Thursday, December 27, 2007

Centrally Planned vs Participatory Planned Economies

Participatory planning allows participants to exercise direct democracy and allows ordinary citizens to control their own lives. Citizens of a post-revolutionary society will be organized into federations of workers and consumer councils. Workers in worker councils need to articulate proposals on what and how much they want to produce, as well as the resources needed for production. Consumers, on the other hand, will need to express through proposals what and how much they intend to consume. Both production and consumption proposals will be sent to the facilitation board where through a system of proposals, amendments, and rejections, a social plan articulated to cover the entire economy is hashed out.

Let's be like Frank Lucas in American Gangster and cut out all the middle men.

The institutions of a participatory economy embody the values of efficiency and effectiveness that we seek. The institutions of a centrally planned economy however, no matter how valiant our efforts, no matter how beautiful are rhetoric, negate and hamper the realization of these values to take form.

Let's take a look at how central planning can be inefficient and ineffective. All which can be viewed in the history of China and Russia's usage of it.

But, first we must realize that a nation's(or regions') economy is an integrated affair. Therefore, any decisions about production in one industry will have ripple effects elsewhere. This is due to the simple fact that the output of one industry can serve as an input towards another , and thereby makes one industry dependent on another. This integration of industries can be represented through the usage of an input-output matrix.

Input Output Table
0.4 tons
2 tons

Suppose through a democratic and participatory process of proposals, requests, rejections, and amendments, a social plan articulated to cover the entire economy is hashed out. One in which it articulates the need for the Coal industry to produce a net output of 200,000 tons of coal and the Metal industry to produce a net output of 50,000 tons. Suppose, coal is required to produce metal and some amount of metal in the form of tools is required to produce coal. To produce 50,000 tons of Metal requires 2(50,000)=100,000 tons of coal. Likewise the production of 200,000 tons of coal requires (0.4)(200,000)=80,000 tons of metal.

Your factory makes cars. There is a demand nationally for the cars you produce. This is known due to the fact of people putting in requests for cars through participatory consumption planning. Yet, we know that the requests and the production of cars has ripple effects. There is a finite amount of resources available to us to produce cars, as well as other products that rely on the same resources. However many cars we make, we can't use the steel and other material for other products. This also extends to human resources as well. The people assembling the cars won't be available to do other work.

There's a finite amount of resources, that goes for labor, time, natural resources, etc. What we had in Russia and China was resources being over committed. Central planners were committing more resources than were available, so there were persistent shortages. And these shortages weren't prone to one industry, but because an economy is integrated it affected other production units.

But that can be avoided with participatory planning and the elimination of the roles of central planners. People express their priorities through the usage of workers and consumer councils, and federations of these. This prevents overproduction and potentially useful products being wasted. Participatory planning is the more efficient in gauging the priorities and needs of the people, than central planning could.

Moreover, the government(centrally planned) established fixed prices for all inputs and outputs based on the role of the product in the plan and on other noneconomic criteria. The prices did not reflect the supply and demand or relative scarcity of the product. Shortages occurred and prices were established too low which resulted in allocation inefficiency and ineffectiveness. So, what we had was some outputs being cheaper than the inputs used to produce it! For example, bread was cheaper than the wheat needed for its production!

Yet, that can be avoided with participatory planning and the elimination of the roles of central planners. People express their priorities through the usage of workers and consumer councils, and federations of these. This prevents inefficient allocation and goods being over or undervalued which can cause scarcity or overproduction. Participatory planning is the more efficient in gauging the priorities and needs of the people, than central planning could.

In central planned economies, managers were rewarded for meeting assigned goals. Can you see the problem here? In Russia and China, managers manipulated and lied about reaching production goals in order not to be reprimanded and to live the good petite-bourgeois lifestyle. But, remember, economies are integrated. Looking at the input output table i have above, if managers in the coal industry are lying about reaching their output goals or manipulating data, this effects the steel industry, who uses that input to produce steel. This decreases the steel intended target, which affects bike makers, car makers and all other industries that use steel as an input.

Not very efficient or effective, huh?

But that can be avoided with participatory planning and the elimination of the roles of central planners. People express their priorities through the usage of workers and consumer councils, and federations of these. Worker's self-manage these work units, information is democratized the decision making process is democratized with each actor influencing decisions in proportion in which they are affected by them.This prevents inefficient allocation and goods being over or undervalued which can cause scarcity or overproduction by managers manipulating data. It would be more beneficial to the workers of the work unit and society as a whole to report accurate data. Again, participatory planning is the more efficient in gauging the priorities and needs of the people, than central planning ever could.



The Red Son said...

very enlightening comrade. It could be fleshed out a bit though.

ajohnstone said...

Sounds very much like you have been reading Albert/Hahn Parecon writings .

What i would suggest is that they and this model ,in fact, over-complicates the problem of satisfying demand inside a socialist economy .

As they rightly say , what is required is indeed a democratic decentralised system rather than a doomed central-planning system . But instead of a myriad of consumer/producer councils that are supposed to set prices and exchange values , the alternative offered by those socialists who advocate a society of free access is a self-regulating system where prices , wages and money are abolished comnpletely . The Marx-Kropotkin objective .

It has been argued that Parecon has adopted much of the Von Mises critique of state capitalism [and its neo-trotskyist critics too]whilst relegating "from each according to abilty to each according to need" as an unattainable utopia due to this misunderstanding that state capitalism is somehow a step closer towards socialism .

Instead of Parecon addressing the social waste of monetary accounting and the use of general equivalents , needs will be satisfied through relatively simple and straight forward stock or inventory control systems employing calculation in kind ( the counting or measurement of physical quantities of different kinds of factors of production). Logistics already being a science employed in today's capitalist world where the stacking of supermarket shelves , or providing components and parts in manufacturing has become fairly automatic. Allocation priorities can be decided by the equally easily adapted decision-making tools of cost benefit analysis .

As i see it ,Parecon is overly -elaborate while the socialist solution is simple .

see various articles at the web-site

blackstone said...

thanks redson, i noticed that also and wanted to flesh it out more, but didn't want to get too complicated or long winded. Maybe, i'll edit it in future or do a followup, no?

Ajohnstone, Yes, i have read alo of Albert, Hahnel, as well as Tom Wetzel and other writers on Znet. I'm also familiar with Kropotkin and Bookchin.

You bring up a strong point and an idea I,myself, pondered about.

But like i said, there's a finite amount of resources of available. Prices, help us gauge the supply and demand of a service or product. Keeping track of stock and inventory controls doesn't accurately judge the needs and wants of the community.

For one, realize how many products are introduced to the market that flop. A waste of resources that could have been allocated to other projects of high demand. BY checking the inventory, yeah we can see noone wants it and never make them again or make lower amounts, but we already wasted resources. That's inefficient.

You can check inventory to see that there's a steady stream of people getting products, X, Y, Z, but what if that's cuz X,Y,Z the only products available. What if they really don't want it, but it's the only thing available in stores.

There needs to be a way for people to truely satisfy there needs and wants. The only way to do that is for people to put in requests. This truely introduces diversity in products.

At least in my opinion.

ajohnstone said...

I think what we have to consider is that the object of socialists is to develop a sustainable steady-state production system , not a society that actually strives to create growth . i am talking here about when the problems of world hunger disease , deprivation and poverty has been addressed - this will be the priority demand no matter whether Parecon or Socialism .Nor am i suggesting that no technical advances or research takes place but there would be no external pressure to do so or even any need to apply all new productivity enhancing techniques.

Decision making due to the nature of production will require decisions made at local , district , regional and world levels . Decisions can and will be made , and many of Parecons suggestions have value but not its bastardisation of capitalism and communism by retaining wages money and prices.

To claim that all factors are scarce (because the use of any factor entails an opportunity cost) and, consequently, need to be economised is actually not a very sensible approach to adopt. Effective economisation of resources requires discrimination and selection; you cannot treat every factor equally – that is, as equally scarce – or, if you do, this will result in gross misallocation of resources and economic inefficiency. It makes sense from an economic point of view to economise most on those things that are scarcest and to make greatest use of those things that are abundant. Factors lying in between these two poles can be treated accordingly in relative terms.Liebig’s Law of the Minimum can be applied , as can Maslow's “hierarchy of needs” . It would seem reasonable to suppose that needs that were most pressing and upon which the satisfaction of others needs were contingent, would take priority over those other needs. We are talking here about our basic physiological needs for food, water, adequate sanitation and housing and so on. This would be reflected in the allocation of resources: high priority end goals would take precedence over low priority end goals where resources common to both are revealed (via the self regulating system of stock control) to be in short supply (that is, where the demands for such resources exceeds the supply of them).

I am also suggesting psychological changes to the world consumers would take place , something that Parecon may fail to achieve with its continual adherence to material reward for the actual producers .
In a “free access” socialist economy the notion of income or purchasing power would be devoid of meaning. So too would the notion of status based upon the conspicuous consumption of wealth. Nor can we forget that free access to goods and services denies to any group or individuals the political leverage with which to dominate others . The ultimate protection of the rights of the majority against the power of the majority .

All wealth would be produced on a strictly voluntary basis. Goods and services would be provided directly for self determined need and not for sale on a market; they would be made freely available for individuals to take without requiring these individuals to offer something in direct exchange. The sense of mutual obligations and the realisation of universal interdependency arising from this would profoundly colour people’s perceptions and influence their behaviour in such a society. We may thus characterise such a society as being built around a moral economy and a system of generalised reciprocity.

Renegade Eye said...

Even the Stalinist bureaucratically planned economies particularly Russia, made great advances. One word: Sputnik.

troutsky said...

What paracon does that johnstones "free access" does not is allow for political differences to arise and a means for settling them.'Free access" is a utopian ideal of harmony and unity which attempts to dissolve all antagonism.It gives priority to "logistics and efficiency" over participation.Being rewarded for sacrifice allows some to decide to accumulate more, but I don't feel it automatically creates class division. As for money, or chits, or tender, it is a simple exchange unit once the coercive relationship of capitalto labor is removed.

ajohnstone said...

Troutsky ,
I have to decline the accolade that it is "johnstone's free access " and bow to the fact that it is the idea of a money-less world taken from Marx and Kropotkin and many others before me .

I no way believe that there will not be differences of opinion on what is produced , where it is produced and when it is produced or that those disagreements will simply be solved by appeals to mere technical efficiencies . Using cost benefit analysis on the basis of points does not preclude subjective factors being included in the calculations . Discussion and debate will be involved in decision-making

Burt perhaps you are also making an unnecessary virtue out of "participation" . One of the criticisms of Parecon in the amount of time and energy spent "in committee" . Parecon appears to be about building a fairly massive (and socially unproductive) administration for policing all the wage levels, labour outputs etc. In contrast the practical aspects of world socialism is not about creating ever greater bureaucratic structures, but probably quite the opposite.

The reason that Parecon has to go to such lengths to construct such a complex and wasteful system of checks and balances is ultimately that its proponents are unwilling/unable to challenge one of the central arguments propping up capitalism, that humans can - if given the right economic framework in fact consciously co-operate, work and consume . It is a continuation of the usual capitalist ideological accusation that socialism is utopian

Yes , free access socialism endeavours to create harmony and unity , but by describing such a system of society utopian you must of course deny that such societies have existed in the past and and do exist presently - those anthropologists and Marxists call "primitive communism" .

To have a system that allows wages to be dispensed on the basis of work carried out, allows money to circulate, and restricts access to wealth (eg food or housing) unless you have sufficient money to purchase something, doesnt seem to be too far from capitalism in terms of its outward appearance.

If a factory unit obtained a more efficient item of plant and become more productive for a given amount of labour, would that not increase the remuneration of those working there ? If so (and I cant think how an incentive scheme could work that didn’t depend on productivity), there would be an obvious incentive for the workers to obtain more efficient plant & machinery.
In reality , someone who had saved up their money, rather than consumed would offer (perhaps under the table , on the black market )their savings to the factory on the understanding that they would get a cut of the increased remuneration won by the factory workers. It would be a private investment - just as happens in capitalism. And before long, those who had invested well would be able to stop working because their investments were providing them with enough income to buy more than they could want. Result ? - a new owning class in all but name .

The fact that Parecon apparently wouldn't permit this to happen is irrelevant - most countries in the world have very strict laws regarding the production and selling of drugs. Thousands of laws, massive police resources and the threat of draconian punishments appears to do little to deter those who see a quick way to get or keep themselves out of poverty.
Why and how does Parecon think that it will be able to police every sphere or sector of production to ensure no illicit investment/profiteering occurs ?
Capitalism finds it hard to cope as it is with the black markets that exist on the untaxed margins of the legitimate market system, (eg drugs, sex industry, gambling/ organised crime). Parecon would appear to provide an immediate incentive to break the law in a number of ways in every sector of production.

Parecon will still have social conflict as long as they they permit inequality through "accumulation" (as troutsky says would be the case ), so we will still have those who will envy and covet their neighbour's chattels which will lead to the continuing problem of thft and the continuance of a Parecon police , Parecon judges , and Parecon prison wardens .

Parecon is attractive to those who dislike capitalism, but who, in the final analysis, lack the confidence that either there are sufficient resources on the planet by claiming scarcity of resources ,
or that human beings can:
- work voluntarily without co-ercion or bribery,
- co-operate to organise production & distribution of wealth without dislocation
- consume wealth responsibly without some form of artificial rationing through money ( and wage-labour ) , the medium Troutsky now claims to be benign .

Leftwing Criminologist said...

I wonder if you ever read 'the revolution betrayed' by Leon Trotsky, he discusses some of the issues brought up here there.

As for the question of central planning vs participatory planning, i think this is to an extent a false distinction. The problem with the stalinist states was as you pointed out the command nature of their economies, centrally decided by bureaucrats who wanted to make themselves look good. Democracy is the life-blood of a planned economy, without it may struggle on and experience formidable growth rates like the USSR did as Renegeade eye has pointed out, but it will falter eventually just like the USSR did.

For myself the central element is more the co-ordination of a plan nationaly and internationally done as you have described in a democratic and participatopry manner. (local plans need to be co-ordinated so the same resources aren't used twice for example, and also as industries are integrated one plan may rely on another etc.)

The aim as has been mentioned would be to get to a situation where there was a plantiful supply of goods to what marx described as "from each what they can give and to each what they need".

ajohnstone said...

Rather than wade through an entire book such as "Revolution Betrayed" , i found Trotsky's "If America Should Go Communist
(August 1934)" article to be an optimistic practical condensed version of his economics ,that can be both criticised or praised .

" National industry will be organized along the line of the conveyor belt in your modern continuous-production automotive factories. Scientific planning can be lifted out of the individual factory and applied to your entire economic system. The results will be stupendous....Only when socialism succeeds in substituting administrative control for money will it be possible to abandon a stable gold currency. Then money will become ordinary paper slips, like trolley or theater tickets. As socialism advances, these slips will also disappear, and control over individual consumption – whether by money or administration – will no longer be necessary when there is more than enough of everything for everybody!"

blackstone said...

To ensure that our economic activity isn't inefficient and wasteful, we need a way to measure how much we value the inputs and outputs to production. This measurement is the aggregate of requests from the population's participation in social planning.

Say for example there is free access to goods and services. And some of these goods require coal as an input. Maybe in your vision, you see thousands of residents willingly going down in coal mines risking there lives.

But lets be realistic. We need to measure things according to their social opportunity costs. We need to know what the demand is for these products that require coal as input, because the extraction of coal poses an extreme health risks to coal miners, thus the price of the goods must reflect it.

Without proper planning, you will find yourself misallocating resources, over and underproducing goods and services.

This is the role that prices play in Participatory Economics; prices do not require the existence of money as cash or capital.

Karl Marx in Wage Labour and Capital explains those very same terms and you will see that those terms, even though they are used by advocates of Participatory Economics, acquire different definitions in a socialist setting.

ajohnstone said...

No , i don't see thousands of people going down the mines to extract coal to the detriment of their health , nor do i see residents of communities inviting energy companies to build nuclear power stations and store radio active and toxic waste in their own back-yards . Socialism CHANGES society .
If the solution is going to be simply enhanced rewards by remuneration - bribery - to tackle health and safety issues of production then that changes little .

Allocation does not need the intervention of prices .
Instead we have

1) calculation in kind
2) a self regulating system of stock control - which identifies
quantities of stocks available and provides a reliable indication
of consumer demand (via the the depletion rates of stocks)
3) the law of the minimum - whereby you economise most on those
factors of production that are relatively scarcest
4) a social hierarchy of production goals - which sorts out the allocation of scarce factors where competing demands are placed
upon them.

Opportunity costs can be ascertained through the above .

Assume a particular factor X has 20 units in stock (as revealed via the self-regulating system of stock control mentioned above ( feature 2).Assume there are two end-uses for X , end-use A and end-use B.
Assume A requires 12 units of X and B requires 10 units of X.
Clearly the full requirements for X for both A and B cannot both be
met. If we chose to meet A's requirements fully then the opportunity cost of this is a slight reduction in the output of B - and vice versa. Deciding which end use should take priority is a function of feature 4 of a socialist allocative mechanism.

As for Parecon's claim that prices and wages are different inside a Parecon system - if it quacks and waddles like a duck - it's a duck .

The market remains but in a disguised form of "iterative planning" ( who has ever claimed that bidding at auctions is not a form of market ) and "price-fixing" , "competition" between enterprises and for jobs , "cost-benefit ratios" or as some would describe them being in reality "rates of profit" .
"Accounting money" is as real as money available balance on my chequeing account or credit card even if it might not be the same as the hard cash in my pocket!

and also see here:-

I would describe Parecon as capitalism without capitalists but by committee

blackstone said...

It is first necessary to understand the point of consumption planning. Its function is to empower people as consumers, to give them the opportunity to ask for improvements to products and new products that aren't yet available.
In your case you are introducing a market in the public goods sector where the population has free access to goods,maybe in the like of distribution centers. In that case the distribution centers production groups would be putting in requests for product, in accord with sales. But this doesn't really give consumers the opportunity to intervene to support new products or product changes. It merely reflects trends in buying what is available.

Believe it or not your allocative suggestions are similiar to the allocative mechanisms of a participatory economy.

Things like self-regulating stock control can, i believe, be introduced in a participatory economy. Yet those reflect trends in buying and not necessarily does it reflect the needs, wants and demands of consumers.

Even your example of implementation of opportunity costs does not tackle this issue.

Free access to goods is great. But who says i wanted those goods?A steady trend of retrievals of a product from your distribution center doesn't mean that this product is necessarily what consumers want. It may just be the only product on the market, the better of the others or whatever the case may be.

You need to give consumers a channel in order to express their demands, needs and wants.

One thing to remember, a participatory economy is not something set in stone. You have to seperate the details and suggestions made by Albert/Hahnel(Albert in particular) with the parecon model itself.

ajohnstone said...

"distribution centers production groups would be putting in requests for product, in accord with sales. But this doesn't really give consumers the opportunity to intervene to support new products or product changes. It merely reflects trends in buying what is available."

Just a small reminder , there is no buying or selling in free access socialism but i take your point on choice .

Re-reading one of the links and Alberts responses i find Joseph Green does place too much emphasis on what he sees is Parecon's falings compared to the tradional Anarcho-syndicalist /workers councils but i must go with Parecon in that it is SOCIAL ownwrship of the means of production and distribution rather than SECTIONAL ownership by producers only . It was one of the arguments used against Syndicalism and Industrial Unionism by the SPGB in the early years of the 1900s . But i do think he may have struck a more accurate criticism on the unspoken presence of a "central bank" which was something Marx was aware of arising in the Grundisse
"The bank would thus be the general buyer and seller. Instead of notes it could also issue cheques, and instead of that it could also keep simple bank accounts..It would not only have to
determine the time in which a certain quantity of products had to be produced, and place the producers in conditions which made their labour equally productive (i.e. it would have to balance and to arrange the distribution of the means of labour), but it would also
have to determine the amounts of labour time to be employed in the
different branches of production.[performing the roles of IFBs, as well ?]....The workers would not be selling their labour to the bank, but they would receive the exchange value for the entire product of their labour,etc.Precisely seen, then, the bank would be not only the
general buyer and seller, but also the general producer. In fact
either it would be a despotic ruler of production and trustee of
distribution, or it would indeed be nothing more than a board which
keeps the books and accounts for a society producing in common.The Saint-Simonians made their bank into the papacy of production."

Nor can we forget Marx's idea of the community as the "universal capitalist" in his 1844 manuscripts .

Perhaps, you are right that the free access model will not accommodate new demands It really is not constructed to since it is created to eventually become a non-growth , steady-state sustainable system of society .

As for your point on cosumer choice , i think you will agree that what pushes consumer demand for change today is advertising and the capitalist need to create more and bigger and wider markets .

Today, goods are produced to make a profit. It is therefore important to sell them, and in order to do that people must be convinced to buy the goods. It does not matter that the goods may have little or no real utility, the important consideration is selling them. With this in mind, advertising creates needs.Goods which never existed before, suddenly become absolute requirements then they sit in closets, unused.A large section of the genre of time- saving appliances is geared to a market that must be convinced that taking 5 seconds to chop a carrot (or whatever) for supper is too long: it can supposedly be done in 1 second if only the consumer purchases the latest, greatest veg-chopper appliance. That is wasteful of the earth's resources and of the labour required to produce those appliances. Without a huge advertising industry pushing the consume, consume, consume ethic at us, most people will not object to spending an extra few seconds doing household chores.Many consumer goods are used rarely. Perhaps sharing them in a neighbourhood will replace the idea that everyone needs one of everything. This will reduce the number of these items required. That means reduced production and reduced scarcity (and therefore no need to limit access to these goods).

For improvements on efficiency and applications , i see no need for all those consumer councils and just a look at how the decision- making processes of the free software movement of linux and the co-operative nature of wikipedia are applied should be an example . A polycentric input of information . Community decisions will not only be geographic necessarily but of those with common interests world-wide , requiring no intervention .
And who knows the science of the consumer researcher - the use of opinion polls and focus group may still be found to be useful in determining consumer happiness

Whereas ,Parecon suggests workers in worker councils propose what
they want to produce, how much they want to produce, the inputs
needed and the human effects of their production choices. Consumers
propose what they want to consume, how much they want to consume and
the human effects of their consumption choices. "Iteration
Facilitation Boards" (IFB) generate "indicative prices", using both quantitative and qualitative information, which is used by workers and consumers to update their proposals for further rounds of iterations. The IFB whittles proposals down to a workable plan within five to seven iterative rounds. A plan is chosen and implemented for the coming year .

All i am saying is , why the need for "indicative prices" ? Why the continual need for wages ? Why the continual need for money ? All of which will add to the difficulties of satisfying society's needs and requirements with unnecessary complications .

As said before it all comes down ultimately to a lack of belief in the co-operative potential of human beings.

As another Pareconist , has said
"For one thing, isn't this
'To each according to need' just an encouragement to the most greedy and aggressive to consume
more, and leaving less for those who are not as self-assertive of
their 'need' or who have more scruples?"

I have agreed with you , there is much in Parecon that is of value - but it stops short .

Dr. T said...

While this sort of thing would work in small groups -- a well-run family works along these lines -- one must wonder how well this would work in larger societies. You are right in your critique of centralized planning for sure. Recent studies of complex adaptive systems shows that large-scale planning is literally impossible. And, if theory weren't enough to convince a person, the factual examples of the USSR and China should (though sadly they don't seem to have convinced all too many). My main concern with this kind of democracy (a true democracy) is the possibility of a tyranny of the majority. Further, there is evidence that even on the small scale -- a good example if the Pilgrims in their first few years in America -- this results in the cheater/free-rider problem. They solved the problem by giving each their own property and telling them "good luck" with it.

Just some thoughts.

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