July 27, 2021

Do individuals in a participatory economy have an incentive to search for innovations, and do workers councils have an incentive to implement productive innovations once they’re found?

A participatory economy does not reward those who discover productive innovations with vastly greater consumption rights than others that make comparable personal sacrifices or effort in their work. Instead a participatory economy emphases direct social recognition of outstanding achievements. This is for a number of reasons.

First, successful innovation is almost always the result of cumulative human creativity and not a single person’s endeavours. Also, an individual’s contribution is often the result of genius and/or luck as much as personal sacrifice, all of which implies that recognizing innovation through social esteem instead of material reward is more ethical.

Second, social incentives will not necessarily prove less powerful than material ones. No economy ever has paid innovators the full social value of their innovations because if it did, there would be little left for those who apply them over long periods of time.

This means if material compensation was the only reward, innovation would be under stimulated in any case. Material reward is often merely an imperfect substitute for something else that is truly desired — social esteem. Actual policy in a participatory economy would ultimately be settled democratically in light of results.

However, there are material incentives to implement socially useful innovations in a participatory economy. Any change that increases the social benefits of the outputs that workers produce, or reduces the social costs of the inputs they use will increase the workers council’s social benefit to social cost ratio.

This makes it easier for the council to get its proposals accepted in the participatory planning process, can allow workers to reduce their effort, can permit them to improve the quality of their work life, or can raise the average effort rating (i.e income) the council can award its members. But just as in capitalism, adjustments will make any advantage temporary. As the innovation spreads to other enterprises, and as indicative prices change, the full social benefits of their innovation will be both realized and spread to all workers and consumers.

The faster the adjustments are made, the more efficient and equitable the outcome. On the other hand, the more rapid the adjustments, the less the “material incentive” to innovate and the greater the incentive to “ride for free” on the innovations of others. A participatory economy is better equipped to manage this tradeoff compared to a capitalistic economy. Most importantly, in a participatory economy “service to society” is recognised directly and is therefore a stronger incentive to innovation. This means that more innovation will occur in a participatory economy than in capitalism for the same speed of adjustments.

Secondly, research and development (R&D) is largely a public good which usually is undersupplied in a market economy, whereas a participatory economy allocates resources to the production of public goods just as easily as to the production of private goods.

Finally, in capitalism the only mechanism for providing incentives for innovation is to slow down their spread, at the expense of efficiency. This is done by making the transaction costs of registering patents and negotiating licenses from patent holders very high. While it is recommended only as a last resort, the transaction costs of granting extra consumption rights for a limited period of time would be negligible in a participatory economy.

Notable Replies

  1. I would just like to add this. Whereas social justice advocates and those concerned about adequately protecting the environment focus first and foremost on other issues, both economists and the most skeptical in the general public worry more about whether or not any alternative to capitalism would prove to be sufficiently “innovative,” i.e. generate new and better ways of making things. So if we are to convince those audiences that a participatory economy is indeed a superior alternative, stimulating innovation is an important topic.

    Anders has summarized our argument in that regard beautifully in his posting. I think it is important for ALL OF US to think about whether what we have proposed is indeed a compelling answer to the question of whether or not a participatory economy would prove to be sufficiently innovative.

  2. I do not really get this innovation thing. I understand that a full fledged capitalist probably believes in some perverted way that innovation(creativity essentially) must be motivated by some pay off…usually money. How we gonna pay for it and who’s making money from it.
    But innovation in capitalist economies still happens all over the place, accidentally and on purpose, regardless of the extremely restrictive and prohibitive procedures and structures to get stuff out there or even started.

    Innovation just happens. It’s a innate drive. In an economy like Parecon, it stands to reason that without the extremely prohibitive and restrictive stuff/procedures/rules/barriers to thinking creatively, innovation would thrive. The participatory nature of it would also probably thrive. More people helping out or getting involved in the act. Much like the diversity of creative output in the visual and aural arts would thrive. For example innovative or marginalised music that people today would perhaps not even consider as music would in fact be far more ubiquitous…not necessarily a raging “success” or popular, but far more noticed and accepted. I have no doubts about this.

    As an aside and to continue the music/innovation analogy. Derek Bailey, the late revolutionary English free improvising guitarist, retired from professional music out of an interest in music. This was his play on the nature of music within an economy that narrows, confines and, well, basically ignores music that cannot be commodified and sold as units for mass profits. So he retired from that world out of an interest in creative music making via improvisation. In doing so he revolutionised guitar playing. He made it possible to play a conventional instrument non-conventionally, yet physically conventionally, that enabled a free improvisor to bypass the harmonic/melodic restrictions and thinking that usual conventional approaches to the instrument foster, thereby restricting and narrowing the nature of the output. I am making no aesthetic judgements here. But Bailey did this to the detriment of his own reward. In other words he had to supplement his income, much like most artists anyway, through other means other than playing. He proceeded to play this kind of music, a music 99% of people do not even consider music or hate, for another 40 odd yrs.

    Frank Zappa also did similar but in a very different way. He innovated by being himself and never restricting his output to what the mainstream corporate music industry demanded, which through its total ubiquitousness and control of the airwaves, reduced the ability of most people to listen to non-conventionally structured innovative music and to listen to anything longer than 3 minutes…unless it’s Bob Dylan! Zappa survived and managed to build a successful career through crafty business acumen and exploiting aspects of a fledgling industry in the sixties that had no idea what was going to be the next big thing. Suffice to say, even today, his music and innovative improvised rock guitar playing is essentially ignored and unknown, even among the young and inquisitive. Capitalist market restrictions that eschew this sort of stuff.

    The point is both innovated and changed music and contributed in ways that was never at its point of origin a selfish pursuit for reward or even fame. It was a need to hear what they wanted to hear. The twentieth century is a century in which the visual and aural arts innovated and questioned basic assumptions of both process and aesthetics. And most did so because they just had the urge, the desire, the need. And it could be argued much of what they did was more to their detriment than rewarding in any substantial way. This saw a truly creative explosion of shit that, within the aural arts more so, because of the way capitalism and markets work, is essentially unheard. Is it socially valuable? You bet your arse it is.

    People do stuff because they have to. They have no choice. Parecon would open the doors to the many in this regard thereby alerting the world to the truly diverse innate abilities and potentials, innovative/creative, of everyone…if they so chose to go down that path.

    Parecon itself is an example of innovation by two people who maybe never really felt the need for reward to come up with it. It’s as innovative and revolutionary as Marx’s Kapital. I have no doubt (we, people, seem to have a hard time equating present day creative output with the supposed “GREATS” of the past. As if the older the better. It’s basically bullshit. I have no doubt there are millions of portrait painters as good as Rembrandt already out there. There are millions of Picassos and Matisses, Kandinskis and Rothkos and Bachs and Mozarts. Hard to imagine, but not if you try a little and maybe let a lot of accepted traditional Art theory, aesthetic theory, ideas, education, and crap roll off you). The reward would be its implementation. In some ways, perhaps the major way, innovation is never really a selfish act, or an act for reward only. It is a creative drive that sometimes just happens. Capitalism in fact incentivises or at least pushes one down the selfish path kind of thinking. It narrows the whys and for what of innovation. The less people involved the more for me. Parecon doesn’t do this. It can’t by its structure.

    I think Marx’s observation or argument capitalism was exceptional in its explosive innovative technological impetus and output is erroneous and well, pointless. More or less innovation or creativity is better or worse is irrelevant. It will be what it will be depending on the institutional structures at play that allow to the maximum possible or the least, and along that spectrum, humans to do their thing…as long as it doesn’t cause a murder. Anything, anywhere, anytime for no particular reason. If it takes, it takes, if it don’t, it won’t.

    To assume somehow, in a more equitable, sociable, self-managed economy, innovation, or creative thinking which innovation is, would somehow be dulled and lessen is to me almost blatantly absurd. I know that’s not an argument, but I just want to put it out there. It’s a feeling. I understand one must come up with arguments against those opposing economies like Parecon showing, logically and rationally, and perhaps with what is for most folk incomprehensible maths (Australian, we say maths over here, like the English), innovation would still happen, but part of establishing economies like Parecon in the first place is in fact to free people from the extremely debilitating structures that inhibit and prohibit creativity, from which innovation arises, among the worlds population. It stands to reason that whatever is deemed innovative by people would skyrocket in a society that actually allows people more actual freedom/time, in which they actually feel freer and in which they actually can wake up in the morning with a real actual smile on their face. The more smiles the better. The more smiles the more creativity and therefore innovation. I’m not backing away from that argument. It’s bullet proof.

  3. Hi IDigressIndeed

    I agree with you that for someone who is a libertarian and wants a system like a Participatory Economy the whole point is to emancipate and allow all people to freely enquire, explore and create via their internal motivation and drive. For others though it isn’t that obvious. People associate Capitalism with innovation so when we talk about a new economic model they may have an underlying assumption that it won’t be as innovative. That’s something we need to address if we want to bring about a libertarian system.

    I think a Participatory Economy is sufficiently innovative and I think we need to produce more content showing this.

  4. I get it. But sometimes you need innovative creative arguing that just doesn’t go down the usual road. The notion that economies incentivise innovation is a red herring. Innovation isn’t incentivised, it just happens within the heads of certain people as a result of our innate creative impulses (of course capitalism does, markets do, that is, create and innovate and you may become rich, but that’s their MO for EVERYTHING.) It’s just creative thinking and doing. So, all possible innovation is merely the outcome of allowing as many people as possible , who naturally think about shit, to do what they do and feel confident they have the time, freedom and possibility to pursue some creative thought process. In the words of Frank Zappa, anything, anywhere, anytime for no particular reason. Out of that “allowance” will come innovation. The speed or rapidity of innovation is actually secondary to all the other economic structures that foster the creative output of the maximal number of people in the world.

    It matters not a bit whether Parecon, or any other like system, can better or match capitalism’s supposed rapid progress within selected areas or fields that proved advantageous to private tyrannies. The speed or dynamism of innovation is not important but rather secondary to all the other criteria that foster, overall and in general, equity, solidarity, diversity and self-management.

    Ok, let’s say it’s shown Parecon doesn’t foster speedy or dynamic innovation? What are you going to do? Introduce measures that may be undermine or erode the values it is founded on? Or are you going to say, well, that’s the trade off? If, attaining true solidarity, diversity, equity, self-management and ecological sanity means slower or far less dynamic technological innovation than capitalism, then so be it. Musk will just have to wait a little longer to get to Mars. The people have spoken.

    I don’t see mounting specific arguments re matching capitalism in the ‘innovation market’ as an overly important aspect of an alternative economy. I get that others will attack it head on and seriously, and perhaps even with data and economic speak against capitalist and market apologists? And they can do if they wish. But I reckon it’s a red herring.

  5. Thanks for sharing your thoughts. As someone who works in a creative industry, I agree with what you’re saying. I think the market creates a “cloning effect” where most creators constantly follow trends because they think it’s the only way to make money. In other words, the market supresses innovation in the arts because people can’t afford to take risks.

    I actually have heard many people in my field talk about how they can’t innovate because they can’t risk the project flopping. Then ironically someone will come along with a brand new idea that makes it big, and everyone starts copying that idea haha. It does seem like, at least in my experience, most people who innovate in the arts are not motivated by money. The risky or innovative projects are almost always made by people with different motives.

    However, I also think innovation is a little different in other industries. For example, if someone is working in a factory there are certain technological innovations we want to make sure can happen to help cut down work time etc. I feel like this article is written from the perspective of industrial innovation instead of artistic innovation.

    Welcome to the forums by the way! Glad you’re here.

  6. Hi Michael,

    Thanks. Again I understand that some, particularly economists, need to speak to innovation in this way. But even what you say regarding other industries I think is the same. Workers in hard industry, in any industry, given the right environs , will always be coming up with new things, techs, more efficient ways of doing…it’s coming from the same place as any other creation, including the arts. In fact, I do not even believe that people need the right environ to come up with innovative ideas. They just do it. It just happens. Yes, some try to do it and you could even come up with a workplace devoted to it. But most people just come up with shit. It’s the barriers of entry that impede and limit it. I would argue that capitalism limits and restricts innovation by its nature. As do markets…they homogenise. It’s not even a competition. Parecon is way out in front.

    I’m a musician. Spent most of my time playing free improvised music.
    Music that 99% of people hate, don’t listen to, and won’t even regard as music. So I get the difference between creative doing for no reason and creative doing for utility/instrumental (pardon the pun) purposes.

    Again, I don’t even regard this as an issue. I see why economists would. Even if something like Parecon was less dynamic in this regard…so be it. The people have spoken. If fostering solidarity, diversity, self-management, equity, and ecological sanity is the name of the game, and “dynamic speedy or in your face innovation” suffers as a result of achieving that, then I say let it. It’s a bit of a red herring to me. A distraction. Not that important.

    Living is and waking up with a smile on one’s face. This area of concern, innovation, seems to me to be pandering to the concerns and demands of capitalist apologists. Being sucked into an argument I find rather secondary, even tertiary, in importance…maybe even less.

    Why did tech/computer nerds go online and build open source software and develop coding and shit? Because of an inherent creative desire but also because they could. They had the money and resources, the time…they had good computers and good jobs that allowed them that time. The p2p movement is born. That’s not the economy incentivising it. But the economy shapes it. Capitalists free ride for their own gain, take what they need. This shapes what others may think about doing or creating, in order to gain reward. But the initial desire to sit behind a computer after hours and “work” and create, had nothing to do with the economy…NOTHING.

    Music’s the same. Home music software has made it possible for more people to do their own thing and upload it somewhere. No need to pay huge amounts of money per hour for recording time. It’s opening up and diversifying production standards. “No, I don’t have to make my recording like a fucking brick man. Nor do I have to do x, y or z because that’s the “industry standard” or “professional”. I’l do what I like, man.”

    But, and there’s always a but…and that’s money and time. Not everyone can afford good software nor have the time to devote to such frivolous affairs as self indulgently making music no one likes! So they don’t and the creative and music world misses out. Simple really. And it’s from a greater diversity of creative doing that innovation comes.

    Also confidence. Capitalism and markets reward the confident, the brash, the arrogant, the action person, at the expense of those of a less extroverted disposition. But it doesn’t foster confidence at all. If anything it squashes it to a pulp and only allows into the fold those able enough to resist it’s weight. In fact I’m not sure “confidence” is a definable thing really. It is in a trivial sense.

    Buying a good guitar or a good piece of wood working machinery costs. Barriers of entry that restrict creative doing. As soon as you open up the economy, make it equitable, foster solidarity and diversity, give people more leisure time, remove the hardarse nature of dog eat dog competitive bullshit etc.,all of a sudden, wham, there’s more creative doing…and consequently more innovation. In industries of all sorts too. It’s automatic.

    Innovation is being creative. One and the same really. Parecon is an example. One could argue Michael and Robin were incentivised by capitalism and markets to come up with it. Hopefully in a Parecon there will be no need for such an innovation…just more and better tweaking and adjustments that improve our lot even more. Because people feel good to do so.

    How I do go on.

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