Democratic Economic Planning (Routledge Frontiers of Political Economy)

__Democratic Economic Planning__ presents a concrete proposal for how to organize, carry out, and integrate comprehensive annual economic planning, investment planning, and long-run development planning so as to maximize popular participation, distribute the burdens and benefits of economic activity fairly, achieve environmental sustainability, and use scarce productive resources efficiently. The participatory planning procedures proposed provide workers in self-managed councils and consumers in neighbourhood councils with autonomy over their own activities while ensuring that they use scarce productive resources in socially responsible ways without subjecting them to competitive market forces. Certain mathematical and economic skills are required to fully understand and evaluate the planning procedures discussed and evaluated in technical sections in a number of chapters. These sections are necessary to advance the theory of democratic planning, and should be of primary interest to readers who have those skills. However, the book is written so that the main argument can be followed without fully digesting the more technical sections. __Democratic Economic Planning__ is written for dreamers who are disenamored with the economics of competition and greed want to know how a system of equitable cooperation can be organized; and also for sceptics who demand "hard proof" that an economy without markets and private enterprise is possible. Democratic Economic Planning presents a concrete proposal for how to organize, carry out, and integrate comprehensive annual economic planning, investment planning, and long-run development planning so as to maximize popular participation, distribute the burdens and benefits of economic activity fairly, achieve environmental sustainability, and use scarce productive resources efficiently. The participatory planning procedures proposed provide workers in self-managed councils and consumers in neighborhood councils with autonomy over their own activities while ensuring that they use scarce productive resources in socially responsible ways without subjecting them to competitive market forces. Certain mathematical and economic skills are required to fully understand and evaluate the planning procedures discussed and evaluated in technical sections in a number of chapters. These sections are necessary to advance the theory of democratic planning and should be of primary interest to readers who have those skills. However, the book is written so that the main argument can be followed without fully digesting the more technical sections. Democratic Economic Planning is written for dreamers who are disenamored with the economics of competition and greed and want to know how a system of equitable cooperation can be organized and also for skeptics who demand “hard proof ” that an economy without markets and private enterprise is possible. Cover 1 Half Title 2 Series 3 Title 4 Copyright 5 Dedication 6 Contents 8 Preface 15 The authors 15 About the main author 15 Intellectual challenges 17 Intended audiences and readers’ guide 18 About the contributors 20 Introduction 22 Semantics 22 Political context 23 Socialist planning in the history of economic thought 24 First socialist calculation debate 24 Post–World War II debate 24 Post-Soviet debate 25 Part I Preliminaries 28 Introduction to Part I 30 1 Defining goals 32 Efficiency 32 Economic self-management 35 Economic justice 37 Environmental sustainability 43 Solidarity 45 Variety 46 2 Social democratic capitalism 48 Better than neoliberal capitalism, but not good enough 48 Why not private enterprise? 48 Private enterprise is incompatible with economic justice 51 Why not markets? 54 Markets are inefficient 55 Externalities are pervasive 55 Markets are often not competitive 58 Markets often fail to equilibrate 58 Practical problems with policy correctives 59 Labor markets are unfair 61 Markets subvert democracy 62 Markets undermine the ties that bind us 64 Conclusion 66 Part I: conclusion 70 Part II Central planning 72 Introduction to Part II 74 3 Central planning: how to do it 76 A multi-good, one-year model 76 A multi-good, multi-year model 78 Information issues in central planning 81 Finding the social welfare function 81 Responding to the tacit knowledge critique 83 Material balances 84 Trial prices 85 Trial quantities 87 Gradient procedures 89 4 Central planning: why not to do it 93 Central planning: an information game of cat and mouse 93 Central planning obstructs worker self-management 97 Conclusion 99 Part II: conclusion 101 Part III A participatory economy 104 Introduction: answer to Auntie Tina 106 5 A participatory economy in brief 109 Social ownership 109 Major institutions 109 Worker councils 110 Balanced jobs 110 Neighborhood consumer councils 111 Federations 111 Income based on effort and need 112 Participatory planning 112 The challenge 113 The annual planning procedure in brief 114 A participatory economy and self-management 117 6 Digging deeper into a participatory economy 119 Social ownership 119 Indigenous cultures and the natural commons 119 Socialism and the productive commons 119 A productive commons for modern times 120 Worker councils 123 Outside stakeholders 124 Birth and death of worker councils 125 Objections to balanced jobs 126 Incentives 129 Fairness, trust, and solidarity 129 Measuring effort and sacrifice 130 Capping average effort ratings 138 Motivational efficiency 139 Allocative efficiency 140 Dynamic efficiency 141 Consumption 142 Allowances 142 Saving and borrowing 143 Councils and federations 148 Councils 148 Governance of federations 149 Assessments for public goods 149 7 The participatory annual planning procedure 151 Who says no? 151 Treatment of capital goods during annual planning 154 Public goods 154 Pollution 159 The pollution demand revealing mechanism 160 Overcoming perverse incentives 162 Multiple victims 162 Misrepresentation 164 Conclusion 169 An important caveat 170 Welfare theoretic analysis 170 A heuristic model 171 Consumer councils 172 Worker councils 173 A formal model 175 Comparing assumptions 178 What participatory planning is not 178 Participatory planning is not central planning 178 Participatory planning is not one big meeting 179 Participatory planning is not a Walrasian auctioneer 179 Appendix on efficient levels of emissions 180 8 Dispelling common confusions 184 The size 6 purple women’s high-heeled shoe with a yellow toe problem 184 Post-plan adjustments 188 If it looks like a market, and smells like a market . . . 191 9 Computer simulations of participatory planning 194 Purpose 194 Platforms 196 The algorithm 197 Practicality: how many iterations will it take? 198 Threshold 199 Price adjustment rule 200 Initial prices 202 Changing exponents in production and well-being functions 203 Tracking when different thresholds are achieved 204 Robustness: sensitivity to relaxing assumptions 206 Intervention by IFB personnel 207 Benefits of human intervention 207 Dangers of human intervention 208 Future simulation research 209 Conclusion: a practical possibility? 210 10 Reproductive labor 216 Conceptualizing reproductive activity 216 Different kinds of reproductive labor 217 Assumptions about education and healthcare 218 The public vs. private choice 219 Reproductive labor in the participatory economy 220 Women’s caucuses 221 Balance jobs for caring labor 222 Anti-discrimination legislation 222 Affirmative action 223 Reproductive activity in households 223 In-home domestic labor 224 In-home caring labor 225 In-home socialization labor 227 Conclusion 228 Part III: conclusion 232 Dangers to be avoided 232 Unique features of participatory planning 233 Part IV Investment planning 236 Introduction to Part IV 238 11 Aggregate investment planning 240 A one-good, three-year model 240 An omniscient investment planner 241 Reality vs. theory 243 Missing information 243 Missing people 243 Inherently undemocratic 243 Participatory aggregate investment planning 243 Challenges 244 The investment planning procedure 247 Sequencing investment and annual planning 250 Welfare gains from updating investment plans 253 Conclusion 257 12 Comprehensive investment planning 259 Producing the efficient amounts of different capital goods 259 Allocating user rights for different capital goods efficiently 265 Part IV: conclusion 267 Participants in aggregate investment planning 267 Participants in detailed investment planning 268 Part V Long-run development planning 270 Introduction to Part V 272 13 Participatory educational planning 274 What does education planning decide? 275 “Producing” education 275 Benefits of education 276 Investing the efficient amount in education 277 A note on time frames 278 Participants 278 Education planning proposal 279 14 Participatory environmental planning 282 Unique features of environmental planning 282 What does environmental planning decide? 284 Investing the efficient amount to protect the environment 284 Participants 285 Environmental planning proposal 285 15 Participatory international economic planning 289 International context 290 Goals 290 Issues to keep in mind 291 Three rules to guide trade policy 293 Evaluating comparative advantages 296 Achieving efficient trade during annual planning 297 International financial investment 298 What does participatory international economic planning decide? 299 An efficient transformation of comparative advantages 299 Participants in participatory strategic international economic planning 301 Does size matter? 302 Conclusion 303 Appendix on investment in infrastructure 306 Investing the efficient amount in infrastructure 307 Part V: conclusion 310 Education planning 311 Environmental planning 311 International economic planning 311 Conclusion 314 The socialist calculation debate a century later 314 Reconciling democratic planning and autonomy 318 Opportunity costs, social costs, and social rates of return 319 A level playing field for public and private consumption 320 Externalities extinguished! 320 Income distribution and incentives 321 Addressing concerns about impracticality 321 Integrating long-run and short-run plans 322 Reproductive labor 323 Looking forward 324 A bridge too far? 325 Appendix: other democratic planning proposals 326 Introduction 326 1 Community-based economics 327 2 The “Scottish” model 333 3 Multi-level democratic iterative coordination 338 4 Negotiated coordination 344 5 Amazon socialism 353 Epilogue on prices in socialism 362 Index 366