Participatory Allocation

Michael Albert

An economy needs some procedure for coordinating different workers' activities with one another and with the desires of consumers. The procedure, called economic allocation, determines how much of each input and output is used or produced, and where it winds up.

The overwhelming consensus is that markets are a worthy economic allocation institution. Some dissidents still support central planning instead. In our view, however, both markets and central planning are abysmal and we need participatory planning as an alternative. Beyond what a short commentary can argue, I hope folks will pursue the evidence and more substantial argument available at www.parecon.org.

Markets, No

Markets involve buyers and sellers coming together with each trying to maximize his or her own benefit. In any transaction the buyer and seller compete to buy cheap and sell dear. For one to get more, the other must get less. Those affected by the transaction but not directly involved as buyer or seller have no say in it. Pollution or other effects on non-buyer/sellers go unaccounted and can't influence the transaction. Even with markets working optimally, actors become individualist. Their motives and preference development are skewed toward me firstism. No wonder "nice guys finish last." Exchange rates ignore social and external effects and therefore diverge from true social costs. And a class division emerges between those few who monopolize decision-making skills, opportunities, and information, and a much larger group disempowered and disenfranchised from decision making. The former we call coordinators. They rule the economy. The latter are the workers. They follow orders. 

In these ways and others markets cause people to trample one another's well being, homogenize tastes within classes, reduce all activity to the cash nexus, remunerate power or output to the point of grotesque income and wealth differentials, and allot disproportionate power to a class that monopolizes decision making access at the expense of the majority who only follow orders.

Central Planning, No

Central planning is conceptually simpler than market allocation. Planners accumulate information by diverse means and then decide exchange rates, amounts to produce, and incomes. Workers and consumers abide the planners' decisions. The only wrinkle is that the planners have to issue orders and get some feedback on their possibility…orders go down, feedback come back up, orders go down, obedience comes back up. The feedback comes from "agents" of the planners in each workplace, the managers. 

On the plus side, Central planning can conceivably overcome the intrinsic inability of markets to account for the social and public implications of transactions and can also conceivably reduce the individualizing effects of market competition and even take into account effects on workers. But as main debits central planning inevitably produces coordinator class rule with planners allying with their managerial agents in each workplace to in turn control rote workers, and central planning also adds an increased generalized authoritarianism and subordination to economics, thereby strongly violating self management. More, the class dynamics and increased authoritarianism of central planning tend over time to swamp the technical potential it has to pay better attention to generalized social and personal development, instead biasing toward the enhancement of power, status, and conditions of elite planners and managers and other educated coordinator class members.

Markets and central planning therefore not only don't promote just rewards, self-management, and dignified work, they severely impede their achievement, even as they also undermine solidarity, diversity, and other civilized social norms.

Participatory Planning, Yes

So what's our alternative? Well, why can't workers in different enterprises and industries, and consumers in different neighborhoods and regions, coordinate their joint endeavors themselves -- consciously, democratically, equitably, and efficiently? Why can't councils of consumers and workers propose what they would like to do, and revise their own proposals as they discover more about the impact of their desires on others? What is impossible about a social, multi-step, planning procedure in which other workers approve production proposals only when in light of full qualitative information and accurate valuations they are convinced the proposals are socially efficient, and in which other consumers approve consumption requests only when in light of full information they are convinced the requests are not socially abusive? What is impossible, in other words, about the associated producers and consumers together planning their related activities without the debilitating effects of markets or central planning?

We already have argued for workers and consumers councils and federations of councils, for remuneration according to effort and sacrifice, for balanced job complexes, and for each actor influencing decisions in proportion as they are affected by them. The participants in the participatory planning procedures are individual workers and consumers, the workers' and consumers' councils and federations of them, and also various groups of people a part of whose balanced job complex is to do data handling to assist allocation in what we call Iteration Facilitation Boards (IFBs).

Conceptually, the participatory planning procedure is pretty simple, but quite different than anything we are accustomed to. Workers and consumers negotiate outcomes based on full knowledge of effects and having proportionate influence in decisions. In a nutshell, the facilitation board announces what we call "indicative prices" for all goods, resources, categories of labor, and capital stocks. These are calculated based on the prior year's experience. Consumers and consumer councils and federations respond with consumption proposals taking the indicative prices as estimates of a true valuation of all the resources, equipment, labor, bad byproducts, and social benefits associated with each good or service. Workers and workers councils and council federations respond with production proposals, listing the outputs they would make available and the inputs they would need to produce them, taking the indicative prices as estimates of the full social benefits of outputs and true opportunity costs of inputs. Receiving the public proposals from workers and consumers and their councils, the facilitation boards calculate the excess demand or supply for each good and mechanically adjust the indicative price for the good up or down in light of the new data. Then, using the new indicative prices plus their access to full qualitative information, consumer and worker councils and federations revise and resubmit their proposals.

Essentially the procedure "whittles" overly optimistic, infeasible proposals down to a feasible plan in two different ways: Consumers individually requesting more than their effort ratings (income) warrant or collectively wanting more of some good than workers propose to produce are pressured by new indicative prices and the desire to attain a viable final plan to reduce or to shift their requests to less socially costly items that can garner the approval of other consumer councils who regard their prior requests as greedy or of workers reluctant to supply the outputs sought. Workers councils whose proposals have lower than average social benefit given the resources at their disposal or who are proposing less than consumers desire of their product, are pressured to increase either their efforts or their efficiency (or their number of employees) to win the approval of other workers and meet consumer desires. As iterations of the planning process proceed, proposals move closer to mutual feasibility and indicative prices converge toward true social opportunity costs. Since no participant in the planning procedure enjoys an advantage in influence over any other, and since each participant impacts the valuation of social costs and benefits like all others, but with each having more impact on what they are involved in and less on what they aren't affected by, the procedure generates equity, efficiency, and self management simultaneously.

In other words, individuals make proposals for their own private goods consumption. Neighborhood councils make proposals that include approved requests for private goods as well as shared requests for the neighborhood's collective consumption. Higher-level federations make proposals that include approved requests from member councils as well as the federation's collective consumption request. Similarly, each production unit proposes a production plan. Workplaces enumerate the inputs they want and outputs they propose to make available. Regional and industry federations aggregate proposals and keep track of excess supply and demand. Having proposed its own plan, every "actor" (individual or collective) receives information regarding other actors' proposals and the response of other actors to its proposal. Each actor (individual or collective), then makes a new proposal. As every actor "bargains" through successive "iterations," the process converges to a viable plan. Along the way the "actors" utilize various information including "indicative prices," their own agreed measures of labor effort and sacrifice, and detailed qualitative information from one another available on request. The attained plan manifests actors' preferences proportionately as they are impacted. More, each actor benefits only insofar as do all others. That is, my income depends directly on the socially average income and my job comfort depends on the quality of the socially average job complex. Even my benefit from any investment I propose for my workplace depends on how that investment raises social averages for jobs or for income or expands the total social product that we all share in -- and so does yours. Solidarity is therefore enhanced by participatory planning because our interests are entwined and our daily economic calculations occur in light of one another's situations. Diversity is welcome to participatory for the benefits that accrue from many options and checks and balances. Equity is guaranteed by the remunerative norm. And self-management is intrinsic to the the allocation system's foundational logic and its operation, fostered by its every feature.

Prices are "indicative" during the planning process in the sense of indicating the best current estimates of final valuations. Prices are not binding at each stage, but are instead flexible in that they may change in a future round of planning, but also in that qualitative information provides important additional guidance that can lead people to act contrary to what quantitative prices indicate. More, the indicative prices up to and including the final rates of exchange, do not stem from competition or authoritarian determinations, but from social consultation and compromise. The appended qualitative information comes directly from concerned parties and enters the process to help keep the quantitative indicators as accurate as possible, as well as to develop workers' and consumers' sensitivity to fellow workers' and consumers' situations and everyone's understanding of the intricate tapestry of human relations that determines what we can and cannot consume or produce. 

Obviously, the above just touches the surface of participatory planning…not providing a detailed picture of either the planning "iterations" or the background of motives, actions, and institutions that make them viable, nor elaborating on the day-to-day roles nor social implications. But if interested you can certainly access more comprehensive discussions online in the parecon section of ZNet - www.parecon.org.

In the next commentary in this series we will address short-term program for attaining participatory planning. For now, however, regarding a vision for how to conduct allocation…it comes down to this.

• Do we want to let people have income in accord with capital ownership or power, or try and measure the value of each person's contribution to social production and allow individuals to withdraw consumption goods from social production accordingly? Or do we want to base any differences in consumption rights only on differences in personal sacrifices made in producing goods and services? In other words, do we want an economy that implements the maxim "to each according to the value of his or her property or power or personal contribution," or an economy that obeys the maxim "to each according to his or her effort?"
• Do we want a few to conceive and coordinate the work of the many? Or do we want everyone to have the opportunity to participate in economic decision making to the degree they are affected by the outcome, and the training and circumstances to guarantee their capacity to do so? In other words, do we want to continue to organize work hierarchically, or do we want job complexes balanced for empowerment?
• Do we want a structure for expressing preferences biased in favor of individual over social consumption? Or do we want to make it as easy to register preferences for social as for individual consumption? In other words, do we want markets or nested federations of consumer councils?
• And do we want economic decisions to be determined by groups competing against one another for well-being and survival? Or do we want to plan our joint endeavors democratically, equitably, and efficiently, with all actors having the proper influence and each benefiting in parallel with the rest? In other words, do we want to abdicate economic decision making to the market, or do we want to embrace the possibility of participatory planning?