xmlns:o="urn:schemas-microsoft-com:office:office" xmlns:w="urn:schemas-microsoft-com:office:word" xmlns="http://www.w3.org/TR/REC-html40"> content="Response to "A Review Essay: In Search of Economic Justice," by Stephen R"> Response to "A Review Essay: In Search of Economic Justice," by Stephen R Robin Hahnel Normal Trial User 2 2006-08-29T16:43:00Z 2006-10-01T06:17:00Z 2006-10-01T06:17:00Z 3 5575 31779 American University 264 63 39026 10.260 96 800x600 125 0 0 In Search of Economic Justice: A Reply   By Robin Hahnel   First of all, I want to thank Steve Shalom for probing the themes discussed in my book, Economic Justice and Democracy: From Competition to Cooperation (Routledge, 2005) at great length and depth in his review essay published in the Winter 2006 issue of New Politics. It was in hope of stimulating the kind of thoughtful dialogue his essay exemplifies that I wrote my book in the first place. I also want to thank him for his excellent, comprehensive summary of what is covered in the book. He and New Politics have done a better job of telling interested readers what they will find in my book than I could have.   I will not take time to comment on the many points where Shalom expresses or expands upon points of agreement between us. Instead I will confine my response to areas where Shalom disagrees with my analysis or recommendations. Since -- unlike Shalom in his review essay -- I take up only points of disagreement, I hasten to caution readers not to infer from my reply that I believe there are fundamental disagreements between myself and Shalom. Quite the contrary, Shalom and I seem to be in close agreement about economic justice and democracy, and about what it will take to replace the economics of competition and greed with the economics of equitable cooperation.   Economic Justice: I argued that economic justice requires that people be compensated according to the sacrifices they make in work, but for an economy to be humane people's basic needs must be provided for in any case. While he is in broad agreement, Shalom writes "I'm not sure this distinction is compelling." Frankly, neither am I. Treating consumption based on sacrifice as a matter of justice and consumption based on need as a matter of humanity is probably overly simplistic. Let me explain what I was thinking, and then qualify my conclusions in light of Shalom's criticism.   In any economy there are a large number of people who are able to work, who are expected to work, and who do work. My principle concern was how regular members of the workforce should be compensated. After discussing a number of alternatives at great length, I concluded that the system of compensating people who work is fair if and only if the rewards a worker receives are commensurate with the sacrifices the worker makes. I shortened this conclusion to "economic justice requires reward according to sacrifice," and later in the book "reward according to sacrifice" was listed as one of the defining features of the theoretical model I advocate known as a participatory economy.   However, in real world economies we must also decide what consumption rights should be given people who, for a variety of reasons, do not work. There must be rules for judging who is able and expected to work, and who is deemed not able, or not expected to work for some reason. After which, consumption levels must be set for those who are not expected to work and for those who are deemed able but who are, nonetheless, unwilling to work. My comments on consumption rights for those who do not work were style="mso-spacerun: yes"> brief for several reasons. First, while reward according to sacrifice in work was a defining feature of a participatory economy, specific rules for compensating those who do not work had never been agreed on and were not considered a defining characteristic of a participatory economy. Second, I considered the rules for rewarding those who work and the rules for granting non-workers consumption rights to be logically separable. For example, capitalism means reward according to the market value of what is produced by the human and non-human capital one owns. But at least in theory, a particular capitalist economy could provide a generous safety net for those with little or no labor or capital income. On the other hand, a participatory economy means style='font-style:normal'>reward according to sacrifice. But a particular participatory economy might have a less generous safety net for those who receive little or nothing based on their sacrifices in work. Third, it seemed to me that people who agree on the moral necessity of rewarding those who work according to sacrifice might not necessarily agree on specific rules for granting non-workers consumption rights. For example, advocates of rewarding work according to sacrifice might disagree on the age at which workers should no longer be expected to work. Or, they might disagree on whether pensions should be the same for all retirees or vary somewhat depending on a person's effort ratings over his or her work life. Or, they might disagree on the level of consumption full time students should be awarded. And finally, while I believe economic justice requires rewarding work according to sacrifice, I am not sure there is only one way to allocate consumption rights to those who are able but unwilling to work that is morally satisfactory. For example, consider a very wealthy participatory economy where all who work enjoy consumption considerably in excess of what is necessary to meet their basic needs, as compared to a poor participatory economy where an average effort rating barely covers a person's basic needs. In both economies I believe justice requires rewarding those who work strictly according to their relative sacrifices. But while I might criticize the wealthy participatory economy on moral grounds if it did not guarantee those who are able but unwilling to work an allowance substantially above subsistence, I would hesitate to criticize the poor participatory economy for granting only a bare subsistence allowance to those who choose not to work. In any case, these were the major reasons I treated the issue of consumption rights for non-workers separately and only briefly. This is also why I said "While I believe justice requires compensating people according to the sacrifices they make, it seems to me that it is our humanity that compels us to provide for those in need." (p. 32)   However, I now believe I devoted too little attention to a discussion of procedures for determining who should be exempted from work, and the terms of compensation for those who are exempted as well as for those who are able but unwilling to work. While I believe it is possible to reach a definitive conclusion regarding a fair rule for rewarding those who do work, as explained above I am less sure a definitive conclusion can be reached regarding a single way to allocate consumption rights to all who do not work that is morally defensible. However, the issue of consumption rights for non-workers is of great moral importance, and I regret if my treatment gave the impression I believe otherwise. Moreover, I now think I was wrong to argue that consumption rights for non-workers is a matter only of humanity and not of justice as well. To take an obvious example, if a wealthy participatory economy failed to grant pensioners consumption rights sufficient even to meet their basic needs during retirement, it would be treating them unjustly as well as inhumanely. In general, Shalom is correct that justice as well as humanity are both relevant to compensating those exempted from work. I also suspect that when push comes to shove the distinction between "for reasons of justice" and "for reasons of humanity" break down the deeper we go into a moral evaluation of the distribution of consumption rights.   Economism: Shalom agrees with me that "economism" is an error that plagued much of the left during the twentieth century and is a bad habit we must overcome. However, he argues that I "overreach" when I object to referring to a society simply as "capitalist" when it is also patriarchal and racist. In defense of continuing to use the word "capitalist" as a general-purpose designation, Shalom argues that "all current-day societies are racist, sexist, heterosexist, able-ist and authoritarian," and therefore, he argues, "these terms don't distinguish between one group of countries and another, while the term capitalist does." I don't think our disagreement over semantics is important since we both have long criticized economism. However, it seems to me the usefulness of the word "capitalism" to distinguish between the economic systems of different countries has all but disappeared, while the danger of using only an economic concept as our general-purpose label for modern day societies remains as great as ever. style="mso-spacerun: yes"> In the twentieth century there were a number of countries with non-capitalist economies for significant periods of time. Shalom and I agree that these twentieth century, non-capitalist economies were not "socialist" in the sense that workers and consumers managed and coordinated their own economic endeavors -- which they did not. I call these economies "coordinator" economies to indicate that a non-capitalist class of managers and planners controlled and directed the labors of others, and I do not think Shalom disagrees with this analysis even if he does not refer to them as "coordinator" economies himself. style='mso-footnote-id:ftn1' href="#_ftn1" name="_ftnref1" title=""> class=MsoFootnoteReference>[1] But today almost every country has a capitalist economy. So I no longer find the word capitalism useful to "distinguish" between the economies of different countries. There are important differences between more humane style='font-style:normal'> capitalist economies like Sweden and less humane capitalist economies like the United States. So we need words like "social democratic" and "neoliberal" to distinguish between different sub-species of real world capitalism. But until we replace private enterprise and markets in some country with institutions supportive of the economics of equitable cooperation, to all intents and purposes the word "capitalism" has lost any distinctive value among existing economies. On the other hand, I fear that failing to mention crucial features of other important spheres of social life -- like the fact that inter-communal relations are racist, and gender relations are sexist -- when we seek labels to identify a country's defining structural features can serve to disguise the importance of non-economic forces just as much today as it did during the twentieth century. I concede the semantic benefits of brevity, but to refer to any country today merely as "capitalist" not only provides no useful information and is therefore a waste of time, it can still easily perpetuate economistic myths. If brevity is prized, "no word" is briefer than "capitalism" and conveys as much information in the twenty-first century world we live in.   Effort Rating Inflation: Shalom does not accept my answer to his question: "What is to prevent a group of coworkers from all exaggerating the effort of one another?" He quotes my answer accurately: "To prevent the possibility of 'effort rating inflation' the average effort rating a council awards its members cannot exceed the worker council's ratio of the social benefits of its outputs divided by the social costs of its inputs." (190) But he says: "I don't think the social benefits to social cost ratio will prevent it."   Shalom is wrong to believe the above rule will not prevent effort rating inflation. Any rule that caps the average effort rating for every worker council will stop effort rating inflation in its tracks. As long as there is a cap on the average effort rating in my council, exaggerating the ratings of any members must necessarily come out of the effort ratings of other members. Only if there is no limit on how high the average effort rating for my worker council can be is there an incentive for me and my coworkers to inflate one another's effort ratings. Any system of caps will prevent effort rating inflation. Different caps for worker councils chosen randomly will stop effort rating inflation, but of course arbitrary caps would be grossly unfair.   It is not difficult to prevent effort rating inflation, the trick is to do it fairly. Here Shalom has put his finger on an important issue that has generated debate among advocates of participatory economics. Some advocates support equal caps on the average effort rating for all worker councils. Others support a cap for each council equal to the social benefit to social cost ratio for that council. The case for caps equal to a council's social benefit to social cost ratio rests on the belief that the planning procedure will successfully charge worker councils for the true social cost of all their inputs, including any differences in the skill of their members. In which case, any differences in ratios between worker councils must be the result of differences in average efforts in those councils, and it is only fair to permit the councils where workers really did exert greater effort on average to distribute effort ratings among themselves that are higher on average. The danger with this rule is that the planning system may fail to level the playing field among worker councils. In which case a higher social benefit to social cost ratio could be the result of members whose higher skill was not reflected in a higher indicative price their council was charged for using this more valuable social resource, and not, in fact, the result of greater effort. The case for equal caps for all worker councils rests on the assumption that there will be very little difference in the average effort in different worker councils. Those who support this rule have less faith in the accuracy of the indicative prices generated by the participatory planning process and more faith that the law of large numbers makes significant differences in average efforts at least between workplaces with many members improbable. In sum, either rule will prevent effort rating inflation, and there is debate among advocates of participatory economics about which is more likely to be fair.   12.0pt;font-family:"Times New Roman"'>Self-Management and Participatory Planning:  Shalom characterizes participatory planning as a referendum approach to planning which insufficiently allows for deliberative democracy. He also questions whether the model can live up to its advance billing that it delivers economic democracy: "A final problem with the participatory economic model is the question of whether it actually accomplishes Hahnel's goal of economic self-management: that is, letting everyone have a say proportional to the degree to which they are affected by the decision…. Does it really give me one-third the say in a decision relative to someone who is affected by the decision three times as much as me? Unlike some aspects of the model which are documented in great mathematical detail, the claim that the model yields self-management seems to me unproven." 12.0pt;font-family:"Times New Roman"'>  12.0pt;font-family:"Times New Roman"'>Participatory planning is not style='font-size:12.0pt;font-family:"Times New Roman"'> planning via referendum, as I will explain. Once we have a clearer understanding of the planning procedure it will be easier to discuss the sense in which a participatory economy can live up to the goal of economic self-management. 12.0pt;font-family:"Times New Roman"'>  12.0pt;font-family:"Times New Roman"'>This is the only passage in my book that mentions how a referendum might be used in real world applications of participatory planning: 12.0pt;font-family:"Times New Roman"'>  0in;margin-left:.2in;margin-bottom:.0001pt;line-height:normal'> style='font-size:12.0pt;font-family:"Times New Roman"'>We did suggest one time-saving procedure that could be used if people in a participatory economy want to. After a number of iterations had already settled the major contours of the plan… the professional staff of the Iteration Facilitation Board could define a few feasible plans within those contours for all to vote on…. The purpose would be to save the time otherwise required to go through further iterations to whittle proposals down to a feasible plan when there is very little left to be decided in any case. For example, if 97% of the plan is already settled in the first 7 iterations, people may decide it is not worth another 7 iterations to resolve the remaining 3%. If they wish, they could ask the IFB staff to formulate, say, 5 different ways to settle the remaining 3% of the plan and submit them to a referendum…. [Such a referendum] could be used, or not, depending on how participants felt about the diminishing productivity of further iterations [in the participatory planning procedure which is not a referendum], and how much people were willing to trust the IFB to formulate different "end game" options." (219-220) 12.0pt;font-family:"Times New Roman"'>  12.0pt;font-family:"Times New Roman"'>Unlike the participatory planning procedure, an end-game referendum is not a defining feature of a participatory economy. It is an idea mentioned merely as a pragmatic way to save time, and only as a way to save time when so little of the plan remains to be determined that people simply want a quick way to cut to the chase. Our intent is to propose a non-referendum process -- the iterative planning process that is unique to the model of a participatory economy -- for determining all important elements of the national economic plan. To make clear we do not propose planning via referendum I pointed out that even if a referendum were used it would only be used to determine something like the last 3% of the plan -- minor details only, the "end game." We did not propose that an Iteration Facilitation Board be permitted to draw up a set of alternative national economic plans for workers and consumers to vote on in a referendum, any more than we proposed that representatives from different worker and consumer councils and federations gather in one big meeting to propose different national economic plans, debate their merits, and somehow agree on one. href="#_ftn2" name="_ftnref2" title=""> style='mso-special-character:footnote'>[2] 12.0pt;font-family:"Times New Roman"'>  12.0pt;font-family:"Times New Roman"'>How do we suggest that the national plan be determined -- or 97% of the plan if people opt for a referendum to settle the last 3%? The participatory planning procedure we propose is neither a one-big-meeting nor a referendum model. Other critics have misconstrued participatory planning as a one-big-meeting model, and proceeded to point out flaws in the one-big-meeting approach to national economic planning as if these were valid criticisms of participatory planning. I believe Shalom has misconstrued participatory planning as a referendum approach to planning and that is why he fails to see that it is, in fact, unlike referenda, a procedure designed to facilitate and enhance meaningful, deliberative, economic democracy. Perhaps the procedure is often misconstrued precisely because the model of participatory planning is unique in the history of economic planning. Participatory planning is not only an alternative to authoritarian, or command planning, it is also an alternative to one-big-meeting and style='font-size:12.0pt;font-family:"Times New Roman"'> to a referendum -- the two best known approaches to democratic planning. Here is how I described the procedure in brief: 12.0pt;font-family:"Times New Roman"'>  0in;margin-left:.2in;margin-bottom:.0001pt;line-height:normal'> style='font-size:12.0pt;font-family:"Times New Roman";letter-spacing:-.15pt'>The participants in the planning procedure are the worker councils and federations, the consumer councils and federations, and an Iteration Facilitation Board (IFB). Conceptually, the planning procedure is quite simple. (1) The IFB announces what we call "indicative prices" for all final goods and services, capital goods, natural resources, and categories of labor. (2) Consumer councils and federations respond with consumption proposals. Worker councils and federations respond with production proposals listing the outputs they propose to make and the inputs they need to make them. (3) The IFB then calculates the excess demand or supply for each final good and service, capital good, natural resource, and category of labor, and adjusts the indicative price for the good up, or down, in light of the excess demand or supply. (4) Using the new indicative prices consumer and worker councils and federations revise and resubmit their proposals. Individual worker and consumer councils must continue to revise their proposals until they submit one that is accepted by the other councils. The planning process continues until there are no longer excess demands for any goods, any categories of labor, any primary inputs, or any capital stocks -- in other words, until a feasible plan is reached." (193) 12.0pt;font-family:"Times New Roman";letter-spacing:-.15pt'>  12.0pt;font-family:"Times New Roman"'>  12.0pt;font-family:"Times New Roman"'>This iterative procedure in which worker and consumer councils propose and revise their own activities is an alternative to both (1) a meeting where alternative different national economic plans are proposed and debated by representatives of interested parties, and (2) a referendum on different alternative national economic plans drawn up by an external agency. But if there are no meetings between the different worker and consumer councils and federations where is the deliberation? There is deliberation inside each council and federation regarding its own proposal and how to revise it during each iteration of the planning procedure -- because decisions about what they, themselves will do are the decisions that most affect their members. The manner in which those in other councils and federations "deliberate" about what my council or federation has proposed to do is carefully constrained to protect my self-management. The guiding principle is that only if others believe my proposal would use scarce productive resources belonging to everyone style='mso-footnote-id:ftn3' href="#_ftn3" name="_ftnref3" title=""> class=MsoFootnoteReference>[3] inefficiently or unfairly should they be able to intervene. The procedure is designed to provide others with quantitative information necessary to determine if this appears to be the case, and it is designed so others have an incentive to intervene only if they have reason to believe this truly is the case. Because we recognize that quantitative information often does not tell the whole story, i.e. that an exchange of statistics is not all there is to deliberative democracy, we also recommended that councils provide qualitative information about the why's and wherefore's of their proposals to supplement the quantitative signals others will consult. Deliberation can also take the form of requests for face to face meetings with representatives from other councils to explain or seek explanation, and face to face meetings that are part of appeal procedures. But we have labored mightily to avoid overburdening the main planning process with meetings, and particularly meetings without a clear agenda and clear criteria for settling disagreements. We have tried to come up with a procedure that avoids unstructured, inefficient deliberation where everyone proposes, debates, and votes on what everyone will do (one-big-meeting to agree on a national plan). We also sought to avoid lack of deliberation altogether as everyone votes on a list of alternative national plans drawn up by experts based on whatever information they could gather and whatever values they thought were important (a national referendum on a national plan). Instead we devised a format that provides meaningful deliberation through a carefully structured, social, iterative process where workers and consumers have a great deal of control over what their own economic activities will be at the same time they can effectively protect themselves from socially irresponsible behavior by others. 12.0pt;font-family:"Times New Roman"'>  12.0pt;font-family:"Times New Roman"'>Can a participatory economy deliver perfect self-management where every person has decision making authority exactly to the degree they are affected in every decision that is made? No, of course not. Nor have I ever believed or claimed that it can. It is important to understand clearly what our goal should be: Try to distribute decision making power in proportion to the degree different people are affected. But the best we can do is devise procedures that approximate this goal. ftn4' href="#_ftn4" name="_ftnref4" title=""> style='mso-special-character:footnote'>[4] Moreover, unlike efficiency, where different decision making rules can be subjected to mathematical models and proofs, measuring the degree of self-management does not lend itself to that kind of analysis. So how does a participatory economy better approximate economic self-management than other kinds of economies do? 1) Every worker has one vote in his or her worker council. 2) In larger worker councils sub-units govern their own internal affairs via one worker one vote. 3) Job Complexes in every workplace are balanced for empowerment. 4) Every consumer has one vote in his or her consumer council. 5) Federations that govern different levels of collective consumption are governed by democratic decision making procedures where ultimately each federation member has one vote. ftn5' href="#_ftn5" name="_ftnref5" title=""> style='mso-special-character:footnote'>[5] 6) Worker and consumer councils and federations not only propose what they will do in the initial round of the participatory planning procedure, they alone make all revisions regarding their own activity during subsequent iterations of the planning procedure. 7) During the planning process councils can vote not to approve proposals of other councils if they have good reason to believe those proposals would use scarce productive resources belonging to everyone either inefficiently or unfairly. name="_ftnref6" title=""> style='mso-special-character:footnote'>[6] "Does it really give me one-third the say in a decision relative to someone who is affected by the decision three times as much as me?" If Shalom means by one-third exactly .333333, then the answer is "no." If he means will workers in a council have considerably more say over what they produce and how they produce it than other workers who also have an interest in how society's scarce productive resources are used, or if he means will consumers in a neighborhood have considerably more say over their own mixture of local public goods than other consumers who also have a claim on society's scarce resources; then the answer is "yes." Nothing more exact was ever intended, or in my opinion possible. 12.0pt;font-family:"Times New Roman";letter-spacing:-.15pt'>  Handling Pollution in the Planning Process style='font-style:normal'>:   Shalom claims I have not only not solved the NIMBY problem, my proposal aggravates it. "By giving veto power to a region it will lead to a more extreme version of the MIMBY (not in my back yard) problem that plagues capitalism. Say we need a vaccine to save millions of lives, but the factory that produces the vaccine pollutes. Where do we locate the factory? The region where the pollution would cause the least harm says we do not want any pollution, hence we veto construction of the factory in our region…. This is nothing more than a giant game of chicken -- who's going to concede first -- with the most socially irresponsible regions benefiting most."   Apparently Shalom misunderstands the procedure I style="mso-spacerun: yes">  recommend for handling pollution. NIMBY happens because local residents do not want to incur the entire social cost of hosting Shalom's vaccine factory while they only enjoy a tiny fraction of the benefit of having the vaccine available for all. In other words, NIMBY occurs because local residents are not properly compensated. But my proposal is precisely to compensate local residents. Shalom identifies the best solution: Build the factory -- because presumably the social benefits far outweigh the social costs. Locate the factory where the pollution would cause the least harm -- because that minimizes the social costs. My recommendation will achieve this result. As long as the social benefits of the vaccine outweigh the social costs -- including the damage caused residents of a region by pollution where the vaccine factory is located -- a worker council will propose to produce it and the planning procedure will approve the request. Any region willing to host the vaccine factory will be compensated for the damage according to the indicative price of the pollutant. In effect regions will bid against one another to host the vaccine factory weighing the compensation they would receive against the damage they would incur. The planning procedure will hone in on an indicative price for the pollutant that will be too low for regions where the damage would be relatively high to find it worth their while to host the factory, but high enough so that the region where the damage is least will find it in their interest to host the factory. Problem solved.   Shalom's concern that "allowing veto power is a very different decision-making rule" than "people have input into a decision in proportion to how much they are affected" is also based on a misunderstanding of when and how vetoes are used in the planning procedure. Residents are allowed to veto pollution as long as they are not sufficiently compensated. If they cannot be compensated enough to make it worth their while to give their permission, then permitting the pollution is socially inefficient and should not be permitted. Other participants in the planning process are allowed to veto a worker council's proposal if the proposal would use scarce productive resources in a way that would leave others worse off. As long as the social benefits of the proposal exceed the social costs this will not be the case, and others would be cutting off their nose to spite their face if they vetoed such a proposal. Moreover, the procedure I recommend is suited to handle issues like desires for open space and scenic vistas not just pollutants which can be measured in physical units. As a matter of fact, one of its advantages is that it generates better quantitative estimates of how much people value what the profession terms "environmental amenities" than contingent valuation surveys commonly used today precisely because market systems fail to provide quantitative estimates for these kinds of "goods."   Shalom's last criticism is: "Hahnel's environmental procedure seems inconsistent with his general decision-making rule. The problem is that he defines the relevant region as that geographic area where residents believe they are affected by a pollutant, without taking into account the degree to which people are affected." I am aware that those within a region affected by a pollutant will not be equally damaged. This is most obviously true for a non-uniform pollutant where those who live closer to the source receive more of the pollutant. If this were the only reason some in a region are affected more than others, we might be tempted to award votes within the regional federation in proportion to one's distance from the source since there is an objective and measurable relationship between quantity of pollutant and distance from the source, although wind patterns would complicate measurements even in this case. (I think this would work better than Shalom's proposal to create nested regions with multiple indicative prices for the same pollutant.) However, there are other reasons beside proximity to the source that people are affected differently by pollutants. Many pollutants harm the very old, the very young, and those who are in poor health more than they harm healthy people in the prime of life. Even more problematic is the fact that just as people have different "preferences" for how many apples they would be willing to give up for an orange, people have different "preferences" for how much consumption they would give up to have less pollution.   The problem of how to get people to reveal their true preferences for public goods -- or in this case, their true aversion for a public bad -- has been studied at great length. The literature on "incentive compatible mechanisms" for providing public goods and collecting revenue to pay for them identifies two critical issues: (1) Will a "mechanism" provide the socially efficient amount of a public good? (Or in this case, permit the socially efficient amount of a public bad to be produced.) (2) Will a "mechanism" make those who benefit more from a public good pay more than those who benefit less? (Or in this case, compensate those who suffer more to a greater extent than those who suffer less.) Prior to the 1970s economists believed it was impossible to design a mechanism that did both. It is impossible to provide the efficient amount of a public good unless people reveal their preferences truthfully. But it was long assumed that if people who report a higher preference are charged more than people who report a lower preference there would be an incentive for everyone to understate how much they benefit from the public good. (In our case, the problem is if we give more compensation to those damaged to a greater extent, everyone will have an incentive to exaggerate how much they are harmed.) In the early 1970s Edward Clarke and Theodore Groves sparked a flurry of creative theoretical work designing new "incentive compatible mechanisms" for providing public goods that, in theory, can induce people to reveal their true preferences while still charging those who benefit more. href="#_ftn7" name="_ftnref7" title=""> style='mso-special-character:footnote'>[7] However, even economists responsible for these theoretical breakthroughs conceded that none of their "mechanisms" seemed to have any practical application because they required a great deal of information gathering and processing. However, it is possible to design a mechanism that will produce the efficient amount of a public good (or bad) without undue complication if we abandon the attempt to calibrate how much we charge (or compensate) individuals on the basis of how much they benefit (or suffer), and that is what I recommended. If 1000 people are affected adversely by a pollutant, and if each will receive one one-thousandth of the total compensation awarded victims for a certain level of pollution, each of the 1000 people has an incentive to vote honestly about how much of the pollutant they want their region to accept. If these "honest" votes are averaged the efficient level of pollution will be reached. However, under this procedure those who are damaged to a greater extent will receive no more compensation personally than those who are damaged to a lesser extent. This is unfortunate, but I think I agree with other economic theorists that people would probably decide that any remedy was more trouble than it was worth. name="_ftnref8" title=""> style='mso-special-character:footnote'>[8] However, I should have qualified my claim that the procedure not only obeys the polluter pays principle but it also compensates the victims of pollution. It compensates the victims as a group, but individuals within the group are not compensated exactly according to their individual damages.   Shalom does put his finger on an issue that bears attention. How to define who is affected by a particular pollutant and who is not will not always be simple to determine or agree on. I did say that scientists in the employ of federations would have to assist in this matter. I also said that if a larger federation comes to the conclusion that its members are affected it should be included in the definition of the region of those affected. However, since there is compensation, federations representing people who truly are not affected might be tempted to misrepresent their case. So interested parties may well contest where to draw the borders for regions where people are affected by a pollutant. Perhaps environmental courts would be required if disagreements proved sufficiently troublesome. name="_ftnref9" title=""> style='mso-special-character:footnote'>[9] However, I should point out that there is no way to draw borders so all within a border are equally damaged by a pollutant. Unfortunately life is not that simple.   International Economic Relations and the Fifty Percent Rule:   Shalom has several objections to my proposal that a participatory economy use what I call the "fifty percent rule" when engaging in international trade and investment. The rule is that a participatory economy must agree to terms of trade that give more than fifty percent of the efficiency gain from specialization and trade  to any country that is poorer than the participatory economy. The same rule applies to interest rates on international loans. Shalom's first objection is that the assessment is based on "the relative wealth of another country as a whole, rather than of the specific individuals who stand to gain or lose from the transaction." Shalom worries: "What if the entire benefit from the transaction goes to the rich capitalist who owns the coffee plantation or the garment factory, with the impoverished workers getting nothing?" This is a valid concern, but Shalom himself explains why it is very difficult to do anything about: "Most economies do not provide outsiders (or most insiders, for that matter) with sufficient information to judge the actual impact of a trade." But instead of concluding that the best that can be done is to apply a simple fifty percent rule which requires no calculation beyond the average wealth of different countries, Shalom concludes that lack of information regarding the internal distributive impacts of international trade (or investment) make "it hard to see how the fifty percent rule could be applied in practice." But I proposed the fifty percent rule precisely because the kind of evaluation Shalom wants is usually impossible to apply in practice while the fifty percent rule is easy to apply. I have no disagreement with Shalom's suggestion that perhaps fair trade groups and unions in a wealthy participatory economy should monitor the fifty percent rule to identify cases where it should be suspended. But I agree with him that the determinations necessary would not be easy. I also suspect a more effective way to handle these concerns is for the government of a participatory economy to heed the recommendations of organizations representing the oppressed and the political opposition in poorer capitalist trading partners regarding suspension of international economic relations. It is better if the suspension is done at their suggestion than on the initiative of organizations in the wealthier economy no matter how well intended. href="#_ftn10" name="_ftnref10" title=""> style='mso-special-character:footnote'>[10]   Shalom is correct that if poorer countries receive only 51% of the efficiency gains international economic injustice would persist for centuries. But Shalom also surmised correctly that I proposed the fifty percent rule only as a minimum requirement to prevent a participatory economy from violating its core principles. I would join Shalom in praise of any wealthy participatory economy that adopted a rule such as "the percentage of the efficiency gain going to the poorer country should be equal to the ratio of the GDP per capita of the richer country divided by the GDP per capita of the poorer country."   Conclusion: As I warned readers I have not reviewed the many points of agreement between myself and Shalom. When I review our disagreements it seems to me we do so usually because Shalom wants more economic justice, more self-management, or more environmental protection than he fears a participatory economy actually offers. I do not disagree with him that it would be nice to figure out ways to better achieve the goals we share. And if anyone can come up with ways to do so that are also practical -- that is, not more trouble than they are worth -- I will be delighted. But I do think we need to recognize that often we are trying to design procedures that at best can only approximate our goals. Often my answer to a Shalom criticism is that what I have proposed is the best that can be done, or what he has proposed instead would not work or is not worth the extra trouble. But I always hope he is right and I am wrong!     name="_ftn1" title=""> footnote'>[1]In a related comment Shalom objects to John Bellamy Foster's claim that style="mso-spacerun: yes">  Mao tried unsuccessfully to combat the rise of a new ruling class in China. Shalom writes: "But surely Mao -- the most powerful member of a dictatorial ruling party -- was not a champion of democracy. He was the head of the new ruling class that was the CCP. That his faction within the party lost out to another faction does not make this a struggle against class rule, for democracy, or for socialism." I agree with Shalom that Mao was hardly pro-democracy, but I believe Foster is correct that Mao was anti-coordinator class. In my interpretation a political faction within the CCP sometimes led by Mao himself, and often aided and abetted by Mao as chairman of the entire CCP, fought long and hard to prevent the coordinator class from rising to power within the Chinese economy. I agree with Shalom that it would be a mistake to interpret opportunistic appeals from Mao's faction of the CCP for the masses to challenge party officials supporting their factional opponents in the CCP as evidence that Mao was pro-democracy. But I do not think one can sensibly explain a great deal of what occurred during the Cultural Revolution and its aftermath without recognizing that what was often referred to as the Maoist faction within the CCP staunchly opposed handing the economy over to coordinator rule. No, they were not pro-democracy, but they were anti-coordinator class nonetheless. As losers in a bitter political struggle that lasted for more than two decades, tens of millions who belonged to Mao's anti-coordinator faction of the CCP, including his wife, paid a very high personal price for their political convictions. name="_ftn2" title=""> footnote'>[2] When I refer to the "one big meeting" approach to formulating a national economic plan I do not mean to imply that representatives of different councils and federations would only meet one time. As a matter of fact, I am convinced this approach would result in endless meetings where these representatives would go over the same ground repeatedly as they discussed and debated different plans. I think coming up with an agenda for such an ongoing meeting, and formulating  coherent criteria for evaluating alternative national economic plans presented at such meetings is impossible. Consequently,  I suspect what would eventually happen if people ever tried the "one big meeting" approach to democratic planning would be that a plan with little merit would eventually receive a majority vote when attendees exhausted themselves and realized further discussion held little prospect of yielding a superior result. name="_ftn3" title=""> footnote'>[3] Scarce productive resources belonging to everyone include not only all natural and human-made capital, but all  human capital as well. A participatory economy considers scarce productive skills and talents of its members as well as all  productive knowledge to be part of the overall productive asset base that is the common property of everyone.   name="_ftn4" title=""> footnote'>[4] In my view the same hold for economic justice. It is important to understand clearly what our goal should be: reward according to sacrifice (for those who work.) But the best we can do is devise ways to reasonably approximate this result.   name="_ftn5" title=""> footnote'>[5] These include federations which have the right to set the level of pollution their members are willing to tolerate as discussed below. I should also point out that  the exact democratic voting procedures within federations have never been fully specified. Should federation collective consumption proposals be drawn up by delegates selected by councils comprising the federation who meet for that purpose, or submitted directly by councils for consideration? Should collective consumption style="mso-spacerun: yes">  proposals be voted on by delegates representing each council or by all federation members? There are important issues to weigh when thinking about how to best design decision making style="mso-spacerun: yes">  procedures inside federations. Advocates of participatory economics have simply agreed that these procedures must be thoroughly democratic.   name="_ftn6" title=""> footnote'>[6] While there are very specific procedures for calculating the social benefits and costs associated with proposals, I should point out that nobody has proposed exact rules for voting to approve or disapprove proposals. There are obviously many possibilities whose relative merits should be weighed. Consensus seems overly demanding while a simple majority might be too lenient. There is style="mso-spacerun: yes">  an extensive political science literature on the advantages and disadvantages of different voting procedures I believe may be useful. On the other hand, deciding on a particular voting procedure may best be left to those implementing participatory planning when the time comes. I, for one, never see the harm of thinking about important issues in advance even if it turns out there is good reason to expect there is no single, best voting rule for all kinds of proposals, for all rounds of the planning procedure, or for all participatory economies. name="_ftn7" title=""> footnote'>[7] See chapter 3 in Robin Hahnel and Michael Albert, Quiet Revolution in Welfare Economics style='font-style:normal'> (Princeton UP, 1990) for a thorough discussion of this literature. The trick is to find a way to tax those who receive greater benefit more than those who receive less benefit, but not style='font-style:normal'> to use the information anyone provides about their own willingness to pay for the public good to do so. One way to do this is to charge everyone the same amount initially, but then subtract from each person's assessment the sum of everyone else's normal'> reported willingness to pay. For any who report a high willingness to pay, yes">  less will be substracted from their assessment since their high willingness to pay is not included in the amount subtracted for them. For any who report a low willingness to pay, more will be substracted from their assessment since their low willingness to pay is not included in the amount subtracted for them. Since nobody's own reported willingness to pay figures in the calculation of their own assessment there is no incentive to lie about how much one really benefits from a public good.   name="_ftn8" title=""> footnote'>[8] It would be interesting to investigate whether there may be fewer practical disadvantages of using the "incentive compatible mechanisms" for public good provision designed by Groves, Clarke, and others in the 1970s inside federations in a participatory economy than there are in market economies. It may be that a participatory economy is better suited to implementing one of these innovative mechanisms which calibrate charges (compensation) for public goods (bads) according to how much a person benefits (is harmed). If any federation chose to implement one of these alternatives I would certainly not criticize them. I, along with Clarke and Groves, would be most interested in how the experiment worked out in practice!   name="_ftn9" title=""> footnote'>[9] Hopefully drawing borders for relevant environmental regions in a participatory economy can be handled better than the Republican controlled Texas State Legislature recently  handled redrawing US Congressional Districts in response to Tom DeLay's prodding! name="_ftn10" title=""> footnote'>[10] When the ANC asked other countries to boycott investing in South Africa as part of its campaign to overthrow apartheid, any participatory economy would have joined the boycott immediately.