Participatory economics is the economics of equitable cooperation as opposed to the economics of competition and greed. The model of a participatory economy was designed to promote: (a) economic justice, or equity, defined as economic reward commensurate with sacrifice, or effort; (b) economic democracy, or self-management, defined as decision making power in proportion to the degree one is affected by a decision; and (c) solidarity, defined as concern for the well being of others—all to be achieved without sacrificing economic efficiency while promoting a diversity of economic life styles as well. The major institutions used to achieve these goals are: (1) democratic councils of workers and consumers, (2) jobs balanced for empowerment and desirability, (3) remuneration according to effort as judged by one's work mates, and (4) a participatory planning procedure in which councils and federations of workers and consumers propose and revise their own activities under rules designed to guarantee outcomes that are efficient, equitable, and environmentally sustainable.

Work: Production is carried out by worker councils where each member has one vote, individual work assignments are balanced for desirability and empowerment, and worker's efforts are rated by a committee of their peers and serve as the basis for consumption rights. There is an ample literature discussing the rationale and advantages of employee self-management, which is a feature of some market socialist models as well. But balanced job complexes and consumption tied to effort ratings by one's work mates are novel features of a participatory economy.

Every economy organizes work tasks into "jobs" which define what tasks an individual will perform. In hierarchical economies most jobs contain a number of similar, relatively undesirable, and relatively unempowering tasks, while a few jobs consist of relatively desirable and empowering tasks. But why should some people's work lives be less desirable than other's? Does not taking equity seriously require balancing jobs for desirability? And if we want everyone to have equal opportunity to participate in economic decision making, if we want to ensure that the formal right to participate translates into an effective right to participate, does this not require balancing jobs for empowerment? If some people sweep floors all week, year in and year out, while others review new technological options and attend planning meetings all week, year in and year out, is it realistic to believe they have equal opportunity to participate in firm decisions simply because they each have one vote in the workers' council? Proponents of participatory economics believe that taking participation seriously requires balancing jobs for empowerment, just as taking equity seriously requires balancing jobs for desirability?

This does not mean everyone must do everything, nor an end to specialization. Each individual will still do a very small number of tasks, but some of them will be more enjoyable and some less, and some will be more empowering and some less. Some will still specialize in brain surgery, others in electrical engineering, others in high voltage welding, etc. But those who perform some tasks that are more empowering than tasks on average will also perform some tasks that are less empowering. And those who perform some tasks that are more desirable than tasks on average will also perform some less desirable tasks—unless they wish to work more hours or accept a lower effort rating. Moreover the balancing can be done over reasonable time periods, and is done by committees of workers in each work place as they see fit—not imposed by an external bureaucracy. There is every reason to expect workers committees to accommodate technological and psychological considerations while eliminating large, persistent differences in empowerment and desirability. The economy we visualize reaps the productivity rewards of a very high degree of specialization, but without the undesirable effects of permanent hierarchies which give rise to permanent concentrations of power.

Critics do raise a valid concern about balanced job complexes on grounds that talents are often "scarce." For example, it is true not everyone has the talent to become a brain surgeon, and there are social costs to training brain surgeons. Therefore, there is an efficiency loss whenever a skilled brain surgeon does something other than perform brain surgery. Roughly speaking, if brain surgeons spend X% of their time doing something other than brain surgery, there is an additional social cost of training X% more brain surgeons. But virtually every study confirms that participation increases worker productivity. If balancing jobs for empowerment enhance effective participation as it is intended to, any efficiency losses from failing to economize on scarce talent should be weighed against the productivity gains from increasing overall worker participation. Moreover, equity gains from having surgeons sharing in less pleasant hospital tasks must be weighed against efficiency losses should there be some.

Personal sacrifice, or effort is rewarded in a participatory economy because any other system of compensation is unfair. In capitalism people are rewarded according to the value of the contribution of the productive capital they own as well as the value of the contribution of their labor. At least that is how people would be rewarded in an idealized version of capitalism. In real world capitalism discrimination, market power, asymmetrical information, and luck distribute income and wealth much more unfairly. But even under ideal circumstances, in capitalism a Rockefeller heir who inherits large amounts of productive capital but never works a day in his life enjoys an income hundreds of times greater than that of a skilled brain surgeon. Unless those with more productive property acquired it through some greater personal sacrifice oftheir own, proponents of participatory economics believe the income they accrue from ownership of this property is unjustifiable. In market socialism while "capitalist injustice" may be eliminated, people are rewarded according to the market value of the contribution of their labor. Since the market value of the services of a skilled brain surgeon will be many times greater than the market value of the services of a garbage collector no matter how hard and well the garbage collector works, remuneration will be unjust in market socialism as well. People will always have different abilities to benefit others, so those with lesser abilities will always be disadvantaged in market socialism regardless of how hard they try and how much they sacrifice. The problem is most differences in people's "productivity" are beyond people's control and cannot be traced to differential sacrifices. No amount of eating and weight lifting will give an average individual a 6 foot 9 inch frame with 300 plus pounds ofmuscle. Yet professional football players in the United States receive hundreds of times more than an average salary because those attributes make their contribution outrageously high in the context of U.S. sports culture. And just as the famous progressive British economist, Joan Robinson, pointed out long ago, however "productive" a machine or piece of land may be, that hardly constitutes a moral argument for paying anything to its owner; however "productive" a high IQ or a 300 pound physique may be, that doesn't mean the owner of this trait deserves more income than someone less gifted who works as hard and sacrifices as much. Only if people are rewarded according to sacrifices they make will the distribution of burdens and benefits in the economy be equitable. Only if someone works longer or harder, or at more dangerous, strenuous, or unpleasant tasks, does economic justice require greater remuneration. Unlike capitalism or market socialism, a participatory economy rewards people according to the effort, or sacrifice they make in work. But does rewarding effort conflict with efficiency, and can effort be reasonably measured?

Once we stipulate that "effort" includes personal sacrifices incurred in training as well as in work, the only factor influencing performance over which an individual has any discretion is effort. So if we include an effort component of training in our definition of effort, the only discretionary factor influencing performance is effort, and therefore the only factor we should reward to enhance performance is effort. Suppose we wanted to induce maximum effort from runners in a 10 kilometer race. Should prize money be awarded according to place of finish, or according to improvements in personal best times? Rewarding outcome provides no incentive for poor runners with no chance of finishing "in the money" and no incentive for a clearly superior runner to run faster than necessary to finish first.

It is commonly held that effort is difficult to measure while outcome is not, so rewarding performance is the best system in practice. But neither half of this proposition is as compelling as usually assumed. Assigning responsibility for outcome in group endeavors is frequently unambiguous. Sports teams are more suited to such calibration than production teams. And it is more difficult to calibrate individual contribution in football, soccer, and basketball than baseball. But even in baseball, arguably the easiest team sport to assign individual responsibility for group achievements, debates over different measures of offensive contribution—batting average, on base percentage, runs batted in, slugging percentage, etc.—debates over the relative importance of pitching versus hitting versus fielding, and acknowledgment of the importance of "intangibles" and "team chemistry," attest to the difficulty of assigning individual responsibility for group outcomes. Nor is measuring effort always so difficult. Anyone who has taught and graded students for long knows there are two different ways to proceed. Teachers can compare students' performances to each other, or to how well they expected a student to do. Admitting the possibility of grading according to "improvement" is tantamount to recognizing that teachers can, if they choose, measure effort. Given a student's level of preparation when s/he entered the class, given a student's natural ability, is this an A, B, or C effort, are not questions teachers find impossible to answer.

And remember who is judging effort in a participatory economy—a committee of one's workmates. Is there any incentive for workmates to reward clumsy effort rather than proficient effort? Why would fellow workers have any less incentive to discourage ineffective effort and encourage effective effort on the part of coworkers than capitalist employers do? Who is in a better position to know if someone is only giving the appearance of trying than the people working beside her? While teachers don't watch their student's study, workers do see their coworkers work. It should not be as easy to disguise ability and fake effort by pulling the wool lover the eyes of coworkers as supervisors (or teachers.) Of course there will be disagreements among coworkers about the relative sacrifices people make, and effort rating committees will inevitably make mistakes. But if procedures—including grievance procedures—are fair, and if dissatisfied workers are free to move to a new workplace where they feel they will be evaluated more fairly, there is no better way to try to achieve economic justice.

Consumption: Every family belongs to a neighborhood consumer council. Each neighborhood council belongs to a federation of neighborhood councils the size of a ward or rural county. Each ward belongs to a city consumption council, each city and county council belongs to a state council, and each state council belongs to the national federation of consumption councils. A major purpose of "nesting" consumer councils into a system of federations is to allow for the fact that different kinds of consumption affect different numbers of people. Failure to arrange for all those affected by consumption activities to participate in choosing them not only implies a loss of self-management, but, if the preferences of some are disregarded or misrepresented, a loss of efficiency as well. One of the serious liabilities of market systems is their systematic failure to permit expression of desires for social consumption on an equal footing with the expression of desires for private consumption. Having the different levels of consumer federations participate on an equal footing in the planning procedure described below prevents this bias from occurring in a participatory economy .

Members of neighborhood councils present consumption requests along with the effort ratings their workmates awarded them. Using estimates of the social costs of producing different goods and services generated by the participatory planning procedure, the burden a consumption proposal imposes on others is calculated. While no consumption request justified by an effort rating can be denied by a neighborhood consumption council, neighbors can express their opinion that a request is unwise, and neighborhood councils can also approve requests on the basis of need in addition to merit. Individuals can borrow or save by consuming more or less than warranted by their effort level for the year, and anyone wishing to submit an anonymous request to protect their privacy can do so.

Participatory Planning: The participants in the planning procedure are worker councils and federations, consumer councils and federations, and the Iteration Facilitation Board (IFB). Conceptually, participatory planning is quite simple: The IFB announces current estimates of the opportunity costs for all goods, resources, categories of labor, and capital stocks. Consumer councils and federations respond with their own consumption requests while workers councils and federations respond with production proposals—listing the outputs they would provide and the inputs they would need to make them. The IFB calculates the excess demand or supply for each good and adjusts the estimate of the opportunity cost of the good up, or down, in light of the excess demand or supply. Using these new estimates of social opportunity costs, consumer and worker councils and federations revise and resubmit their proposals until the proposal from each council and federation has been approved by all the other councils and federations.

Essentially this procedure "whittles" overly optimistic, infeasible proposals down to a feasible plan in two different ways: Consumers requesting more than their effort ratings warrant are forced to reduce their requests, or shift their requests to less socially costly items, to achieve the approval of other consumer councils who reasonably regard their requests as greedy. Just as the social burden implied by a consumption proposal can be calculated by multiplying items requested by their opportunity costs, the benefits of the outputs a worker council proposes can be compared to the social costs of the inputs it requests using the same indicative prices from the planning procedure. Worker councils whose proposals have lower than average social benefit to social cost ratios are forced to increase either their efforts or efficiency to win the approval of other workers. As iterations proceed, consumption and production proposals move closer to mutual feasibility and estimates more closely approximate true social opportunity costs as the procedure generates equity and efficiency simultaneously.

The participatory planning procedure also protects the environment. Federations of all those affected by a particular kind of pollutant are empowered in the participatory planning process to limit emissions to levels they deem desirable. A major liability of market economies is that because pollution is what economists call a "negative externality"—i.e. pollution adversely affects those who are "external" to the market transaction and decision making process—market economies permit much more pollution than is efficient, even by mainstream economic standards. The participatory planning procedure, on the other hand, guarantees that pollution will never be permitted unless those adversely affected feel that the positive effects of permitting an activity that generates pollution as a byproduct outweigh the negative effects of the pollution on themselves and the environment.

Conclusion: The "model" of a participatory economy was never intended to be a "blue print" for others to follow when they are ready to abandon capitalism. The model was initially created to demonstrate that efficient, equitable cooperation between "associated producers" (and consumers) is theoretically possible via a participatory system of democratic planning, and therefore, that opponents of capitalism are not limited to choosing between (1) authoritarian planning, (2) "market socialism," or (3) some version of "community economics" which forfeits the considerable advantages of specialization, and fails to explain how communities will interact when it turns out they are only "semi-autonomous" rather than entirely self-sufficient. The model of a participatory economy is comprehensive and concrete, rather than merely a list of values and goals, not to dictate how things must be done, but to provide doubters with something concrete to criticize. Specifics are provided not to rob those who will live in the economy that replaces capitalism of their right to choose how they will organize their affairs, but to force all of us who believe that equitable cooperation is humanly possible to explain how conflicts would be resolved, and how incentives could be arranged so that when people do act in their own interest they will not do so contrary to the social interest. Proponents of participatory economics seek dialogue with others about these matters because we believe the anti-capitalist movement must constantly be thinking about how things can be done better, rather than leave the question of what we would replace capitalism with to the post-capitalist future. We believe we need to address the questions raised by participatory economics while we struggle against the inequities and inefficiencies of capitalism so that a majoritarian, anti-capitalist movement will know what to do when capitalism is finally replaced.

Brief Bibliography (Compiled by IMC editors):

Michael Albert & Robin Hahnel. The Political Economy of Participatory Economics. Princeton University Press, 1991.
Michael Albert & Robin Hahnel. Looking Forward: Participatory Economics for the 21st Century. South End Press, 1991.
Michael Albert. Parecon: Life After Capitalism. Verso, 2003.
Pat Devine. Democracy and Economic Planning. Polity Press, 1988.
Robin Hahnel. The ABCs of Political Economy: A Modern Approach. Pluto Press, 2002.
John Lawrence. "Democratic Worker Cooperatives." New Politics. No. 33, Summer 2002.
Alec Nove. The Economics of Feasible Socialism. George Allen & Unwin, 1983. [Hahnel & Albert's "participatory economics" is in part a response to Nove's argument for "market socialism."]
Anton Pannekoek. Workers' Councils. AK Press, 2003.