In this final lecture I would like to present some of the debate that has taken place around the participatory economic model. To do this I include an essay Robin Hahnel and I wrote in answer to some economist critics. It summarizes a variety of weaknesses attributed to parecon, and answers them as best we are able to. First, however, we need to briefly address the questions raised last chapter.

Answers to Lecture 9 Questions

First, how would one approach this question in a disciplined fashion? Well, I don’t think it is different in method from what we have tried to do in the prior lectures. One needs to decide basic aims for kinship. Then one needs to figure out basic concepts, first what is the kinship sphere, then what are its component institutional functions. Next, we might evaluate existing models and proposals for kinship structures using our values. Ultimately, we have to try to conceive new institutions (or choose among existing ones that we like) and construct a model for the sphere out of favored options.

When I think about this, it seems to me that Kinship institutions should impose no distinctions on men and women, or adults and children, or people of different sexual preference that are (a) biologically unnecessary, and (b) contrary to full development and fulfillment of all these actors. There should be no opposed interests for the groups, or any other groups. When I think about kinship roles, I happen to conclude that attaining these aims requires, ultimately, an end to the nuclear family, an end, in fact, to the whole idea of gender defined asymmetrical mothering and fathering—as compared to gender neutral parenting. That said, however, one can conceive many ways, I think, that people might court, procreate, socialize, etc., all consistent with desirable social values and outcomes.

I think the implications, in both directions, are in general easy to describe. Each sphere of social life has to have no implications for actors that are contrary to basic operations in any other sphere. So, the economy cannot demarcate among men and women, or any other constituencies, in ways that would make kinship institutions inoperable. This would certainly happen if the economy enriched men and impoverished women, for example.

In the same way, however, the kinship sphere, and thus socialization institutions, etc., have to provide people with habits, beliefs, skills, knowledge, and personalities suited to participation in a parecon.

Following the usual procedure, I find myself favoring something I call intercommunalism. The idea is simple enough. There is no right culture. The notion that everyone should have a correct culture is a cultural nightmare (though typically it is the view of many marxists). Instead, there ought to be many cultures, which is to say, many cultural communities. These may be defined in many ways, including religion, geography, various types of taste and preference and belief, or whatever. Intercommunalism is a situation in which every cultural community is free to pursue its beliefs and customs and celebrations, etc., as it likes, and is provided by right the space and means to do so, and is protected by right in any dispute with any larger cultural community. The large gives way, that is, to the small...an intellectually trivial but profoundly important practical requirement, I think.

The economy will, to be compatible, have to treat all people identically, whatever their cultural allegiances. More, it will have to welcome cultural community caucuses to ensure that the culture of workplaces, etc., is not oppressive to minority groups. There is nothing in parecon that I can see that would disrupt intercommunalism, and much that would augment and foster it.

Why Participatory Planning?

In the shadow of Soviet turmoil, and very far from the public eye, a debate over what is a desirable economy has rekindled among those who believe people deserve more than capitalism. In the past five years a small torrent of books and articles have appeared. Science and Society and the Review of Radical Political Economics have both published special issues on the debate, Z Magazine has published a symposium, Pen-L (a progressive economists’ Internet Forum) has facilitated spontaneous interchanges by modem, and periodic conferences of academics and activists have hosted the debate on panels in numerous cities. Participants have divided into two schools—proponents of “market socialism” versus proponents of democratic or “participatory planning”with important differences of opinion within both camps. As an active partisan in these discussions, we would like to:

Unaddressed Market Liabilities

Markets Are Unfair

The distributive maxim implicit in public enterprise market economies is `to each according to the social value of his or her labor.' However, to the extent that productivity is the result of talent (the genetic lottery), education and training (frequently at public expense), or the quantity and quality of other productive inputs or of luck—rather than greater personal effort or sacrifice—payment according to productivity is unfair. It rewards people for things beyond their control and effort.

But the inequity of some hard working people receiving lower wages and salaries than others who make lesser personal sacrifices but are lucky, have more education, are physically stronger, or work in better equipped factories, is unavoidable in any market economy. In a free market labor is paid at best and only roughly according to its marginal revenue product, which is the value the individual contributes to the product. But this usually differs significantly from the effort an individual expends. Moreover, any attempt to rectify the difference between what effort justifies and people’s marginal productivities, necessarily leads to gross inefficiencies. Labor costs inevitably form a substantial portion of total production costs of most goods and services. In a market system, if wages differ from productivities to make them more equitable, labor costs, and consequently the entire cost structure of the economy, will deviate from true social opportunity costs. Since prices play an allocative role in every market model, this implies that any attempt to make wages more equitable must lead to significant allocative inefficiencies, even in a “market socialist” economy.

Some advocates of “market socialism” recognize and admit this liability. “A more just system of economic remuneration would arguably link payment solely to differential personal effort and personal sacrifice, not to the luck of the genetic draw.” (Weisskopf 1992, page 8) And: “Even though our proposed system [market socialism] is likely to be more egalitarian than capitalism, there will be several departures from egalitarian distribution to the extent there are various incentive payment schemes for managers and workers.” (Bardhan & Roemer, 1992, page 14) And a few advocates of “market socialism” admit that the inequity in their system is not necessary for motivational efficiency any more than the inequity in capitalism is: “In market capitalist economies people are rewarded for productive contributions due to the property they own (in the form of capital income); such rewards to property ownership not only have very unequal distribution consequences, but they are generally not necessary to assure deployment of the property in production. In `market socialist' economies people are rewarded primarily for productive contributions due to their own labor. Yet `market socialism,' like capitalism maintains rewards to people’s natural abilities (in the form of labor income), even though such rewards may not really be necessary to elicit the deployment of those abilities in production.” (Weisskopf 1992, page 8)

Advocates who admit that “market socialism” is inequitable console themselves with the observation that capitalism is more inequitable, and the fact that progressive income taxes can ameliorate inequities: “While `market socialist' systems do not achieve this ideal [payment according to effort], they do not depart from it anywhere near as much as do capitalist systems. Moreover, to the extent that unwarranted returns to a person due to their luck in the genetic lottery or in economic circumstances remain, the resulting differentials can be diminished by a progressive system of income taxation.” (Weisskopf 1992, page 8)

Of course, the greater inequity of capitalism is not disputed by progressive critics of “market socialism.” And it is important to also note that advocates of “market socialism” conveniently ignore the psychological and political obstacles to tax correctives, as well as the inefficiency that would accompany such intervention. Isn’t it likely in a “market socialist” society that the economically advantaged would translate their advantages in wealth and leisure into disproportionate political power? And isn’t it likely their disproportionate political power would be used to obstruct tax reforms to correct wage and salary inequities? Moreover, besides greater economic and political power to defend their advantages, opponents of corrective progressive taxation in “market socialist” societies would have two powerful arguments on their side. First, while progressive taxes on personal income do not initially disrupt allocative efficiency, they do create dynamic, or motivational inefficiency in a system that relies heavily on material incentives—as conservative opponents of progressive taxation have correctly pointed out in capitalist economies. Second, and more important in our view, people inevitably tend to rationalize their behavior. The logic of the labor market is: s/he who contributes more gets more. When people participate in the labor market they must defend their right to a wage on the basis of their contribution. The logic of redistribution through progressive taxation contradicts this logic. So participation in “market socialist” labor markets not only does not lead people to see the justice of progressive taxation, it inclines them to accept the argument of opponents, which is: “Everyone already got what they contributed, so any after-the-fact redistribution would be unfair.”

There is a further ethical dilemma in “market socialism.” Advocates of social democracy and “market socialism” invariably treat education as a fundamental human right and champion universal public education as a cornerstone needed to guarantee equality of economic opportunity and a democratic polity, We agree. But what is the sense of permitting individuals to appropriate the benefits of greater productivity that comes from education and training—which they will in “market socialism”—if the cost of that education and training is born at public expense? Market logic requires either that individuals bear the expense of education from which they reap the benefits in the form of higher wages and salaries, or that education at public expense not give rise to private benefits. But efficiency precludes the latter possibility in “market socialism.” It is therefore unclear how social democrats can wrap themselves in the mantel of generous universal public education and sing the praises of markets as well, without serious inconsistency.

Class Divisions

We have claimed on numerous occasions that “markets create a social environment in which a class of managers, professionals, intellectuals and technicians—who we call coordinators—increasingly dominate and ultimately exploit ordinary workers.” (Albert and Hahnel, 1992a, page 47) And some advocates of “market socialism” even admit this is the case. “It is certainly true that under `market socialism' there must be some people occupying positions of key decision-making responsibility, and in all likelihood such people will have higher incomes as well as greater power than most of the rest of the population.... There would be ample scope for inequalities associated with differential skills, talents and responsibilities.” (Weisskopf 1992, page 9)

To quote another advocate of “market socialism” speaking more broadly: “If democratic governance is a value, it seems reasonable to favor institutions that foster the development of people likely to support democratic institutions and able to function effectively in a democratic environment. Among the traits most students of the subject consider essential are the ability to process and communicate complex information, to make collective decisions, and the capacity to feel empathy and solidarity with others. As we have seen, markets may provide a hostile environment for the cultivation of these traits. Feelings of solidarity are more likely to flourish where economic relationships are ongoing and personal, rather than fleeting and anonymous; and where a concern for the needs of others is an integral part of the institutions governing economic life. The complex decision-making and information processing skills required of the modern democratic citizen are not likely to be fostered in either markets or in workplaces that run from the top down.” (Bowles, 1991, page 16) Bowles’ main point here is that markets are not the training grounds for political democracy they are advertised to be in the mainstream equation of political democracy with free market economics. But the dearth of “complex decision-making and information processing skills” as well as empathy generated in market economies, and particularly the unequal distribution of these traits among participants, are precisely what make market systems breeding grounds for what we call “coordinator class” dynamics and distinctions.

As with inequity, the defense mounted by advocates of “market socialism” is not to deny that “market socialism” fosters class differentiation, but to point out that the class inequalities would be less than those in capitalism, and to suggest that class differentiation is inevitable in any event. “Although a market system could not assure anything close to full equality of income and power for all participants, neither could any economic system in a complex society. Such societies require sophisticated decision-making institutions of one kind or another; and there are bound to be great differences among people in their ability (or desire) to participate effectively in decision-making processes.” (Weisskopf 1992, page 9)

While we agree that differential economic power and class distinctions are inevitable in “market socialism,” we believe specific features of a participatory economy make formation of classes unlikely, as we discuss below. Ironically, those like Weisskopf who are pessimistic about the possibilities of ever eliminating unequal decision making power are also among the first to criticize features of a participatory economy designed to minimize unequal economic power as infringing on individual freedoms.

Antisocial

While Bowles concludes his recent discussion of the pros and cons of markets with a plea for regulation rather than a call for a superior allocative mechanism, and while the sentiments he expresses about market’s antisocial bias are very reminiscent of arguments we have made elsewhere (Albert and Hahnel, 1978; 1981, and Hahnel and Albert, Chapter 7, 1990), we quote him because it is more significant when these problems are admitted by a defender of markets than espoused by market bashers like ourselves.

Bowles writes: “Even if market allocations did yield pareto-optimal results, and even if the resulting income distribution was thought to be fair (two very big ‘ifs’, the market would still fail if it supported an undemocratic structure of power or if it rewarded greed, opportunism, political passivity, and indifference toward others. The central idea here is that our evaluation of markets—and with it the concept of market failure—must be expanded to include the effects of markets on both the structure of power and the process of human development.” (Bowles, 1991, page 11)

And continues: “The beauty of the market, some would say, is precisely this: It works well even if people are indifferent toward one another. And it does not require complex communication or even trust among its participants. But that is also the problem. The economy—its markets, workplaces and other sites—is a gigantic school. Its rewards encourage the development of particular skills and attitudes while other potentials lay fallow or atrophy. We learn to function in these environments, and in so doing become someone we might not have become in a different setting.” (Bowles, 1991, page 13)

And concludes: “By economizing on valuable traits—feelings of solidarity with others, the ability to empathize, the capacity for complex communication and collective decision making, for example—markets are said to cope with the scarcity of these worthy traits. But in the long run markets contribute to their erosion and even disappearance. What looks like a hardheaded adaptation to the infirmity of human nature may in fact be part of the problem.” (Bowles, 1991, page 13)

Quite simply, We couldn’t agree more. We have been playing these themes for close to two decades to largely empty houses. And we also agree with Weisskopf: “Don’t market systems systematically undermine efforts to serve the general public interests? Markets provide an environment in which people are encouraged to find ways to better themselves at the expense of others.” (Weisskopf 1992, page 8) And: “To transact effectively in markets, people do have to think mainly in terms of their own individual (or family) welfare, while setting aside consideration for others; markets encourage anonymity, autonomy and mobility rather than community, empathy and solidarity. `Market socialism' thus admittedly does not provide direct support for a culture of community, empathy, and solidarity.” (Weisskopf 1992, page 9)

But Weisskopf offers rebuttal to his own criticism: “This line of reasoning is theoretically plausible; yet it is not decisive. Rent seeking behavior and self-aggrandizing coalitions of one kind or another can and will occur under any conceivable system of economic organization that permits some people to live better than others. Virtually every system will therefore require institutions that limit antisocial behavior. The only way in which an economic system of organization per se could eradicate the problem would be if that system, by virtue of its controls on individual patterns of living, precluded any individual from enjoying the gains from self-interested behavior. Thus a solution to the problem of such behavior could come only at the price of strict limits on privacy and freedom of choice—a price that `market socialists’ are unwilling to pay.” (Weisskopf 1992, page 8) [Of course, we deny this convenient “impossibility.”] Weisskopf finishes with the usual observation that capitalism is much worse, anyway, and a prayer that non-economic institutions may save the day: “Yet [`market socialism'] surely does provide a less hostile environment for the development of empathy and solidarity than (market) capitalism.... [And] such [desirable personality] characteristics may be fostered in other spheres of life even in a market system.” (Weisskopf 1992, page 10)

Let us state again, for the record, that `market socialism,' or what we prefer to call public enterprise market economies, are more desirable than market capitalism. We have no doubt that “to each according to personal contribution” is more equitable than “to each according to contribution of person and property.” And employee managed market economies obviously afford more opportunities for self-management than economies in which absentee owners manage the laboring capacities of others by means of hired henchmen. Moreover, the fact that advocates of “market socialism” are on the defensive in their debate with defenders of private ownership over the relative efficiency of the two systems is... amusing. If employee managed market regimes proved stable—that is, if the logic of competition and accumulation did not lead to a restoration of private ownership—We have no doubt they would prove more efficient as well as more equitable than capitalism. The motivational advantages of a greater degree of self-management in employee managed systems is considerable. And the inefficiency and waste caused by the conflict between owners and employees in employer managed systems is extensive as well. Moreover, claims that private capital markets are best suited to the task of weeding out those who are less adept at discovering and implementing innovations with the greatest net social benefits are preposterous on both logical and historical grounds. But this is not our major concern. We happily concede that employee managed market economies (what our opponents call “market socialism”) are more desirable than employer managed market economies, i.e. capitalism.

But in return for our unqualified support in their debate with pro-capitalists, we think it only honest for “market socialists” to concede that the superiority of “market socialism” over capitalism has no bearing on a debate over the relative desirability of “market socialism” and democratic or participatory planning. Comments to the effect that “market socialism” is more fair than capitalism, or more democratic than capitalism, or more efficient than capitalism, carry no weight in a debate over whether participatory economies or “market socialist” economies are more equitable, democratic, or efficient. And we also fail to see why it should be of any comfort that non-economic institutions may prove more supportive of solidarity and democracy than markets. Logically it is just as possible that markets undermine solidarity and community in other spheres of social life as it is that solidaritous dynamics elsewhere will ameliorate the antisocial effects of markets. And as far as evidence is concerned, our sense of the last 500 years of history, aided by the insights of Karl Polanyi and countless anthropological studies, make the former hypothesis far more plausible.

But, is it true, as Weisskopf claims, that “rent seeking behavior and self-aggrandizing coalitions of one kind or another can and will occur under any conceivable system of economic organization” so this problem is not due to markets but is a fact of economic life?

Certainly Homo Economus—who is well represented by the law firm of Micro, Neoclassico, and Marketo—can be counted on to check out these possibilities in any system s/he is put in, including a participatory economy (to be discussed below.) But in market economies there are two avenues to self-aggrandizement: One is through socially beneficial behavior such as discovering and producing goods and services that others like rather than dislike, or discovering and implementing techniques that lower social costs of production. Adam Smith studied the beneficial logic of voluntary exchange long ago and dubbed it the “invisible hand.” But market economies offer another route to self-aggrandizement, namely advancing one’s interests at the expense of the interests of others. Smith believed, erroneously, that competitive market structures and full information closed down this second route to self-aggrandizement, thereby securing the invisible hand. In actual practice, however, while competitive conditions diminish opportunities to pursue this route of self-advancement by providing others one might disadvantage with opportunities for exit, this does not eliminate a multitude of opportunities for self-advancement in market economies which are socially counter productive. E.K. Hunt pointed to externalities as a plentiful source for such opportunities, identified externalities as the Achilles heel of market economies with respect to efficiency, and dubbed the dynamic whereby markets provide incentives for socially counter productive individual advancement the “invisible foot” (Hunt and D'Arge, 1973). Environmental economists such as Jacobs have used the term invisible elbow. We have explained elsewhere why political economists should expect externalities to be much more prevalent than neoclassical economists admit, and why recognizing that people’s preferences are endogenous magnifies the socially counter productive potentials of Hunt’s invisible foot and Jacobs’ invisible elbow. (Hahnel and Albert, Chapters 6 and 7, 1990).

Still, Weisskopf is right that in a system that not only relies exclusively on material self-aggrandizement as the means of motivating behavior, but aggressively penalizes any and all failures to do so, socially counter productive, “rent seeking” behavior will occur unless there are “institutions that limit antisocial behavior.” But there are two insuperable obstacles to erecting adequate corrective institutions of this kind in market economies. First, there are too many holes in the market system dike. As Hunt demonstrates, the solution of creating new markets in the external effects is no solution at all and actually compounds the problem. And we have demonstrated that any conceivably adequate system of incentive compatible mechanisms for dealing with the ubiquitous public effects of private actions would transform a market system into something bearing little resemblance to a “free market” economy. (Hahnel and Albert, 1990, chapter 7) Second, any institution that closed down a socially counter productive avenue of self-advancement would also undermine people’s motivation to innovate, invest, and/or work in a market economy.

In short, the “human” logic of market economies is very simple: They dangle opportunities for individuals to capture rents before people’s eyes. If people are permitted to capture those rents both inequities and inefficiencies result. But if people are prevented from capturing those rents (by well designed “institutions that limit antisocial behavior”) there is little reason for people to “play the market game.” How can “socialist” marketeers pretend to have their cake and eat it too?

But this is not an answer to Weisskopf’s argument above. He does not deny this dilemma exists in market economies—although he does not go out of his way to highlight it either. Instead he asserts that this problem exists in “any conceivable system of economic organization that permits some people to live better than others,” and implies that any system which did not permit some people to live better than others is undesirably restrictive of “privacy and freedom of choice.” We will take up these issues below in the context of a participatory economy. But we can state here that participatory economies were designed in large part: (1) To reduce to a minimum the possibility of socially counter productive self-advancement. (2) To prevent some people from “living better” than others unless they had undergone greater personal sacrifice (in which case you might say they do not live better than others in the overall context). And (3) To do all this without any infringement on privacy and freedom other than when necessary to prevent a greater infringement on the privacy and/or freedom of others.

Inefficiency

In the Review of Radical Political Economics special issue on “The Future of Socialism” we stated the case regarding efficiency politely: “Received wisdom not withstanding, markets allocate resources very inefficiently.” (Albert and Hahnel, 1992a, page 47) We will summarize the reasons here again so “market socialist’s can explain which of our argument(s) and or assumption(s) they dispute.

Pat Devine poses the challenge to market efficiency based on points 4 and 5 as follows: “My overall conclusion is that models of `market socialism' represent an attempt to square the circle. `Market socialism' is advocated because markets are alleged to be efficient in generating information and motivating enterprises to act on the basis of that information.... However, the British school of “market socialism” is understandably reluctant to accept this logic, for two basic reasons. First, there is the recognition that atomistic decision-making with respect to investment necessarily involves market uncertainty.... This is what underlies the argument for indicative planning and industrial policy as ways of seeking to reduce market uncertainty without limiting enterprise independence. Yet, unless enterprise independence is limited, market uncertainty cannot be overcome. The second reason for reluctance to accept the logic of efficiency through the market is the desire to allow wider social considerations than those determining enterprise profitability to influence enterprise decision-making.... If wider social considerations are to be taken into account, either the independence of the enterprise to pursue profit maximization must be limited, or the enterprise must be constituted in a way that directly involves representatives of social interests in the decision-making process.” (Devine, 1992, page 76) In our view, Devine is right. Enterprise independence and the profit criterion are hallmarks of market systems. Moreover, once one admits that efficiency requires abandoning these features, it is hard to maintain support for the efficiency of market economies since these features are the basis for claims to the efficiency of markets in the first place!

Finally, Chris Tilly typifies the understandable, but illogical recent turn-about of many political economists: “I can recite a list of reasons why capitalist markets don’t work: They feed boom-and-bust cycles, fail to provide needed goods such as clean air, and waste economic resources in ways ranging from unemployment to advertising expenditures. But before consigning markets to the dust-bin of history, consider a friend’s visit to a store selling government-subsidized goods in revolutionary Nicaragua in 1987. The only goods on the shelves were sanitary napkins and Lenin’s collected works.... Let’s face it: We need markets of some kind. Markets do not ensure that everybody gets enough rice to survive, but they do a good job of matching up needs with suppliers in complex modern economies.” (Tilly, 1992, page 6) We’re sorry, but markets are no better (or worse) at allocating resources efficiently in Peru or the United States than they were before the demise of communism and the second coming of Monsieur “laissez faire” as the world’s Savior.

Criticisms Of Participatory Economics

Participatory economics has been offered as a model for a better economic system via a number of books and articles. Its defining features are:

Unfree

Critics of participatory economics claim that it sacrifices personal freedom to attain other, in their view, less important, ends. Weisskopf argues, for example: “The issue is how much value we should attach to the opportunity for individuals to exercise such libertarian rights as freedom of choice, privacy, and the development of one’s own specialized talents and abilities—as compared to the more traditional socialist goals of equity, democracy and solidarity.” (Weisskopf 1992, page 21) For Weisskopf, therefore, the debate between participatory economies and “market socialism” largely reduces to a debate over the relative importance of different values. He would have readers believe that while participatory economies may better serve “traditional socialist goals” like equity, democracy, and solidarity, it does so only at the expense of “libertarian values” such as individual freedom and privacy, which in his view are better served by market systems. We find the charge that participatory economies sacrifices libertarian values to be entirely without basis, deriving from a shallow and indefensible interpretation of libertarianism and a biased reading of what composes participatory economics. So, for reasons we clarify below, we reject framing the debate as a choice between worthy values, and reject Weisskopf’s conclusion based on that assumption: “Participatory economies best serves one set of `high principles,' while “market socialism” best serves a different set of equally `high principles.' But market socialism is less ambitious, closer to what we already have, and therefore more easily achievable.” (Weisskopf 1992, page 22)

But what is a libertarian economy? If people are restricted, for example, from buying another human being, is an economy thereby made less libertarian? Surely there are circumstances that would lead people knowingly and willingly to sell themselves into slavery, yet few would refuse to call an economy libertarian because slavery was outlawed. Likewise, if people are restricted from hiring the services of another human being for a wage, is an economy thereby made less libertarian? There are familiar circumstances that lead people knowingly and willingly to accept what “traditional socialists” called “wage slavery.” Does this mean that Weisskopf’s model of “market socialism,” is not libertarian because the employer/employee relation is outlawed? To equate libertarianism with freedom of individuals to do whatever they please is a shallow interpretation that robs libertarianism of merit it richly deserves.

It is of course a good thing for people to be free to do what they please—at least, insofar as what they choose to do does not infringe on more important freedoms or rights of others. I should not be free to kill you because that would be robbing you of a more fundamental freedom to live. I should not be free to own you because that robs you of a more fundamental freedom to live your own life. I should not be free to employ you because that robs you of a more fundamental freedom to manage your own laboring capacities. I should not be free to bequeath substantial inheritance to my children because that robs the children of less wealthy parents of their more fundamental right to an equal opportunity in life. Presumably, there is little disagreement about any of this between advocates of “market socialism” and proponents of participatory economies. But are there additional fundamental freedoms and rights that others should not be free to violate in choosing to do what they please? And is one difference between “market socialism” and participatory economics that participatory economies unjustifiably curtail personal freedoms that markets respect, or that markets violate rights participatory economies protect?

Advocates of participatory economics think everyone should have equal opportunity to participate in making economic decisions in proportion to the degree they are affected. We think, in fact, that this is the only way to interpret what “economic freedom” means without having one person’s freedom conflict with another’s, and we call this goal economic “self-management.” We think economic self-management, in precisely this sense, is a fundamental right, so that allowing people freedom to do what they want must not permit them to infringe on others’ right to self-management. In other words, we do not think some people should be free to appropriate disproportionate decision making power, leaving others with less. In more familiar terms, we do not think some should be “free” to oppress others with their greater economic power. But we do not think ourselves any less libertarian for wanting to outlaw this type of oppression, any more than abolitionists thought themselves less libertarian for fighting to outlaw slavery.

Advocates of participatory economics also think distributing the burdens and benefits of economic activity fairly, or equitably, means people should benefit in proportion to their effort, or personal sacrifice. So we believe economic justice requires that nobody be “free” to appropriate more goods and services than warranted by their personal sacrifice. In more familiar terms, we do not think some should be “free” to exploit others. And, again, we do not think ourselves any less libertarian for wanting to outlaw exploitation, anymore than progressives thought themselves less libertarian for fighting for progressive income taxation in the early Twentieth century.

But does this take all the fun out of freedom? If freedom does not include the freedom to oppress and exploit others, what is left? Is a “politically correct” economy—ie. one free from oppression and exploitation—a drab and regimented world, as critics seem to believe?

We see no reason to think so. People in a participatory economy are free to develop and pursue preferences for any goods and services they wish. They are free to choose more consumption and less leisure, or visa versa. They are free to distribute their effort and consumption over their lives anyway they want. They are free to apply to work wherever they want, free to bid on any job complex at their work place they want, and free to organize a new enterprise to produce whatever they want, however they want, with whomever they want. People are free to educate themselves in any career they want and train for any tasks they want. They’re just not free to do any of these things in ways that oppress or exploit others.

Suppose I'm intellectually gifted, score high on standardized tests, do well in my undergraduate studies, am admitted to medical school, and follow with a specialty in brain surgery. Shouldn’t I be free to sell my talents or skills to whomever I wish? In a free market economy there would be others willing to pay me up to the value of my contribution. But if this is permitted, there will be others who receive less than the effort, or sacrifice, they incur. There is no way around it:

Or, suppose I'm particularly competent and energetic and more than willing to spend all my work time analyzing and evaluating different options for my workers’ council. Shouldn’t I be free to work in a job complex where I am engaged full time in analytical and decision-making activities? But if I am permitted to work at a job complex significantly more empowering than others, before long my work mates’ formally equal opportunities to participate in economic self-management will not be effectively equal to mine.

What appear to be simple desires for “personal freedom” are not always so simple. But there is another way to see the logic of participatory economics: from the bottom up. The first priority is to guarantee economic justice for those who have never enjoyed it by making sure that people’s consumption is commensurate with their sacrifices and by making sure that people’s work experience equips them to participate in economic decision making should they want to. And there is also another way to look at talent and education. A participatory economy encourages people to use their talents. In a participatory economy esteem and social recognition for outstanding abilities that create great social benefits for others will be very high. The idea is not to keep people from using their talent or education. But there is no material reward for anything other than effort and sacrifice—since to do otherwise would be inequitable. And while those with greater talent and education may spend part of their work time analyzing complicated consequences, and may have their opinions more highly regarded than others because historically their opinions have been more accurate, they do not get greater decision making authority in a participatory economy because this would infringe on the self-management rights of others.

We wish to emphasize that personal freedoms are not sacrificed in the interest of solidarity or community in a participatory economy. This concern, voiced by advocates of markets, has no basis. Only protecting the freedoms of others and the dictates of justice limit the freedoms individuals enjoy in a participatory economy. And in our view limiting one individual’s personal freedom or rights because they infringe on the more important freedoms or rights of others is perfectly consistent with the only kind of libertarianism that can be justified.

So how do we answer specific criticisms that participatory economies are “unfree?”

For example, “Wouldn’t a participatory economic system tend to be too intrusive in restricting individuality, privacy, and freedom of choice?” (Weisskopf 1992, page 18) And: “The more weight one places on... individuality, privacy, and freedom of choice... the more skeptical one will be about the desirability of participatory socialism.” (Weisskopf 1992, page 20)

In fact, there simply are no restrictions on individuality or privacy in participatory economics. Anyone who wishes to submit anonymous consumption proposals and avoid feedback from neighbors about the content of their consumption requests is free to do so. Many people have reasonably good relations with their neighbors and would appreciate helpful suggestions. But if this is not the case, in a participatory economy privacy in consumption is available with no questions asked. We see no reason to think that other privacy issues are any less tractible in a participatory economy than any other. Regarding freedom of choice, as explained above, it is restricted only when it infringes on the freedom of choice of others and only in ways that distribute decision-making authority in proportion to the degree people are affected.

Weisskopf says: “Freedom of choice—in how to live, what to consume, what kind of work to do, how to express oneself, how to define one’s social identity, etc.—is an important value.” (Weisskopf 1992, page 19) Exacly. And there is complete freedom of choice in where and how to live, what to consume, how to express oneself, and how to define one’s social identity in a participatory economy. Presumptions to the contrary are unfounded. And the restrictions on what kind of work people do—that job complexes be balanced for empowerment—are only those necessary to protect everyone’s right to economic self-management.

And Weisskopf says: “A participatory system is likely to require people to justify many of their choices... to some kind of collective decision-making body, which in turn is bound to limit the extent to which people can really get their choices accepted—no matter how democratically decision-making bodies are constituted. By enabling individuals to make most choices without reference to what others think about their decisions, a market system provides much greater freedom of this kind.” (Weisskopf 1992, page 19) But, if a participatory economy achieves its goal of self-management—which we understand can only be approximate—then only people affected by decisions will have influence over those decisions, and only to the degree they are affected. If life style, social identity, and what kinds of goods to consume are decisions that only affect an individual—and we agree, for the most part, that they are—then individuals will have control over those decisions in a participatory economy. But there are many decisions some individuals make in a market system that affect other people as well. A participatory economy is designed to provide others affected with influence proportionate to the magnitude of what are “external” effects in a market system. We believe this is only seen as intrusive from the perspective of people accustomed to a market system where people make decisions without reference to the opinion of others even when those others are affected by the outcome. True, factory owners are used to being “free” to pollute the air in market economies and chafe at environmental regulations. Those who make decisions that affect others in market systems are used to being “free” from the opinions and influence of others. But those affected by decisions in a market system who have neither voice nor influence just as surely have their freedom curtailed. The question is not “free” or “unfree” but when unrestricted freedom is legitimate and when it is not.

Weisskopf says: “Many people are likely to prefer doing more specialized work activities than would be permitted under a balanced job-complex requirement which means that enforcement of the requirement might well involve implicit or explicit coercion.... Apart from their inhibition of personal freedom, balanced job complexes designed to avoid specialization seem likely to deprive society of the benefits of activities performed well only by people who have devoted a disproportionate amount of time and effort to them.” (Weisskopf 1992, page 20) First of all, balanced job complexes are not designed to avoid specialization. They are designed to avoid disparate empowerment and desirability. As already explained, this is to protect the freedom of those who otherwise would not have equal opportunity to participate in economic decision making, and to ensure equity. It is designed to prevent oppression and class divisions. But it does not curtail specialization as usually understood. People will still specialize in brain surgery, electrical engineering, high voltage welding, etc. But those who perform these specialized tasks if they are more empowering than average tasks, will also perform less empowering tasks as well. And if these tasks are more desirable than average, those who perform them will perform some less desirable tasks as well, unless they wish to accept a lower effort rating. We admit this does require training more brain surgeons, electrical engineers, and welders than if none of these specialists ever had to work at any other tasks, assuming, for the sake of discussion, that skilled workers didn’t use their advantages to reduce their work time in any event which imposes the same social cost. But this does not mean an end to specialization, nor mean that society will be deprived “of the benefits of activities performed well only by people who have devoted a disproportionate amount of time and effort to them.”

Weisskopf says: “Critics of participatory socialism question whether it can adequately protect the legitimate interests of those who hold and wish to act on minority views. True democracy requires not only that people have more or less equal influence over decisions that affect them to the same degree, but that minorities be protected from majority decisions—however equally and fairly arrived at—which disadvantage them in important ways.” (Weisskopf 1992, page 18) But advocates of participatory socialism, such as the well known libertarian, Noam Chomsky, are among the first to recognize the importance of protecting minority views and rights. This is a matter of civil liberties and protection of civil liberties. And while we have not written much on this subject—since we have no particular expertise in constitutional law, civil rights, and civil liberties—we see nothing in the procedures of participatory economies that make protection of minority views or rights more difficult than their protection in other kinds of economies. The only opinion we ever expressed on this matter was to argue for the importance of implementing minority plans for economic projects along with majority plans, whenever possible. We argued this is preferable because it is not only desirable for minorities to allow them to pursue their ideas, it is better for the majority as well, to have contrary opinions tested by their advocates since no majority has ever been right all the time. If there is something specific in the procedures of participatory economies that threatens minority rights and interests we would like very much to hear what it is so it can be reexamined and corrected.

Nancy Folbre says: “The tone of Looking Forward sometimes reminds me of a parent telling the kids they can’t have any dessert until they've eaten their spinach. Albert/Hahnel sound just as certain that they are right about what’s healthy and what’s not. They are willing to allow the children to choose different jobs but not to choose specialization and hierarchy. I think many children may feel just as oppressed by this rule as by current structures of constraint that preserve free choice for the privileged few.... Individuals who don’t like aspects of their job, specified for them by the larger group, may be as likely to shirk as those who feel that capitalists or coordinators are in control.” (Folbre, 1991, page 70) We apologize for our tone if it was condescending. We did not feel at all certain we were right about how best to pursue economic democracy, equity, and solidarity when we published Looking Forward and Participatory Economics. Instead, we felt the discussion of what constitutes a desirable economy had gotten badly muddled in the context of recent world events. We also felt that a degree of professional managerial class “skin privilege” had intruded into the debate. When working to build a movement dedicated to democracy and justice it is critical to examine the possibility of convenient “blind spots.” Few engaged in the debate over “market socialism” versus participatory planning have large amounts of private capital they may be tempted to rationalize. There is little need for self-scrutiny on that account. But many of us do enjoy advantages in human capital, and empowering, desirable job complexes. In this context, we wished to clarify some issues we find critical and present an alternative to both central planning and “market socialism” that was sufficiently coherent to permit others to evaluate it seriously. And we are gratified that to an extent a serious evaluation has occurred. But that does not bind us to agree with all criticisms. And not agreeing is not the same as claiming omniscience.

Yes, we have presented a case against hierarchical relations of production, as well as a set of procedures to prevent hierarchy from sneaking in the back door after the front door is barred. We do not believe we have thereby prohibited specialization, but we are aware that some aspects of balanced job complexes will not be personally gratifying to those who carry them out. On the other hand there are many aspects of most people’s jobs in capitalist or “market socialist” economies that are not gratifying to those who must carry them out, which most assuredly does lead to shirking. But as long as there are unpleasant tasks—and unlike traditional Marxists and modern day high tech utopians, we believe this will always be the case—someone will have to do them. The difference in a participatory economy is not that nobody will ever have to perform a task they dislike, but that a valid case can be made that any task in a job complex that is not gratifying is there because it would be unfair if it were not. How much less shirking would take place in an economy where unpleasant tasks are fairly distributed, remains to be seen.

Weisskopf says: “Certain libertarian objectives associated with personal freedom of choice can best be satisfied only if individuals have the kind of opportunities for choice and for exit that a market system alone can provide.” (Weisskopf 1992, page 22) The assumption that “exit” is more difficult in participatory economies than other systems is unfounded. In capitalist economies what can workers do who don’t like their boss? In public enterprise market economies what can you do if you don’t like your boss or the majority decisions of your work mates? Switching work places or starting up a new enterprise is the exit option in any economy. In a participatory economy, workers are free to leave their workplaces and apply for work in any other workplace. And we believe participatory economies’ iteration facilitation boards would make finding a new, more compatible work site easier than even social democratic Swedish-style Labor Market Boards. Moreover, convincing an industry federation committee of the social usefulness of a new enterprise is similar to convincing a bank—whether privately or publicly owned—that a new enterprise will prove profitable. As for what you do if you come to dislike your neighbors—if it gets bad enough you move in a participatory economy, just like you do in any other economy. But with your income secure, and consumer facilitation boards for assistance, again, it should be easier.

Insufficient Incentives

When working on the procedures for a participatory economy we assumed the primary concern would be with allocational, or static efficiency. After all, we were advocating abandoning both markets and central planning, which most economists presume are the only conceivable ways to determine the social opportunity costs of productive resources in order to allocate them efficiently. In the words of Sam Bowles: “The debate proceeds as if the menu of institutional choices offers just two items: command—meaning centralized planning; and competition—meaning the neoclassical textbook rendition of the market. Our task, one imagines, is to find some judicious combination of these two conceptually homogeneous and unproblematic poles.... But the plan versus market debate reflects an impoverished view of markets and the alternatives to markets, one that thwarts the consideration of the essential political and moral issues: namely, the manner in which markets shape human development and structure the exercise of power. Thus if the economists first disability is to ignore the non-economic impacts of economic choices, the second is the economist’s tendency to assume that the alternative to the invisible hand is Big Brother’s fist.” (Bowles, 1991, page 11-12) So we assumed this was the major obstacle—demonstrating that a qualitatively new allocation procedure was capable of generating accurate estimates of social opportunity costs and thereby able to allocate resources efficiently.

Predictably, those who practice free market ideology as their religion and presume that only markets can allocate resources efficiently, felt no need to examine the procedures of participatory planning or the analysis we offered. But surprisingly, among those whose faith is less strong, and who examined the procedures of participatory planning, none has challenged our claim that, in theory, participatory planning will yield socially efficient outcomes under less restrictive conditions than market models. Some find participatory planning undesirably cumbersome and time consuming, but no one has claimed it fails to yield efficient outcomes under the assumptions we specified.

On the other hand, there has been widespread skepticism about participatory economies’ ability to employ scarce human talents and skills efficiently, and to achieve dynamic, or motivational efficiency. Would balanced job complexes under employ scarce talents and socially costly training? Would people be motivated to work sufficiently hard? Would efforts be directed toward fulfilling socially desirable needs? Would people be sufficiently motivated to pursue education and training in socially useful careers and skills? Would individuals be sufficiently motivated to search for new innovations? Would workers’ councils be adequately motivated to pursue and implement new innovations? Would participatory economies be sufficiently dynamic?

Folbre argues: “Personal endowments as well as preferences differ greatly. Up to a point, specialization provides important efficiency gains. A certain level of specialization and hierarchy lowers transactions and training costs.” (Folbre, 1991, page 70) Indeed, specialization does lower training costs. So we agree that requiring those whose training is more socially costly than average to also perform tasks in areas requiring less training incurs extra social costs since it means more people must receive socially costly training. But we pointed out that this efficiency loss needs to be weighed against efficiency gains from real worker self-management, better morale among workers, and greater familiarity with the overall work process for all workers. If there are still net efficiency losses, which we find unlikely, these are the price of making self-management real, rather than a hollow sham.

While hierarchy does lower transaction costs, this does not mean that we must tolerate permanent hierarchies. Permanent hierarchies subvert self-management and create class distinctions. But clearly enforced lines of responsibility and authority in workplaces do not require permanent hierarchies. Making sure that workers who exercise managerial authority in one area are subject to authority from others in other areas lowers transaction costs in production just as much as permanent hierarchies do, but without creating social inequities.

Alec Nove complains that: “In the absence of a market `the supplier is usually designated by the supply plan, and is therefore in a position of an absolute monopolist.' The supplier therefore can sacrifice quality to meeting quantity goals, by which fulfillment is measured. `I can be meaningfully instructed to give 50 lectures, but it is not so easy to enforce an order that I give good lectures.' How can one measure quality except by consumer choice, which negates planned supply, in turn negating plan, and which requires a market?” (Mandel, 1993, page 350 quoting Alec Nove) In fact, in participatory economies consumer councils and federations, answerable only to the consumers they represent, are the recipients of deliveries. We see no reason to believe quality will go uncontested under these circumstances. Negotiations over expectations and quality between consumer and producer federations rather than between individual consumers and suppliers should increase pressure on producers to maintain quality. Is it harder for producers to hoodwink Ralph Nader consumer protection organizations or the average individual citizen?

Weisskopf says: “Wouldn’t it be very wasteful to try to allocate labor without an incentive system that rewards individuals according to the market-determined value of their work contributions?” (Weisskopf 1992, page 16) Well, it is true that in participatory economies workers are not “paid” according to the social value of their contributions. Workers are “paid” according to effort expended on the job, because that is what is fair. But the process of participatory planning charges workplaces for workers according to the value of their laboring capacities in their most socially useful and efficient employment. And since participatory planning is the procedure for allocating labor in a participatory economy, Weisskopf’s concern does not apply to a participatory economy. Yes, in market economies allocating labor efficiently requires paying people “according to the market-determined value of their work contributions,” which means market systems must pay people unfairly. But participatory economies have been designed precisely so we can have our cake and eat it too. People are compensated fairly—wages based on effort—but labor is allocated according to productivity—users are charged true social opportunity costs.

Mark Hagar argues: “Because success, even in a non-capitalist order, may easily turn on talent, luck, and other morally undeserved factors, it is easy for the authors to show that equity favors distribution according to effort. My question, however, is whether they succeed in showing that distribution according to effort achieves efficiency alongside equity.... A society seeking optimum production needs to discourage clumsy effort and encourage proficient effort so as to avoid waste. Otherwise, the less successful have no material incentive to modify bungling methods or to seek work where their comparative advantage in contribution is greater. For efficiency, one must at least reward efforts to improve the success of efforts, and rewarding contribution may be the only feasible way to do so.” (Hagar, 1991, page 71)

And Weisskopf adds: “They [Albert & Hahnel] propose that the consumption opportunities available to individuals be linked to an individual’s input into the production process—in the form of personal effort made or personal sacrifice endured... Albert & Hahnel’s proposal would surely lead to greater equity in the reward for labor than the market-based alternative, but their claim of greater efficiency is misguided.... First of all, it is very difficult to observe and measure an individual’s sacrifice or work effort.... Any input-oriented incentive scheme would tend to encourage the substitution of quantity for quality of effort. Moreover, people would have an interest in understating their natural talents and abilities.... Second... [while] it would presumably elicit greater work effort and sacrifice on the part of individuals, it would do nothing to assure that such effort and sacrifice were expended in a desirable way. The social good is best served by encouraging activities the results of which are highly valued relative to the cost of undertaking those activities. In order to motivate people to expend their efforts in a desirable way, it is therefore necessary to reward activities according to the value of work output rather than according to the quantity of work input.” (Weisskopf 1992, page 16-17)

Hagar and Weisskopf make an important point here. It is a different point than the previous concern with allocating labor to its most productive use. Here the issue is whether people who are rewarded for effort and sacrifice will be motivated to expend their efforts in socially desirable ways rather than clumsily. For example, will they work to produce more, rather than better?

In market economies a single incentive is used to motivate both quantity and quality of effort and to direct effort in socially desirable ways—material rewards for the value of outcome. But rewarding the value of outcome does not just reward these three things. It also rewards talent and luck—luck in what job one occupies and with what equipment and work mates one works, luck in whether applied effort yields smaller or greater output, and luck in one’s own, or someone else’s guess about what others find socially useful. So market economies do not reward only the things that efficiency requires. They reward those things, and other things as well.

Participatory economies use three different incentives to reward quantity of effort, proficiency of effort, and socially useful application of effort, in slightly different proportions. There are material rewards for quantity of effort. Proficiency of effort is motivated in enterprises by the incentives in participatory planning for enterprises to increase the ratio of the social benefit of outputs to the social cost of inputs (SC/SB), and within enterprises by the interests of coworkers and the supervisory system to motivate proficiency in each worker because lack of proficiency in one requires greater effort from others. Thus, peer pressure from those inside and outside one’s workplace is important in motivating proficiency. Socially useful application in training and work effort is primarily motivated in participatory economies by social esteem and recognition. I maximize my chance for social esteem if I educate and train myself in areas that are my comparative advantage and if I orient my efforts toward maximizing the social benefit of what I do.

But it is important to bear in mind who is doing the monitoring, rating, and evaluating in a participatory economy. My work mates and I decide how our work will be monitored. My workmates judge my efforts. And social recognition comes from my workmates, other workers in the same federation, and from consumers through their consumer federations. It is easy to point out that maximizing effort input is not really what we want to motivate. Weisskopf is right that we want to maximize the social value that results from a given human effort. But when we talked of rewarding effort rather than outcome, we meant effort expended proficiently to socially useful ends. And in a participatory economy that is the only kind of effort it makes any sense for one’s fellow workers to try and reward in either supervision or effort ratings. Why would my fellow work mates give me high effort ratings for taking two hours longer to mop rooms because I mopped from the door to the far wall and had to mop over my foot prints as I left? Why would my fellow workers give me high ratings because I worked four hours to copyedit a piece because I didn’t use the spell checker and grammar checker? We think many of the problems Weisskopf and Hagar foresee stem from misconstruing what we meant by “effort” and disappear in the context of who is doing the judging.

It is also important to keep in mind who is judging, when thinking about measurement problems. Of course there are problems measuring effort—just as there are problems measuring the value of output and attributing that value to different people involved. In a participatory economy effort rating committees in different workplaces can put as much or as little time into measuring effort as they wish. And they can collect whatever information they wish—hours worked, indications of output, improvement, comparisons with other enterprises, self-evaluation, evaluation of team members, etc. Nothing is perfect. To the extent they measure inaccurately, there will be inequities in effort ratings. But we have a hard time believing those inequities would not be considerably less than the inequities built into the normal, successful operations of “market socialist” or capitalist economies.

In participatory economies there are both material and social incentives, and both kinds of incentives can be used to motivate proficient work effort, socially useful training and education, and innovation in product design and production technique. But 1) every attempt is made to maximize the use of peer pressure and social esteem. And 2) there is relatively greater reliance on social incentives to motivate socially useful education, training, and innovation, and relatively greater reliance on material incentives to motivate work effort. The reason for the first choice is obvious to any parent who has tried to minimize the use of allowances to get children to do their chores. The reasons for the second choice are: a) Greater material rewards for greater sacrifice is equitable, greater material rewards for education or innovation is usually not. b) Contributions that comes from innovation and education are usually owed to a diffuse network of people rather than a single individual.

We also believe that while those pursuing education in more socially valuable careers could be rewarded with greater consumption rights as an incentive, it should seldom be necessary to do so since 1) the social and personal cost of the training is born by society rather than the individual, 2) it is not unusual to like to study what you are good at, and 3) chances of earning greater social esteem are better if one trains in one’s comparative advantage. In any case, if someone who would have been an excellent surgeon decides not to pursue graduate studies, we have no doubt there will be many other talented people who will accept admission to medical school.

Stimulating innovations is somewhat different. Most innovations are the result of cumulative human efforts with a good deal of luck involved, and this provides good reason for not awarding an individual who puts the finishing touch on a cumulative advance with substantial material rewards. That is why we think efforts to minimize material rewards for innovation are warranted, and why we suggest 1) stimulating innovation directly through planned expenditures on R&D under the management of consumer as well as producer federations, and 2) social esteem and recognition for both individuals and enterprises that are particularly innovative. But participatory planning can award innovative enterprises with job complexes that are more desirable than average and/or with consumption allowances that are higher than average for specified periods of time. And this can be done without retarding the spread of the innovation to other enterprises. If the citizens in a participatory economy decided in a democratic dialogue that their economy was insufficiently dynamic, material incentives such as these could be deployed. We think, however, that very few, if any, material rewards for innovation would prove necessary, except in early phases of a participatory economy, and we believe there are good reasons to work particularly hard to hold them to a minimum.

Cybernetic Overload

Weisskopf says: “Wouldn’t the allocation of resources in a complex economy by means of participatory decision-making institutions place impossible demands on information processing and inordinate demands on people’s time?” (Weisskopf 1992, page 13)

And he adds: “The mere listing of [the requirements for decision-making in a participatory economy] is enough to generate skepticism about whether and how they can possibly be met. Even if, in principle, institutions and processes can be developed to accomplish the necessary tasks (and Albert & Hahnel and Devine have advanced some ingenious ideas to do so), one is bound to wonder whether the whole system would actually function in practice. Assuming that computer technology could be relied upon to process and disseminate the enormous amount of information needed to make the system work, how would people be persuaded to provide the needed information in an unbiased and disinterested manner? And even if all the needed information could be accurately compiled, wouldn’t participatory planning require each individual to dedicate so much time, interest and energy to assessing the information and participating in decision-making meetings that most people would get sick and tired of doing it?” (Weisskopf 1992, page 14-15)

In defining participatory economic institutions, we paid close attention to the incentives for people to provide needed information truthfully. It is in the interest of any person who wants to win approval for a consumption request or production proposal to provide qualitative information explaining why the quantitative estimates based on estimated social opportunity costs fail to account for some particular circumstances. As to whether people would go overboard and exaggerate needs and disabilities, perhaps they will. But such accounts are only testimony others will review when deciding if exceptions should be granted, and presumably people will learn to evaluate such qualitative information with a critical eye. Regarding the quantitative information and genesis of our indicative prices, we are familiar with the literature on incentive compatibility and believe we have designed an incentive compatible mechanism. Participatory planning is completely different from central planning where individual producers have incentives to hide their true capabilities from planning authorities. If anyone thinks otherwise, we would appreciate a specific criticism, until which time we can only dismiss worries such as “how would people be persuaded to provide the needed information in an unbiased and disinterested manner” as confusing our system with a better known but completely different system.

Weisskopf wonders: “Isn’t the process of democratic decision-making sufficiently complex and problematic that it should be applied only to a limited range of critical decision-making areas?” (Weisskopf 1992, page 15) And adds, “Isn’t the practice of participatory democracy sufficiently difficult, time-consuming and emotionally draining that it would in practice have to be limited to a relatively small range of decisions?” (Weisskopf 1992, page 15) As well as: “These kinds of concerns about the operation of democratic decision-making processes should not of course be read as a condemnation of democracy.... Rather, such concerns suggest that democratic political institutions ought to focus on a critical and manageable range of decision-making areas, rather than be used for all kinds of economic as well as political decisions.” (Weisskopf 1992, page 15-16)

No. This sounds reasonable, at first listening. And it is certainly true that we should devote more decision-making time to more important decisions and less to less important ones. But people should have decision making input in all decisions to the degree they are affected. And people, themselves, should decide which decisions are of little importance and therefore those on which they do not wish to spend much time. In fact, many of the decisions that people care a great deal about are ones concerning their own neighborhood and workplace—so spending time on these issues is not unwarranted. But excluding people from a say over long-term national investment plans is also undesirable. In participatory economies people are free not to attend meetings, or to call for closure, or leave meetings early as they desire. But this is not the same as saying some issues are too small to warrant democracy, or that some issues are too complex and distant for people to decide for themselves. Any time a decision is not worth spending any more time over, people are free to call a halt to the debate, vote, and move on. But democratic decision making is a process that is more likely to occur efficiently and with good result the more it is practiced wherever people have an interest.

Weisskopf asks: “Won’t the politicization of all kinds of decisions lead to excessive conflict, strife, and anger?” (Weisskopf 1992, page 15) Market systems are clever at disguising exploitation and oppression. Painful consequences often seem to be the result of market competition that none can forestall, and we are taught that market competition is socially beneficial. In market economies the distribution of inequity is largely impersonal, which is an important reason the inequities have been tolerated so long. Participatory economies, in contrast, make every attempt to make the consequences of individual and group choices for others as graphic and plain as possible—because otherwise people cannot engage in knowledgeable, collective self-management. So, we plead guilty to politicizing economic choices, but with cause. If you get a low effort rating you will know it is because your fellow workers thought that’s all you deserved. If your enterprise’s proposal is not accepted, you will know it is because other workers’ councils thought it was inefficient or too lazy. If your consumption proposal is rejected, you will know your neighbors did not think your work effort rating merited consuming that much, or that your special needs requests were not compelling. However, we do not believe participatory economies will lead to the kind of conflict, strife, and anger that plague private enterprise and market economies. By providing an open, democratic, efficient, and fair procedure for negotiating conflicts of interest, we feel participatory planning minimizes the probability of strife and anger after the plan has been agreed to.

Folbre complain: “One perverse incentive could be labeled `The Dictatorship of the Sociable.' Some people really like meetings. They like to talk, to negotiate, to debate. As a result, they often attend meetings enthusiastically, and they often prevail at them.” (Folbre, 1991, page 69) And Weisskopf adds: “In practice such a system might well enable some people to exercise much greater influence over decisions than others. Disproportionate influence would not arise from disproportionate wealth or income, but from disproportionate interest in and aptitude for the relevant decision-making processes.” (Weisskopf 1992, page 15)

We should be frank. Long live the dictatorship of the sociable if that is the only alternative to the dictatorship of the wealthy or the dictatorship of the better educated—which is what capitalism and “market socialism” come down to. But isn’t it ironic that those who worry about the dictatorship of the sociable are the same people who find balancing job complexes—which is done precisely to guarantee equal opportunity to participate effectively for all—unjustifiable infringements on personal freedom? The purpose of balancing for empowerment is to prevent the economic system from generating unequal endowments of what we might call “social capital” that effectively disenfranchises significant segments of the workforce. Balancing for empowerment is the only way to preclude a “Dictatorship of the Educated and Managerial,” who needn’t be all that sociable!

Folbre adds: “A related problem is the “Let’s Not Piss Anybody Off” principle.... Many individuals would rather accept some decline in collective efficiency rather than risk their social reputation as a nice person. Nobody wants to be seen as a hard-ass. So discipline is weak. Individuals who fail to do what they promised to do are not sanctioned. Individuals who always do what they promise to do are ripped off.” (Folbre, 1991, page 69) Enterprises in a participatory economy that indulge in this kind of “liberalism” will have a difficult time achieving an acceptable ratio of social benefits of product to social costs of inputs. If the hard-working nice people Folbre is so concerned about want to carry their irresponsible workmates, they may choose to do so rather than struggling with them. But participatory planning and effort ratings are “incentive compatible” in the sense that people who engage in this kind of liberalism “pay a price.”

We freely admit that most people would spend more time in workplace meetings in a participatory economy than a hierarchical one. But this is because most people are excluded from workplace decision-making in hierarchical economies. And we also freely admit that democratic decision-making takes more “meeting time” than autocratic decision-making. [Having everyone get vacations, not just a few; or having everyone get work breaks, not just a few; or having everyone get weekends off, not just a few, also reduces output. In all cases the issue is whether the lost output is worth it. In any case, we should note that decisions arrived at democratically should take less time to enforce than ones arrived at autocratically.

But, we think critics have failed to appreciate an important feature of participatory planning when criticizing the amount of “meeting time” our “social, iterative planning process” would require. For the most part people and their delegated representatives do not meet face to fact to discuss and negotiate how to coordinate their activities, as critics seem to assume. Instead, individuals and councils submit proposals for their own activities, receive new estimates of social costs, and summit revised proposals. Moreover, rather than have delegates from federations meet to hammer out the “end game” of the planning process, we proposed that after a number of iterations had defined the basic contours of the plan, the professsional staffs of iteration facilitation boards would define a few feasible plans within those contours for constituents to vote on without ever meeting and debating. We also did not propose face-to-face meetings where different groups plead their cases for consumption or production proposals that did not meet normal quantitative standards. Instead we proposed that councils submit qualitative information as part of their proposals, so that higher level federations could grant exceptions should they choose to. And the procedure for disapproving proposals is a simple up/down vote of federation members, rather than a rancorous meeting.

We are Homo Economus Not Homo Socialis

Weisskopf worries: “Wouldn’t a participatory economic system be viable only if there were a prior transformation of people’s basic consciousness from one that is individually oriented to one that is socially oriented?” (Weisskopf 1992, page 17)

And adds: “In order for mechanisms [of participatory economics] to add up to a workable system of motivation which could substitute for individual material incentives, there would surely have to be a wholesale conversion of human behavior patterns from homo economus to what might best be characterized as homo socialis—i.e. a person whose very consciousness was socially rather than individually oriented.” (Weisskopf 1992, page 18)

He argues: “The first issue is whether and how people could be expected to change from homo economus, as we know him/her in contemporary capitalist societies, to homo socialis, as he/she is depicted in the operation of participatory socialist societies.... If people act essentially as homo economus, it follows that a significant amount of inequality, hierarchy, competition, etc. is a necessary ingredient of an efficient economic system.” (Weisskopf 1992, page 21)

Finally: “To transform homo economus into homo socialis would thus involve a massive change in people’s mind-sets. Such a transformation might conceivably be imposed on a society by an authoritarian elite, but it is virtually impossible to imagine it being generated by a democratic process that respected the current attitudes and preferences of the general public.” (Weisskopf 1992, page 21-22)

Concerns such as these—that a participatory economy assumes people are altruists, or that a participatory economy requires a different set of human motivations than those people have currently, and that there is no way to get from here to there—are usually the last line of argument against pursuing participatory economics as a political project. Weisskopf poses the essential dilemma of all fundamental social change well when he asks how fundamental human and social change can be compatible with democracy.

We are under no illusions that a democratic economy cannot result from a non-democratic political process. Only a social movement committed to democracy and justice in all spheres of social life, supported “body and soul” by at least a third of the population, and approved of by at least another third of the population, could possibly establish a participatory economy. That means that a third of the population would have to be convinced that they wanted an economy that was compatible with homo socialis rather than reproductive of homo economus. And it means that the solid beginnings of such a system of motivation and reward would have to be well established during decades of struggle—which places important conditions on the internal dynamics such a movement requires. But this is precisely the democratic process that can lead to a participatory economy. Those who are sufficiently disgusted and or oppressed by the results of the economies of greed to struggle for a just economy of cooperation and to engage in that struggle respecting the principles they are fighting for will establish the “living proof” of the possibility and advantages of an economy based on those principles. That is also presumably how they could win the approval of another third of the population. We always assumed a transition could require many decades of blood, sweat, and tears with no guarantees. But, for us, that is a better prospect than another 500 years of solitude, with present results guaranteed.

But notice that the third of the population that is the movement for social change does not impose a participatory economy on the rest of the population. Only when there is another third that votes along with the diehards to take the plunge, would a democratically elected government have a mandate to set up a participatory economy.

But when this occurs, there will still be 33 percent of the population who neither believe in nor support many of the features of a participatory economy. And there will be more than 33 percent who are acclimated only to incentives reproductive of homo economus. Moreover, few in the 33 percent who have been exposed to different incentives via participation in a democratic, equitable movement will have both feet firmly in the psychological world of the “new man and woman.” But we are under no illusions about this either, which is why the features of a participatory economy are designed not to assume homo socialis, but to work with people who are homo economus, and to help transform most of them, over time, into homo socialis.

Unless we are interested in an economy suited only to saints, a participatory economy must have mechanisms that pressure people to behave in socially responsible ways. The principle mechanism that compels workers’ and consumers’ councils to behave in a socially responsible way is peer pressure. Workers’ councils must demonstrate that their proposals generate an acceptable excess of social benefits over social costs. And consumers’ councils must demonstrate that the social cost of the goods they request is consistent with the work effort ratings of their members. Ultimately, if self-imposed social responsibility as well as peer pressure fail to yield socially responsible behavior, a suitably defined majority of other councils imposes an acceptable proposal. The principle mechanism that compels individually responsible behavior are effort ratings by one’s work mates and consumption allocations based on effort ratings, as well as need. The logic here is to run the economy in a way that ensures that even homo economi will behave as homo socialis. The idea is that practice makes perfect, not that any of us are, or ever will be, 100% homo socialis. We are not surprised that people who are drawn to participatory economies have a spasmodic, confessional reaction. As one student put it, “I believe that people, myself included, want to, on some occasions, think only of themselves.” Participatory economies are not unmindful of this aspect of the human condition, despite what critics have assumed.

Incidentally, this is why we cannot accept the olive branch from “market socialist’s” who are kind enough to offer it: “Even if one’s ultimate hope is to progress to a participatory form of socialist society, a gradual move to some form of `market socialism,' which would begin to change people’s actual socioeconomic environment in a more socialist direction, would appear to be a necessary first step in achieving a democratic transition.” (Weisskopf 1992, page 22) The problem is that the logic of “market socialism” is precisely a socioeconomic environment conducive to the reproduction of homo economus and the eradication of homo socialis! If people have both potentials, and if the principle obstacle to a transition to a participatory economy is a long history of reinforcing the former and repressing the latter, how can an economy that continues to do just that be an important part of a transition strategy? True, things would be far easier if it could. But to pretend “market socialism” will lead to participatory economics seems illogical and utopian to us.

Incapable of International Economic Relations

One initial criticism of participatory economies was that they could not engage in international economic relations with other kinds of economies. In the April 1993 issue of Z Magazine we gave some tentative suggestions regarding how participatory economies might engage in international economic activities: We said “we should not be too disapproving if a group of historically distinct participatory economies agreed to:

But even so, this must be arranged through democratic discussion and planning based on moral argument and informed by serious attempts to re-estimate the external costs and benefits of economic activities. Otherwise it would still corrode economic democracy and equity, as well as continue to destroy the planet at an escalating pace.” If a participatory economy engages in trade with hierarchical and exploitative economies that have higher levels of consumption per unit of effort it need only pursue its own advantage in negotiations in order to advance the above principles. On the other hand, if a participatory economy engaged in trade with less materially advanced hierarchical and exploitative economies, equity would require the participatory economy to give its international economic partners a majority of the mutual benefits. To do otherwise would seriously undermine the values and principles necessary to the functioning of a participatory economy.

While critics have not had time to react to our tentative suggestions on this score, we find it comforting that the conclusions we came to were consistent with the conclusions of the Non-Aligned Movement during the debate over a New International Economic Order in the North South debate in the late 1970s, as well as more recent recommendations from progressive circles in the aftermath of NAFTA and GATT. [See Jeremy Brecher, “After NAFTA: Global Village or Global Pillage?” (Nation, December 6 1993), and Cavanagh, Broad and Weiss, “Global New Deal” (Nation, December 27 1993).] One additional complication we see for a materially advanced participatory economy is what to do if the effects of a generous distribution of the benefits of international cooperation to an economy that was internally hierarchical and exploitative was counter productive to democratic and egalitarian reforms within that economy. Our inclination is that representatives of the reform movement within the exploitative economy should decide if the participatory economy should engage in trade with their economy, and if so, on what terms. This is analogous to letting the ANC decide when other nations should trade with or invest in South Africa as long as it pursues apartheid, and on what terms.

Final Thoughts

The debate so far has clarified some important issues for participatory economics.

First, in theory, equity does not require balancing job complexes for desirability as long as differences in desirability of work conditions are counterbalanced by unequal consumption offset. In other words, if someone wanted to work a more desirable job complex and was willing to consume less in order to do so, this could, overall, still be equitable. So denying people “freedom” to choose to do this, or “freedom” to work at a less desirable job complex in return for greater consumption privileges, is not required by the dictates of justice or the principles of participatory economics. But there are important practical obstacles. Most important, whether job complexes are balanced for desirability or not, they must be balanced for empowerment to protect self-management. In reality, however, there is often a significant correlation between empowering and desirable tasks. Second, your work mates may not want to work less desirable complexes so that you can work a more desirable one. In other words, one would have to arrange to suit one’s preferences in this regard with work mates with compatible preferences. It is therefore possible this would be one important difference between different workplaces one considered in applying for work: some would have job complexes balanced for desirability and others would have job complexes that were more and less desirable than average, with offsetting effort allotments. Of course, real world social and technological conditions could also impinge on the degree of flexibility in this area. Even so, we see no reason to ban flexibility in theory. The essential issue with respect to equity, as compared to empowerment, is only that the overall burdens and benefits of work and consumption—which is to say economic life as a whole—should be balanced for everyone in the economy.

Second, there are, in fact, some complications that arise if we succeed in rewarding sacrifice, or effort, and do not materially reward talent. For example, imagine a world with capitalist economies, “market socialist” economies, and participatory economies all existing side-by-side. If there were people in the participatory economy who owned a greater than proportionate share of the physically productive assets in the economy, there would be an incentive for them to emigrate with the capital they own to a capitalist economy. But, of course, nobody owns the physically productive assets in participatory economies, and trying to emigrate with state property would obviously be theft. However, there would be particularly talented people in participatory economies, as there are in all economies. And there would be people who had received substantial amounts of education at social, rather than personal expense. And in each of these cases there would therefore exist a material incentive to emigrate to “market socialist” economies where they would receive greater material reward for the contribution their talent or education permits them to make. If there is no respect and esteem for talent and expertise in the participatory economy, if self-management, equity, and solidarity are not forthcoming, and if people do not come to see talent and socially costly education as a “gift” that confers an obligation to benefit less fortunate citizens who are engaging in equal or greater sacrifices—then the material advantages of emigration may become weighty. We support the “Cuban” rather than the “Russian” policy response. The Cuban government always said “good riddance to bad rubbish—goodbye gusano.” Soviet policy was often to restrict emigration of the more highly talented or educated. A logical case could be made for requiring people to pay back the cost of their greater education that was paid for at public expense, but the implication of keeping people “captive” who want to leave is unacceptable, in our view. In any case, a participatory economy with a strong net out migration, or an emigration/immigration pattern that produced a strong brain drain, is not a participatory economy that deserves to withstand the test of time. We would never defend a system that had to put up fences to keep people in. But we remain confident that those who would leave to exploit their talent or education elsewhere would be more than adequately replaced from the pool of talent and education remaining.

We should note, also, that there is an analogous problem that could lead to black markets in a participatory. That is, in activities without economies of scale, highly talented or educated individuals could strike mutually beneficial deals with consumers outside the “formal” participatory economy. Instead of working in an official workplace where they would be paid only according the their effort, they could make the product and sell it on the black market for a price under the social opportunity cost—the benefit to the buyer—but high enough to compensate the producer more than they would have received for doing the same work at their official work site, since the “market would bear” a price reflecting their effort and greater than average talent or training. What would minimize this problem—and it is a problem because it leads to inequities and undermines the system of incentives participatory economies rely on—are the considerable economies of scale in production of most goods and services, and popular consciousness that would see this activity as “cheating” rather than “fair.” Also, to the extent that material rewards were less important and social rewards more important in achieving esteem, such activity by talented and educated people would be counterproductive.

Third, Weisskopf says: “Advocates of participatory planning...tend to ignore the myriad problems involved in establishing fair and efficient democratic decision-making processes. First of all, choice among alternative voting conventions is complex and critical: when should decisions be made by simple majority, by a super majority, or by consensus? What will distinguish constitutionally protected rights from those subject to democratic voting?” (Weisskopf 1992, page 15) This point is well taken. We have engaged in a degree of hand waving regarding the exact procedures for approving and disapproving proposals in participatory planning. We continue to believe the general principles are correct—that only when councils can demonstrate that their proposals are socially beneficial and responsible is there reason for others to approve them. But no doubt disagreements will arise, and the modern game theoretic literature regarding voting coalitions does have contributions to make in this area that require further exploration. Moreover, as we acknowledged earlier, constitutional rights that supersede majority rule are important issues in any society and economy, including a participatory economy. We agree that more work needs to be done in this area, as well as distinguishing between people who feel themselves (and are) affected by a decision another would take, but who we may decide have no legitimate right to influence the decision. A majority of most American communities we lived in would have liked to cut our long hair in the late 1960s since it really galled them. But that doesn’t mean that the principle of self-management gives them the right to do it!

But as we have said elsewhere: “Ultimately, the social process of consciously, democratically, and equitably coordinating our interconnected economic activities is fundamentally different from the social process of competing against one another in the exchange of goods and services. And while both ‘solutions’ to the economic problem are feasible, only the former is compatible with self-management (decision making input in proportion to the degree one is affected by the outcome), equity (to each according to personal sacrifice or effort), solidarity (concern for the well being of others), variety, and efficiency (maximizing the social benefits resulting from the use of scarce productive resources), not to speak of ecological sustainability.” (Albert and Hahnel, 1992b, page 131) And that is why we need participatory planning, rather than markets.

References for Lecture 10

Albert and Hahnel, Unorthodox Marxism, (Boston: South End Press, 1978).

Albert and Hahnel, Marxism and Socialist Theory, (Boston: South End Press, 1981).

Albert and Hahnel, Looking Forward: Participatory Economics for the Twenty First Century, (Boston: South End Press, 1991a).

Albert and Hahnel, The Political Economy of Participatory Economics, (Princeton: Princeton University Press, 1991b).

Albert and Hahnel, “Socialism As It Was Always Meant To Be,” (Review of Radical Political Economics, Vol. 24; No. 3 & 4, 1992a).

Albert and Hahnel, “Participatory Planning,” (Science and Society Spring 1992b).

Bardhan and Roemer, “market socialism”: A Case for Rejuvenation,” (Journal of Economic Perspectives, Summer 1992).

Bowles, Sam, “What Markets Can and Cannot Do,” (Challenge, July/August 1991).

Breitenbach, Burden, and Coates, Features of a Viable Socialism, (Hemel Hempstead: Harvester Wheatsheaf, 1990).

Brus and Laski, From Marx to the Market, (Oxford: Clarendon Press, 1989).

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

Devine, Pat, “Markets Socialism or Participatory Planning?” (Review of Radical Political Economics, Vol. 24; No. 3 & 4, 1992).

Ellerman, David, The Democratic Worker-Owned Firm, (Winchester Mass: Unwin Hyman, 1990).

Folbre, Nancy, Contribution to “A Roundtable on Participatory Economics,” Z Magazine, July/August, 1991.

Hagar, Mark, Contribution to “A Roundtable on Participatory Economics,” Z Magazine, July/August, 1991.

Hahnel and Albert, Quiet Revolution in Welfare Economics, (Princeton, NJ: Princeton University Press, 1990).

Hahnel, Robin, “Cooperacion International Si, NAFTA, No!” (Z Magazine, April 1993).

Harrington, Michael, Socialism, Past and Future, (Boston: Little Brown, 1989).

E.K. Hunt and R.C. D'Arge, “On Lemmings and Other Acquisitive Animals: Propositions on Consumption,” (Journal of Economic Issues, June 1973).

Le Grand and Estrin, eds., “market socialism”, (Oxford: Clarendon Press, 1989).

Mandel, William M, “Socialism: Feasibility and Reality” in Science and Society, Vol. 57, No. 3, Fall 1993

Miller, David, Market, State and Community: Theoretical Foundations of “market socialism”, (Oxford: Clarendon Press, 1989).

Nove, Alec, The Economics of Feasible Socialism Revisited, (London: Harper-Collins Academic, 1991).

Schweickart, David, “Socialism, Democracy, Market, and Planning: Putting the Pieces Together,” (Review of Radical Political Economics, Vol. 24; No. 3 & 4, 1992).

Schweickart, David, Against Capitalism, (Cambridge: Cambridge University Press, 1993).

Tilly, Chris, “Dilemmas for Socialists,” Dollars and Sense, July/August, 1992.

Weisskopf, Thomas, “Toward a Socialism for the Future in the Wake of the Demise of the Socialism of the Past,” (Review of Radical Political Economics, Vol. 24; No. 3 & 4, 1992).