Parecon Planning -- (Was ZMI Report Forward)

Justin Schwartz jschwart at
Thu Jun 25 21:15:39 PDT 1998

Would Albert and Hahnel (A&H)'s "parecon" be able to generate accurate inputs of consumer demand without excessively burdening the consumers? I said no, because people can't make accurate estimates:

> Justin replies:
> > But you have to know what good you will want. I don't know a week in
> > advance. When I go grocery shopping, I _always_ forgot something and have to return to the store, sometimes several times in a week. In addition there are unexpected needs. My son outgrew his tap dance shoes the week of the recital. If I'd ordered on
e set for a year, expecting them to last, he couldn't have danced. Or, my wife and I just saw a bunch of furniture by an artist we liked; we were going to accumulate a bunch of stuff slowly for our new house, but we found this stuff we liked and the pric e was right, so we bought quite a lot of it unexpectedly. Or one's car dies, as it will.
> Gar
> Your estimate is a just that -- an estimate. You are not tied to it
> to the penny. Also you are spending more time on this than you do on
> a grocery list. As long as total consumption remains the same, you can
> shift within reason between categories.

Firast note the concession taht it's more burdensome on the consumer. We are to spend more time on our estimates than we would on a grocery list. Moreover, not the concession taht the guesses I make will be inaccurate. This means the aggregate demand input, multiplied by everyone's inaccuracies (never mind deliberate overestimates) will be catastrophically wrong. We are not "tied" to it, but if we wehat we decide to make is based on wrong inputs, there will be shortages of what people _do_ want and surpluses of what they _don't_ want. And who decides what is a "raesonable" shift between "categories," And We fixes the categories?

> Justin adds
> >
> > If you estimate high, as everone would in A&H's system, threre will be
> > overproduction andwaste. If you estimate low, you'll be stuck. The thing is, as Hayek says, the future is hard to get right.
> Gar
> All right. Here is the key. Overproduction (within reason) is not
> waste. It is a sensible hedge against risk. Nobody gets the future
> right.

A fundamental disagreement. Overproduction is waste. It means that we have more stuff of certain sorts that we don't want, so in a world of scarece resources we have less of what we do want. Note also the sources of the overpriduction. It's not a "sensible hedgea gainst risk" to make a lot of stuff no onewants based on bad estimates. A sensible hedge would be figure out the margin of error based on accurate estimates of demand.

> No decent restaurant ends up without some food waste. Grocery stores
> end up with a certain amount of produce rotting on their shelve.

Sure, but we try to minimize this, or we should. A&H guarantee a great deal of waste.

> (Thanks to capitalism, some people starve while food rots on the
> shelves.)

A red, as it were, herring. I don't advocate capitalism. Btw in social democratic capitalism, people don't starve.

> Gar
> People can give a rough estimate that far in advance -- which is all
> you need. I'll deal with the power issue later in this post where you
> do.

It's not all you need in a rigid system like A&H. And the system is rigid, since it requires approval and debate up and dwon the line for changes.

> Gar
> Um the only thing in Parecon that requires approval by a majority of
> everybody are certain decisions at an extremely MACRO level which we
> both deal with later in this post.

But it requires a good deal of consensus at the lower levels, which involves transactions costs in getting to that consensus. There will be tendency to avoid the debate and living with a suboptimal set of choices.

> Justin
> >In a market system, if you think you can sell your designer furniture or tap shoes and can raise the capital, the only approval you need is from your creditors. It's much more flexible. It's also more flexible for consumers. You can just go and get
what you need and can afford when you need and can afford it. You don't have to wait for the plan to creak through a correction.
> Our current system is more flexible for the producer? Have you ever
> tried to get a new project or a change in an existing one through top
> management in a big corporation?

But outside monopoly situatuions there are at least many different corporations, all of which are in any case raiding the ideas of small entrepreneurs. In any case, I'm not sure that it's a recommebdadtion of A&H that their system is just as rigid as corporate capitalism, even if that were true.

> In the first case, in a market system you have to go to upper
> management. And, if you think this is decided without lots of meetings
> and lots of people pissing in the soup, you are crazy.
> In a parecon, you would have to get approval from some local level of
> workers council. Why would you expect the number of meetings or the
> transaction cost of dealing with a workers council to be higher than
> those of dealing with corporate vice-presidents.

A worker's council in a factory or plant, that wouldn't be too bad. In fact, that'swhat I'd like to see in a worker self-managed market system. But in A&H you need a lot of approval outside the firm. In capiatlsim or worker self-management, the form thinks upa n idea and flaots it. The market sells them whether it was a good idea. In A&H, sinxce you don't have a market, you need all sorts of political approval from local community leaders, from the suppliers and their local political leaders, etc. It's not like negotiating a contract. It's more like dealing with a coalition.

> In terms of entrepreneurship. If you want to start a new
> entrepreneurial business of any size in a market economy, you go to
> venture capital (and this involves meetings galore). If one venture
> source turns you down you can try another. But you have to find
> someone to put up the money.
> In a Parecon, you have to find a council of workers (at some level) or
> perhaps a consumers council (in exceptional cases) to advance you the
> resources. Again if one turns you down you can go to another. Why
> should this be less flexible or have higher transaction costs than
> going to venture capitalists?

Partly because, dealing in kind, instead of getting the capital from lenders and buying what you want, you have to deal _in kind_ with each supplier of resources. Of course there';s the question of incentive. In a market system, lenders lend and sellers sell because theyt expecta profit. But why should my lumber mill give you wood for the houses that you think area good idea? Even supposing that we agree, why think that giving it yoyu rather than to Him is a better allocation of resources?
> What about entrepreneurs financing business out of personal
> consumption? Very rare -- but can happen in both Parecon and Markets.
Rare enough not to be worth discussing.


> > > And if part way through the year, aggregate
> > > consumption differs drastically from the plan
> > > there is no reason price signal could be adjusted
> > > in response.
> Justin replies
> >
> > But it operates very differently. In a market, the price rise tells
> > producers, go here; the price drop tells consumers, buy now. In the A&H model, the price rise doesn't increase or change the structure of
> > production. It affects only the consumer demand function.
> Gar
> Um pardon me. How carefully have you read their books or on-line
> postings? Shadow prices are used by producers as much as by consumers
> in Parecon.

A confusion. What I said was not taht shadow pricesa ren't used by producers, indeed, they are used only by producersa nd planners. Rather it was that a price rise does not have effect it does in a market system. Therem the price raise says, Profits to be made here! In A&H, therea re no profits to be made. To get producers to reallocate their efforts, someone authoritative will have to tell them to do that, no doubt democrarically and with a good many transactions costs.

> > > 2) Lack of privacy.
> Justin replies
> >
> > Oh, right. In a smallish community, if there is a request for an unusual sort of item or one disapproved of by the community, it will be known who made it. How _dare_ I put in for a big budget of scholarly books when we hace all these and such unmet

needs? Never mind if I have other tastes that I don't care to answer to all and sundry for.
> Gar
> Talk about red herrings! Obviously, to maintain confidentiality
> figures will have to be aggregated sufficiently to avoid identifying
> people with unusual tastes.

Insofar as A&H idaelize smallish communities with face to face democracy, this will not be so easy. In any acse, even if there is no individual identification, there will be an understandable reluctance to enter your preferences for things of which your community disapproves.

> Justin
> >
> > In addition A&H haveeliminated a ntional market, since all request have to go through the local community first. So if my taste for scholarly books or body piercing technology or antique lithographs can't get past the filter of my local community, i
t's out; I can't put in a request over the net to Powell's Books or whatever and get it from elsewhere.
> Again, are you familiar with their work? Consumption requests at or
> below that earned by work cannot be vetoed by consumption councils.

That can't be right, since decisions about what is made have to be approved at the lower levels before being aggregated and sent on several times. What A&H say is that request for stuffwe decide to make can't be vetoed. The problem comes in deciding what to make. If my preferences for the works of Hayek never get past the local level, they will be printed,a nd I will be unable to buy them with what I earn.

Youa re right that I was in error about being able to buy from a national market.

> > Of course A&H do not explain their technique for determining what people have "earned" in any plausible way. This leads back to the problem of abstract labor that Marx so unsatisfactorily finessed.
> Gar
> Actually A&H explain exactly their technique. With variations (which
> I will go into if anyone really wants that much detail) they pay

As I said, this is hopeless implausible. It's exactly Marx's treatment of abstract labor. It's a hopeless irrational method of allocating labor, because it doess not price labor according to its economic value or the value of producing it. Skilled machinests are just a lot more expensive than ordinary laborers, and A&H have no nonauthoritative method of allocating labor to where it's needed.

BAck to the estimates problem: Gar:
> > > tax. Anyone who has to pay quarter income tax goes
> > > through a more equally burdensome process.
> >
> I was talking about time, not difficulty. This was my fault for being
> unclear. And since taxes would be simpler in a system where everyone
> had pretty much the same income (variations based only on hours worked
> and special needs funded out of collective consumption), you would not
> have that big an increase in time.

But you said--correctly--that the process would be at least as difficult as doing taxes now, not as doing taxes _then_.

> The process would be simple -- though time consuming. So you would not
> have to use a consultant.

Well, I could do own taxes. But I'd rather not.

(In fact Albert really did not like my
> bringing up the possibility of such consultants arising).

He wouldn't. He also wouldn't like the huge black market tahtw ould spruing up to evade his ridiculous system.

But there is
> a hell of a difference between having decisions made by a central
> planner, and having the choice of doing it yourself (feasible but
> tedious) or hiring someone of your choice.

That's misleading in ever which way. In the first place, the big decisions would be made by central planners. In thesecond place, it's no answer to that problem to say that you get into tell the planners about your preferences and vote up or down in a referendum on a plan every few years. In the third place, it's irrelevant tomy point here, which is taht it makes democracy, such as it is, meaningless, if you make participation so difficult that it must as a practical matter be delegated to professionals.

I would say this meets
> Marx's requirements for "recallablity" or representatives with a
> vengeance.

A requirement I view as absurd. But the "recallability" you have here is just employment at will.

> Gar
> You don't think spending two weeks a year you could come up with a
> plan for the year which was "rough and ready and imprecise"? That is
> all that is required for the system to work.

I very much doubt taht spending two weeks a year I could come up with a plan to which I would be willing to precommit myself. I would not have that much confidence. Least ofa ll would I be willing to entrust the fate of theeconomy to an aggregation of such attempts.

> Justin
> >In fact the way they describe it, you can't even redo it every year, Running it up tothe national level and back downw ith all the debate they envisage, five years would be optimistic.
> Gar
> This is merely asserted -- no evidence shown.

On the contrary. I argued for the point. I did nota ssert it. I observed taht the Russians were only able to make a rather bad plan every five years,a nd this without all the added transaction costs of participation. I think ythat those costs would add rather than substract from the total time required.

For consumers there is
> an increase in planning time. For producers, I do not see why planning
> time should be any greater than the eternal tedious meetings which go
> on in our current big corporations.

There's a big difference wuith trying to coordinate within versus across an enterprise. I don't think that Albert and Hahnel have ever discussed Coase and Williamsom on the reasion we have firms and markets and why the boundary is where it is. The argument, in brief, is that at a certain point the transactions costs of planning make it more efficient to use market relations and vice versa.

I don't know how much time you've
> spent in the corporate world. But I can tell you, planning is not
> something you can escape.

Not much. But I am aware of the phenomenon. I don't think much of theargument that, since there's a lot of planning alraedy going on, that we can therefore plan everything.

> Justin
> > The Rissian did it--badly--every five years without the debate.
> Gar
> The Reddest Herring.

Nonsernse. You can't blow off the most systematic experience we have had with planning. Not taht all the changes that A&H make from Soviet planning add layers of complexity and additiona transaction costs. The Soviets system should work better than theirs.

> Justin replies
> > Au contraire, I think people thing a great deal about their consumption; many people think of little else. I don't think A&H foster the right kind of thinking about consumption. Micro-thinking, do I needthis, should I buy that--that's the sort of live

simply crap you hear from certain green types.
> Gar
> Now a green herring. This is not live simply stuff; this is a chance
> as a consumer to actually shape what will be offered to you for
> consumption -- in a way that a market economy only claims to. Big
> decisions are influenced by little decisions.

And how is it that consumers don't shape the decisions enterprises make ina market economy? Ask the designers of the Edsel.

> Most of these decisions are made in meetings now. And no one has to
> participate in a particular meeting. You can always send your proxy
> with someone who is attending if you don't want to attend in person or
> electronically yourself.

Great. You don't have to participate. All you give up is your say. In contrast, in a market economy you get your say just buy buying this rather than that. In &H, you participate or take what they give you.

We turn to too many meetings:

> Justin continues
> >I won't have to worry about my kids, because they'll be in childcare. I won't have to worry about my wife. We can see each other at consumption planning meetings. I won't have to woory about finding time for leisure or schilarly work. There won;t be a q
uestion of
> > any such time.
> Right -- after planning doesn't duplicate any of the time you spend
> now, so it will all be added time. And there are not efficiencies in
> Parecon that make any of that lost time back.
> >

I don't see any in your argument or A&H's.

> > I see. All the decisions will be smart and I will see their wisdom and
> > feel part of the process because I have one vote--in the national
> > plan--out of 280 million.
> No you have 100% of the vote in your personal consumption, 1/tenth
> of the vote in your workplace team, 1/100th of the vote in your
> workplace.

No, you don't have 100% of the vote in your personal consumption. You get to apply for what you want made and then you get to receive the next nearest thing to what you asked for that comes out of the planning process. And don't tellme that A&H don't havea national refereumdum on the final plan, 1 vote in 280 million.

> Gar
> Here we have a misunderstanding because you weren't clear. I thought
> you were talking about the intermediate rounds of price setting.

That too. The intermediate rounds also gibe those who aggregate the inputs and send on a local or regional proposal a great deal of power to frame,

> are talking about the idea that once a plan is close to slack
> equilibrium (what you call overproduction) final rounds of refinement
> could be shortened by having facilitators prepare a choice of final
> plans.

There is no alternative to this, except to presenta single final plan.
> But at this point, how inputs and outputs are matched has been pretty
> well decided in the iterative process. So has collective consumption.
> At this point I can see only two dimensions to be decided.

What you ignore is that there are a great number of paths from any set of inputrs to any set of outputs, the choice among which will have significant consequences for the final outputs. The choice among these involves framing.

> 1) How safe do you want to be? That is how much surplus do you need to
> produce to allow for errors, disasters and changes.

That is, how much waste we can tolerate.

> 2) What leisure/production tradeoff do you want.

Note that waste involves reduced leisure, since people will be working on useless production and will have to work more to make up for it.

> I would think it would be possible to produce a spectra of choices
> along these axis which give you a pretty comprehensive set of choices.
> (In spite of what A&h say, I'm not sure that four or five is the right
> number though.) I think you could control for framing problems in a
> number of ways.
> 1) Make none of the above a choice

And if it wins, we have no plan.

> 2) allow people other than the facilitation broad to submit plans
> (within the range decided by the iterative process).

A California initiative Ballot problem. Therange of choices has to be manageable.

> 3) possibly use Borda weighted voting. (That is if there are nine
> plans, rate them on a scale from 1 to 9. Add up total points for each
> plan. Plan with the most points wins.)
How does taht help with framing?


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