ParEcon Questions & Answers

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Participatory Planning

vvIf parecon rejects markets and central planning, what does it adopt in their place? To start, can you summarize the case for participatory planning?

In place of top-down allocation via centrally planned choices and in place of competitive market allocation by atomized buyers and sellers, we opt for informed self managed, cooperative negotiation of inputs and outputs by socially entwined actors who each have a say in proportion as choices impact them, who can each access accurate information and valuations, and who each have appropriate training, confidence, conditions, and motivation to develop, communicate, and manifest their preferences.

That allocation approach, if we could conceive institutions able to make it effective, could compatibly advance council centered participatory self-management, remuneration for effort and sacrifice, and balanced job complexes, and also provide proper valuations of personal, social, and ecological impacts while promoting classlessness.

Participatory planning is conceived to accomplish all this.

Worker and consumer councils propose their work activities and consumption preferences in light of best available and constantly updated knowledge of local and national implications in the form of true valuations of the full social benefits and costs of their choices.

Their negotiation features a back and forth cooperative communication of mutually informed preferences via a variety of simple communicative and organizing principles including what are called indicative prices, facilitation boards, rounds of accommodation to new information, and other features which permit actors to express, mediate, and refine their desires in light of feedback about other actor’s desires. In short, everyone together interactively negotiates compatible choices consistent with advancing the values we have highlighted.

Workers and consumers indicate their personal and group preferences. They learn what others have indicated. They alter their preferences seeking a personally fulfilling pattern of work and consumption as well as a viable overall plan.

At each new step in the cooperative negotiation each actor seeks personal well being and development, but each can improve his or her situation only by acting in accord with more general social benefit.

As in any economy, consumers take account of their income and the relative costs of available items and choose what they desire. This occurs not only for individual consumption, but also for groups, neighborhoods, and regions, all via consumer councils

Workers similarly indicate how much work they wish to do in light of requests for their output as well as their own labor/leisure preferences.

In capitalism, as Sinclair Lewis succinctly conveys, to be able to fleece others is a welcome trait: “His name was George F. Babbitt, and … he was nimble in the calling of selling houses for more than people could afford to pay.”

Or as the famous advertising executive Ernest Dichter says about American advertising: “We must use the modern techniques of motivational thinking and social science to make people constructively discontented…. If you are relatively happy with your life, if you enjoy spending time with your children, playing with them and talking with them; if you like nature…if you just like talking to people…if you enjoy living simply, if you sense no need to compete with your friends or neighbors–what good are you economically?”

But in a parecon, not only does no one have any interest in selling at an inflated price, no one has any interest in selling more for the sake of income either – because that is not how income is earned. Nor is there any competition for market share. Motives are simply to meet needs and to develop potentials without wasting assets, which is to say to produce what is socially acceptable and useful and to fulfill one’s own as well as the rest of society’s preferences compatibly.

Actors’ proposals about their desired production and consumption are communicated each to every other via special mechanisms for the purpose. Negotiations occur in a series of planning rounds or iterations. Every actor has an interest in the most effective utilization of productive potentials to meet needs since each actor gets a share of output that is equitable and grows as the whole output grows.

Every actor also has an interest in investments that reduce drudge work and improve the quality and empowerment of the average balanced job complex since this is the job quality and empowerment everyone on average enjoys.

This is more difficult than other parts of parecon, and I would like to explore it in more detail. First, don’t a lot of economics, including on the left, claim there is no alternative to markets and central planning, dismissing your agenda before it even begins?

In 1983 the British economist Alec Nove wrote an influential book titled The Economics of Feasible Socialism. He argued to a surprisingly receptive leftist audience that for economic allocation we could only choose either markets or central planning, two systems that in this volume we have already rejected. Nove summarized his argument”: 

It is clear that someone (some institution) has to tell the producer about what the users require. If that someone is not the impersonal market mechanism it can only be a hierarchical superior. There are horizontal links (market), there are vertical links (hierarchy). What other dimension is there? In a complex industrial economy the interrelations between its parts can be based in principle either on freely chosen negotiated contracts (which means autonomy and a species of commodity production) or on a system of binding instructions from planning offices. There is no third way. 

If Nove was right, we would have to go back and pick a lesser evil from between markets and central planning, no other option being possible. Our economic choice would then be limited to capitalism or to market or centrally planned coordinatorism, with as many features as we could impose to better the lot of citizens. 

British Prime Minister and statesman William Pitt (1759-1806), an otherwise unlikely cast member of this book, noted accurately and succinctly, though in an entirely different context, that “Necessity is the argument of tyrants. It is the creed of slaves.” 

We never knew Alec Nove. We are confident that he was no tyrant and that he was no slave. Yet, despite its influence, it is hard to find in his book any other rationale than the argument from necessity. Nove notes that no links other than horizontal or vertical exist. But this ignores that there may be means other than markets for horizontal relations unless one assumes, by necessity, that markets are the only horizontal allocation system possible. Nove asserts that there can be no third way. Alternatives are logically impossible. But he gives no reason why this must be so other than complexity. This is precisely what Pitt means by “arguing from necessity.”  

Nove believes producers and consumers cannot together respectfully arrive at “instructions” that they mutually carry out without any central agency and without competition and commodity exchange, except with horrible repercussions. But why can’t it happen? Or why must there be horrible repercussions? 

Does Nove examine the properties that such a system might have and find them wanting in comparison to class division, alienation, and exploitation? Does he describe features that must accompany such a system and show that they have consequences we cannot abide? He does neither. Instead, the only answer Nove provides as to why cooperative allocation cannot happen is that allocation is too complex for anything other than markets or central planning to work. He offers a negative proof—an alternative to markets or central planning is impossible. Nove achieves his proof by simply stating that nothing could fulfill complex allocation needs other than markets or central planning. That is, his supporting logic is to simply state the result itself. His only evidence is to pile up indications of what no one doubts in the first place: that is, that allocation is complex and important. Nove’s presentation argues only from necessity. It must be that there is no third way because it must be that there is no third way. We do not have one now, therefore we cannot have one ever. With this mindset, and this was part of Pitt’s point, we would never have advanced beyond the institutions of the Pharaoh’s Egypt. 

As Nove’s claim, repeated by many others, is operationally very important in communicating with various left audiences, let’s back up a step. If a person thinks a society promoting solidarity, diversity, equity, and self-management is potentially attainable, then for him or her to say it should be morally off the agenda and therefore that people should not try to define it, explain it, and forcefully advocate for it, would be to say that humanity should stop progressing and resign itself to an economic system that falls short of desired virtues. In the US case, this would make sense only if the person actually thought it was ideal to have an economy in which one percent of the population owns the great majority of the means of production and accrues gargantuan profits as a result; in which roughly 4 percent own most of the rest of the productive assets, thereby also becoming immensely rich and powerful; and in which another 15 percent or so own some residue of productive assets and also monopolize the economic positions in society that largely decide daily economic outcomes and circumstances, thereby enjoying associated status, power, work conditions and, of course, grossly disproportionate income. It would mean that the person was satisfied with roughly 80 percent obeying orders for their whole economic lives, subordinate in their workplaces and even in much of their consumption activities, and in which many in this huge majority are downright hungry, even if alternatives were possible. 

It is hard to imagine a person in full possession of his mental faculties and with a level of morality higher than a dung beetle’s, who would argue that in society less solidarity is preferable to more, less equity is preferable to more, less justice and democracy are preferable to more, and less control over our lives is preferable to more. But this is what it would mean to argue that implementing participatory economics or some other system able to attain these values while also accomplishing required economic functions should be off the agenda, supposing one thought it was potentially attainable. So those who wish to take economic vision off the human agenda and who also wish to retain a shred of dignity and rationality do not generally make the argument that we shouldn’t want to meet needs and develop potentials better than we do now. They instead make the argument that something about parecon, or even about any conceivable alternative economic system at all, is necessarily so adverse or so unattainable that even thinking about implementing such a system is a waste of time. 

Why do so many people argue that the desire to attain a better economy should go into history’s garbage bin? Why do so many people assert that no better economy is possible and that trying to attain one is a deluded pipe-dream detracting from useful pursuits? One answer is that a person could feel that a better economy would be wonderful, thus being a morally sound and sensible person, but nonetheless feel that regrettably there is no combination of institutions that could possibly bring about better outcomes. Any effort to improve economic solidarity, equity, justice, self-manage- ment, diversity, etc., would (a) fall short of our intentions, and/or (b) cause so much loss of output and/or of other desired outcomes (such as privacy, say) that the gains it did attain in equity or self- management or whatever else would be far outweighed by countervailing losses in output, privacy, etc. This is the real logic of Alec Nove’s position and also of TINA—Margaret Thatcher’s famous assertion that “there is no alternative”—which is better termed TINBA, for “there is no better alternative.” 

The first reply to TINBA is why would anyone in his or her right mind utter such a phrase gleefully? Imagine at some point in history someone yelling TINBA about slavery, or about child labor, or about overwhelming illiteracy, or about average life spans in the 20s, 30s, 40s, or 50s, or about dictatorship, and so on. Any sane and morally sound person yelling TINBA about such things would presumably do so only tearfully, and only if he or she had had his or her hopes dashed by a very powerful set of arguments and associated evidence. Why else would one erect a “do not enter” sign in front of domains that of course everyone with a shred of moral decency would like to enter? Without compelling evidence for the claim, it would be pathological on the part of those suffering the ills of slavery, child labor, overwhelming illiteracy, short life spans, dictatorship, or, in the modern instance, stupendous inequalities of economic wealth and power, or it would be grotesquely self-serving on the part of a few who benefit from such conditions, to declare that nothing better than such ills is possible and to be gleeful about it. 

The second reply to those proclaiming TINBA is that there is, in fact, not only nothing compelling that supports their stance, but no argument whatsoever on behalf of TINBA other than the loud pronouncements of sectors of the populace who greedily benefit from such beliefs. There is no operational evidence or analytic argument that economic institutions which empower workers and consumers to influence decisions proportionately to how they are affected, or that reward people in accord only with their effort and sacrifice, or that disperse responsibilities in a manner which balances empower- ment and quality of life, are either impossible or fraught with problems so damning that they outweigh their virtues—or even with problems at all. In fact, the situation is quite the contrary. Those who have made preliminary studies of such institutions have found them to be very promising, while the advocates of TINBA have (predictably) virtually ignored these analyses. 

At a minimum, therefore, until and unless someone makes an overwhelming and unassailable case that equity, solidarity, self- management, diversity, and other desirable values unmet by current economic institutions are either (a) incapable of being delivered by different economic institutions, or (b) impossible to deliver without bringing with them horrible ills offsetting the benefits—attaining a better economy, and, more specifically, an alternative to markets and central planning, should be very much on the agenda. Still, the only definitive final refutation of Nove’s academic denial of a third way or of Thatcher’s emotive assertion that “there is no alternative,” even when such claims are made without serious rationale, is to present an actual third way itself. 

Therefore, we need to describe an allocation alternative that we call “decentralized participatory planning.” Our claim is that decentralized participatory planning permits consumers’ and workers’ councils to participate directly in formulating a plan that would benefit everyone in a just and equitable fashion. It arrives at more accurate pricing and economic adjustment than markets and central planning can achieve, but additionally it enhances rather than obliterates solidarity, diversity, equity, and self-management. 

Allocation, remember, is the process whereby an economy determines the amounts to be produced and the relative exchange rates of all inputs and outputs. It chooses from a nearly infinite list of every conceivable thing that might be produced in a year with every conceivable combination of patterns of labor and resource use, plus every conceivable apportionment of the product, the single final list of what all the various economic actors actually produce and consume. It is a gargantuan selection process. There is a massive, nearly endless set of possibilities of what the economy might do in the coming year. We settle, over the course of the year, on what the economy actually does. This process is called allocation. It is what markets accomplish by selecting via competition among buyers and sellers final outcomes embodying particular market properties. It is what central planning accomplishes by selecting via top down commands final outcomes with particular central planning properties. And it is what any “third way” will have to accomplish by selecting in its own manner final outcomes with its own particular (in our case, participatory economic) properties. 


A big part of allocation is obviosuly about information – communicating the data people need to make decisions. What precisely do workers in a council need to know to regulate their production according to the effects on themselves, and on other workers, and consumers? And what must consumers know to formulate their consumption requests in light of their own needs as well as the needs of other consumers and workers?

For informed collective self-management, the following conditions must be present: 

  • Participatory workers must weigh the gains from working less or using less productive though more fulfilling techniques, against the consequent loss of consumer well being. Likewise, participatory consumers must weigh the benefits of consumption requests against the sacrifices required to produce them. 
  • Participatory workers must distinguish an equitable work-load from one that is too light or too heavy. Likewise, participatory consumers must distinguish reasonable consumption requests from ones that are excessive or overly modest. 
  • Everyone must know the true social costs and benefits of what they desire to consume or produce, including the quantifiable and non-quantifiable consequences of their choices. 


bSo how does participatory planning meet these requirements? 

Allocation performs one very complicated function—providing a means to decide among options. Should certain productive assets be used to produce peanuts or prison cells, autos or shoes, in any conceivable combination of options? Likewise, given such products, what is their relative worth? How much of one should we exchange for another? 

A key concept in making such choices sensibly is the “social opportunity cost” of doing any particular thing. If we produce peanuts, how much of other things will we have to give up because we have used labor, land, facilities, etc. in peanut production? Likewise, if we produce autos, what do we forego from not having produced something else that we could have? In markets, prices are an indicator of bargaining power. We feel they should more properly be an indicator of true social opportunity costs. They should tell us if we do x, how much of y could we have done instead, and therefore, do we really want to do x or would we prefer doing that much y? If an economy is functioning optimally, then it will be cognizant of the full social effects of both the production and consumption of its inputs and outputs. The full range of actual choices in the economy, the pattern of production and consumption that results from allocation, will simultaneously determine the social opportunity costs of every single choice among the totality of possibilities. It is a kind of circular or interactive relationship. The total quantities produced of shoes, autos, peanuts, and everything else and how they are apportioned will in sum determine the value of each particular item, which is its social opportunity cost. The economy will ideally produce peanuts up until the point when producing any more peanuts would entail losing some other item more valuable to society than the extra peanuts, which is to say, it will produce them up until the point when the social opportunity cost equals the benefit from the last peanut. 

We are churning out pencils, as another example. When do we stop churning? Pencils are useful, but the more pencils we have, the less is the value of each new one added to the pile, at least after a point. Moreover, we certainly do not want to use up so much of our labor and resources churning out pencils that we start having to forego things more desirable to us than our growing pile of pencils—say, milk. Ideally the economy will churn out each output to a point where the benefit of the last item produced was equal to the opportunity cost of producing it. To produce another of the item would occur at the same or at a bit higher opportunity cost and would have the same or a bit less social value … so that, by not producing that item we can use our productive capability to produce something else that benefits us more. 

It is complicated, to be sure, but not incomprehensible. The hardest part is the interactivity—the fact that the decisions have to be made globally for a whole economy with each decision affecting the basis upon which all others should be made. Economists call it a general equilibrium problem. 

Let’s return to discussing what is needed for a good allocation system. Producers and consumers use prices as a shorthand way of discerning the relative value and cost of various choices. Prices should therefore embody accurate estimates of the full social costs and benefits of inputs and outputs—they should equal their true social opportunity cost. In a parecon, prices, or relative valuations, arise in the process of participatory planning and serve as guides to proposals and evaluations. The social character of prices—their emergence from the preferences, circumstances, wills, power, and social interactions of economic actors not only in parecon, but in all economic systems—is important to understand. 

Too often theoretical economists ignore the interactive and social origin of prices and view them as quantitative measures that can be found technically by an analyst solving equations. In the literature on central planning, for example, prices will invariably be seen as emerging from a cut and dried mathematical calculation. In neoclassical literature on markets, similarly, all the prices in the economy are said to arise mathematically from plugging fixed preferences and given technologies into some complex equations. Used carefully this sort of thinking can shed light on some questions, to be sure. But used indiscriminately to comment on real economies, it can be very misleading. 

The point is, real people’s preferences arise in social interactions. Not only do the outcomes of the clash and jangle of different people’s preferences depend on what those interactions are like, but the very preferences that people bring to their decisions and that lie at the basis of the results the economy attains depend on people’s interactions as well. Our preferences are influenced by our circumstances and situations, which are in turn influenced by the nature of the economic activities we undertake. 

In thinking about allocation, therefore, we should remember that for estimates of social costs and benefits to be accurate they must arise from realistic social, communicative processes. If we are to propose positive approaches for allocation, we have to come up with processes that give people no incentives to dissimulate regarding their true desires, that give people equal opportunity to manifest their feelings in determining outcomes, and that help people arrive at desires that are not perverted by their situations. It is precisely because our participatory planning process differs in many respects from the flawed communicative processes of market and centrally planned allocation that its prices are different as well. 

In any case, prices are “indicative” during the participatory planning process in the sense that they represent the best current estimates of final relative valuations. As the process unfolds these estimates become steadily more accurate. Indicative prices in a parecon are also flexible in the sense that qualitative information about the actual conditions of labor and implications of consuming items provides important additional guidance. We do not use quantitative prices alone, and the mechanism of arriving at and refining quantitative prices has checks and balances. Indicative prices (measuring social opportunity costs) in a parecon derive from cooperative social consultation and compromise checked by dissemination of qualitative information and deliberative decision-making. These both ensure that quantitative indicators remain as accurate as possible and help develop workers’ sensitivity to fellow workers’ situations and everyone’s understanding of the intricate tapestry of human relations that determines what we can and cannot consume or produce. But since to both assure accuracy and to foster solidarity we need not only set quantitative prices but also continually socially reset them in light of changing qualitative information about work lives and consumption activity, the burden of distributing information in a participatory allocation procedure is considerably greater than in a non-participatory economy which simply disregards such matters. Not only must a participatory economy generate and revise accurate quantitative measures of social costs and benefits in light of changing conditions, it must also communicate substantial qualitative information about the conditions of other people. 


But people need to know about the work that is to be done too, don’t they? How dores participatory planning handle that?

As explained earlier, job complexes would be balanced in and across workplaces. If there were plants with better than average work conditions, people employed there would spend some time doing more menial tasks elsewhere, while for plants with below average work conditions, workers would put some time into more interesting pursuits elsewhere. For an individual in a given period to work significantly more or less than the social average and not disrupt the humane balance of work, she or he need only diminish or increase her or his hours worked at all tasks in the same proportion. Then, each individual could receive from her or his workplace an indicator of average labor hours expended as an accurate indicator of work contributed. Over a sufficient period, whenever a person’s indicator was high (or low) compared to the social average, the individual would have sacrificed more (or less) for the social good, and would be entitled to proportionately more (or less) remuneration in return. In parecon, job complexes would be balanced by a real social evaluation, but measures of hours plus intensity worked would serve only as guidelines for decisions since councils could grant exceptions for higher (or lower) consumption requests as conditions and needs warranted. 

In short, because in participatory planning people have balanced job complexes, we will obtain a reasonable first estimate of effort expended by counting labor hours. These estimates can in turn be revised in light of effort ratings. In pursuing various routes to personal consumption flexibility, only significantly unbalancing job complexes will be prohibited. The measure of work is therefore another information component of participatory planning. 


What abotu the qualitative side of economic choices?

To guard against people making decisions based only on an enumeration of quantitative costs or benefits which could begin to diverge from accuracy and in any event lacks texture, each actor in a parecon will also be able to access a list of all direct and indirect factors that go into producing goods, along with a description of what will be gained from consuming those goods. This means those who produce and consume particular goods must communicate to the (still to be discussed) planning process the qualitative human effects that cannot be fully conveyed by quantitative indicators. This does not entail everyone writing long essays about their work and living conditions. It does mean people will need to generate concise accounts that substitute for the fact that not everyone can personally experience every circumstance. Of course, not every worker and consumer will use all this qualitative information in every calculation. But when there are odd changes in preferences of workers or consumers that someone does not understand or wants to explore further to comprehend what is behind a particular indicative price, the qualitative information is available for a check and clarification. Moreover, by paying attention to this information, over time people will become familiar with the material, human, and social components of the products they use just as people are now familiar with the products themselves. In this way, everyone can more accurately assess the full effects of others’ requests and even their broad collective motives in a way that enhances solidarity. Both producers and consumers must therefore be able to consult not only quantitative summaries of overall social costs and benefits in indicative prices, but detailed qualitative accounts as well. Only this will ensure that the human/social dimension of economic decision-making is not lost and guarantee that summary (quantitative) price data remains as accurate as possible. 


So then, how is participatory planning organized?

In parecon, every workplace and neighborhood consumers’ council will participate in the social procedure we call participatory planning. But besides workplace councils, we will also have industry councils and regional federations of workers’ councils. And besides neighborhood consumers’ councils, we will also have ward, city, county, and state federations of consumers’ councils as well as a national consumers’ council. Moreover, in addition to all these councils and federations of councils, parecon will have various “facilitation boards” or agencies that facilitate information exchange and processing for collective consumption proposals and for large-scale investment projects, workers requests for changing places of employment, and individuals and families seeking to find membership in living units and neighborhoods, among other functions. Finally, at every level of the economy there will also be facilitation boards to help units revise proposals and search out the least disruptive ways of modifying plans in response to unforeseen circumstances. 


That’s a bit too succinct for me to get a good picture. What are the steps involved in participatory planning?

In participatory planning every actor (individual or council) at every level will propose its own activities, and, after receiving information regarding other actors’ proposals, and the response of other actors to its proposal, each actor makes a new proposal. 

Thus, each consumption “actor,” from individuals up to large consumer federations, proposes a consumption plan. Individuals make proposals for private goods such as clothing, food, toys, etc. Neighborhood councils make proposals that include approved requests for private goods as well as the neighborhood’s collective consumption requests that might include a new pool or local park. Higher-level councils and federations of councils make proposals that include approved requests from member councils as well as the federation’s larger collective consumption request. 

And similarly, each production “actor” proposes a production plan. Workplaces enumerate the inputs they want and the outputs they will make available. Regional and industry-wide federations aggregate proposals and keep track of excess supply and demand. 

As every individual or collective worker or consumer participant negotiates through successive rounds of back and forth exchange of their proposals with all other participants, they alter their proposals to accord with the messages they receive, and the process converges. There is no center or top. There is no competition. Each actor fulfills responsibilities that bring them into greater rather than reduced solidarity with other producers and consumers. Everyone is remunerated appropriately for effort and sacrifice. And everyone has a proportionate influence on their personal choices as well as those of larger collectives and the whole society.


I think I am getting it, but how about in a bit more detail…how do people prepare first proposals, for example?

Suppose we keep records of the production and consumption that took place in the just completed year. Then with each year we will have information about last year’s plan. Suppose the prices used to calculate social costs, benefits, and income last year are also recorded. Then each year we will have a set of final prices from last year to use to begin this year’s estimates. By storing last year’s full plan in a central computer, access to relevant information, including indicative prices, could be made available to all actors in the planning process. Additionally, by accessing such information, each unit can easily see what its own proposals were in each round of the prior year’s planning process. With all this available, how do workers’ and consumers’ councils plan for the coming year? 

1    They first access relevant data from last year. 

2    They more or less simultaneously receive information from facilitation boards estimating this year’s probable changes in prices and income in light of existing knowledge of past investment decisions and changes in the labor force. 

3    They also receive information from production and consumption councils regarding long-term investment projects or collective consumption proposals already agreed to in previous plans that imply continuing commitments for this year. 

4    They review changes in their own proposals made during last year’s planning to see how much they had to scale down their consumption desires or their plans to improve their quality of work life, and to remember their past aspirations in these regards. They also look to see what increases in average income and improvements in the quality of average work complexes are projected this year, and how these might best be taken advantage of. 

5    Finally, using last year’s final prices as starting indicators of social costs and benefits, they develop a proposal for the coming year, not only enumerating what they want to consume or produce and therefore implicitly what they think society’s total output should be, but also providing qualitative information about their reasons. This proposal enters the mix with all others, feedback arrives, and revisions are made, round by round, until a final version is reached. 

Please note, this does not mean that individual or collective councils must specify how many units of every single product they need down to size, style, and color. Goods and services are grouped into categories accordingly to the interchangeability of the resources, intermediate goods, and labor required to make them, as well as the easily predicted variation of minor optional features. For planning purposes we need only request types of goods, even though later everyone will pick an exact size, style, and color to actually consume. 

At any rate, individuals present consumption requests to neighborhood councils, which collectively approve or disapprove the requests and organize them into a total council request for individual goods for all their members along with the neighborhood collective consumption request, to become the total neighborhood consumption proposal. 

Neighborhood proposals are added to consumption requests from other neighborhoods and then to full ward proposals, city proposals, and so on. Having the next higher-level council approve or contest lower level requests until they are ready to be passed on saves considerable planning time and is essential for collective implications, in any case, as we will see later. 

In the same way, on the production side of the economy, a firm’s iteration board provides all its workers with summaries of last year’s production, including what was initially proposed, changes made during planning iterations, and what was finally approved. The board also issues its prediction of this year’s requests based on extrapolations from new demographic data and last year’s negotiations. Individual workers consider this information, discuss ideas for improving work life, and enter personal proposals in turn averaged into the firm’s first proposal for inputs and outputs. After some number of iterations, firm proposals are discussed, negotiated, and decided as a unit rather than with each individual making his or her own proposal and these being averaged. 

It should be kept in mind, as well, that preparing and communicating relevant planning information as part of planning facilitation either inside a firm or industry, or at various consumption levels, is a work task like any other, though with its own special features. In other words, facilitation work is included as part of a balanced job complex, of course. And note also that in addition to quantitative proposals for each production and consumption unit, a qualitative addendum including descriptions of changes in circumstances and conditions is also entered into the planning system. At any time, a council can access the data banks of any facilitation board and any other council. The whole process is open to all. 


Okay, so people make first proposals, how do they move on to a second?

The first proposals are in. We have all answered how much we want to work and consume in light of our own presumably overly optimistic assessments of possibilities. Do the proposals constitute a plan or must we have another round? To decide, it is only necessary to collect all proposals and compare total demand and total supply for every class of final good and service, for every intermediate good, and for every primary input. In a first iteration, where consumers propose in part a “wish list” and workers propose substantial improvements in their work lives, while some goods may be in excess supply, for most goods initial proposals will likely generate excess demand. In other words, initial proposals taken together will not equal a feasible plan. As the next step, every council receives new information indicating which goods are in excess supply or demand and by how much, and how the council’s proposal compares to those of other comparable units. Facilitation boards provide new estimates of indicative prices projected to equilibrate supply and demand. 

At this point, consumers reassess their requests in light of the new prices and most often “shift” their requests for goods in excess demand toward goods whose indicative prices have fallen because they were in excess supply or at least less in excess demand than others. Consumers’ councils and individuals whose overall requests were higher than average would feel obliged to whittle down their requests in hopes of winning approval for their proposals. Equity and efficiency emerge simultaneously from this negotiation stage. That is, the need to win approval from other similar councils forces councils whose per capita consumption request is significantly above the social average to reduce their overall requests. But the need to reduce can be met by substituting goods whose indicative prices have fallen for those whose prices have risen. Attention focuses on the degree to which councils diverge from current and projected averages, and on whether their reasons for doing so are compelling. 

Similarly, workers’ councils whose ratios of social benefits of their outputs to social costs of their inputs were lower than average would come under pressure to increase either efficiency or effort, or to explain why the quantitative indicators are misleading in their particular case. Before increasing their work commitment, workers would try to substitute inputs whose indicative prices had fallen for inputs whose indicative prices had risen, and substitute outputs whose indicative prices had risen for outputs whose indicative prices had fallen. 

Each round of planning, or iteration, yields a new set of proposed activities. Taken together, these proposals yield new data regarding the status of each good, the average consumption per person, and the average production “benefit cost ratio” per firm. All this allows for calculation of new price projections and new predictions for average income and work, which in turn lead to modifications in proposals, all of which recurs until excess demands are eliminated and a feasible plan is reached. 


I don’t get something – and it seems like a big problem. There is a plan for a year, what if things change – are we stuck with it? 

Converging and updating are related because both can take advantage of the large scale of the planning process. For example, assume we have settled on a plan for the year. Why might we need to update it during the year, and how might this be done with the least disruption? 

Consumers would begin the year with a working plan including how much of different kinds of food, clothing, meals at restaurants, trips, books, records, tickets to performances, and so on they will consume. What if someone wants to substitute one item for a slightly different one? Or what if she wants to delete or add entries to what she had expected to prefer for the year? Or what if she changes her mind and wants to save or borrow more than she planned to? 

Well, she belongs to a neighborhood consumers’ council that in turn belongs to a ward council, a city federation, and so on. Some changes that Tony and Thalia and all the rest opt for will cancel out when taken together with changed requests from all the consumers within the neighborhood (some people going up for a particular product, other people going down for it). Other variations will cancel out at the ward level, and so on. As long as consumer adjustments cancel each other out at some consumption federation level, production plans need not change. Indeed, making adjustments without disrupting production plans will be one function of consumer federation boards. 

But what happens if aggregate demand for a particular item rises (or drops)? Suppose individuals record their consumption on “credit card” computers that automatically compare the percentage of annual requests “drawn down” with the fraction of the year that has passed, taking account of predictable irregularities such as birth dates and holidays, seasonal variation and the like. This data can be processed by planning terminals that communicate projected changes to relevant industry councils that, in turn, communicate changes to particular firms. The technology would be similar to that used in contemporary computerized store inventories, where cash register sales are automatically subtracted from inventory stocks. In any case, what would then happen is that consumer federations, industry councils, and individual work units would negotiate adjustments in consumption and production, which could in turn entail adjustments in work assignments to account for changed demand. Such dialogues may lead to work diminishing in some industries and increasing in others, including possible transfers of employees, but there need be no more moving about than in other types of economies. In any case, the need for workers to change jobs or increase or diminish workloads and the ensuing impact of that on their lives would be a factor proportionately considered in the negotiations over whether and how to meet changed demands. 

Notice also, since each firm’s activities have implications for other firms, if planned matches between supply and demand are calculated too closely, any change in demand could disrupt the whole economy. For this reason a “taut” plan would prove unnecessarily inconvenient since it would require excessive debating and moving. To avoid this and to simplify updating, the plan agreed to should be loose enough to include some unutilized capacity for most goods. A practical knowledge of those industries most likely to be affected by non-canceling alterations would facilitate this type of preparatory slack planning and is logically no different than planning in advance for medical, disaster or other needs that individuals alone can’t predict, but that we can socially gauge. 

There is a related technical issue, however. During the planning period there emerges a certain array of exchange rates or prices based on planned inputs and outputs for the economy. At the end of the year, we will have had actual inputs and outputs for the whole economy. Due to changes in output of various goods from the initial plan to the final reality, final real prices will be somewhat different from planned ones. A person could have benefited or lost, having paid the plan price but gotten items whose true value was somewhat higher or lower. A parecon could simply reassess people’s overall expenditure, charging them accurately at year’s end, leading to some debt or remittance compared to their initial intentions. Additionally, facilitation boards could release price estimates every few months, for those who wished to avoid any large variations by adapting choices based on new valuations. Or, a parecon could instead allow such errors to pass on the assumption that over many years they would average out to no one’s undue advantage. These are low order details that will no doubt be resolved in practice, perhaps in different ways in different economies, not purely in theory. The thing to keep our eye on, instead, is the broad institutional structure of our preferred vision. 


Okay, that took us a little out of sequence. How does the process finally arrive at a plan?

Realistically adjusting indicative prices in light of stated preferences to balance supply and demand is more complicated in practice than in economists’ theoretical models. A product in excess demand in one planning iteration could overshoot equilibrium into excess supply as workers offer to produce more and consumers offer to request less responding to indicative prices. Since each product’s status affects many others, progress in one industry could disrupt equilibrium in another. Regarding market-driven economies subject to similar dynamics, theoreticians’ solutions to these headaches simply assume away the troublesome phenomena. Whether the issue is market equilibrium or the convergence of iterative planning procedures, abstract mathematical remedies with names like “convexity” and “gross substitutability” are good aspirin for theoretical headaches, but assumptions that grossly distort reality are no aspirin at all for sincerely putting theory into practice. 

To make the participatory planning procedure efficient, there- fore, specific economies will incorporate flexible rules that facilitate convergence within a reasonable time but do not unduly bias outcomes or subvert equity. Procedures can range from simple formulas carried out by computer that take short cuts toward equilibrium, to rules designed to prevent time consuming cycles of dissent and discussion, to adjustments fashioned and implemented by workers who are experienced in facilitating convergence when particular situations arise. Devising and choosing from among these and other possibilities is a practical issue in implementing any actual participatory economy. Some considerations in a choice of methods include, for example: 

1    The extent to which iteration workers could accidentally or intentionally bias outcomes. 

2    The extent of reductions in the number of iterations required to reach a plan and ensuing time savings. 

3    The amount of planning time saved through compartmentalizing subsets of iterations with special simplifying procedures. 

4    How much less onerous to producers and consumers their calculations could be made. 

One thing to make clear about participatory planning and parecon in general is that there is no single right answer to how to do most functions. As with capitalism, within a parecon various approaches to problems will be taken in different parts of the economy and different institutions. Different approaches could exist for measuring labor effort, for example, or for balancing job complexes in or across units, or for organizing councils, or regarding the trade-off between different kinds of decision-making affecting participation and apportionment of influence, or regarding tradeoffs between individual and social consumption and among different instances of the latter, and regarding methods for facilitating convergence. 

The point is that a parecon is a parecon insofar as it employs pareconish remuneration, job definition, ownership, council organization, allocation, and decision-making, with the values of solidarity, equity, diversity, and self-management guiding people as they make diverse choices among different means of implementing pareconish aims. 


Since the procedure we have described is dramatically different from traditional market and central planning allocation, can you describe what a typical planning process might actually look and feel like to its participants? 

The first step is for each individual to think about her or his plan for the year. Individuals know they will end up working in a balanced job complex, and can expect to consume an average consumption bundle unless their work effort is above or below normal intensity or they have special needs that dictate greater reward. The first decision each individual will make is whether they want to “save” by working longer or consuming less than average, or to “borrow” by working less or consuming more than average. Facilitation boards will provide an initial estimate of the year’s likely average consumption and workloads based on the previous year’s levels, on investments in equipment and training, and on adjustments made during the planning period. When you prepare your first proposal you understand that you are not only proposing a level of work contribution and consumption request for yourself, but by extrapolation you are also proposing, on average, a level for everyone else as well. To be realistic you must coordinate your work and your consumption with one another, though you need not agree with facilitation board growth estimates. 

In other words, what you propose is: “I would like to work so much at my job complex and to consume so much (for that work) broken down in the following way.” And this proposal would be based on last year’s experience, your prediction of economic growth, and your individual saving and borrowing. Everyone able to work makes such a choice, trying to optimize their well-being given their particular preferences and within the constraint that the overall amount consumed must also be produced and that responsibilities and rewards in this endeavor will be distributed equitably. 

After first proposals are collected, new indicative prices are calculated and new projections of social averages estimated. Note that it would not even be possible to precisely implement most initial production proposals since in most firms one person in a team may have proposed working more hours than another person in the same team, where their tasks are interdependent so that workers can only do their work together. Moreover, most goods will be in excess demand so the initial plan is of course infeasible on those grounds as well. 

So in the next step, every individual would formulate their response. You compare your proposed workload and proposed consumption level to the average proposals of others. You might also consider more localized averages, for example for your firm or industry, and for your council or neighborhood. You consider the status of each item you ordered or proposed, not least because excess demands and supplies will be reflected in changes in indicative prices. That is, you will be faced with summaries of the statuses of goods as well as new estimates of social opportunity costs and benefits. After you consult descriptive explanations for anything that might seem odd to you, like large gaps in worker productivity or consumer choice, and after you consult with whomever you like and examine whatever data interests you, you make any desired changes and enter your second proposal. 

And, once again, all these new proposals are summed and the new information is made available for the third iteration. So far there have been no rules or limits on workers’ or consumers’ responses. Now, however, there could be a change. (The phrase “there could be” means a particular implementation of participatory planning might opt, perhaps after experimentation and in light of experience, for what we now describe. Another implementation may use different techniques, however.) Instead of being able to change proposals in any direction by any amount, limits might be imposed. For example, consumers might be prohibited from increasing their demand for certain goods beyond some maximum percentage above projected averages for the economy. Or producers might be prohibited from lowering output proposals by more than some percentage, in this and subsequent rounds. 

The point is that it is possible to impose rules limiting changes to specific ranges to keep the status of goods from varying excessively from round to round. Any particular implementation of participatory planning will settle on socially desirable and mechanically efficient rules to guide the behavior of producers and consumers in different iterations. 

In the third or fourth iteration, proposals might be limited to councils instead of individuals. Consumers would meet in their local neighborhood councils and workers in their workplace councils to settle on council-wide proposals. In this stage, work proposals would go from being abstract averages to consistent plans that could be enacted if the inputs requested were made available. 

Note that nothing about our procedures forces people to consume the same amounts of different goods. Individual consumers and producers can hold steady on proposals that are far from average. On the other hand, workplaces will feel pressure to work up to average benefit-cost ratios, and consumers will be pressured to keep their overall requests from exceeding average income. Indeed, at this stage, production councils that persist, with proposals that have benefit-cost ratios below their industry’s average might have to petition their industry not to disband them for being dysfunctional. And, similarly, local consumers’ councils with above average proposals might have to petition higher federations, including an explanation of special circumstances that justify their requests. 

The fifth iteration in our hypothetical procedure might deploy still another rule to accelerate planning. This time facilitation boards would extrapolate from the previous iterations to provide five different final plans that could be reached by the iterative process. What would distinguish the five plans is that each would entail slightly different total product, work expended, average consumption, and average investment. In this version, everyone affected would then vote, as units, for one of these five feasible plans. Each plan would be a viable consistent whole. Once one of the five was chosen as the base operating plan, units could adjust their requests in subsequent iterations in conformity with the base plan until individual agreements were also reached. 

Is all this written in stone – is there only one way to do things?

No. And this is quite importnat, and it seems that however many times advocates of parecon go over it, folks take things differently. Parecon, particiaptory planning and all the other aspects, is a description of a social system based on some central values and incorporating some key institutions. Look into the future – don’t know how far – and there are lots of society’s with this economy, if all goes well, and within each, there are of course lots of industries and workplaces within industries, regions and neighborhoods within regions. In all this there is obviously going to be incredible diversity – it is, after all, a key value of the whole approach. There won’t be the old modes of organization because they violate the core values. As far as we know now, there will be the key new institutions, in broad strokes, because they fulfill the values. But details will vary, out of preference, out of different circumstances, due to technologies, and on and on.

So no, there is no one right answer to most questions about parecon. Think capitalism for a minute. Would it make any sense to say there was only one way to do everything in capitalism? Of course not. It is a social system and as such has all kinds of adaptations in varient piled on varient. They all have some core elements in common, however, which is what makes them all instances of capitalism. We know it when we see it. This will hold for parecon too – features will differ from society to society, industry to industry, firm to firm, and community to community – though not the basic core comittments.


Okay, I get it, and it is rather obvious, so let’s not belabor it. But what about the problem of externalities that you make so much of in criticizing markets. How would participatory planning do better? What you ahve said so far focuses on individuals making consumption requests and on workers and workplaces making production proposals. It explains how proposals for what producers wish to supply and for what consumers wish to demand are conveyed and contrasted, and how, in light of related information, each individual alters their proposals until a plan is reached. I suppose it may be that embedded in the logic and structure of the discussion is how collective consumption is handled as well, but I could use some clarification of that?. 

Okay, first let’s consider collective consumption. Suppose your neighborhood would like a new swimming pool, your town wants to expand its public park, or your state wants to overhaul its public transport system. A consumer council proposes any or all of these as part of its plan. There are two aspects to consider. First, if the collective consumption is to occur, it of course has implications for what must be produced. This is no different than what holds for a whole bunch of private consumption requests taken together, and handling this is like the private consumption case, as described earlier. Second, these types of collective goods are still, ultimately, consumer goods that benefit people, and they must be both charged to consumer budgets and considered with attention to their impact on everyone they would affect, presumably the people making the order and benefiting from it. 

At first glance, there would seem to be no new issues. The neighborhood council discusses the matter and decides to ask for a pool. If the proposal goes through, people in the neighborhood will be charged on their consumption budgets their fair share of the indicative price, which price in turn may alter during the plan’s iterations. If the cost to be charged is too high, that is, if the neighborhood residents feel they will have to give up too much of their consumption allotment to have the pool, the neighborhood foregoes the request. If the amount they have to pay from their budgets to get the pool is acceptable to them, given their desire for the pool, they persist in their request. 

So far so good, but some problems do arise. Larry and Lance both live in the neighborhood. Larry is going to swim but Lance is not. Are they both charged a share, or only Larry? Suppose the pool will be used and enjoyed by folks in the surrounding towns as well. Larry and Lance’s neighborhood may have proposed the pool, but if it is going to be built should not all those benefiting bear some of its cost? And what if the reverse is the case? What if the pool’s effect on water delivery will adversely affect the neighborhood next door? How do people suffering repercussions from the decision to have a pool influence the decision to propose the pool to the planning process of a council they are not even in? 

Or consider the same problem on a larger scale: suppose Michigan’s citizens, through their councils and after due deliberations, decide to collectively request a hydroelectric dam to replace a horribly polluting series of coal-based electric generators. How do the people of Michigan decide to request this in the planning process? More, how is the dam’s cost to be allocated against the consumption budgets of the people of Michigan? Do the asthmatic citizens who suffer hugely from coal-generated pollution pay more than the folks less bothered by that pollution? But more, it turns out that the pollution from the coal plants afflicted Chicago and to a lesser extent other cities in Illinois. Shouldn’t those citizens who will also benefit bear some of the costs of the new dam, and, if so, how does that come about? To what degree do they pay and what impact do they have on the deliberations? 

Or suppose the reverse is the case. The Michiganites are pro- posing some mass project which will not benefit but rather adversely affect people in Illinois. Again, how do the citizens of Illinois have their appropriate impact? Even more complicated, suppose the rest of the country enjoys clean air. Isn’t there an equity issue? Why should Michiganers, even if they are most affected, foot the bill if, in fact, they were enduring worse than average air conditions in the first place? Parecon’s answers to these queries are rooted in the logic of council-based organization and participatory planning understood as social deliberative processes. 

H ow is it different than markets?

  • First, unlike in markets, we want decisions about goods to account for their full social costs and benefits. We want the indicative price of goods to reflect all their effects as best we are able to make that happen. 
  • Second, we want all people affected to proportionately influence decisions.  
  • Third, when a proposal is made that affects large numbers of people, it is not just that we want the initially formulated proposal decided on properly. We also want the system to permit and even to facilitate the proposal’s improvement. 

That is, suppose a proposal has negative external effects. In addition to properly accounting for them, why not amend the proposal to reduce them or even completely offset their impact? The participatory planning process should not only promote that all those affected decide on collective proposals, but that they be able to amend and otherwise improve such proposals. When my neighborhood requests a pool or Michigan requests a dam, very likely the people involved do not have at their disposal the full awareness and insights of people in other neighborhoods or states. We do not want to incorporate only the decision influence of those other people, but, if they are affected, also their ideas and ingenuity. 

To these ends, in participatory planning, when the residents of a smaller council propose some desired collective consumption (a pool or a changed energy delivery system), the proposal has to not only gain support in their own council, but must also be delivered to more encompassing councils above. So a proposal may go from a neighborhood up to a town and then to a city, a county, and so on, and likewise it may go from a state to a region and on to a country. 

If a pool is proposed in my neighborhood, or a new dam in my state, and if there will be beneficiaries beyond the area of the proposing council, then in passing up the proposal its advocates are looking for it to become a proposal of the higher level council, with the hope that all who benefit at that next higher level will also be charged for its consumption, rather than only a subset in the smaller proposing council footing the whole cost.  

If we have a proposal, in contrast, which has negative impact beyond our own council’s citizens, then after passing it up, broader constituencies will presumably indicate their displeasure. In this case too, the proposal is taken over by the higher level council, but this time it is likely adapted through deliberations to rectify or otherwise account for its broader negative impacts. The point is that regardless of where proposals originate, collective goods consumption proposals are eventually sponsored at the level where they have their overwhelming proportion of impact, and at that level they are massaged and refined before acceptance. Only then will the proposal be put to producers and other consumers, to assess opportunity costs, etc. 


What about the apportionment of influence over these decisions, and payment for the items?

In the absolute ideal case, each individual is going to influence a choice in proportion to the extent it affects him or her. Likewise, each is going to carry a share of the cost proportionate to the extent that he or she benefits. 

Members of a council make decisions by means that involve both information transfer about the decision’s properties and about people’s reactions to it, as well as deliberations over possible refinements, etc., and via some agreed upon set of voting rules. Parecon principles say we ought to choose all these mechanisms to try to make most likely an outcome that accounts for all relevant information and effects, is appropriately influenced by all concerned, and takes time and energy commensurate to what is at stake, but no more. There is no single right answer to how to achieve all this. One person might feel that with each decision we should try as perfectly as possible to represent divergent opinions. Another person might feel that over the whole planning process there are many such decisions and if we err a little in some of them, the deviations from perfection will average out. Why not do a good job, therefore, but save the extra time required to do a nearly perfect job in the knowledge that in sum and on average, deviations in each decision will more or less be made up for by deviations in others? 

There are other possible attitudes as well. But the point is that unlike in other systems where the outcomes are determined by elites with no attention to either most of the relevant information or most of the impact, or to the wills of most people affected, or to the merits of the methods utilized, in parecon all these considerations are central. 

Take the case of the pool in the neighborhood. It is proposed by someone living there, is supported by others, and so is put forward as a specific proposal. Members express their reactions. The pro- posal clearly fits into some broad category of decisions typically decided by a particular decision-making approach, let’s say majority vote by the whole neighborhood. If the proposal passes, it is is adopted along with a plan for how the bill will be charged throughout the neighborhood. The proposal then goes up to the next council level. If folks in higher councils are adversely affected, they begin to debate anew, and they may reject the proposal, or, more likely, add various amendments that would make it acceptable by reducing or eliminating its adverse implications. Debate between levels could also occur, leading to refinements as well. If the neighborhood felt that broader constituencies should help with the payment, it would pass up the pool request not as a finished proposal, but as an entreaty that the higher level council adopt it as their proposal, rather than the neighborhood having to go it alone. 

What if the original vote in the neighborhood council failed? The proposers have a number of options. Those in favor could form a subgroup and join resources to propose the pool as part of their personal consumption allocations. As with other personal consumption requests, if there were harm to others, the neighborhood could intervene; but otherwise personal consumption requests that are within average consumption levels are approved. However, because these are personal consumption requests, the requesters would have to forego help with payment for the pool from others in the neighborhood. A second alternative that could be pursued if the original vote in the neighborhood council failed would be that the proposers could go to the next higher council to see if they could convince that body to fund a pool, though the opposition of the neighborhood council would be a strong count against doing so. 

The situation is essentially the same for Michigan enacting a massive project that would affect people throughout the state, or also in Illinois. Each collective consumption good proposed in the planning process is addressed first to determine the appropriate council level to handle it to be sure all its significant positive and negative effects are dealt with appropriately. Next, deliberations discover the properties of the proposal and its implications for various users or bystanders, etc. Reactions are presented. Deliberations take place. Finally, decisions are made using voting rules chosen to be as suitable as possible to the case in question. 

In the negotiations themselves, proposals are altered in an effort to arrive at ones that are universally desired or at least overwhelmingly accepted. Take the Michigan dam. Suppose it would displace various people. The initial proposal (we might hypothesize) could have come from a city well away from the proposed site of the dam that was seeking better energy provision and cleaner air, and that might have ignored the harsh implications the dam would have for those displaced. As the proposal goes up through the ascending council levels, the local people who would be displaced gain knowledge of it and join the deliberations. Given the huge impact on them, they would play a powerful role, being given a chance to make known their horror at the idea. The proposal is changed to include reimbursing people from the dam region, providing them new houses in locales of their choosing, up to and including reconstructing their town, all as part of the cost of the dam. 

The point of all this is that goods with substantial collective impact are handled by social deliberations that arrive at choices that try to appropriately incorporate the wills of the people affected, to massage and modify proposals so they become optimal, and to apportion payment for them in accordance with the benefits they bestow, and when need be, to correct for negative implications or make restitution for them. 

Is it all accomplished perfectly? Not always. Are there disputes or mistakes? Of course. These are fallible social processes. But in contrast to markets and centrally planning, problematic outcomes arise due to ignorance or to errors, not due to systematic failings that always elevate some groups and make others subordinate, that incorporate only limited information, and that employ authoritarian procedures. Moreover, the above description of how participatory planning deals with collective goods and externalities reveals that the planning process has additional implications for individual consumption beyond those earlier explicitly described. 


Okay, what about individual consumption? I think maybe I need a little more on that too…particularly regarding the collective implications?

Consider a cigarette smoker. In the best possible world, the price of cigarettes (assuming they are not outlawed) should reflect not only the usual matters of the labor and other ingredients that go into cigarette production, but also their impact on those smoking them and on the health system that cares for those who become ill, and their impact on those in the vicinity of smokers, and on the health system that cares for them. How does the price of cigarettes get set in a parecon? How well does it accord with the best possible world? Who pays the costs and enjoys the benefits? 

The adverse impact of smoking on health, society might decide, should be paid for by the smoker. Health care would be free, but why should everyone in society foot the bill for health care that arises due to predictable, avoidable choices? On the other hand, what about sports injuries or even pregnancy—are these comparable? There are issues, obviously, about what aspects of a good’s implications are the responsibility of its users, and what aspects are properly a part of society’s responsibilities. There is no need to explore all dimensions of all variants for all goods here. What is important about parecon is the institutions that arrive at assessments in such matters. 

Thus, if our particular prediction about what people would decide was appropriate, the price of cigarettes would include a component fee to cover the costs of health care for medical problems that arise from smoking cigarettes. The cost would be high. But what about second-hand smoke? Cigarettes are, in this respect, a collective good. If a local council proposes, in sum, to consume a total volume of cigarettes—5,000 cartons, say—if their consumption was entirely unregulated, the adverse impact from second-hand smoke would be significant. Councils at many levels, wanting a healthy environment, would be appalled by the overall consumption request. What happens? As with the earlier examples, councils deliberate. 

The first possibility is to implement restrictions that would reduce ill effects, such as no smoking zones. A second options is to charge fees that cover the costs of ventilation methods, and medical charges. A third possibility is to alter the product itself to reduce its ill effects. A fourth possibility is the more aggressive banning of the product entirely, on grounds that there is simply no way to reduce the ill effects sufficiently to permit its safe consumption. Perhaps there are other possibilities. The point is, as with more typically collective consumption, individual goods which yield adverse collective effects are deliberated partly on a personal level, as in each consumer saying that they want or do not want cigarettes, but also by larger councils that would consider the sum total consumption by all members and its broader implications. 

One last example: consider the purchase of gasoline for an auto- mobile. The consumer wants gas in order to travel from place to place. Let’s ignore, for the moment, the obvious option of providing cleaner burning cars, better public transit, etc., assuming that these options have not yet been achieved. Consumers are in a position to request gas for their travel in light of a clear understanding of how much they desire to travel, as well as the conditions of the workers who produce and dispense gas, and the opportunity costs of foregoing other uses of the gas and of the assets used in the gas’s creation. Likewise, if informed by a high indicative price and by qualitative information that gasoline burning has external pollution effects of great cost, consumers will moderate their requests accordingly (while also, we assume, clamoring for better modes of transport). The problem is, how does the impact of pollution affecting distant and diverse citizens translate into appropriately modified qualitative information and indicative prices that are conveyed to the gasoline consumer? How is it, for gas or for other similar products, that what are currently called external implications of transactions become, in a parecon, appropriately weighted factors integral to pricing and therefore also to consumers’ and producers’ choices? 

If no one seeks clean air, there is no issue to be addressed. No economy can account for unexpressed preferences, of course. But if local, regional, or wider constituencies, through their councils, desire clean air, then the situation becomes analogous to the case of the cigarettes. Suppose the sum of the gas requests the Los Angeles council receives comes to a billion gallons of gas consumption for the coming year, or whatever number it turns out to be. The cumulative effect, if the requests are adopted, will facilitate transportation but will worsen air quality with resulting sickness and other problems. Citizens concerned about their health will, acting through their local, city, and regional councils, insist that the greater Los Angeles council include the costs of pollution in their assessment— abatement measures, medical costs, work time lost to illness, etc.— and urge stricter emission standards and other changes in the consumption choices. Again, there would be a collective deliberation because there is a collective impact, and the result is that while each gasoline consumer makes a personal choice, the implications for the broader community have an impact on that choice by pushing up the indicative cost, on the one hand, and conveying information that helps propel alterations in options, on the other hand. 

This has been long, can you very briefly conclude/summarize and highlight what you are trying to communicate?

The participants in participatory planning are the workers’ councils and federations, the consumers’ councils and federations, and various Iteration Facilitation Boards (IFBs). Conceptually, the planning procedure is quite simple. An IFB announces what we call “indicative prices” for all goods, resources, categories of labor, and capital. Consumers’ councils and federations respond with consumption proposals taking the indicative prices of final goods and services as estimates of the social cost of providing them. Workers councils and federations respond with production proposals listing the outputs they would make available and the inputs they would need to produce them, again, taking the indicative prices as estimates of the social benefits of outputs and true opportunity costs of inputs. An IFB then calculates the excess demand or supply for each good and adjusts the indicative price for the good up, or down, in light of the excess demand or supply, and in accord with socially agreed algorithms. Using the new indicative prices, consumers and workers councils and federations revise and resubmit their proposals. 

The procedure whittles overly optimistic and otherwise infeasible proposals down to a feasible plan primarily in two different ways. To achieve the approval of other consumer councils who regard their initial requests as greedy, consumers requesting more than their effort ratings warrant are forced to reduce or shift their requests to less socially costly items. To win the approval of other workers, workers’ councils whose proposals have lower than average social benefit to social cost ratios are forced to increase either their efforts or their efficiency. Both workers and consumers easily access not only indicative prices which summaries the whole economic picture, but qualitative and descriptive data as well. As iterations proceed, proposals move closer to mutual feasibility and indicative prices move closer to true social opportunity costs. Since no participant in the planning procedure enjoys an advantage over others, the procedure generates equity and efficiency simultaneously. Social deliberations in councils arrive at sensible proposals for collective consumption in light of true opportunity costs including incorporating desirable refinements that reduce ill effects and expand positive effects. As to possible worries about the possibility of adverse by-products or other implications of participatory planning overriding its benefits, we will consider these in coming chapters. 

The point of the special cases addressing collective consumption has been threefold.  

1    We wanted to specify the pricing and deliberative properties of participatory planning vis-à-vis public goods and what are currently called externalities, whether positive or negative. 

2    We wanted to convey, again, our two-track approach to its subject matter. On the one hand, we talk about basic institutions, like balanced job complexes, remuneration for effort/sacrifice, participatory planning, and council demo- cracy, and in doing so we lay out demanding norms and features. On the other hand, to make the meaning of these defining features clear, we also describe a more detailed context of features that are more hypothetical and could vary within particular economies and also from one economy to another, with many of the likely possibilities to be discovered and refined in the future. 

3    We wanted to emphasize, again, that in a society, outcomes arise from social processes. Written descriptions tend to get cut and dried, logical, precise, math-like. But the actualities these summary accounts describe in fact involve infinite details. There is no such thing as perfect remuneration for effort/sacrifice, perfectly balanced job complexes, perfectly accurate attribution of perfectly proportionate say in decisions, nor is there one best method for all the steps associated with trying to accomplish these aims in every possible context What we have done is to construct a vision whose logic advances these aims, and whose social processes will diverge from the aims only due to ignorance or the choice to save time by settling negotiations satisfactorily rather than perfectly, but not due to some systematic incapacity or bias that always and inexorably obstructs these aims. If we compare the “ideal” participatory economic model to the “ideal” capitalist, market socialist, or centrally planned socialist model, the participatory economy maximally attains our aims where the other economies systematically violate them. If we examine not the rarified world of perfect models, but the real world of actual social processes, the case becomes stronger because the fall-off in achievement in parecon as we move from theory to the real world is quite modest, but the fall-off in performance of the other models is huge and destructive. 

We have now presented a description of a third way to accomplish economic allocation beyond markets and central planning. Most readers will probably find evident by now that implementing a parecon is possible. When we address possible criticisms of participatory economics, concerns about whether implementing it will have adverse implications for matters of efficiency, incentives, and other reasonable concerns, will be addressed further. But we should also tell professional economists reading this volume that in The Political Economy of Participatory Economics (Princeton University Press, 1991) and also online at we provide a mathematical model demonstrating parecon’s superior convergence, efficiency, and stability properties as compared to those demonstrated by similar models for market and centrally planned economies, all with the understanding that desirable allocation should produce each item until its true social opportunity cost equals its true marginal benefit to society. Parecon, in other words, attains familiar productivity and allocative aims better than old systems, and goes on to as well advance equity, solidarity, diversity and self-management, unlike old systems which trample those values.  

Next Entry: Consumer’s Role


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