ParEcon Questions & Answers
Equity and Parecon?
If not getting it perfect meant the whole thing would collapse, everything social that you know would collapse. There is no such thing as mathematical precision in soical interactions. What there can be, and all that we need, is for workers in workplaces to agree that they are implementing their remuneration scheme consistent with their values, within the limits that their knowledge permits, and that their desire requires - given the cost of trying for more precision.
It is the same as seeking self managemnet. The workers and consumers settle on whatever methods they locally want, and pursue them to whatever degree of day to day precision they want, likely in all cases seeking very accurate balance over time, on average - that is, seeking for deviations from perfection to be random, not always in one direction. That is the key thing. That is what ensures that the norms picked, in our case self management and remuneration for effort and sacrficie, are implented rationally (given the costs of seeking excessive precision) and justly (given that there will be deviations from perfect accuracy).
Can you just defend the idea of consumters councils and equitable remuneration, briefly?
Every individual, family, or living unit would belong to a neighborhood consumption council. Each neighborhood council would belong to a federation of neighborhood councils representing an area the size of a ward or rural county. Each ward would belong to a city consumption council, each city and county council would belong to a state council, and each state council would belong to the national consumption council. The major purpose for this nesting of consumer councils is to allow for the fact that different kinds of consumption affect different numbers of people. Failure to arrange for all those affected by consumption activities to participate in choosing them not only implies a loss of self-management, but, if the preferences of some are disregarded or misrepresented, a loss of accurate, appropriate accounting of preferences as well. One of the serious liabilities of markets is their systematic failure to allow for the expression of desires for social consumption on an equal footing with the expression of desires for private consumption. Having the different levels of federations participate on an equal footing in the participatory planning procedure prevents such a bias from occurring in a participatory economy.
Members of neighborhood councils present consumption requests accompanied by effort ratings done by their workplace peers in accord with norms established there. Using indicative prices the social burden of each proposal is calculated. While no consumption request justified by an effort rating is denied by a neighborhood consumption council without very good reason (as in, for example, a request for machine guns or large quantities of poison, etc.), neighbors could express an opinion that a request was unwise, and neighborhood councils could also approve requests on the basis of need in addition to effort. Individuals could “borrow” or “save” by consuming more or less than warranted by their effort level for the year, and anyone wishing to submit an anonymous request for collective consumption could do so.
The major questions are whether “to each according to effort” is fair, and whether this distributive maxim is consistent with efficiency.
Capitalist economies embody the distributive maxim: “to each according to the value of his or her personal contribution and the contribution of property owned.” Public enterprise market economies operate according to the maxim: “to each according to the value of his or her personal contribution.” In a participatory economy the only reason people would have different levels of consumption would be differences in work effort or differences in need in the event of special circumstances. By effort we mean anything that constitutes a personal sacrifice for the purpose of providing socially useful goods and services. If work complexes were truly balanced for desirability, and if everyone worked at the same intensity, then effort could be measured in terms of the number of hours worked. For variation in intensity, there is reward. In other circumstances, effort could take the form of working at a less pleasant or more dangerous job, or undergoing training that was less agreeable than the average training process.
Socialists have long argued that consumption rights derived from the ownership of productive property are unjustified. Beside the simple fact that they generate grossly unequal consumption opportunities, the usual rationale is that those who receive the extra income did little, if anything, to deserve it. They neither contributed more to the value of social production through their own labor than others, nor underwent any greater personal sacrifice than others. But in Capitalism and Freedom, the right-wing Nobel Prize-winning economist Milton Friedman pointed out the hypocrisy of denouncing income differentials due to differences in ownership of property while tolerating differentials due to differences in talent. “Is there any greater ethical justification for the high returns to the individual who inherits from his parents a peculiar voice for which there is a great demand than for the high returns to the individual who inherits property?” Friedman asked. Friedman, of course, was arguing in favor of both genetic and financial inheritance. But his challenge is still a legitimate one. In our view, the honest answer to Friedman’s challenge is “no.” Despite the historical fact that private ownership of productive property has generated considerably more economic injustice than differential talent has, there is nothing more fair about the birth lottery than the inheritance lottery. Greater personal sacrifice made in the production of socially beneficial goods and services is legitimate grounds for greater access to those goods and services. But neither ownership of property nor possession of talent that makes it possible to produce more valuable goods and services carries any moral weight, in our view.
As stated earlier, we believe this creates an ethical dilemma for those who support public enterprise market systems. If wages are determined via the market some will earn more than others who work longer and harder. But if wages are set according to effort by a dynamic overriding market wage determinations, markets will assign prices that deviate from the true social opportunity costs of goods, yielding a price system that systematically misjudges social costs and benefits (even worse than other market failures cause it to). There is no way around this dilemma in an economy with a free labor market.
In contrast, in a participatory economy, while individuals consume according to their work effort, users of scarce labor resources are accounted according to the actual value of those resources, their opportunity costs, via the mechanisms of participatory planning. This avoids the contradiction between equity and allocative efficiency intrinsic to a market economy.
But what about the common view that rewarding according to the value of one’s personal contribution provides efficient incentives while rewarding according to effort does not?
Differences in the value of people’s contributions arise from differences in talent, training, job placement, luck, and effort. Once we clarify that “effort” includes personal sacrifices incurred in training, the only factor influencing performance over which an individual has any control is effort. By definition, neither talent nor luck can be induced by reward. Rewarding the occupant of a job for the contribution inherent in the job itself does not enhance performance. And if training is undertaken at public rather than private expense, no reward is required to induce people to seek training. In sum, if we include a training component in our definition of effort, the only discretionary factor influencing performance is effort, and the only factor we should reward to enhance performance is effort. Not only is rewarding effort consistent with efficiency, but rewarding the combined effects of talent, training incurred at public not private expense, job placement, luck, and effort, is not.
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