Robin Hahnel Interview on Participatory Economics – Part 6 – Monopoly & Essential Sectors

Editor’s Note: discussion topics include monopoly & oligopoly, how to regulate monopoly in capitalism, how to regulate monopoly in parecon, how to organise strategic & essential sectors (like health) in parecon.

[After The Oligarchy] Hello fellow democrats, futurists, and problem solvers, this is After The Oligarchy. Today I’m speaking with Professor Robin Hahnel.

Robin Hahnel is a professor of economics in the United States, and author of many books, but today I’m interviewing him as co-originator with Michael Albert of the post-capitalist model known as Participatory Economics (or Parecon).

Today’s conversation is in association with meta: the Centre for Post-capitalist Civilization. This is the third in a series of interviews with Professor Hahnel about participatory economics, and in particular his latest book Democratic Economic Planning published in 2021. If you haven’t watched the first two interviews check them out here.

It’s an advanced discussion of the model proposed in that book so I recommend that you familiarize yourself with participatory economics to understand what we’re talking about. You can do that by visiting participatoryeconomy.org. You can also read Of the People, By the People (2012) for a concise introduction to parecon. And Professor Hahnel has a new book coming out in a few months called A Participatory Economy (2022).

Robin Hahnel, thank you for joining me again.

[Robin Hahnel] Great to be with you again.

[ATO] The next question is a bit different, it’s about monopoly and strategic sectors. For example, what about natural monopolies in parecon? These would be things like electricity, [methane] gas, water, sewage, transport, communications, health, mining, etc. These are sectors of the economy, these are production processes, where … electricity production and distribution is a classic example; it doesn’t make sense for there to be three companies with three different electrical grids, for example. And which are also of strategic, vital, importance. That society be provided with a reliable supply of electricity, where there aren’t blackouts, where it has an appropriate cost, and so forth. So, there are sectors like this which are natural monopolies, and either you end up with a situation – where you have a market system – private monopolies, or a situation where the solution is for the state to take control of these and nationalize them.

So, is there any opportunity in parecon to charge monopoly rents? And what if natural monopoly worker councils don’t treat indicative prices parametrically? Let’s deal with the first question then come back to the second. And if you could just explain what a monopoly rent is to people.

[RH] We have an answer. Every economist knows that only if you have competitive market structures could you make any case that you’re going to get efficient outcomes. As soon as you have a market structure that’s not competitive in a capitalist economy, what will happen is in the most extreme cases a monopoly, and a natural monopoly is sort of the most likely real world example to end up with, one company is the only company that’s producing this product.

As soon as you have that, there is a perverse incentive for that company to produce less than the socially optimal outcome, and therefore to drive its price up. So, two things happen. It reduces the amount that it supplies. That also means it reduces the number of units it’s going to sell, so that’s a negative effect on revenues. On the other hand, every unit it does sell is going to sell at a higher price, and that’s a positive effect on revenues. And the problem is the positive effect is larger than the negative effect leading to a predictable sub-optimal level of output.

Now there are two solutions to this in a capitalist economy. One is to nationalize the natural monopoly and not have it maximize profits but to maximize net social benefits, that is produce the amount that actually is the efficient amount. And the other solution is to regulate the monopoly and say well there’s only one of you but we’re going to set up a regulatory agency. And the regulatory agency’s job … Most people think the regulatory agency’s job is to keep them from price gouging but what economists understand is, no, the regulatory agency’s job is not really to keep them from price gouging, it’s to force them to produce more than they would otherwise be willing to produce if they weren’t regulated. And then the price will take care of itself.

That’s how it works, and one of the problems that defenders of modern market capitalist economies are faced with is in theory they know their economy is only efficient if all industries are competitive. But in reality, what has happened over time is the number of non-competitive industries, and it’s usually not a monopoly, a natural monopoly, it’s an oligopoly. But the same logic applies to oligopolies and economists all know this. So, on the one hand in the real world markets become less and less competitive, and yet defenders of market capitalist economies continue to insist that these are the most efficient economies.

We have a solution in a participatory economy. And the solution takes a very simple form, which is any worker council in our economy is supposed to take the indicative prices as givens.

[ATO] Can you just explain to people briefly what the indicative price is?

[RH] Right, so for instance if you have a natural monopoly let’s choose electricity. During the planning procedure that natural monopoly is quoted a price per watt of electricity and then responds with its output proposals.

[Editor’s Note: During annual planning, worker councils and consumer councils make production and consumption proposals for the year. These proposals are aggregated by the Iteration Facilitation Board (IFB) which feeds back new ‘indicative prices’ to producers and consumers according to a rule chosen to encourage the balancing of supply and demand. This continues for a number of rounds (iterations) until a feasible plan is reached.]

Now, the thing that a monopoly does that’s inefficient is it doesn’t look at market price and take it as a given. Instead, what it does is it asks well wait a minute I’m looking at the entire demand curve. I’m not going to take the price I’m quoted as a given because I can see that if I reduced my supply I could drive that price higher. So, in effect what monopolies are doing is they are not taking prices as givens. They are recognizing that their monopoly status permits them to affect what the price is going to end up being.

These are worker councils in a participatory economy, and there just happens to be one that’s producing electricity in a given region. They don’t have stockholders that are telling them to maximize profits, instead they are certainly supposed to be obeying the rules of the system and one of the rules is when you make your proposals you respond to indicative prices as the given price. You do not calculate ‘but I could affect that price by my response in this round’. Aha, what would prevent one from doing it?

Robin Hahnel Interview on Participatory Economics – Part 2 – Worker Self-Management & Central Planning

Editor’s note: discussion topics include defining worker self-management, the scope for worker self-management in central planning (and Towards a New Socialism in particular), and the scope for worker self-management in Participatory Economics.

[After the Oligarchy] Hello everybody, this is After the Oligarchy. Today I’m speaking with Professor Robin Hahnel.

Robin Hahnel is a professor of economics in the United States, co-founder with Michael Albert of the post-capitalist model known as Participatory Economics (Parecon), and author of many books.

Today’s conversation is in association with meta, The Centre for Postcapitalist Civilisation. This is the second in a series of interviews with Professor Hahnel about participatory economics, and in particular his latest book Democratic Economic Planning published in 2021. If you haven’t watched the first interview check out Part A and Part B here.

It’s an advanced discussion of the model proposed in that book so I recommend you familiarize yourself with participatory economics to understand what we’re talking about. You can do that by visiting participatoryeconomy.org. You can also read Of the People, By the People for a concise introduction to parecon.

The discussion will also continue on the forum of participatoryeconomy.org.

Robin Hahnel thank you very much for joining me.

[Robin Hahnel] Great to be with you.

[ATO] So you said actually that there was another book which will be published by AK Press in a few months called A Participatory Economy. Did you write that or was that written by somebody else?

[RH] No, I wrote that. What I realized was that Democratic Economic Planning, that book, can be a real challenge. Parts of that book would be a real challenge for people who do not have extensive background in economics, who haven’t studied economics, who didn’t major in economics, who aren’t professional economists. And yet obviously there are more people interested in post-capitalist economic models who are not economists than who are economists. So, the second book. And it’s published by an appropriate publisher. AK Press is a press that basically is for that audience, for libertarian minded people interested in post-capitalist visions.

So that second book is an attempt to present essentially the same ideas but not require the reader to have any extensive economic background. There are no proofs of theorems in that book, so that that’s the difference. And that that’s coming out, I think, sometime in June (2022). Both books are my attempt to get everybody up to date with what we now, after all these decades, have managed to come up with. So, they’re the most recent version of everything we have to say in response to all sorts of criticisms and questions people have raised over the years. But one book is more appropriate for one audience and the other for a different audience.

[ATO] Well Democratic Economic Planning, for what it is – as I said last time – is outstanding for people who really want something rigorous and detailed. And I will certainly read A Participatory Economy when that comes out in summer of 2022. I’m sure that it’ll be a good read as well.

So, let us begin with the questions. Our discussion today has a central theme. Last time we talked about housing and we talked about consumption, so this time I would like to talk about production units broadly, worker councils and so forth. And the first question is about worker self-management.

I have been having some discussions with Dr. Paul Cockshott about Towards a New Socialism and the model that he and Alan Cottrell put forward in that book and subsequently. And I quoted from Democratic Economic Planning a passage that you wrote about that model, and central planning more generally, which critiqued it on the basis of it inhibiting worker self-management. And so Paul Cockshott had a response, and I’d like to just put that to you and we can have a discussion.

And just before we proceed I just saw some [YouTube] comments when Paul Cockshott reposted that video on his own YouTube channel. Maybe some people seemed to misunderstand. When we’re having this discussion it’s really about two people who respect each other, who actually agree far more than they disagree, and are just having a civil, constructive, discussion about some disagreements about post-capitalist models. Some people seemed to think that it was some kind of polemic struggle. So, I just want to put that out there before beginning, so that people understand this in the right light.

So, the quote, to repeat it from page 314 of Democratic Economic Planning, was ‘as a consumer and voter, every person has as much say over what any particular group of workers produces and what inputs they will be allocated to produce it as those workers have themselves … [and thus workers] do not get to exercise meaningful self-management. [Hence] we believe it would predictably lead to the kind of worker apathy that plagued centrally planned economies in the 20th century’. I put this to Paul Cockshott, we discussed it briefly, we’re going to discuss it again subsequently. And Cockshott responded by questioning the assertion that there was worker apathy, and asked ‘what is the measuring bar that he’s using?’, and ‘where is the evidence?’. So what do you mean by apathy, by worker apathy? What is your measuring bar? And what is the evidence of work apathy in the centrally planned, socialist, states in the 20th century? And, lastly, similarly, if we can talk about what is worker self-management in concrete terms, what does it mean to possess or enact workplace self-management? It’s a big topic.

[RH] It is a big topic. First of all, I completely endorse when we have discussions about things like this they can either become sort of sectarian screaming matches and point scoring or they can be conducted more along the lines serious inquiry and probing. And this is a problem that has plagued the left from time immemorial: that too often our discussions about serious problems where people have somewhat different ideas about what the solutions are descend into scoring points and name-calling. And I always think that doesn’t serve any of us well, and I appreciate that Paul approaches these things in a better way, and I seek to do that as well. And there certainly are many, many, points of agreement between myself and Paul, and people who support his post-capitalist vision and people who support the post-capitalist vision known as participatory economics.

But there is I think a very serious difference of opinion and it’s been there for a very, very, long time. And, in some ways, the position that I endorse has long been the one associated with people who one way or another think of themselves as libertarian socialists, and who feel like that the essence of the socialist vision is one where workers finally get to manage themselves rather than be bossed around by other people. And I do sincerely believe that the essential pitfall, the essential mistake, that the Soviet Union made, and the Soviet model of socialism made … Now, I’m not talking about the political sphere, and we can really leave that aside, whether a single party state governed by a communist party whose internal rules are the ones called democratic centralism, whether that is profoundly anti-democratic and a poor way to organize political life. We can leave that aside for the moment, and we can just talk about the economic model, the economic system itself.

But I think that the economic system that the Soviet Union adopted was one where the real Achilles’ heel was it did not provide workers with the opportunity to manage their own productive activity themselves. And my sincere my most basic disagreement with Professor Cockshott, and his collaborator Alan Cottrell, is that – I think they would wish that in socialism we had full-blown and vibrant worker self-management – I think they don’t realize that the model they’ve proposed for decision-making would not provide that. And I was rather surprised, I mean I had not heard this from him but his response which was ‘well, Professor Hahnel where do you think there’s evidence that there was worker apathy in the Soviet economies?’. No, I haven’t done an exhaustive study but I do believe that there is ample evidence that over time what workers in the Soviet economies came to understand was that what went on in their workplace was they had basically no particular influence over that. They were just people who showed up and did what they were told, and what they were told to do was something that had been calculated through a planning procedure, and that planning procedure had provided them no more ability to influence what they produced and how they produced it than anybody else in the economy. Even if the entire planning procedure was incredibly democratic.