What Is Participatory Planning?
Erik’s principal objection to the “model” of a participatory economy is the proposal to replace markets with a procedure we call “participatory planning.” Here the distinction between a long-run goal and a transition strategy is crucial. I have never been under the illusion that we can replace markets with participatory planning immediately. The market system has been growing and deepening for hundreds of years, and regrettably still has the allegiance of an overwhelming majority of the population. Since the “system change” we seek is highly democratic it can only happen when we have convinced a significant majority to support replacing the market system with participatory planning. Therefore, I personally have long argued that while the market system persists, much of our transition strategy necessarily consists of various ways to “socialize” markets—as Erik and other proponents of market socialism put it—in order to ameliorate their detrimental effects. This is why I believe supporters of participatory economics can work together with market socialists on many campaigns to “tame” markets in the here and now. In other words, in my view the difference is not that market socialists fight to tame markets while proponents of participatory economics do not. The difference is that advocates of participatory economics fight to tame markets until a majority supports replacing them altogether with something far better, while market socialists fight to tame markets to keep them.
The case for eventually replacing markets altogether logically has two parts: (1) Demonstrating how and why markets—even if “tamed”—would still have undesirable consequences. (2) Demonstrating that there is an alternative way to coordinate a productive division of labor that is both feasible and less problematic. I can postpone the first part of this “case against markets” until after Erik presents his reasons for believing that eliminating markets entirely is unnecessary and undesirable. Here I confine myself to the second part—the “how and wherefores” of the participatory planning alternative. To keep things simple I will confine myself to the annual participatory planning procedure, taking care to correct some common misconceptions.
The Planning Procedure
The annual participatory planning procedure takes place in the context of an investment plan that has already decided what investment goods will be produced this year and how they will be distributed to increase capacities of different industries at year’s end. It also takes place when the stocks of all kinds of natural capital (e.g., acres of fertile land), produced capital (e.g., lathes), and human capital (e.g., people-hours of welding labor) available for use during the year are known.5 What the annual planning procedure “decides” is which worker councils will use which productive resources, what those worker councils will use their primary and intermediate inputs to produce, how intermediate goods produced will be distributed among worker councils, and how consumption goods produced will be distributed among consumer councils and federations. In other words, the procedure yields what economists call a comprehensive, annual production-consumption plan.
Only worker councils, consumer councils and federations participate in the annual planning procedure. Each worker and consumer council, and each federation of consumer councils participates by submitting a proposal for what that council or federation wants to do, i.e. councils and federations make what we call “self-activity proposals.” There is a single “iteration facilitation board” (IFB) that performs one very simple function. The IFB announces current estimates of the opportunity costs of using each kind of “capital”—natural, produced, and human—the social cost of producing every produced good and service, and the damage caused by every pollutant. The IFB raises its estimate of the “indicative price” for anything in excess demand in the previous round of the planning procedure, and lowers its price for anything in excess supply, after which councils and federations revise and resubmit new “self-activity” proposals until a feasible plan is reached, i.e. until there is no longer excess demand for any natural resource, any kind of physical capital, any category of labor, any intermediate or final good or service, or any pollutant.6
Individual workers participate only within their own worker council, helping formulate and revise their own worker-council proposal. Individual consumers participate only within their own neighborhood consumer council, (1) voting for delegates to higher-level consumer federations responsible for requesting higher-level public goods, (2) making their own and approving the individual consumption requests of others, and (3) deciding on requests for neighborhood public goods. The process whereby individual consumption requests are approved is internal to each neighborhood consumption council, and not part of the participatory planning procedure itself. The process whereby federations of consumer councils decide what higher-level public goods to ask for is also up to them, and not part of the planning procedure.
Each round in this social, iterative procedure begins with new, more accurate estimates of opportunity and social costs, followed by revised proposals from all councils and federations in light of new information about how their desires affect others. Each council and federation must revise and resubmit its own proposal until it meets with approval from the other councils. Consumption council and federation proposals are evaluated by multiplying the quantity of every good or service requested by the estimated social cost of producing a unit of the good or service, to be compared to the average effort rating of the members of the consumption council or federation requesting the goods and services. If, for example, the average effort rating for a neighborhood consumption council is equal to the social average, this should entitle them to consume goods and services whose production costs society an amount equal to the average cost of providing a neighborhood consumption request. A neighborhood council with higher than average effort ratings (indicating that they had made greater than average sacrifices as workers) is presumably entitled to a consumption bundle that costs society more than the average; a neighborhood council with lower than average effort ratings should presumably only be entitled to a consumption bundle that costs less than the average.
The estimates of opportunity and social costs generated during the planning procedure make it easy to calculate the social cost of consumption requests. This is important information for councils and federations making consumption requests since otherwise they have no way of knowing the extent to which they are asking others to bear burdens on their behalf. It is also important for councils and federations which must vote to approve or disapprove consumption requests of others, since otherwise they have no way of knowing if a request is fair (consistent with sacrifices those making the request have made) or unfair (in excess of sacrifices made).
Production proposals are evaluated by comparing the estimated social benefits of outputs to the estimated social costs of inputs. In any round of the planning procedure the social benefits of a production proposal are calculated simply by multiplying quantities of proposed outputs by their “indicative” prices—including negative prices for proposed emissions of pollutants—and summing. The social costs of a production proposal are calculated by multiplying inputs requested by their “indicative” prices and summing. If the social benefits exceed the social costs—that is, if the social benefit to cost ratio of a production proposal exceeds one— everyone else is presumably made better off by allowing the worker council to do what they have proposed. On the other hand, if the social benefit to cost ratio is less than one, the rest of society would presumably be worse off if the workers go ahead and do what they have proposed, unless there is something “the numbers” fail to capture. Again, the “indicative” prices make it easy to calculate the social benefit to cost ratio for any production proposal, allowing worker councils making proposals to determine if their own proposals are socially responsible, and giving all councils who must vote to approve or disapprove production proposals of others an easy way to assess whether or not those proposals are socially responsible.
This procedure “whittles” overly ambitious proposals submitted by worker and consumer councils about what they would like to do down to a “feasible” plan where everything someone is expecting to be able to use will actually be available. Consumers requesting more than their effort ratings and allowances warrant are forced to either reduce the amounts they request, or