Protecting the Natural Environment

November 21, 2020

Do the basic institutions of a participatory economy – democratic worker and consumer councils and federations, remuneration according to effort and need, jobs balanced for empowerment and desirability, and participatory planning – create an institutional setting and incentives that promote judicious relations with our natural environment?

As long as producers and consumers are not forced to bear the costs of the pollution that results from their decisions, they will continue to pollute too much. How does a participatory economy solve this?

In each iteration in the annual planning procedure the Iteration facilitation Board (IFB) quotes the current estimate of the damage caused by releasing a unit of each pollutant. Enterprises proposing to emit the pollutant and the community of parties affected by the release of this pollutant respond to this signal. Since consumers affected by a pollutant will not always correspond to consumers living within the boundaries of a geographical consumer council or federation, a participatory economy will presumably create “communities of affected parties” for specific pollutants regardless of which geographical consumer council people belong to (CAP= Community of affected parties regardless of geographical boundaries).

Enterprises propose how much of the pollutant they want to emit, knowing they will be charged for those emissions an amount equal to the current estimate of the damages per unit times the number of units they propose to emit.

The damage from emissions thereby becomes part of production costs. The community of affected parties (CAP) proposes how many units of the pollutant it is willing to allow to be released, taking into account that the CAP will be compensated by an amount equal to the current estimate of the damages per unit times the total number of units the CAP allows to be released.

The CAP can, of course, decide they do not wish to permit any emissions at all, but if the CAP decides to allow X units of a pollutant to be emitted, members of the CAP will receive “credit” for damages suffered for the level of emissions they authorize. This “sacrifice” from exposure to pollution is added to whatever “sacrifices” CAP members made as workers when calculating how much consumption it is fair for them to enjoy.

The IFB will change the estimated damage caused by the pollutant in response to the difference between the proposals from the CAPs to allow the pollutant, and the workers councils’ proposals to emit the pollutant. What is a pollutant and what is not is decided by the CAP, who is advised by scientists employed in R&D operations run by the CAP.

There are good reasons to believe that unlike market economies which predictably lead to over pollution, this procedure will settle on efficient levels of emissions, i.e. emissions will only be permitted if the social benefits from the increased production the emissions allow exceed the damages the emissions cause.

In a participatory economy there is a strong incentive to apply for membership in a CAP since victims receive compensation. This means that there is a perverse incentive to falsely claim damage, and therefore membership. There is no easy solution to this problem and it becomes clear that procedures for establishing membership are crucial, and this is where time and resources should be spent.

On the production side, however, it is no longer possible to externalise costs of pollution, as is the case in a market economy. Therefore, it is fair to expect that a participatory economy will allocate more resources than a capitalist market economy to research that aims to reduce pollution. Furthermore, it is also fair to expect that people in a participatory economy will value leisure time more than in a capitalist market economy since there is no inherent growth imperative in a participatory economy that needs to be fulfilled.

The procedure in the annual planning process protects the environment only if present residents in the CAPs are the only ones who suffer negative consequences. Often the negative effects of pollution today persist over long periods of time and affects future generations as well as the present generation.

The interests of future generations must be handled in the long-run planning procedure by means of restraints that the present generation places on itself in democratic deliberations concerning long-run plans. Major changes in the energy, transportation, and housing sectors, as well as conversions from polluting to “green” technologies and products are all determined by the long-run planning process.

In the end, there is no way to guarantee that members of the present generations will consider the interests of future generations or choose wisely for them. And this is true for any economic system. We can only hope that people living in a society based on values such as economic democracy and justice, solidarity, diversity will be inclined to do so.

Notable Replies

  1. Great article. How do I join a CAP (community of affected parties) and who decides if I am affected by the pollutant?

  2. good point: How do we prevent everbody wanting Hamburgers all day long…
    I bet that some poeple might say: Id like cheeseburgers, meaning it might level out at scale.
    But still the whole society can aggree to flying for hollidays is wanted…

  3. Members of a CAP receive a “credit” for damages which creates a perverse incentive. On the one hand, it creates an incentive for people to be actively concerned about the effects pollutants have on them, but on the other, there is a conflict of interest because they stand to personally gain by doing so.

    There may be an alternative approach to CAPs.

    IFBs already ascribe a cost for emitting pollutants that is included in the indicative price of a good. Under most circumstances, dealing with the harms caused by a pollutant are more costly than preventing them in the first place. A good example is the production of organic food. The production process avoids the introduction of any chemicals used to controls pests or for fertilization. In all respects the approach is better for the environment. We pay a premium for these products to account for this production process. However, the prices of non-organic produce do not incorporate the cost of polluting into their indicative prices. But there are costs involved which include for example restoring depleted arable land or health care costs associated with ingesting chemicals. If these costs were incorporated into the indicative prices of produce, then it is likely that when we shop at the supermarket, the organic food would cost less than non-organic food.

    I contend that people should not be compensated for pollution but instead the ‘pollution costs’ raised through sales of these polluting products would be used to restore the environment and cover health care costs. With an interest to increase the greatest Social Benefit possible when producing a product, worker councils would likely endeavour to change their production methods so as to prevent pollution, the lest costly option. There is after all an incentive to do so, because if Worker Council A indicative prices are higher than Worker Council Bs, then several things would happen:

    If WCB seeks to expand its operations WCA will gradually decrease its output because access to the means of production will be awarded to the WCB because it provides the greatest social benefit to society, as reflected in its indicative prices.

    Consumers would obviously purchase the less expense goods and when only the expensive goods remain, they would certainly put pressure on WCs to adopt the production processes that prevent rather than emit pollutants.

    In the long run, this approach would actually address the problem of emitting pollution in a way that would eliminate it completely.

    C

  4. But who requests the restoration of the environment etc. in the annual planning, in your example, and to what extent? We want to decentralise decision making as much as possible and avoid centralised decisions. The point of CAPs and CAP members’ compensation for harm is to allow individuals, instead of a central instance, to express their preferences and, in so doing, affect production decisions. When deciding how much harmful emissions to accept at a certain price/compensation, a CAP member (and the CAP collectively) needs to weigh the compensation against the negative effect it will have in terms of higher prices of goods etc.

  5. I would keep that function of the CAP, in fact I didn’t elaborate on this aspect, but I reflected on the need for some sort of “governance structure” that would serve as a forum to raise these issues. Members can express their preferences and so on.

    In our current society, I would see environmental organizations best poised to assume that administrative function.

    I wouldn’t compensate anyone however. It creates a conflict of interest. But there should be discussion about the impact raising prices would have on consumers as a whole. Whatever decisions that are taken should be communicated back to society, or at perhaps only those affected by those decisions (i.e. people specifically requesting to consume those goods), then have some sort of deliberation and then vote on some options.

  6. Hi Claude

    Interesting points.

    In edition to CAPs there are Consumers’ Councils that can make decisions in extension to CAPs that need no central body.

    Regarding CAPs I don’t see the perverse incentive. Maybe if you could elaborate more? CAPs are a way to get the supply and demand of pollution and for prices to reflect the true social and Opportunity costs. As you mentioned these prices will effect what a workplace produces; their output will be socially responsible (less polluting). CAPs are used to generate prices with members responding to indicative prices. How exactly can prices be generated to reflect the true social and Opportunity costs in another way?

    As far as being paid damages for externalised pollutants, this is in line with the PE income maxim: effort, sacrifice and need. Just like a person who say, works down the mine will get paid more according to their sacrifice (more dangerous work) people who are part of a CAP are sacrificing by being effected by harmful pollutants. How does this create a conflict of interest and with whom?

  7. Hi Chris

    This is a good discussion because if we were setting up a Parecon, we’d need to sort these things out. In the spirit of doing so, here goes…

    CAPs in and or themselves are needed so that we have a forum to do the work that environmental organizations do today, which is to bring awareness to society about the consequences of environmental damage and to take some sort of action to address these. They would point out pollution issues using scientific data and other sources of information to make their case. It would also be their role to quantify the costs to society if no action is taken. That cost, such as the harms plastic bags are having on our environment, is then added to the cost of producing a good, so that the indicative price reflects the true cost of producing that plastic bag. If it can’t be recycled and must be buried, thus harming our groundwater, then we are stuck having to process that ground water at a greater cost than if the water was pure and clean in the first place. I can’t see any other way at the moment of generating the true social cost of a product. I’m open for suggestions.

    As for the damages paid to individuals for being exposed to pollutants here is my thinking on this. When it comes to working and having an income, society bases remuneration on effort and sacrifice, and if for some reason you can’t work, it is based on need. But being paid in the context of enduring harm vs working I see as two different things. If you work harder, doing dangerous work and for longer hours, a person’s pay should reflect those greater sacrifices. But we’re also making a sacrifice when we are exposed to pollution we don’t want. However, the problem I see with being compensated for having to be exposed to heavy metals, either by breathing them or consuming them, could lead to undesirable behaviours such as seeing this as an easy way to earn a greater income without having to work for it. Look at the behaviours today of people suing for outrageous sums of money. It’s created a cultural pattern of being a victim and demanding compensation for it. It’s easy money. I wouldn’t want to see this “victimhood mentality” continue under a Parecon. It’s like a cancer that could spread throughout society and become difficult to eliminate. If we focus our attention on solving the pollution problem, we’d all be better off down the road.

    C

  8. I also think that the most important reason for having CAPs is that they maximise self-management, by giving those that are affected by the pollution the say over the level of pollution they are willing to accept. Personally, if it was me, I would want the right to influence the decision, not some other body making the decision for me.

    Does this create a socially undesirable incentive for people to damage their health which generates a higher than optimally efficient level of pollution because the compensation is so luring? It’s an interesting question and I guess we will have to see in practise, but I think the context in which this is happening would be very different than today, where there are people in society that are so poor that this could be their only recourse for gaining a decent income. We are also not talking about a situation like today where you can receive millions of dollars in compensation from lawsuits. The question would be, in a society where there is an egalitarian distribution of income from effort for work and for need, would you be willing to receive a bit of extra income as compensation for the health effects and reduction in well-being you would suffer from accepting more pollution in your community or not? This would also take place in the context of longer-term environmental plans with socially agreed targets.

    Robin Hahnel has a new book Democratic Economic Planning, coming out later this year, in which he fleshes out the role of CAPS in more detail including a pollution demand revealing mechanism. There is also a chapter on Longer-term Participatory Environmental Planning.

Continue the discussion at forum.participatoryeconomy.org

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