Lecture 5: Allocation Values
In this lecture we will try to hone our general values into specifics bearing on issues of allocation. First, however, answers to last lectures questions.
Answers Lecture 4s Questions
For lecture 4, the focus was consumption values. How do we translate our overarching normsequity, solidarity, self-management, diversity, and efficiencyinto a set of more explicit aims regarding consumption? And what do we get when we do this? I thought it would be useful to focus on a few aspects of consumption: income, information, influence and incidence.
I spelled out a few possibilities for how we might approach the four is, and then asked for evaluations of each of these possibilities re the guiding values I am utilizing. So here are my answers to the questions I raised.
It could be that we each have claims on output in proportion to how much of the means of production we own, or how productive the means of production we own are.
This option yields differential income with no basis in anything that the individuals involved have actually done or committed of themselves. It is inequitable in the same simple way that it is inequitable if you give one child a very narrow straw, and another a wide straw, and set them both to the task of drinking out of a single milk glass, day in and day out for breakfast.
As with the children, only more so, division according to capital ownership is not conducive to solidarity; jealousy and attempts to grab the bigger straw get in the way.
More, when translated to income from milk consumption, the different income to different property owned approach ensures that those with high income will utilize it to enhance their abilities to control other choiceswho gets which toys, and, even more important, who gets the next technical innovation, the next bit of additional productive property, the computer as compared to the abacus for doing homework, thus also violating self management in a progressive spiral of divergence from proportionate say for all actors over the decisions affecting their lives.
Regarding diversity, the option has relatively minor implications, I suppose, beyond narrowing options for some.
As to efficiency, the option does foster the most productive use (or, more accurately, the most profitable use for the owner) of capital goods. But it does not lead to the widest possible development and utilization of peoples talents and abilities. So if we could accomplish the first endand improve it by making the aim of the use of the capital goods social well being rather than private profitwithout sacrificing the second aim, the development of human potentials, we could make progress on the efficiency front too.
This is a very popular conception, including among people who call themselves socialists. If you produce more of the overall output of society than I do, you should have just that much more claim on the social product. Or so goes the argument.
But what determines this gap between what you produce and what I produce?
It could be ownership of better tools, etc., unless we have already ruled that out, as above.
But it could also be that you work harder. Or that you have better training. Or that you are just plain more productive, intrinsically, because independent of how hard we work or how much training we have, you are quicker, stronger, calculate faster, have a better eye for design, or whatever.
Should such differences be rewarded?
Lets leave out of consideration the work harder component of the difference in output for now, dealing with it below, to consider first, instead, genetic endowment.
If you are physically bigger and stronger, and we work equally hard and for an equal period of time, should you get more reward because your pile of output (picked oranges or whatever) is bigger than mine? Well, to reward this is to say that hey, since you were already lucky in the genetic lottery, now we will bestow on you some more advantage to go with what that luck already gave you. What justice is there in this? And it cant be a matter of incentives, as opposed to justice, either. For surely no matter how much or in what manner we set up our payment schemes, no one is going to be able to respond by improving their genetic endowment. There is no incentive effect on attributes that are beyond our control. And there is no moral reason to reward what we have nothing to do with determining either. So the option is inequitable and without redeeming worth.
But what about differences in skill and knowledge that are learned, rather than inherited. Suppose I go to school for four years while you sweat in a mine. Then we both work someplace where my school training makes me more productive. Do I deserve to be paid more? First I enjoyed my school days while you enhanced your probability of dieing of black lung. Then I benefit again on top of that when I work at the same effort level as you, because my learned skills increase my output.
Whats the logic? It cant be moral. It cant be that I deserve more for my pleasurable time in school. Incentives you might say. We need to pay for the schooling or else people wouldnt do it. Well, yes, if the schooling is onerous and involves sacrifice and hard work, we ought to pay for that, like we pay for it in any productive contribution, because it is deserving and because the incentive effect is needed. But if a task we undertake is pleasant and fulfilling, than why do we have to pay a whole bunch extra to get people to do it?
Answer: of course, we do not. This is just one more of the almost endless array of idiotic lies hoisted by economists upon the public. Ask yourself, given the choice do you opt for grad school or a job, say, in a coal mine, for the next 6 years? Suppose the coal miners pay is $30,000 a year. The incentives argument is that we need to pay you more, over a lifetime, in returns on the schooling, to get you to do it. Well, is this true? Would you do the schooling or the coal mining at $30,000 each. Now, how high do we have to raise the coal mining salary to get you to do it instead of the grad schooling at $30,000?
The deduction is simple. There are elements of schooling and learning skills that should be remunerated, as work, in the same way as work is. But the accumulated skill, talents, and knowledge, which then contributes to output, should not be remunerated per se.
OK, so what are the impacts on solidarity, self management, diversity, and efficiency? Well, what we are really talking about here, I believe, is a clear class division. A gap created between conceptual/order giving economic actors and instrumental order taking actors based on the qualitative effects of their activity, and on the remuneration for it as well. However this gap initially opens up (genetic endowment, training, luck, brute force) once it exists those with power and extra income will use it to further enhance the conditions of their dominance (by setting up things like the AMA, school tracking, etc.) thus gaining a disproportionate control over economic outcomes. A class rule is fostered: coordinator class dominance over working class dominated. Solidarity is gone. Diversity is delimited for those at the bottomand even for those at the top who must defend their positions.
Why then is this choice popular among many who call themselves socialists? Well, I have to say that I think that the answer is either ignorance, or that these individuals are victims of, rather than transcending, their class position. They are advocates of coordinator class vision and values, however unself-consciously, pure and simple. Often they take their stands with a heart...but then capitalists sometimes show a little heart too, as long as the basic underlying values that keep them on top are preserved.
This is just war by another name. And it is, in fact, what exists in real market economies. Remuneration is a function of such things as monopoly buying or selling power, control over technologies, barriers to entry, organizational might (in unions or corporations), ability to withhold assets and thereby wreck havoc, and so on and so forth. Power, bargaining power to be exact, is the main determinant of income.
There is no equity in any humane sense. More like the law of a nightmare. Solidarity is gone. Self management is gone, etc.
Well this would be nice. And where does it all come from? This is, indeed, utopian. Meaning it is impossible because of limitations built into the domain we are discussing. It is like asking trees to fly, or the New York Times to tell the whole truth. Actually, in this event it is more like the former, as the constraints are due to physical laws not solely social ones (as in the Times case), but otherwise I hope the point is clear.
This one is nice too. Indeed, it is really just four with a lid on demand. But what is the lid? Where is it established? Is it our needs/wants? And (a) how do we measure these, and (b) why is there in fact a lid on our needs/wants? The only way such a lid can arise is if we put limits on ourselves before the fact of knowing what society can deliver, or if we do it in light of understanding what the economys situation and potential are. How do we do curtail ourselves without knowledge of potentials? Does everyone do it the same? Is it even a good idea? And if we are curtailing ourselves in light of potentials, that is merely operating in terms of a budget, and is not option 5. These are things to think about because they actually have implications later. The point is, we dont have to spend much time on this one now because surely expressed needs would greatly exceed available output now, so that this option immediately reverts to option 4 or has to be passed over on route to option 6. But what if we had socialist (or parecon) people, who had developed a profound social responsibility as a natural part of their beings (much as people now learn quite early how to grab?). Would we then want an economy in which people essentially limit their requests, but get what they say they want? (The only alternative still in the range of option 5 would be some objective determination of need from without, which would remove control over our lives from us, and is obviously a fiasco.) Would this in fact be good, as many intuitively think (especially greens)? (It is worth thinking about. I think the answer is no, this would not be ideal...) Anyhow, in the real world, for now and the indefinite future, 5 is utopian at least if thought of as operating as the sole criterion for allocation of all goods. (Though, say, for health care it might work fine...).
Well, clearly I like this. It rewards what we in fact do have control over. So as an incentive it makes sense. As a fair act in response to our efforts it makes sense. I dont think it would disrupt solidarity, even if some people work a little harder and earn a little more and other people work a little less hard and earn a little less, supposing each person is free to choice any available option. The income differentials couldnt become very large, certainly not large enough to disrupt self management. All in all, I dont see any problem other than the following: What if I cant work? Or what if I have a disease, or a hurricane hits my neighborhood and so I have way more expenses than others?
The answer, it seems to me is to have distribution according to need for calamities, health, and some other related similar facets of consumption. Where does it come from? Everything always comes form the overall social product. So, it must be that in our good economy some part of the total social product is set aside for these purposes. Thus, it is a kind of social fund, or insurance fund, if you like...
Which is what I arrived at under the option 6 discussion above.
Next, in lecture 4 I also asked: what kind of information must a person have to make sensible decisions about which items in particular they would like to get from amongst all those produced in society, up to their income level? What do our overarching values tell us ought to be our aims in this regard? And I presented some options and urged that each be evaluated.
Well, this doesnt seem to have any first order implications for equity. Using the price indicators we can choose consumption goods totaling to our income level, and if that has been determined equitably, we are fine on this score.
The approach doesnt do anything for solidarity, however, and arguably is even anti-solidaritous. Why? Well suppose you were operating in your family and you never took any account of the actual impact of what you are doing on anyone else. It just wasnt an option. Indeed, you could instead only consider implications for yourself. Not too solidaritous, not even if the other family members were recompensed when your choices affected them adversely.
As to self management and diversity, I think the effects are modest depending on the effectivity of the pricing structure. If the prices reflect true social costs and benefits, than when we use them to make our choices we are at least judging in light of a sensible accounting. If they dont our best efforts will nonetheless diverge from our intentions. The informative problem about information in this option, however, to my thinking, is that while there is theoretically enough information in a price that represents true social costs and benefits (I am now assuming that the prices are that good, unlike market prices) for people to make good choices, there is no information to facilitate people actually feeling any concern for one another or having any empathy for one another, and regardless of their desires in the absence of this people have to act as though others do not even exist.
Of course, if the price doesnt account for the full social costs and benefits, the effects on people, society, etc. etc.then in addition to the problem of the absence of qualitative information, we will have a price that is misleading and our decisions will be inadequate no matter what our motivations may be.
In other words, we could add to a price indicator, some qualitative info about what the material components are. It is progress of a sort, but not much, at least bearing on the question above. We now know that when we buy a couch it uses rubber, and so has implications for rubber workers, but we know nothing about the circumstances of those workers.
Now we are getting some place, with this knowledge we can have empathy for these people We can begin to overcome what is called alienation in the sense of starting to understand that each item we consume is really part and parcel of a social process rather than some finished independent entity with no history, links, human dimension, etc.
More progress. More connectedness. More qualitative info relevant to our decisions.
Next I noted in lecture 4 that in each of the above cases, we could encapsulate the added knowledge in the form of a price structure that more accurately incorporates all cost and benefits in the number we are presented, or we could have the information in a more qualitative or descriptive form, or we could have both.
Well, I guess that in my above answers I temporarily cheated by mostly assuming away the inaccurate prices problem. But now let me clarify it. The best allocation system in creation is not going to have numbers (prices) which perfectly match real social costs and benefits. At best, they will be a very close representation. But there is an important problem lurking here. And this is so even assuming prices pay attention to all effects at the level of (5) above.
When something is a little off, a tiny bit, it is generally no cause for hysteria. That is the nature of measurement. But, what if error accumulates. That is, suppose a price that deviates inexorably, however little, leads to choices which then cause further distortions in the same direction, and so on, and so on. Minor errors that arise for whatever reason are multiplied over time. Now you need some kind of corrective for your prices, which will inevitably have errors, to avoid those small errors leading to large problems. And you also need to be sure that the errors are truly random, rather than systematic. (Notice, with markets the errors in prices are systematic, due to not accounting for public and external effects, and so the problem of errors accumulating, Robin and I call it snowballing, is acute and also lacks a significant corrective mechanism). Anyhow, the point here is that there is a second purpose for the incorporation of qualitative information into a desirable economic system. First, it reduces alienation and facilitates solidarity (as well as empowerment through knowledge) as noted earlier. But, second, it acts as a corrective to prices alone which are, after all, supposed to be a congealed representation of all qualitative information. (If no one asks any questions about this, I may give a pop quiz on it...).
The third focus in lecture 4 was how much say should we should each have in the final resolution of what exactly we get to fulfill our claims on productive output? Should it be our choice alone? Should others have impact? What context facilitates the preferred balance?
Since it is consistent with our income, it is equitable. But what if our choices impact on our neighbors? Or what if the workers dont want to expand output of some good we are trying to get a whole lot of? It seems that this issue is like that of information, but at the decision level... It should not be that prices alone are accountable for determining that peoples wills are exercised in the right proportions given the effects people endure. The prices are guiding tools, indicative is the economic term, but there also ought to be qualitative information to use in these determinations.
Well yes. Suppose my neighbors want to put a park into our community. Doesnt that have implications for me?
On the one hand, we want a degree of privacy. I dont want to have to ask for permission for everything I consume. On the other hand, my choices can affect the quality of life in my living group, neighborhood, etc. And so what I consume affects others, who therefore should have some level of impact (proportionate, of course) on the outcome.
I dont know that theres a right answer, but it seems to me that you first have to resolve collective needs and consumption, and then in the context of those choices arrive at lower level smaller group choices, or individual choices. Whether I get skis depends on whether the region I am in chooses to maintain ski lifts, for example. And so on.
In this question I was merely seeking out awareness that there are goods that primarily affect individuals, small groups, larger groups, etc. And so there will need to be mechanisms for arriving at preferences at each relevant level: the individual person, the living group, community, neighborhood, region, whatever...and awareness that there is a logic in trying to deal with the more encompassing consumption first, as it establishes a context for the smaller group and individual choices.
The next topic, the last we will deal with explicitly under the focus of values, is allocation values. How do we refine our broad values for the economy as a whole into more precise aims vis-à-vis allocation? Well, we do it, presumably, by thinking about what exactly allocation is, and then seeking to understand what kinds of specific aims we want for how we accomplish allocation so that it will further equity, solidarity, self management, diversity, and efficiency.
So what is allocation?
Suppose we have something we'll call economic activity. We have already seen that it can be production or consumption.
In fact we have seen that production which has diverse inputs becoming diverse outputs, and consumption which has diverse inputs becoming diverse outputs, are in some sense the same. We use the word production when we are concerned about the outputs and the process of their creation. We use the word consumption when we are keying on the inputs. But each act of production also has what we can sensibly call a consumption moment, or aspect. And, likewise, each act of consumption also has what we can call a production moment or aspect.
Each act of consumption and production clearly has an allocation moment or aspect. For each act of production/consumption certainly influences this overall outcome for the economy. Yet there are some economic actions that are more allocational, in our sense, than others. For example, the interaction of actors deciding what to buy and sell in a market system or the process of the planning board meeting and proposing inputs and outputs for the steel industry in a centrally planned economy are both primarily allocational, rather than productive or consumptive. Yet these acts, notice, are also themselves part and parcel of consumption and production. We choose to feature them, however, when we are talking about the allocation aspect of economic activity.
So, when talking about allocation we are talking about determination of outcomes. Again, consider a society at a moment in time, say day zero of year 2000. It has a certain condition, and it has certain possibilities. Indeed, imagine some kind of God could come down, take a look around, and then list all possible outcomes for day 365 of that same year in that same society. You have this and that. She has so and so. We have done such and such. Or, alternatively...this other arrangement is the result. And so on, though a nearly infinite list of possibilities. There are different amounts of this and that produced, with different actors, choices about technologies, and distributions of the products (and byproducts) in each different possible societal economic result. Now suppose we look at the same society/economy on day 365 of year 2000. In fact of all the possibilities, one has eventuated. We can call this the plan for the year 2000. Of course we have found it out after the fact, but, nonetheless, it is a map of what happened, and is, in precisely that sense, an enacted plan, whether or not anyone wrote it out before the fact or not.
It depends on the economy. Market dynamics might do some of it, or central planners, or both. CEOs of firms may do some of it, or government bureaucrats. Workers might do some of it, as might consumers. So what is the point?
So, we know our broad values. We know, also, that in thinking about economic inputs and outputs we have much more in mind than just material things. (We also know that we have some aims already in mind for production and consumption, and we of course want allocation to operate consistently with these.) So, as with production and consumption, perhaps we can move toward some clarity about allocation by pursuing various questions concerning it. (These might not be quite as easy to even try to answer as those in prior lectures. But nobody said this would be easy all the time... And I have no doubt that those trying to answer are going to get far more out of this than those who just wait around for a few pages for my answers.) .
I guess thats enough in the way of questions preparatory to next lecture. One thing critical to this conceptualizing business is obviously thinking up the questions in the first place. If you are trying to develop a theory, or a model, for example, you need to figure out your concepts, then you need to address the topic by trying to tease out what matters from what is really less consequential. One way to do this is by asking questions and answering them, and working the results into a theory, or vision. Actually, what really happens is more likely that you keep refining your choice of concepts, and your understanding of their interrelations, in light of how you answer the questions you ask, until you get to a compelling picture. That is what we are doing. anyhow.
So how do you come up with the questions? Well, partly it is just creative and hard to give rules for, but partly there is a knack. You try to ask questions that isolate aspects you care about, that differentiate among alternatives, that reveal underlying causes and effects. And you try to be disciplined about it, meaning you try not to jump to answers (which, being spontaneous may be infected with presuppositions, prejudices, and just downright errors of myth) but to slowly and carefully work out answers paying special attention to using your conceptual toolbox, and to expanding it only when you absolutely need to.
At this point the idea is to think about the above questions, in light of the values we have posited and any others you may prefer, and what we have already said about our attitudes to production and consumption (our view of job complexes, remuneration according to effort and sacrifice, etc.), and using our many concepts.