Editor’s note: discussion topics include whether consumer councils in Participatory Economics (parecon) are incentivized to oversell, whether worker councils in parecon can oversell, conspicuous consumption, whether parecon would reproduce a ‘throwaway society’, whether consumer federations in parecon would compete, plan adjustments during the year, and the scope for rising living standards within ecological limits.
[After the Oligarchy] Hello everybody, this is After the Oligarchy. Today I’m speaking with Professor Robin Hahnel.
Robin Hahnel is a professor of economics in the United States, co-founder with Michael Albert of the post-capitalist model known as Participatory Economics (Parecon), and author of many books.
Today’s conversation is in association with meta: the Centre for Post-capitalist Civilization. This is Part B of the first in a series of interviews with Professor Robin Hahnel about participatory economics, and in particular his latest book Democratic Economic Planning published in 2021. It’s an advanced discussion of the model proposed in that book, so I recommend you familiarize yourself with participatory economics to understand what we’re talking about.
The discussion will also continue on the forum of participatoryeconomy.org.
Okay so the next question, staying on consumption, is about excessive consumption and the possibilities of this in participatory economy. So, firstly on the side of consumer councils, since consumer federations organize consumption – for example through shopping centres and online shops – consumer federations will decide how to present and, in general, ‘market’ goods and services. Will there be any incentive to oversell? For example, to convince people to buy things they don’t need or want.
[Robin Hahnel] Okay so I warned you before that you had picked the two things that I am the least … well, are my least favourite subjects.
[AO] Well your intellectual honesty is always appreciated – that’s how we like to do things here. But just whatever comes to mind is good enough.
I’ll give you my best answer, but I’ll preface it by saying that I don’t shop right. I don’t go shopping, I hate shopping. I have always found somebody else who will do the shopping for me. The only thing I enjoy shopping for is … I cook and I go into stores and I shop for food. [But not] clothes, [nor] anything else. There was a time when I would go into bookstores but now we don’t read books anymore, they’re all online. So I am not a shopper.
And at one point, there were three female students in one of my classes and we had done a little section on participatory economics. And they came in during office hours, three of them together it was like a delegation, and they came in and they said ‘well, Professor Hahnel, there are a lot of things we really do like about what you’re proposing here. But there’s one thing we just don’t like: you don’t seem to understand the pleasures of malling it.’ And at first I didn’t even understand what the word [was], I didn’t know what they were what they meant when they said ‘mall’. And they meant going to a mall and seeing and being seen, and spending four hours, you know, after school or after work at the mall. And that they were basically telling me some of us really like that, and we just want to know whether we’re going to be able to do that in a participatory economy.
And I had to say ‘well your dream is my nightmare’. I mean the fact that I would be trapped in a mall for five hours is sort of the worst thing that could ever happen to me. And so I’m going to admit to you that anybody who enjoys the pleasure of shopping, at least this person who designed this economy did not have you in mind. Because it’s the farthest thing from my mind.
But I do just think that structurally, almost by accident, I was concerned with the perverse incentive for sellers to lie to people about how good their products are. And that’s a huge feature of capitalism. I thought well, why don’t we reverse who is in charge of explaining to people what the properties of different options are? Why don’t we put the consumer federations, why don’t we assign them that role? Rather than put producers in the situation where they’re constantly trying to convince somebody to buy something, [where] they’re over-selling the value to the consumer. Let’s get the incentives right.
So the proposal was … I mean, people do need to find out about products. Now, at this point I don’t know how they do it because now everybody’s buying online. Nobody goes to the malls anymore. But at the time we were originally writing this, we said well we can still have malls. I mean, I was trying to get my poor students, I was trying to convince them to support participatory economics, it was shameless. That’s what I was trying to tell them. You can still go to the mall, but the mall is going to be run by your consumer federation. And they’re going to have all sorts of things that are new things on display there. And maybe you can impulse buy, if you want to impulse buy. Or you can just go and see it.
I know that in Cuba they did set up … they weren’t shopping malls, but they would periodically put on sort of a big show where they would display items that were going to be new items that were going to become available. And they would put them on show, and people would visit, and that’s how they would become aware of what was going to soon become available, if they wanted to find out what was coming.
So our suggestion has been that that should be the approach. And then the question is well if it’s the consumer federations that are in charge of … first of all, the consumer federations are going to have their own research and development units that are responsible to them for doing research into new consumer products. Why don’t we want the consumers to be in charge of looking into new consumer products instead of having the producers be the ones that are doing all that research? So we essentially said let’s reverse who’s in charge of that research. Let’s reverse the whole question of who is in charge of presenting and showing people what is available, A.K.A. advertising.
My father was a miserable employee in the advertising industry, so I grew up very aware that there are two supposed purposes of advertising: one is a legitimate public service, which is making accurate information about product availabilities and capabilities available to the public; and the other is tricking them into buying things they really don’t want. So the goal here is … we do have a legitimate service that needs to be provided, and that is information. But we want to do it in a way that we don’t have a terribly perverse incentive about who’s in charge of it and what their motivations will inevitably be.
[AO] It is a very interesting move, and I think very sensible to try to eliminate that perverse incentive by an institutional measure rather than the classic ‘well, workers in the future won’t use pernicious advertising tactics because they’ll be lovely future socialist workers acting in solidarity’. And that the consumer federations would be in charge of that, I think is a very good idea.
And, in general, I imagine that it would eliminate the worst excesses. I’m just wondering within that context would there be any incentive for consumer federations to oversell. I mean, I suppose the thing that first enters my mind is that you’d say ‘oversell to whom?’. Because they would really, for the most part, be overselling to themselves in a way.
[RH] Right. That’s why I don’t think you’re wrong to worry about whether there’s still going to be some perverse [incentive]. What I would claim is I think this proposal about switching who’s in charge of this over to the consumers federation from the producers, that should take care of the bulk of the perverse incentive. I don’t want to claim that there might not still be some, but I think that takes care of the bulk of it.
But I completely agree with your sentiment that what socialists have done in the past is whenever we get into a situation where some somebody says ‘well, won’t this bad thing happen?’ our answer is ‘no, it’s only capitalists who do bad things’. And once it’s the workers who are in charge they won’t want to do these bad things. Well yeah, but I think it is reasonable to … in a participatory economy anything that increases the social benefit to social cost ratio in one way or another makes life more pleasant or better for the workers’ council. So I think it’s a very reasonable question to keep asking whether or not we have created an incentive for them to do something that would have that effect. Anything that would have that effect it’s very important to worry about, and I don’t want to dismiss it on the grounds that ‘oh, but these are workers, they’re not capitalists, they wouldn’t do that’. And I think that’s a fundamental methodological difference between how I and some of us have gone about you know trying to design a better system from the way that a lot of people who say ‘I really like socialism’ have gone about it.
[AO] Yes, absolutely. I mean, the way I think about it is that it’s all about institutions. There are nuances, but really taking the long view of human society it’s almost like institutions are a glass and humans are the water. We’re quite malleable. We see that in capitalism where so many of us – for example as consumers – we don’t want to participate in all sorts of destructive activities. But because the personal narrow institutional interest is misaligned with our personal preferences these toxic behaviours happen anyway. Because we’re trying to go against the grain of the institutions, as it were, and there’s no reason to imagine that that won’t also happen in a future society.
There’s another question about this issue. It’s about the worker council side. So worker councils will have a strong incentive to convince consumers to purchase their products, because this contributes to their social benefit score. What scope is there for worker councils to use behaviour modification techniques, A.K.A. advertising, to this end? Even though consumer federations sell products to consumers and provide consumers product information, could worker councils still have a significant effect?
[RH] I’m thinking out loud here a little bit. Sometimes worker councils are selling to others worker councils, and sometimes worker councils are selling to actual consumers. And here’s where I’m thinking out loud: very few people worry about whether one business is hoodwinking another business.
[RH] And I wonder … I mean, I don’t know enough about the advertising industry to know. You would get the impression, the popular impression if you take the popular mindset on this, you would assume that 80 to 90 percent of advertising budgets are ones where it’s a capitalist company that’s selling to consumers, and that’s where all their advertising is going. On the other hand, if what they’re doing is selling to other businesses they don’t bother advertising because they just can’t hoodwink them. I don’t know if that’s true or not, but we do tend to think of the consumer as being uniquely manipulable, uniquely the actor who can be potentially manipulated. So, the thinking out loud part of this is: is this a problem that’s really unique to protecting consumers from this kind of predatory advertising? Or is it a general problem of anybody selling to anybody, even if one business is selling to another business. In our case, one worker council do another worker council.
[AO] Can I intervene just momentarily? Yeah, actually that’s a very good point, I didn’t even think about that. I think there definitely is advertising directed at other businesses. I imagine that this is very much the case. It doesn’t necessarily take the same form, although sometimes it does. I mean, I know I switch on the radio and there are always advertisements saying ‘if you want to improve this or that in your business, go with this insurer, this IT system, or this security system or this …’
[RH] That’s true.
[AO] And there is, I imagine, a huge amount of money [in it] because of the nature of businesses. You know, when businesses tend to buy things they tend to ‘buy big’. But then it probably also happens in other ways which consumers aren’t exposed to. It’s a very good point, I suppose you’d say that it’s almost up to the worker federations to protect themselves from that. I’m not sure actually, but if you want to jump in …
[RH] Yeah I’m not sure either. I mean, I’m trying to recall what we said about advertising.
[AO] I mean I suppose to begin with, if we split this into the production and the consumption side, the question to ask … I mean, I’m trying to play devil’s advocate and ask these difficult questions, but really the question to ask is when consumer federations are providing information directly to consumers – you could imagine something like Amazon, for example, being run by consumer federations.
[RH] There should be no conflict of interest there. Because the consumer federation is basically governed by the consumers who it represents. And we can actually generalize that. If the information about quality and characteristics of products is being provided by whoever the people who are the users or consumers of that are, then you’ve eliminated the perverse incentive for the producers to oversell. And I was thinking entirely in terms of ‘oh the buyers are always consumer federations’, and that’s why I wanted to empower the consumer federations as the ones that are providing that information. We’re not going to leave that to the producers to do that. But there is a similar situation that you have, you have situations where some producers are buying from other producers. I mean the analogy would be if you have automobile making companies buying steel from steel making companies, you want the automobile making companies to be providing information about the quality of the steel and the nature of the steel products to the automobile companies. You don’t want the steel companies to be doing that.
[AO] To move the consumption side out of the way, what I was getting at is one would ask why if there were this high quality information being provided – and to be more concrete, we could imagine that there would be something like an Amazon, for example, provided by consumer federations, where consumers would be provided with high quality information; in the book you talk about Consumer Report and Nader’s Raiders; there would be people whose job it would be to test products to see how the reality measures up to whatever the producer councils have told them – so the question would be then, even if worker councils wanted to over-hype their products and tell consumers lies, why would consumers want to or be inclined to listen to them in the first place?
[RH] Why don’t we disempower the workers’ councils from being able to directly … they’re not the ones that should be providing information about their products. I think the proposal amounts to that we want to institutionally protect the users from manipulation.
So, we have a workers’ council making steel and they say ‘but we really do have this interesting steel product, and it’s innovative, it’s a little different from the others, our steel is a little different than the steel that you’re getting from these other steel-making workers’ councils’. Well, they would basically have to make that case. Instead of going out and advertising in … I suppose there are going to be journals that are read by car-making companies, about whether we should be buying this kind of steel or that kind of steel. Instead of that allowing them to be their self-advertisers, I think the idea is you want them to provide their information to an agency that represents the interests of all who might be using it, rather than they just simply try to directly access those people themselves.
It’s the direct access to the buyer of your product that I think we want to substitute a different process for. We want to substitute a filter. We’ve got to provide a means by which workers’ councils can describe their products, and the advantage of their products to somebody. But I think we want to basically have this intermediary, so that we eliminate what is the manipulative part of advertising from the ‘it’s really just information’ part. So then we empower the intermediary to hear the case from the workers’ council and then write up the description in Amazon, or provide the information in some sort of malls and displays, run the malls and displays where this stuff gets [sold].
As I said in the beginning, I only go food shopping and I really am only interested in the meat section and I actually don’t pay for high quality meat because I can find meat I really like and I love getting it at low prices. So I am just not the person who ever thinks of any of these things.
[AO] No, it’s good, it’s interesting. And what you said there is a very interesting, concise way, to summarize the issue. The problem being that direct connection between the producer and the consumer, whether that consumer is another workers’ council or that consumer is an actual consumer.
[RH] In this regard, there’s one thing that I did think was a very helpful suggestion that we made. Which is that right now if you buy something from a capitalist firm and it’s not up to snuff, it’s not what it was supposed to be, then you an individual consumer have to battle with that company about taking it back, reimbursing you. I mean and then we get into some companies who will advertise themselves as great companies by saying ‘oh, if the consumer isn’t satisfied we always take it back’ which usually turns out to be actually a misrepresentation. They just say they do that, but in fact they don’t.
One of the things we suggested that’s a structural change in this dynamic – because there the problem is it’s a very unequal power dynamic, you have an individual consumer who’s not satisfied, they’d have to personally take the time and energy to go and hassle with the company to take it back, give them a rebate, replace it, etc. I like the idea that consumers can just turn all of that over to their federation. So anybody that gets delivery of something that they’re not satisfied with, they just give it back to the federation and then the consumer federation on a more equal power footing argues with the producers federation about whether this was below standard, this was not what it was supposed to be.
So I like the idea that in any disputes over whether or not something was, in truth, what it was supposed to be, I like to have that settled between roughly equally powerful groups. And as a person, I would love to be able to turn all of that over to my consumer federation. I’m not happy with this, I just hand it to them and a week later they tell me what the resolution is. I would trust them to do a better job of representing my interest than my own, and then I don’t have to take the time to do it. So one of the functions of these federations is to relieve individuals in particular unequal power situations from the inevitable hassles of something wasn’t what somebody thought it was going to be.
[AO] Absolutely, I mean there’s one word which illustrates this in the society that we live in and that’s ‘Apple’. I just think it’s funny that we say that we live in a consumerist society, but it’s also a society where consumers have very little power. So we as consumers run around buying huge quantities of goods and services, but when it comes down to it we actually don’t have much power at all.
I mentioned Apple because you know they’re notorious for being one of the wealthiest companies, and in many ways producing great products, but also in other ways really screwing over consumers. You can’t replace the battery, you can’t replace the screen, you know nothing, you can’t see the source code for anything, everything’s proprietary, they have their own cable for everything.
And as consumers we’re faced with a kind of game theoretic nightmare. I mean, you go into those kind of dynamics in great detail when you’re discussing the Pollution Demand Revealing Mechanism (PDRM), but it’s the same kind of situation where nobody wants to be the first person to go after Apple and try to do something about it. So essentially it doesn’t happen.
[RH] That’s right. Whoever puts in the time and energy to call them out is doing a tremendous service to everybody else, but there’s a perverse incentive not to do that. I mean, I think at some point – I’m not sure it got into the book or not – but I always was impressed with ‘every company mouths the slogan “the consumer is always correct” with equal insincerity’.
[AO] Yeah absolutely, so true. So, some more questions about consumerism. Parecon involves the buying and selling of consumer goods and services, albeit in a very different context. To what extent do you think that conspicuous consumption will persist?
[RH] Yeah, we can throw the degrowth movement in here too.
[AO] And the other question, we can put the two of them together: to what extent do you think that habits of just throwing goods away and buying a new one will persist? How can Parecon counter these tendencies? And maybe if you could explain what conspicuous consumption is for people who haven’t encountered that phrase.
[RH] Well ‘conspicuous consumption’ was a phrase that Thorstein Veblen came up with. And he is definitely one of my favourite economists of all time. The reason he is one of my favourite economists is he was very sensitive to how it was that what people wanted and didn’t want was very influenced by the institutions in which you … When you put people down in one set of institutions, they want and don’t want certain kinds of things; you put them down in a different set of institutions, and you’d be very, very, surprised at just how different people’s preferences are. So, the whole idea that institutions can bias and warp the kinds of preferences that people come to have – which has been an important part of my theoretical economics work dating back to my graduate school days – it really just comes from an insight our of Thorstein Veblen.
But he got very concrete about it. He was writing in the in the robber baron era of American capitalism, and what he realized was that many people were just consuming things to demonstrate, to achieve, status in society. That it was almost better to overpay for something, because if you overpaid for it you had demonstrated your status in society as a higher wealth, higher income, person. So it wasn’t really that you wanted that good. It’s that buying that good was a way of … So that’s what he meant by ‘conspicuous consumption’. You weren’t consuming the thing because it had any real use value for you, or utility for you. The utility it had for you was it conferred status on you compared to other people.
Now, I think that’s a very important concept. I think that’s a very important. So the real question reduces to, in a participatory, in a healthy society, how would people go about achieving status in the eyes of others. Well, certainly in a socialist society, our vision isn’t that you would achieve status as being a higher income person or a person with greater wealth. So, part of what we’re proposing is changing society from the way that you impress other people with yourself as a human being because you’re wealthier and you can consume more. That was a crazy, terrible, way that people achieved this goal under capitalism. And we’re going to eliminate that. We’re not going to have these huge differences in income and wealth.
So then, I think in part what the socialist vision is – and this is vision – are people going to really not care what other people think of them anymore? No, I don’t think that’s true. I mean, I don’t think that’s in the human gene, you know that’s not in our DNA. So people are going to care. But then the question is, well, how would you go about trying to win esteem? And our goal as socialists we want to create a society in which the way you try to earn the respect and the esteem of others is that you’ve done things that are socially valuable. In essence it’s sort of substituting one whole way for humans to earn the respect of others for what was really a kind of … What was brilliant about Veblen was he managed to write about it to make you understand what a sick, absurd, way it was that people were going about trying to win the respect and esteem of other human beings.
And that’s that that comes into play when we’re talking about incentives to innovate. And we can come back to this in terms of, well, there are no patents anymore so why would anybody try to innovate? Well but innovators are doing something that’s socially valuable. So if you have a society that has moved away from I’m going to be respected by others because of my conspicuous consumption, instead, to a society where if I want to be respected by others one way I could do it is if I happen to come up with a new innovation that’s socially valuable, then people will know that and that’s how it will get respect. So, I think that’s part of what we’re imagining here.
And that also to the extent that that has happened, that has implications, for instance, whether are we going to have to reward people beyond their sacrifices and efforts if they happen to come up with innovations. Well if what people are getting respect from others for is the innovations they come up with, then you don’t have to give them extra consumption for that. On the other hand, if that’s not sufficient, if we haven’t achieved in the evolution of the socialist economy enough of that to satisfy people, and we’re not getting enough innovation, well then what I argue is you may discover that you would have to resort to what I would argue is an unfair system of material rewards for innovators. Because we haven’t achieved the point where simply recognition for having come up with a social[ly valuable innovation] is the direct reward of esteem and respect. We still have to substitute this material reward in order to induce enough innovation.
And there has been so much concern with how the old cloggy centrally planned socialist economies failed in terms of stimulating innovation, that I know this is a huge concern that a lot of people have. Is what you’re proposing something that would be sufficiently innovative, Or would we once again lapse into just very low rates of innovation? And that’s what I’ve said, the hope is that we now have gotten out of the crazy Veblen situation, that he just did such a brilliant job of making fun of, and we’ve moved on to a system where direct respect and esteem and appreciation for innovation … But if we haven’t, there is a fallback. But I just think that fallback is something that should be decided through a democratic political process, How much of that do we still have to do? The whole question of do we have to do it at all I think should be part of a democratic debate. If people are feeling like maybe we need to do a little bit of it, then that’s the way it should be handled. But the goal should always be that we’re moving away from that.
[AO] Definitely. I intend to get into innovation in detail. But before we do that, it is very interesting to think about what the material basis of conspicuous consumption is, as we know it. I’m sure there will be some kind of conspicuous consumption forever, so to speak, I mean even in hunter-gatherer societies there’s always some element of this. But it’s of a completely different character. And it’s interesting to wonder how much conspicuous consumption is even possible in a society where incomes and wealth are radically egalitarian. Can that even be sustained? And particularly in a culture where you don’t have a mass brainwashing by producers to create preferences and personalities which pursue that. I guess I’m thinking about how conspicuous consumption arises in that context, and I’m not sure where it can actually get a foothold.
[RH] If income and wealth is very egalitarian, I think that’s the major institutional barrier to the growth of the actually psychologically sick behaviour of conspicuous consumption. That’s the big institutional barrier. And the predictable degree of income and wealth inequality in a participatory economy has got to be lower than any other model of socialism that I’m aware of. So, I think that, in some sense, if there’s any economic proposal that is immune to this problem, this would be the most likely. What you’re saying is well being the most immune doesn’t mean you’re entirely immune and I wouldn’t dispute that.
[AO] Well, look, bringing this back to engineering, in engineering there’s no such thing as zero. Don’t know what that is. It’s always 0.000 or something, so I’m not interested in zero, I’m not interested in perfection, it’s about dealing with the largest problems and then you can make the refinements once you are lucky enough to get there.
What about the matter of a disposable culture, a throwaway culture? You know, fast fashion. And it doesn’t matter if I don’t get this repaired. People don’t repair things anymore, because why bother getting repaired because that costs as much as it does to get a brand new version.
[RH] My answer to that is if we incorporate all the externalities – which is a huge, huge, part of what we’ve proposed, and proposed very concrete mechanisms for how to estimate their magnitude and how to get them included into the social costs that everybody has to take into account – that’s essentially my answer to that. That’s incredibly inefficient because somebody has not incorporated the costs of the throwaway and the cleanup. And I think if you take care of the externalities that basically is the solution to that.
At some point we should take the conversation in the direction of … Because over-consumption and the degrowth phenomenon, they are related to one another, as is the throwaway stuff.
[AO] There’s a question about that. I’ve broken them into sections. If you want to make some preliminary comments that’s fine, but there’s an ecology section and there’s a whole part about how can a participatory economy facilitate a zero growth or a degrowth economy versus, say, a market which has a growth imperative. But I just wanted to say don’t worry, we will absolutely get there.
[RH] Then good, proceed along your agenda and we’ll get to it. That’s fine.
Here’s the thing I’ll throw in. I envision that in a participatory economy material standards of living will continue to rise at a healthy rate forever for the human beings living in this. And there’s a certain interpretation and presentation of degrowth that assumes that is environmentally impossible, and I think they are absolutely crazy, they are absolutely wrong, there is no reason that we … I do not believe we have to preach to the world you are just going to have to accept no significant rise in material standards of living for humanity, because unless you accept that the environment will be destroyed.
I’m just going to throw out there that I am proposing that if we have a participatory economy, people will enjoy a nice healthy rise in the average material standard of living for human beings. And because the income distribution will be more egalitarian than ever, that rise will be something that everybody enjoys. That we do not have to accept the fact that our living state, our economic living standards, will no longer continue to increase. But anyway we will can come back to that
[AO] That’s a very enticing assertion, and that’s an incentive for viewers to hang on until we get to that and discuss and reveal the arguments for that.
[RH] That’s right. It doesn’t have to be doom. I am not preaching doom and gloom. Only if we don’t wake up and do something sensible. But not because it’s inevitable we’ll have to accept it. Go ahead.
[AO] There’s another question about consumption, and that is about consumer federations competing with each other. The question is: is there competition between consumer federations? Hoarding information, for example, or trying to attract members with higher effort ratings. And if consumer federations are pushing to sell all their merchandise, does that mean that, say, shopping centres will be competing for customers or online shops will be competing for customers?
[RH] I honestly don’t see a problem here. Let’s just go back through them one by one.
[AO] Is there competition between consumer federations, so for example …
[RH] To get members with higher effort ratings.
[AO] Yes, that was one.
[RH] Okay, well the consumer federations are geographically based. So a consumer federation would be, what, maybe 10,000 people, maybe 3,000 families. And they are in a geographical area. So they don’t compete for members, their members are fixed by the fact that they live in that neighbourhood.
I also don’t know what advantage it would be to a consumer federation to have people with higher effort ratings, to the federation itself. I think there will be differences in the average effort rating of different consumer federations, and that does in fact mean that all the residents of that consumer … Suppose you’re in a consumer federation where the average effort rating is five percent lower than the national average. Well, then the social value of the goods that everybody in that neighbourhood is going to be consuming is going to be five percent less than the national average. Now, supposedly that’s fair because their effort ratings were five percent less and they basically made the choice that they wanted to be more leisurely about things and cared less about what they had to consume. But that’s the way it works, and so I don’t see a real problem there.
I can’t see what the advantage to a consumer federation would be of recruiting high effort members. I guess you could say, well, a high effort member might have a nicer house on the block and then the whole neighbourhood and the whole street is a little nicer. But differences in effort ratings and income are going to be small enough so we’re really not worried about is my neighbourhood a ghetto versus walled estates. There aren’t going to be neighbourhoods with walled estates and neighbourhoods with ghettos. So, I honestly don’t think that’s a problem
[AO] Yeah, if the variations in effort ratings are relatively small then there isn’t much of an issue there.
If you have if you have 10,000 people living in a neighbourhood council, and maybe half of them have jobs, those 5,000 people are working in different workers’ councils. So it’s not like we’ll have a workers’ council with a low effort rating and everybody in the neighbourhood works there. So if people in one consumer council ended up with an average effort rating five percent below some other neighbourhood consumption council, that would have been the outcome of people in both places working in hundreds of different worker councils and it just turned out that in the neighbourhood there was a five percent difference in the average effort rating. Everybody is working in very different workplaces.
[AO] Okay, really that issue is more of an issue about the effort rating income calculation distribution process.
[RH] Yeah. Between worker councils and within worker councils, exactly. That’s where there really is a serious issue. I mean, that’s where the discussion needs to be because that issue does require attention.
[AO] Yes and we’ll get there. And then also statistical effects, that will deal with a lot of the issue there when you’re looking at significant populations.
And just on that last point of, for example, shopping centres competing with one another. They all want to clear their products, their goods and services, so would there be competition between different consumer federations running, say, shopping centres in different areas of a city, or so anything like that?
[RH] I mean, quite honestly I just never shop
[AO] I didn’t think you’re going to say that.
[RH] I don’t even shop online. I don’t even I don’t even shop on Amazon. I mean, I have six children and three grandchildren, when birthdays come around then I have to have somebody show me how to go on Amazon and get something shipped someplace.
Look what I always imagined was that there’s all these goods that the people in a neighbourhood consumption council have put in our proposals that have been approved. We’re going to be consuming these things during the year. Well, there has to be a distribution centre. I always imagine there’ll be a distribution centre some place in the neighbourhood or close to the neighbourhood where all this stuff gets sent when they go to pick it up.
[AO] Can I intervene on that for clarification? So, would you say then that – because this this was a question I was going to ask, but I thought maybe it’s not worth asking – that most consumption at the household level would occur locally?
[RH] Why would you want to go to a distribution centre that is a 40-mile drive instead of the one that’s closest to you. We might have some items where the distribution centre is covering five neighbourhood councils – the warehouse and the place you go to pick them up. I mean, think of it now, we have grocery stores, and then we have corner markets, and then we have malls. And you go to those different places to get different categories of goods. So in that sense, I think we would still have different sizes for different categories of goods’ actual physical distribution centres. But I always imagine those as being run by the consumer councils.
[AO] If I understand it correctly, the annual plan establishes more or less the consumption schedule for the year but …
[RH] The annual plan doesn’t say how the goods that are produced actually get to the people who end up using them during the year. So what we’re talking about is ‘but then how does that happen?’, and my honest answer is I don’t give a shit. That was my honest answer but it’s a reasonable question to ask. And so my second honest answer is well ask somebody else, that can’t be that hard to work out. So now you’ve asked me well could that work out, and I’m just sort of thinking out loud. But yeah they go to distribution centres and people go to pick them up.
The more complicated thing is in my mind is what if people during the year start to pick up different amounts of things than what they were pre-approved for? And then how do you make those adjustments? Now, that I took upon myself as a serious question that somebody’s got to try to provide a serious answer to. But the short answer always was I just imagine that the consumer councils and their federations are managing what I just think of as distribution centres, where different things are sent and the people who’ve been authorized to consume that stuff are going and picking it up as conveniently as possible.
All this was written before [COVID] … Everybody is so afraid, you can’t go into a store, and Uber is dropping off your food, and if Uber won’t do it, Safeway will do it for you for a small charge. I mean, we’re living in a whole new world about how people are picking things up, and, I don’t know, maybe it’s a better world, maybe it’s a worse world, but I’m the person that never shopped, I don’t know.
[AO] So can I just clarify for my own benefit, it was my understanding that consumers would, at the point of actually obtaining the good or the service that they had put in their request for, when they actually come to realize that request, they would need to pay for that on the spot out of their income.
[AO] So I’m just asking, you don’t think then that there will be much price competition between, for example … I might have put in a request during the year to my consumer council, but then I see that maybe on the other side of the city, or something like that, the thing that I wanted is being sold there at maybe a slightly lower price. Because they’re trying to clear things, and you know it’s an imperfect …
[RH] I don’t think that’s the problem. You’re not going to find a better price at a different location.
But this is a situation that that will arise. I put in my consumption request and it was approved, but during the year I end up doing something different. And that means that for some items, when I go in and I get them and they charge me on my swipe card, I pick up more of some items than I was approved for and I pick up less of other items than I was approved for. So there is a real question of how do we adjust for that. And the really big question is do we adjust the prices in that case or not? And if so, why and how? And I actually do write a decent amount about that in Democratic Economic Planning.
In the best of all worlds, when you pick up less of an item and I pick up more of an item from our own distribution centre they cancel each other out. We’ll be charged different amounts [than planned in our proposals]. And that will basically mean that in your bank account you have maybe overspent what you were allocated, you’ve either done a little borrowing. Or you’ve actually saved some.
And I do talk about the borrowing and the saving. And the saving is easy. Anytime somebody’s purchases end up being well wait a minute you didn’t buy everything you were you were authorized for, then you’ve saved and it just goes into an account.
On the other hand, the borrowing isn’t a problem unless it gets to the point where there’s no credible way you are actually going to pay back all that borrowing by consuming less in the future than you’re authorized for during that year, than your income. And then we have to talk about well what banks – although, in our case I think it’s more like credit unions – their real job is to basically just monitor, and see whether or not somebody who is spending more than their allocated income year after year after year, and it’s gotten to the point where it’s very obvious that this is not something they’re going to be able to repay, then what do you do about that? And that’s where I think credit unions with their standard monitoring of that kind of behaviour have to come in.
But basically the system is certainly flexible enough so that: people will change their minds during the year, when they do change their minds then basically that will amount to they will either borrow or save as compared to using exactly their income for the year. That’s okay, we can take care of what I would call bad faith borrowing. In any system that allows borrowing, you have to have some mechanism or institution that is take that is monitoring borrowing to see whether it’s bad faith or good faith borrowing. And then there has to be somebody that steps in and does something about it, and brings it to a halt. But I don’t think that’s rocket science.
And the tricky part is in the end we have to have the actual matching of the supply and the demand. And do we use price adjustments to do that? Here’s the other thing that I think is a policy issue that would have to be discussed and debated, if we run into a situation where on average people have picked up during the year more than the collective order was. Well, then we’re going to have an aggregate shortage of the thing, and should people who have ordered a certain amount get priority over people who are just coming in and now saying I want more of that than I actually had in my proposal? And essentially you can use price adjustments to take care of this or you can use well but they put in the proposal, so if we’re going to run out of shoes then they get the shoes, and you have to wait because you actually didn’t put in a proposal for that many shoes. So there’s sort of two different ways of taking care of it and there are pros and cons to both I suppose.
[AO] There are. I mean we will go into that at another time, but I think there is certainly one advantage. Effectively one is a rationing … well, I suppose it’s all rationing really, but one is a typical what’s called ‘rationing’ system.
[RH] Right, one is rationing, and the other is you make the price adjustments and we traditionally don’t call that ‘rationing’.
[AO] Yeah, which is funny. It is this funny thing of, well, what do you think rationing is? Rationing is when there’s a certain amount and you have a way to decide who gets it and who doesn’t get it. Which is the hilarious thing, that people think that in a market society or in capitalism, there’s no rationing. But of course, that’s what money is.
[RH] Right. When you put a price on something that I can’t afford, guess what? You’ve just rationed me out of it.
[AO] This is a complete aside but, when people foam at the mouth about the ‘social credit’ system in China … now, I’m not an uncritical defender of China, that’s not what I’m getting at. But people talk about how the social credit system is so dystopian, and you’re not allowed to do certain things depending on the way you behave or what you think. And I just think, hmm, there’s a ‘social credit’ system… there’s some kind of score attributed to you depending on the way that you behave which determines what you’re allowed to do and not allowed to do.
[RH] Oh right, I know what you’re talking about now, yes.
[AO] Yeah, money. Yes, we have a social credit system.
But that point you’re making, though, about underwriting. I mean, from what I read about finance, it seems that like you said it’s not rocket science. It seems to be that the hardest part is actually making sure that it is done and that it’s not a situation where criminals take over and make sure that there’s no underwriting at all, and turn finance into a total scam. But the principles of underwriting, the way to do it is not that complicated. When you’re talking about good and bad faith borrowing.
[RH] Right, so good and bad faith borrowing. One of my daughters works for a credit union, and she’s worked in the collections department, and she’s worked in the loans department. And there are members of the credit union that are extended credit and then it turns out well they just can’t pay it. And sometimes it’s an accident, and sometimes there’s an easy way to fix it in terms of oh well you’re going to pay it back but it’s going to be over a longer period of time, we’re going to give you an extension of time.
The first step that has to be taken is well we’re not going to let you do that again next year. When you defaulted on a car loan from your credit union, then you don’t get to do it again the next year. And it isn’t rocket science to have people in the credit union to figure that one out, and know who we have to stop from continuing this. Basically a dishonest representation of their intentions or a totally unrealistic ability for them to assess their own situation. It can be malevolent or it can just be irresponsible, but we have systems where people, actual employees of a workplace, know how to go about this.
[AO] Yes absolutely. I mean life and finance are lot simpler when it is not just a giant scam.
[RH] I really don’t think that if Donald Trump had had to apply to participatory economy credit unions for the kind of credit that he has accumulated, I do not think he would have gotten away with all of the shenanigans he has through his entire business life.
[AO] Indeed. I just want to say one thing I meant to say about the rationing. I think one argument in favour of that, where people who had entered a certain good or service into their consumption proposal in advance, is that it would encourage people to be more accurate in their proposal.
[RH] Yes. If the solution was that people who had it in the proposal get priority over people who didn’t, yeah that that would provide an incentive for trying to be more careful about your actual proposal. It would also disadvantage me because I know that I would be very lackadaisical about putting my proposal in. And when I got there and they said ‘but you didn’t actually ask for this and this person did and therefore you’re going to have to wait’, I would be the first one to be told I’d have to wait. And I would decide that’s okay because I just don’t want to take the time to think too much about my annual consumption proposal anyway. Take last year and add five percent for everything because I think I’m going to have a higher effort rating – that would be the way I’d do it.
[AO] Your distaste for shopping and consumption would persist even in …
[RH] … even that context, yes.
[AO] Okay, so we can leave the questions there. You’ll be happy to know that there’s only one question left about shopping, so the torture will end after that. You’ve given me so much of your time, so I’m really grateful. It’s been a wonderful discussion, and we will continue this.
[RH] Sounds good to me. Alrighty, have a good evening.
[AO] That’s the end of Part B of my first interview with Professor Robin Hahnel about participatory economics and his latest book Democratic Economic Planning. Stay tuned for our upcoming second interview.
And as always I want to hear your thoughts in the comment section below.
That’s all for now. The only viable future for humanity is one After the Oligarchy
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