual workers—the central planners and plant managers who we call coordinators—monopolize the technical information required for decision-making. 

4    The only management left to individual production units is to “manage” to fulfill the central planners’ targets using inputs allotted them by the central planners. 

In other words, central planners gather information, calculate a plan, and issue “marching orders” to production units. The relationship between the central planning agency and the production units is authoritative rather than democratic, and exclusive rather than participatory. Moreover, since each unit is subordinate to the planning board and any superior agent will always seek effective means for holding subordinates accountable, methods of surveillance and verification will be employed to minimize malfeasant lying and shirking. To these ends, central planners appoint and then reward and punish managers according to the performance of their units rather than establishing procedures that give power to rambunctious workers’ councils. Since it is senseless to punish managers for the behavior of workers over whom they have no control, central planners grant managers dictatorial powers over their workers. What begins as a totalitarian relationship between the central planning agency and production units ends up extending to managers a dictatorial say over workers. Not only do workers have no say over what they produce and what inputs they work with because central planners make allocative decisions outside the workplace, workers have little say over how they use inputs to meet their output quotas because plant managers make these decisions unilaterally. Real world central planning therefore prevents workers from deciding how to use their laboring capacities because its logic requires pervasive hierarchy. 

So you reject even an optimal version of central planning?

Even if we assume the planners have all the information they need; that the social values of final goods are determined by a completely democratic voting procedure among consumers; that the planners forswear all opportunity to bias the social values guiding planning in favor of their own interests; that the planners accurately calculate the optimal plan; and that workers carry out the plan to the letter of their instructions (a very long and utterly implausible list of “ifs”)—nonetheless, even in this highly unreal, best-case scenario, central planning would still fail to deliver self-management for three reasons: 

1) Since the central planners monopolize all the quantitative information generated in the planning process, workers and consumers lack access to quantitative information about the relationship between different primary resources and final goods in the economy. And since very little qualitative information is generated in central planning about the human aspects of different work and consumption processes, workers and consumers lack information about the situations of other workers and consumers. But this means workers and consumers in centrally planned economies do not have the information required to engage in intelligent and responsible self-management. How can people sensibly decide what to produce and consume without knowing how their choice will affect others—even if they were allowed to do so? 

2) Regarding valuation of outputs, central planning could let every consumer “vote” say 10,000 points, indicating his or her relative preferences for different final goods and services. But even this fair and democratic consumer voting procedure would deny self-management for workers. Once votes were tallied and used to formulate the planers’ objective function, even the best central planning would translate those preferences into specific work plans for each and every production unit. But that means every consumer/worker would have had the exact same decision-making input (10,000 votes) as every other consumer/worker over every facet of what to produce and how to produce it in every single workplace. Even assuming this structure could ever be harnessed to yield workable and sensible outcomes, which it could not, it would fail to provide self-management for workers because it would not give workers input into production decisions according to how much they are affected by them. Your opinion about what to produce and how to produce it should count more towards what goes on in your own workplace than the opinion of someone who is less affected by what happens in your workplace—just as their opinion should count more than yours about their workplace. But the best that central planning can conceivably do (a goal that it never remotely attains due to devolution into class division) is to give everyone equal input in all economic decisions via a democratic determination of the plan’s objective function. Central planning is therefore ill-suited to providing actors influence in accord with the differential impacts that different decisions have on different workers and consumers. 

3) Finally, as we have discussed at greater length in other contexts, in any economy individuals rationally orient their preferences toward opportunities that will be relatively plentiful and away from those that will be relatively scarce. We know that orienting ourselves to want what we cannot have or cannot afford yields little satisfaction, while orienting ourselves to want what we can have and can afford can yield more. Thus our preferences are not fixed and we influence them by our actions and choices. If a bias arises in the expected future supply of particular roles or goods so that some are under-priced and others are overpriced, people will orient their development accordingly. If I can get commodity X at a price below what it ought to sell at, and can get commodity Y only at an inflated price above what it ought to sell at, I am going to feel a real incentive to change my preferences from Y toward X to benefit from this mispricing. On average, over a whole population, tastes will drift as a result. In the case of central planning, the bias against providing self-managed work opportunities keeps people from developing (systematically) desires and capacities for self- management, and instead promotes steadily greater apathy among the workforce. That is, the apathy of its workers often noted by those who studied the Soviet and Eastern European centrally planned economies was not genetic, of course, but a logical result of the bias against self-managed work opportunities in those societies, as well as a result of political alienation. But this apathy would develop even in the best case of central planning, much less in real world versions. Why should a worker in a centrally planned economy develop a keen interest in what she will produce or how she will produce it, or develop a powerful desire to influence such decisions? It is better not to care. (The parallel to the disinterest in participating in political democracy by those without means to influence agendas is obvious.) 

cWhat about solidarity, equity, and diversity?

We need not spend excessive time on these. With a class division between workers and coordinators (including central planners, local managers, and other actors who share their relative monopoly on decision-making options and access to information), solidarity is clearly less than it would be with classlessness. With planners and managers in position to reward themselves excessively and possessing a world view that sees themselves as “conceptual” and “in charge” and that sees society’s workers as “needing to be cared for,” we can predict with great confidence a growing gap in income, perks, and conditions. So there is no equity. 

Diversity is subtler, and can increase or decrease in this model depending on many variables, though, in practice (as all the jokes about “communist robotic regimentation” convey), our expectation is not positive. All in all, not surprisingly central planning is an allocation system that obstructs the values we favor including equity of circumstance and income, solidarity, self-management, and diversity.  

Next Entry: Workers Councils?

Leave a comment

Skip to toolbar