The Participatory Economy model and the shortcomings of economic models

The Participatory Economy model is the most concrete and elaborate proposal for how an alternative non-authoritarian democratically planned economy could function presented so far. Since its first presentation, it has been discussed, further developed and scrutinised in numerous subsequent books, articles, panel discussions, and debates on various forums. 

However, just like any other economic model, the participatory economy model rests on a multitude of abstractions, generalisations, and simplifications that often make it appear to non-economists as disconnected from reality or even nonsensical. The model, as presented so far, either reduces the economy, and especially the participatory planning process, to a number of abstract mathematical equations that for most non-economists have little to do with what goes on in a real-world modern complex economy, or, when presented in a more accessible language, describes the economy in a schematic and incomplete fashion ignoring many important functions, interactions and interrelations in an economy.

As just one example, the model assumes an abstract one-fit-all price formation template for all goods and services, regardless of whether the product is toothpaste, a bus, electricity, a building, a natural resource, or whether it is consumed individually or collectively, mass produced, unique or bespoke, or has a long economic lifespan or is consumed instantly. This is not a critique of the participatory economy model per se. If anything it is a critique of the field of economics in general and its tendency to basically abstract away the reality and of the indifference, at best, towards details and elaborations that most economists exhibit.

People certainly have a right to be sceptical of non-capitalist alternative economic visions and models in light of twentieth-century history. In order to convince a majority of citizens that an alternative fair and democratic economy is possible, let alone preferable, those of us who argue that it is, need to become a lot better at explaining exactly how our proposed economic models can be implemented and operate in a complex reality. We need to do our best to bridge the sometimes considerable gaps between our preferred abstract economic models and the reality. In short, we need to add realism to our models.

Any serious economic model that aspires to replace the institutions of markets and private ownership of productive resources with alternative democratic institutions for the coordination of economic activities has a lot of explaining to do and a lot of questions to answer. The presentations of the Participatory Economy model have provided viable answers and solutions to many questions and critical objections and successfully clarified many confusions. Nevertheless, we feel that there remain important questions that have not been sufficiently addressed and areas that are inadequately explored, especially when focus shifts from the abstract and theoretical economic model to more realistic real-life situations.

In the case of the participatory economy model, I think there are especially two important areas that should be elaborated and explained further to convince people it is a viable alternative to both markets and central planning: 

1. The handling and pricing of the enormous number and variety of goods and services in the economy, i.e., the incorporation and inclusion of the huge range of very different kinds of goods, services and resources with different characteristics and features produced and consumed in a modern economy into the annual planning procedure and the resulting annual plan to be implemented. 

2. The positioning and contextualisation of the formal annual planning process, which is carried out during a short period of time before the start of every new year, in a wider and complex real world environment with many extensive, long-term, intricate and interdependent relations, activities and ongoing operations. 

The compilation of an annual planning product catalogue

A fair and efficient annual planning process, in which consumer and worker councils prepare, submit and adjust their consumption and production proposals in a number of iterations arriving at a viable comprehensive annual plan for the whole economy, requires a well thought through, structured and extensive product catalogue accessible at the start of the process, listing all kinds and categories of products and services various actors relate to when preparing their proposals.

Analysing the consumers/users’ and producers’ roles in relation to (a) product categorisation, (b) product design, and (c) production processes, different kinds of products and resources can be identified, each of which can be thought of as constituting a separate section in a comprehensive annual planning product catalogue. Consumers/users’ and producers’ influence over categorisation, design and production are different for each kind of product and resource. The actual distribution of influence over these activities will greatly affect exactly how the final compilation of the annual planning product catalogue will look like and have important implications for the preparation of production proposals, product costing and pricing. 

The contextualisation of annual planning

When the annual planning procedure starts, many long-term issues and action plans have already been discussed and agreed. Important decisions have been made in various development and investment planning procedures. The agreed development and investment plans position the overall consumption and productive activities and especially the annual planning in a broader long-term context, for instance concerning the economy’s relations to technology, work/leisure, ecology and international trade. I believe we should continue the contextualisation of the annual planning process further and position it even more clearly and concretely within the framework of the ongoing and complex relations existing in a fair and democratic modern economy. The formal annual planning procedure represents merely a short lived and small, albeit recurring and important, part of all the planning, coordination, and decision making that need to happen continuously in a Participatory Economy for the economy to function efficiently and democratically.

For example, many crucial planning and coordination activities in a participatory economy outside of the formal planning procedures are performed continuously over long periods and throughout the year and not just in the short timeframes defined by the formal planning procedures. So, for instance, when a consumer council or federation discusses its present and future levels of various collective consumption or when an industry federation discusses the construction or location of a new large production site, the deliberations are often ongoing and prolonged and may take years to finalise. And many decisions have long-term effects and can require years of preparation and discussions before a final decision can be reached, which also has implications for how consumption and production proposals are prepared and finalised. 

Importantly, many crucial functions and tasks performed in a participatory economy by worker and consumer councils, their federations and society outside of the formal annual planning procedure require extensive and time consuming preparation activities, decision making routines and implementation, for instance the organisation and coordination of complex interconnected work processes and supply chains or the logistics of various aspects of the implementation and adjustment of an agreed plan during the year.