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Participatory economics, often abbreviated parecon, is an economic system proposed by activist and political theorist Michael Albert and radical economist Robin Hahnel. It uses participatory decision making as an economic mechanism to guide the production, consumption and allocation of resources in a given society. Proposed as an alternative to contemporary capitalist market economies and also an alternative to centrally planned socialism or coordinatorism, it is described as "an anarchistic economic vision",[1] and it could be considered a form of socialism as under parecon, the means of production are owned by the workers.

The underlying values that parecon seeks to implement are equity, solidarity, diversity, workers' self-management and efficiency. (Efficiency here means accomplishing goals without wasting valued assets.) It proposes to attain these ends mainly through the following principles and institutions:

Albert and Hahnel stress that parecon is only meant to address an alternative economic theory and must be accompanied by equally important alternative visions in the fields of politics, culture and kinship. The authors have also discussed elements of anarchism in the field of politics, polyculturalism in the field of culture, and feminism in the field of family and gender relations as being possible foundations for future alternative visions in these other spheres of society. Stephen R. Shalom has begun work on a participatory political vision he calls "parpolity".


Institutional framework


Decision-making principle

One of the primary propositions of parecon is that all persons should have a say in each decision proportionate to the degree to which they are affected by it. This decision-making principle is often referred to as self-management. In parecon, it constitutes a replacement for the mainstream economic conception of economic freedom, which Albert and Hahnel argue that by its very vagueness has allowed it to be abused by capitalist ideologues.

Consumers' and producers' councils

Albert and Hahnel proposed the creation and organization of consumer's and producers' councils to implement the decision making principle. Many individuals would participate in both types of councils. These would be similar to workers' councils.

Geographically, these councils would probably be nested with neighborhood councils, ward councils, city or regional councils and a country council. Decisions would be achieved either through consensus decision-making, majority votes or through other means compatible with the principle. The most appropriate method would be decided on by each council.

Local decisions like the construction of a playground might be made in the ward or city consumers' council, probably interacting with both city and countrywide producers' councils. Countrywide decisions, like the construction of a high-speed mass transportation system, would be discussed by the country consumers' council, possibly interacting with a city producers' council in the city where the materials are produced, or countrywide or international producers' councils.

The producers' councils would probably correspond to workplace councils in each workplace and similar workplaces would group into nested councils on successively larger geographical and linguistic scales.

Compensation for effort and sacrifice

Albert and Hahnel argue that it is inequitable and ineffective to compensate people on the basis of their birth or heredity, their property, or their innate intelligence. Therefore, the primary principle of participatory economics is to reward for effort and sacrifice.[citation needed] For example, mining work — which is dangerous and uncomfortable — would be more highly paid than office work for the same amount of time, thus allowing the miner to work fewer hours for the same pay, and the burden of highly dangerous and strenuous jobs to be shared among the populace.

Additionally, participatory economics could provide a certain leeway for exemptions from the compensation for effort principle.[citation needed] It was suggested that people with disabilities who are unable to work, children, the elderly, the infirm and workers who are legitimately in transitional circumstances, can be remunerated according to need. However, every able adult has the obligation to perform some socially useful work as a requirement for receiving reward, albeit in the context of a society providing free health care, education, skills training, and the freedom to choose between various democratically structured workplaces with jobs balanced for desirability and empowerment.

The starting point for the income of all workers in participatory economics is an equal share of the social product. From this point, incomes for private expenditures and consumption rights for public goods can be expected to diverge by small degrees reflecting the choices that individual workers make in striking a balance between work and leisure time, and reflecting the level of dangerous and strenuous of a job as assigned by their immediate peers.[citation needed]

Money in a participatory economy

Money in a parecon would be more akin to a bookkeeping system than a traditional capitalist currency. Money would be non-transferable between consumers, and would be only usable at a store to purchase goods.

Electronic "credits" would be awarded to workers for their work, as a means of saying that this worker benefited society with their work. The more effort and sacrifice, the more credits are awarded. Credits would then be used to buy goods and services. Once used to purchase something, a credit would be deducted from the consumer's total; it "disappears" and does not go into a till or bank, it is simply deducted for the consumer's total. There would be no banks in the capitalist sense. Workers would have to work more to get more credits. In this way, there would be no flow of money. Workers would be able to borrow money if approved by an appropriate board, but no interest would be charged.

The non-transferability of parecon credits would make it impossible to bribe or even beg for money. People would still be free to barter their individual goods with each other, e.g. exchange a couch for a stereo, but any attempt to create an exchangeable currency would be discouraged, as this might lead to attempts to reinstate capitalism. Credits might be shareable amongst family members, depending on how the parecon is set up. A lost or stolen "credit" card would not be usable by another person, as presumably there would be means to verify the identity of a citizen at shopping centers.

Albert and Hahnel did not clarify how a currency of this form would be used in international trading with non-parecon countries. If a capitalist country refuses to be paid for their bought goods in this way, it is likely that a parecon nation would use a normal currency for international trading, but keep its unique currency for internal purposes.

Participatory Planning

The participatory planning procedure would be a yearly event where citizens participate to determine which and how many goods to produce. Prices for goods and services would remain static until the onset of the participatory planning procedure, after which they get new values. Albert and Hahnel suggested the creation of Iteration Facilitation Board (IFB), which would estimate indicative prices based on previous year's economic results. These prices would represent the estimated marginal social opportunity cost for all goods and services. Not only do the prices reflect supply and demand, but also the environmental and social cost of producing the good. For instance a product that produces pollution in its manufacture, or is especially dangerous for workers to produce, would have its price automatically inflated to discourage excess consumption.

Using these prices as a guide, citizens would respond with their private consumption proposals, and participate in the formulation of collective consumption proposals at the neighborhood, ward, municipal, provincial and national levels. Private consumption proposals would be a prediction by each citizen of what goods and services they plan to consume the next year. For instance a couple expecting a new baby would request the appropriate goods, and a citizen who enjoys exotic fruit would put in her demand to make sure it is received. Collective consumption proposals would be created by citizens making proposals for collective consumption (e.g. a new recreation center at the community level or a new power plant at the provincial level) that are received by a facilitation board. The facilitation board would work with the citizen(s) that originated the proposal to work it into a manageable proposition. Around the time of the planning procedure, interested parties within the region affected by the collective consumption proposal would be able to view the collective consumption proposals and vote them up or down. This could be done at large meetings or via computer. At the same time, worker's councils, industry councils and production federations would respond with production proposals outlining the outputs they propose to produce and the inputs they believe are required to produce them. Individual workers would indicate their proposed hours of work, and workers will be able to propose upgrades and innovations for their workplace, aided by a facilitation board.

Facilitation boards would then calculate excess proposed supply and demand based on the proposals, adjusting the indicative price for each final good or service according to its impact on society and the environment so that the social opportunity cost is reflected. Using the new indicative prices, consumer and workers' councils and federations would revise and resubmit their proposals. Individual worker and consumer councils would continue to revise proposals until they submit one that is accepted by the other councils.

Iterations would continue according to some predefined method which is likely to converge within an acceptable time delay. For instance, proposals would only be changeable by a minimum percentage for the second round, and a lesser percentage for the third round, and so on, forcing convergence of a feasible plan.

The facilitation boards should function according to a maximum level of radical transparency and only have very limited powers of mediation, subject to the discretion of the participating councils. The real decisions regarding the formulation and implementation of the plan are to be made in the consumers' and producers' councils.

Job complexes

Some tasks and jobs are more comfortable than others, and some tasks are perceived as more empowering than others. So, to achieve an equitable division of labour, it is proposed that every worker must do different tasks, which, taken together, bring an average comfort and an average empowerment. The main goals are to achieve one class of workers, and to empower all workers to make contributions to the workplace.

For example, someone who works in a publishing house might have a mix of tasks including editing books (empowering), sweeping and cleaning (disempowering) and even others like driving a truck to deliver books (somewhere in between). Surgeons would be required to do duties like clean bedpans or work in a mine. The time scale of when these tasks are performed is variable, one might do several different tasks in a week, or do a task like work on an oil rig for several months, then do more empowering work like astronomy for several months. A rough numeric rating system would be developed that would rate each task performed in the economy according to estimated degree it empowers workers.

Common criticisms and responses

Too much administration

A common criticism of parecon is that it would increase bureaucracy and reduce timely decision-making. However proponents of parecon argue that capitalist economies are hardly bureaucracy free, with massive administration in corporations and government. In a parecon there would be no banks, advertising, stock market, credit cards etc. This would free up many workers to do tasks associated with facilitation boards. Some say that it is probable that a similar number of workers will be involved in a parecon bureaucracy as in a capitalist bureaucracy.

Too many meetings

Parecon would seem to require many meetings, perhaps to a debilitating degree. In the workplace, workers that would not, or hardly ever, attend meetings in a capitalist society would be attending regular meetings. However, some workers in a capitalist society do little else but attend meetings. Thus, while it would be the case that more people attend meetings in the workplace, the total time spent in meetings as a whole might be similar. Further, concerning meetings for participatory planning, the planning process would last a few weeks, with time off work to participate. Decisions for collective consumption do not require meetings, as voting proposals up or down can be done by computer. Also those not interested in the collective consumption proposals do not have to attend.[2]

Loss of efficiency

There are several ways a parecon might lose efficiency in the workplace. For one, expert and exceptional workers (e.g. exceptional surgeons and scientists) would not be performing their tasks full time. This is most likely an efficiency loss, however, it should be offset by other efficiency gains, such as other workers being more motivated than in a capitalist economy to perform well, since everyone has empowering work. Another possible efficiency loss is a loss of innovation, as an inventor would not profit from patents of their invention. This assumes that the only motivation for innovation is monetary, which is of course debatable. In a parecon, an inventor of a useful technology would benefit from social acclaim and gratitude. Further, in a parecon there would be no work wasted on advertising or banking, freeing the labor of many; another efficiency gain.[2]

Facilitation board becoming an elite class

Facilitation board members do very important economic work running the economy, and thus one might think they would gradually take over a parecon. However, it is easy to block this from happening, as board members could be required never to handle proposals that pertain to their own region. It is impossible to bribe board members, due to parecon's unique currency. Board members also work in a balanced job complex where they do disempowering tasks, and any Facilitation Board meeting would be transparent to the public.[3]

Humanity is intrinsically selfish

Human nature is often seen as too backward and selfish to allow a parecon to work. An underlying philosophy behind parecon is that people are affected by their environment and do selfish things largely due to the institutions they live in. For example, in a capitalist society, a corporation that strives to protect the environment will most likely be out-competed by rival corporations; a corporation that rewards its workers too well will not profit as much as one who strives to cut wages. Simply removing these institutional factors should greatly reduce such antisocial behavior, argue Hahnel and Albert. It is further noted that despite the institutions of capitalism encouraging people to act selfishly, many still give to charity and do other positive ventures, something that should increase in a parecon. The only route to monetary gain in a parecon (if there are people that have only that interest in a parecon) is to work hard and benefit society as a whole.[4]

Defense of participatory economics

On the notion of informational incentives, Robin Hahnel has argued that “participatory planning is not central planning”. “The procedures are completely different and the incentives are completely different. And one of the important ways in which it is different from central planning is that it is incentive compatible, that is, actors have an incentive to report truthfully rather than an incentive to misrepresent their capabilities or preferences.”[5] Hahnel has also written a detailed discussion of parecon’s desirability compared to capitalism with respect to incentives to innovate.[6] Notably, innovation is sometimes the outcome of cumulative creativity, which might not be legitimately attributed to individuals. In capitalism, patent laws, intellectual property rights, industry structures, and barriers to market entry are institutional features that reward individual innovators while limiting the use of new technologies. Hahnel notes that, in contrast, “in a participatory economy all innovations will immediately be made available to all enterprises, so there will never be any loss of static efficiency.”[7] This position concurs with the more empirically oriented work of Pat Devine, with whom Hahnel has worked as a visiting scholar at Manchester University, and whose work has demythologised Austrian and mainstream theories of entrepreneurship while highlighting the potential for participatory approaches.

Albert and Hahnel have voiced detailed critiques of centrally-planned economies in theory and practice. Yet they would argue that central planning's dismal performance hardly lets capitalism off the hook. Hahnel further supposes, “the truth is capitalism aggravates prejudice, is the most inequitable economy ever devised, is grossly inefficient — even if highly energetic — and is incompatible with both economic and political democracy. In the present era of free-market triumphalism it is useful to organize a sober evaluation of capitalism responding to Friedman's claims one by one.”[8]

One reason why proponents of parecon would consider the non-specific criticisms outlined above misplaced is that, unlike historical examples of central planning, the parecon proposal advocates the use and adjustment of price information reflecting marginal social opportunity costs and benefits as integral elements of the planning process. Hahnel has argued emphatically against Milton Friedman’s a priori tendency to deny the possibility of alternatives:

Friedman assumes away the best solution for coordinating economic activities. He simply asserts “there are only two ways of coordinating the economic activities of millions — central direction involving the use of coercion — and voluntary cooperation, the technique of the marketplace.” [...] a participatory economy can permit all to partake in economic decision making in proportion to the degree they are affected by outcomes. Since a participatory system uses a system of participatory planning instead of markets to coordinate economic activities, Friedman would have us believe that participatory planning must fall into the category of “central direction involving the use of coercion.”[9]

Opposition to market alternatives

Free market and rational choice theorists and others argue that any alternatives to the market economy will provide weak incentives. Milton Friedman, for example criticises such alternatives because he does not believe there is any incentive for innovation or production as time progresses. He has argued that it is very difficult and inefficient for planners to guess or approximate values and demand for goods and services and that it is better to let prices float freely by allowing the market to determine them.[10]

Critique of markets

A primary reason why advocates of participatory economics perceive markets to be unjust and inefficient is that only the interests of buyer and seller are considered in a typical market transaction, while others who are affected by the transaction have no voice in it. For instance, the sale of highly addictive drugs, like alcohol and tobacco, is in the interest of the seller and (at least in the short term) in the interest of the buyer, but others outside the transaction end up bearing costs in the form of social problems and medical treatment. When vehicles using fossil fuels, are manufactured, distributed and sold, others outside the transaction end up bearing costs in the form of pollution, and resource depletion. This may be considered under economics as a common pool good. The market price of such vehicles and drugs does not include these additional costs, which are referred to as externalities. The implications of significant external effects invalidate market efficiency regardless of the economic calculations of market actors because in such cases prices will not accurately reflect opportunity costs.

In contrast to parecon, mainstream economics suggests that the problem of externalities can in large part be addressed by the use of Pigovian taxes — extra taxes on goods that have externalities. If the taxes are set so that the after-tax cost of the good is equal to the social cost of the good, the direct cost of production plus cost of externalities, then quantities produced will tend toward a socially optimal level, according to economic theory. Hahnel observes, "more and more economists outside the mainstream are challenging this assumption, and a growing number of skeptics now dare to suggest that externalities are prevalent, and often substantial. Or, as E.K. Hunt put it externalities are the rule rather than the exception, and therefore markets often work as if they were guided by a "malevolent invisible foot" that keeps kicking us to produce more of some things, and less of others than is socially efficient."[11]

Albert and Hahnel favour Pigovian taxes as long as a market economy is in place, which sometimes appear as green taxes, over other solutions to environmental problems such as command and control, or the issuance of marketable permits. However, Hahnel, who teaches ecological economics at American University, argues that in a market economy it would be predictable that businesses would try to avoid the "polluter pays principle" by shifting the burden of the costs for their polluting activities to consumers. In terms of incentives he argues this might be considered a positive development because it would penalize consumers for "dirty" consumption. However it also has regressive implications since tax incidence studies show that ultimately it would be poor people who would bear a great deal of the burden of many pollution taxes. "In other words, many pollution taxes would be highly regressive and therefore aggravate economic injustice."[12] Therefore, he recommends that pollution taxes be linked to cuts in regressive taxes such as social security taxes. In the end Hahnel argues that Pigovian taxes, along with associated corrective measures advanced by market economists, fall far short of adequately or fairly addressing externalities. He argues such methods are incapable of attaining accurate assessments of social costs:

"Markets corrected by pollution taxes only lead to the efficient amount of pollution and satisfy the polluter pays principle if the taxes are set equal to the magnitude of the damage victims suffer. But because markets are not incentive compatible for polluters and pollution victims, markets provide no reliable way to estimate the magnitudes of efficient taxes for pollutants. Ambiguity over who has the property right, polluters or pollution victims, free rider problems among multiple victims, and the transaction costs of forming and maintaining an effective coalition of pollution victims, each of whom is affected to a small but unequal degree, all combine to render market systems incapable of eliciting accurate information from pollution victims about the damages they suffer, or acting upon that information even if it were known.[13]

Critique of private ownership and corporations

Advocates of parecon say the basis of capitalism is the concept of private ownership, which confers upon every owner the right to do with their property as they please, even though decisions relating to some property may have unwanted effects on other people.

This concept extends to private property belonging to corporations. In the course of the late nineteenth and early twentieth century, a stepwise juridical revolution made corporations into “juridical persons” with the rights of citizens under the concept of corporate personhood.

At the same time, every corporation has its own set of owners who have the right to do as they please with it, because people outside a corporation do not have any right to interfere with its activities while it abides by the law. Although market economists note that all consumers can influence corporations through their own market interactions, or through buying and selling of their goods, services, or even shares, advocates of parecon are unsatisfied with this as this influence has a limited extension, and organization of collective consumer action is difficult in a market economy. Pareconists believe that the state is unlikely to interfere in the market for the benefit of the public, and advocates interpret economic history as demonstrating that it is more often the other way around, through means of plutocracy.[citation needed] Being huge agglomerations of economic power, large corporations tend to interfere with the decision-making of states by lobbying for legislation and policy that suits their interests or, in many cases, by bribery, or by financing huge propaganda campaigns for the success of some political candidate who would support the corporation’s interests. An example included the corporate slogan “what is good for General Motors is good for America.” In some cases, there have been corporate-backed coups.[citation needed] However, Milton Friedman believes that such corporate lobbying is only possible in states that allow for significant state interference within the economy.

Promoters of parecon hold that the pursuit of private profit and power by these kinds of corporations is not in the interest of the majority of citizens.

Comparison with other socialist movements

Although participatory economics is not in itself intended to provide a general political system, clearly its practical implementation would depend on an accompanying political system. Advocates of parecon say the intention is that the four main ingredients of parecon be implemented with a minimum of hierarchy and a maximum of transparency in all discussions and decision making. This model is designed to eliminate secrecy in economic decision making, and instead encourage friendly cooperation and mutual support. This avoidance of power hierarchies puts parecon in the anarchist political tradition. Stephen Shalom has produced a political system meant to complement parecon, called Parpolity

Although parecon falls under left-wing political tradition, it is designed to avoid the creation of powerful intellectual elites or coordinatorism, which is perceived as the major problem of the economies of the communist states of the 20th century. The archetypal workplace democracy model, the Wobbly Shop was pioneered by the Industrial Workers of the World, in which the self-managing norms of grassroots democracy were applied.

While many types of production and consumption may become more localised under participatory economics, the model does not exclude economies of scale.

Example implementations

A few workplaces have been established based on principles akin to parecon, particularly in Canada and the USA:

  • South End Press, a book publisher in Boston, Massachusetts.
  • G7 Welcoming Committee, an independent record label closely tied to the Winnipeg band Propagandhi.
  • Z Magazine, a progressive/radical magazine.
  • The Old Market Autonomous Zone, a three-story building in Winnipeg, Canada that houses organizations which have similar principles, including: Mondragon Bookstore (a vegan restaurant and anarchist bookstore), G7 Welcoming Committee Records (see entry further below), the Rudolf Rocker Cultural Centre, Natural Cycle (a bike repair and courier company), Canadian Dimension (a radical magazine), DadaWorldData (a documentary film company), Junto Local 91 (a lending library), and the Canada-Palestine Support Network. Another parecon-inspired worker-run collective, Arbeiter Ring Publishing, named after the radical Jewish labour organization, was also based out of the A-Zone until 2002, and continues to operate in the city. The Emma Goldman Grassroots Centre is the A-Zone's second floor, where many activist groups share communal meeting and organizing space.
  • The NewStandard, an online progressive hard news website published by the PeoplesNetWorks Collective, headquartered in Syracuse, New York. It ceased publication in April, 2007.
  • OAT, the Organization for Autonomous Communications (previously TAO Communications).

See also


  1. ^ Albert, Michael Parecon: Life After Capitalism Chapter 19 Individuals / Society
  2. ^ a b
  3. ^
  4. ^
  5. ^ Economic Justice and Democracy: From Competition to Cooperation, p. 221, Hahnel, Routledge, 2005
  6. ^ Economic Justice and Democracy: From Competition to Cooperation pp. 241, Hahnel, Routledge, 2005
  7. ^ Economic Justice and Democracy: From Competition to Cooperation pp. 240, Hahnel, Routledge, 2005
  8. ^ Economic Justice and Democracy: From Competition to Cooperation ch. 4, Hahnel, Routledge, 2005
  9. ^ Economic Justice and Democracy: From Competition to Cooperation pp. 81, Hahnel, Routledge, 2005
  10. ^ See, Friedman, Milton. 1960. Capitalism and Freedom. See also, Friedman, Milton., and Rose Friedman. 1980. Free to Choose
  11. ^ Economic Justice and Democracy: From Competition to Cooperation, 85
  12. ^ Economic Justice and Democracy: From Competition to Cooperation, 274
  13. ^ Robin Hahnel, (2004). "Protecting the Environment in a Participatory Economy". Accessed February 13, 2006.

Further reading

External links


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