Economics and Parecon

A second interview for Polish publication…

1) Many economists, for example L. Mises and other austrian economists, think that private ownership of means of production is a necessity. They argue that without private ownership of means of production economic calculation is impossible because means of production (like machines and others) don’t have prices so it’s not possible to say which way of using resources is better. These economists also say that people care mostly about things that belong to them. They say that nobody has ever cleaned a borrowed car. How would you comment on such views?

Again, I don’t know what Mises or Austrian economists might say, but what you have offered seems incoherent to me. First, I don’t know what it means to say means of production don’t have prices. Of course they do, in a market system, in a centrally planned system, and in a cooperatively negotiated system such as with parecon.

Prices refer to relative valuations. They allow us to decide how much of this or that we want, given our tastes and preferences, and what we have to give up that we could have had instead. This goes, as well, for using factories, machinery, etc. Do we want to produce x with it, or y? How do we decide?

Well, the population has tastes and preferences, both for outputs like x and y, among others, and for labor versus leisure, different types of work, and so on. In different institutional settings these preferences, and other factors as well such as bargaining power, or property rights, and so on, are mediated by allocation institutions into assessments of relative values. Nothing about having Bill Gates or anyone else own Microsoft’s buildings and hardware is either necessary or sufficient for setting prices — though, if you do have private ownership and markets, then the mechanisms for price setting will have certain properties, whereas if you have other structures, the price-setting mechanisms will have other properties.

To make a judgement about which way of arriving at relative valuations or prices we like, we should determine those properties, and compare them. So, for example, with private ownership of productive assets and markets the drive for profits will largely dictate economic behavior, competitive individualism will contour choice and actions, and results for prices will ignore external effects, among other problems. As a result relative valuations will not measure how much the populace — with each person having an appropriate influence — values this as opposed that item, but much more it will measure relative power of the buyers and sellers of the various items.

As to the assertions about borrowing, again, I don’t find it even coherent. In fact people often borrow things and care quite well for them, in many cases better than they care for their own things, though not when they are borrowing from capitalist firms who seek to fleece them and who in the rental price include the costs of clean-up, but this assertion is entirely beside the point in any case. Cars are not means of production and, in any event, means of production are not “borrowed” or “privately owned” as the only possibilities.

2) In the economic vision which you and Robin Hahnel have authored and advocate and which is called ‘parecon’ there is no private ownership of means of production. Could you explain why you think that it a desirable solution?

Economies have various key defining features. To say that choosing one type of property arrangement instead of another is desirable can be a little confusing. You can have public or state or collective or essentially no ownership of means of production but also have markets or central planning, or even worse additional features. So doing away with private ownership of means of production doesn’t alone guarantee desirable outcomes. But even if we abstract from everything else about an economy, the difference between having private ownership of productive assets and having no ownership of them, is the difference between the economy having a built-in cause of inevitable gigantic disparities of wealth and power and an economy at least not having those sources of horrific inequality.

In a parecon — a participatory economy — beyond new ownership relations, we incorporate a new division of labor (balanced job complexes), new workplace and consumer venues of decision making (workers and consumers councils), new decision making methods (self management), new modes of remuneration (for duration and intensity of socially useful work), and new modes of allocation (participatory planning). Just like half a bridge isn’t a very useful item, so too for a part of an economy. Parecon needs to be assessed in full.

3) As you know, for many years in Poland private ownership of means of production didn’t exist but the effects weren’t encouraging. There was a lot of wastes and absurdity. How would you convince people in Poland that private ownership of means of production is useless to create a better economic system? Maybe workers should rather own factories like, for example, in Argentina?

Feudal lords didn’t exist in Poland in those brutal years either. Nor did slavery exist there. Does this mean kings and slaves must be a part of a better system? Honestly, there isn’t even an argument here to refute.

To make a case for parecon, I would have to try to convey how having its combination of defining features would be different from both the centrally planned class divided economy that Poland suffered in the past, and from the market-driven class divided economy it suffers from now. If some people were interested in models of markets plus workers owning plants (far more like Yugoslavia, by the way, than like anything in Argentina), then I would have to make a case for why that approach to is flawed, and why another is better. I don’t see how I can do all this in a quick interview, but the heart of it would be to show how both central planning and markets — with or without capitalist ownership — pervert allocation motives, distort pricing, and impose class divisions, and how, instead, parecon’s self managing councils and participatory planning arrive at true social costs and benefits, seek to meet needs and fulfill potentials, and eliminate class divisions.

4) Most economists say that ‘serious’ economic ‘theories’ must be based on ‘realistic’ assumptions. One of them is that people are generally selfish. They say that people are only sometimes altruisic or cooperative but, according to them, it is naive to create institutions on such premises. What do you think about this?

First off, this is not the only assumption one can have or can leave aside. For example, one can assume that preferences that people have are unaffected by economic relations (the technical term is that they are exogenous), or that with direct and unrestricted competition, no units will achieve sufficient size to impact outcomes adversely, or that there is perfect information for all, and so on. For those who adopt these assumptions to talk about being realistic is a bit of an irony.

Second, of course people are in part seeking to better their own lives and conditions. Is there someone who doesn’t think that that is the case? As to designing institutions, I more or less agree. That is, I would like institutions to propel people into caring about one another, being social, having solidarity, etc. But I don’t want to assume those traits a priori.

A market economy is such that even a person who for whatever reasons enters the economy as a caring, moral, social agent, who feels solidarity with others and is concerned to behave honestly and justly, will be propelled by the requisites of cut throat competition for market share to become anti-social, or will not succeed greatly. In the U.S., the slogan encapsulating this insight is that “nice guys finish last.” In other words to climb in status, income, and power, one must become oblivious to or even self consciously pursue hardship for others, like it or not. It isn’t just that markets don’t assume social inclinations, rather if they are present markets obliterate them.

A parecon, in contrast, is such that even a person who for whatever reason enters the economy as an anti-social brute concerned only with personal gain and not giving a damn about how their advance impacts others, will be propelled by the requisites of cooperative negotiation for personal advance to become solidaritous toward others, or at least respectful of their needs, or will not succeed greatly. In other words, being nice will be the only route to personal advance of even a narrow sort…being a nice guy is a kind of precondition for success, like it or not. It isn’t that participatory planning assumes social inclinations, rather they are absent it promotes them.

5) In parecon, economic activity is based on cooperation. Do you think that this is a realistic assumption? Could such an economic system work?

In a parecon for a person to do well requires that the person cooperate with others, that is true. But this is also true of most people in any economy. If there was no cooperation at all in a capitalist economy it would grind to an instant halt. Cooperation is, of course, a prerequisite to achievement for any group acting in concert. What happens in capitalism is that instead of maximizing benefits for all that can accrue from collectively acceptable cooperation, the benefits accrue mostly to a few, and instead of having as much cooperation as makes good sense, much if prevented — for example, for the most part between owners and wage slaves and between between buyers and sellers.

As to whether a system maximizing rather than utilizing only a minimum of cooperation can work, I have to say, people who honestly want to know that will want more than my saying it can. They will want to see a full description of its features. They will want to think about the properties of those features. Can the institutions work means can people functioning in accod with the institutions produce and consume to meet needs and fulfill potentials in a way that propels desirable values and outcomes. So someone wanting to know whether economics can be done better by some new system than it is done by capitalism, say, will want to assess the alternative institutions. I can’t make a full case here. But I can point to a place where anyone interested can find lots of relevant material — www.parecon.org

6) When I was going to study economy I was thinking that when I go through all these voluminous books, full of mathematics, econometrics, statistics and so on I will understand how economy works but I was rather disappointed. All these theories seemed to be logical but they are mostly unrealistic and often based on ridicoulous assumptions. After finishing studies I realised that not much is really known about how economy really works. After reading your essay “Neoclassical economics: Science or Silliness?” I think that your conclusions about most economic theories might be similar. What would you like to say about condition of economics today? Why economic theories looks like that?

There are oases of insight, no doubt, in modern economic theory — but overall I think the discipline exists not to understand economic relations but to service corporate elites, whether through rationalization or through advice regarding profit making. In the esssay you mention I provide quite a lot of evidence to that effect, including presenting more or less similar assessments of many noble prize winners backing this claim.

7) Do you agree that in economic institutions today the most important things are not ‘efficiency’, ‘innovations’, ‘prosperity’ or ‘consumer’s satistaction’ but rather power and connections with rich and privileged?

Modern capitalist economies are complex affairs, but, yes, to a first order what is going on is that powerful centers of corporate control are pursuing profits and continuation of the conditions that permit them to profit. If innovations would disrupt profit making — for example, to introduce long lasting technologies that would diminish market opportunities, or public transport that would cut into car sales, or means of organizing work that would empower and uplift workers causing them to be more productive but also enabling them to demand more income — they are rejected. Consumer satisfaction and indeed all other motives, come into play only in pursuit of profits. Capitalists are not trying to satisfy consumers when they dump pollution, etc., nor, really, at any other time. If you buy something adding to capitalist profits, they are happy. If you buy or do something else that fulfills you better, they are sad. The extent of your fulfillment — about that the owner doesn’t give a damn unless it bears on buying his product or not, which it often doesn’t.

Efficiency is an important, but horribly manipulated concept. What efficiency means, in fact, is attaining your sought ends without wasting assets that you care about. As a result, it is idiotic for someone to want to be inefficient as it means they either don’t want to attain their sought end, or they want to uselessly squander valued items in doing so. There is a very real sense in which modern corporations are, as claimed, very efficient. That is, they attain the owner’s sought ends — profits, market share, continued corporate social relations — and they don’t waste assets the owner values, such as labor time, inputs, equipment, and so on. But this is efficiency in the same way that Hitler’s campaign were efficient in reaching ends Hitler sought and not wasting things Hitler valued. That someone else finds something efficient doesn’t mean you ought to celebrate it. It is not good to be efficient per se. It is only good if one likes the sought ends and agrees on valuations of items utilized.

Capitalist corporations are efficient at earning profits for owners and at maintaining their dominance even while wasting human capacities, dignity, participation, etc. A parecon is efficient at meeting needs and fulfilling potentials and doesn’t waste human capacities, dignity, participation, democracy, or for that matter the environment and its resources.

In other words, for the capitalist owner of the coal mine it is quite efficient to work the mines at low cost, fragmenting the workers to ensure lasting submission, coercing use of coal even where other options might be socially better, and finally inducing black lung disease in miners who are then dispensed and replaced. In a parecon, instead, the workers in the coal mine have balanced job complexes, incentives to ensure and improve the health and safety of the labor, an interest only in generating coal to meet real needs, etc. Efficiency is a systemic rather than a stand alone concept.

8) How would such things as power and privilege be eliminated in parecon? In history there were always ruling classes. Why parecon should be different?

I have to say, you are asking me to explain a whole economic system, justify it, show its merits, etc., far too quickly to be convincing. I would hate for readers to think that these brief answers are thought to be compelling. I just think they are indicative. And if folks would like them to be true, they might want to check in more detail to see what they think.

That said, at one point in history almost no one could read. Cannibalism existed. Women were essentially items to be owned. There were serfs. Slavery was plentiful. And so on. The fact that in the past some condition existed, even universally, doesn’t mean it will be so in the future. It isn’t even a strong indicator to that effect, much less a compelling argument. The reason parecon would be different than past economies is because it has different defining institutions. The people have the same genetic code. No change in that respect from Pharonic Egypt to the present and into the future. But what does change is the institutions that humans conduct their lives in. The switch to parecon is a major economic change in how work is organized, how decisions are made, how product is valued and distributed, etc. The reason parecon should be different, is, in short, because it is different. It is like asking why would capitalism be different than feudalism — the answer is due to having different institutions. So someone wanting to judge, simply needs to assess the features of those institutions.

Power isn’t eliminated, which is certainly impossible by definition, but it is made equitable and just by ensuring that in decisions in a parecon each actor has a level of influence in proportion to the extent he or she is in turn affected by the decision. This is called self management. It is institutionally accomplished via workers and consumers councils, a selection of voting procedures and information transfer, etc., that is appropriate to decisions on a case by case basis, balanced job complexes, and participatory planning.

Priviliege, meaning inequitable distribution of income, is eliminated by remunerating duration and intensity and hardship undergone in socially useful work, not property, power, or even output. Classes are eliminated by removing the property ownership basis for capitalist rule, and removing the monopolization of empoowering conditions and positions basis for what I call coordinator class rule (such as you endured in Poland, for example). Critical to this last achievement is enacting balanced job complexes instead of corporate divisions of labor and paticipatory planning instead of markets or central planning.

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