The loud status quo in welfare economics

Before Michael Albert became a Democrat-supporting shitlib, he did some amazing work.  I may now be the owner of his old parecon.org domain, and I am absolutely still a passionate supporter of participatory economics and pareconish theory.  But in 2022, his (and Robin Hahnel’s) most important work isn’t parecon — it’s Quiet Revolution in Welfare Economics.

I can’t help but be continually amazed that the learned, well-read, educated left — which has read every book ever written, and wrote half of them anyway — has no idea that Quiet Revolution even exists.  The book was published in 1990, and contains several theorems relating to markets, central planning, and private ownership.

If you’re not familiar with mathematics, a theorem is a mathematical fact.  You may have experience with proving theorems if you took a geometry class in high school.  Most people hate doing proofs.  That’s fine, of course.  People are allowed to like different things.

The theorems in Quiet Revolution rely essentially on only one assumption:  that preferences are endogenous.  A person’s preferences are endogenous to the extent that those preferences are formed by a person’s circumstances.  To the extent that a person’s preferences are innate and unchangeable, we would say those preferences are exogenous.

People that say that preferences are exogenous will say that markets give people what they want.  They use this as part of a justification for capitalism, which is a market-based economy.  Albert, before he became a Jimmy-Dore-smearing shitlib, liked to say — quite correctly — that he could easily prove that markets do not give people what they want.  After all, literally one hundred percent of the population wants commercial-free television, but markets don’t give that to them; quod erat demonstrandum.1

As he always did, Albert had other good analogies, but here’s mine:  Think about the food you today:  probably things like Hamburger Helper, Kraft macaroni and cheese, Ragu spaghetti sauce, or Ramen noodles — you know, poor people’s food.  You eat store-brand ice cream.

Now suppose you win the Power Ball.  Suddenly, you’re no longer drinking Milwaukee’s Best or Steel Reserve to wash down your pork chops.  Now you’re eating filet mignon and washing it down with a fine chardonnay, with Häagen-Dazs for desert.

If preferences were exogenous, you’d keep eating cheap food,  But if you won the lottery, cheap food would be the last thing you would want.  You’d develop a taste for the good stuff.  You’d think the old food you ate was horrible and you’d wonder how you ever managed to stomach it.

Until, like most lottery winners, you blew through your stash and had to declare bankruptcy.  Now, no longer able to afford the good stuff, Steel Reserve and Pyramids would suddenly become appealing again.

Preferences really are endogenous — or certainly much more endogenous than anyone cares to admit.

Given that preferences are obviously highly endogenous, this makes the mathematical work of Hahnel and Albert in Quiet Revolution factually true.  So what does that work say?

Private Enterprise

Hahnel and Albert prove two theorems related to private-enterprise economies.  By private enterprise, we mean, “who owns the workplaces?”  For instance, Jeff Bezos owns Amazon.  If Amazon existed in the former Soviet Union, which was a public-enterprise economy, it would have been owned by the government.

Quiet Revolution states the following:

THEOREM 8.1: BIASES IN WAGES UNDER PRIVATE ENTERPRISE.  Under private enterprise production, unless there is 100 percent labor turnover each time period, any kind of laboring activity that generates employee-empowering traits will have an actual market wage that is less than the socially optimal wage and be undersupplied.  And any kind of labor activity that weakens employee-empowering traits will be paid more than the socially optimal wage and be oversupplied.

This is followed by:

THEOREM 8.2: SNOWBALLING NONOPTIMALITY OF PRIVATE ENTERPRISE PRODUCTION.  Not only will production under private enterprise fail to deliver optimal job mixes in some initial time period, oversupplying work conditions that empower employers vis-à-vis employees, but there will be a cumulative divergence away from optimal allocations in future time periods as individuals “rationally” adjust their personal characteristics to diminish their need for work opportunities that are underpaid and enhance their preference for work opportunities that are overpaid.

The first theorem says that in any workplace that is privately-owned, the owner will always seek to disempower the people that work for him.  He doesn’t want them taking over his business.  It’s why workplaces tend toward Taylorism.

The second theorem says that, no matter what point of workplace-deskilling you are at, from the standpoint of a worker, things are always going to get worse.  Further, working people will warp their own psyches over time to actually want to be disempowered.

I would like to say that, to its credit, the left tends to oppose private-ownership economies.  And indeed, the left does.  However, the left doesn’t do this because it wants workers to be empowered.  The left does this because it’s a managerial-class (or coordinator-class) left, and it resents having to answer to owners (capitalists).  It seeks to overthrow the capitalist class and take over the economy for itself.  Concern for workers’ well-being does not enter into left calculus at all.  Indeed, no one really hates working people more than the managerial-class left.

Markets

Regarding market economies, like those of the United States (capitalism) or the former Yugoslavia (market socialism), Quiet Revolution says:

THEOREM 7.1: MARKET OVERCHARGES. Markets overcharge purchasers of goods with greater than average positive external effects.

And:

THEOREM 7.2: SNOWBALLING NONOPTIMALITY OF MARKET ALLOCATIONS. Not only will markets misallocate resources in some initial time period — undersupplying goods with greater than average positive external effects as compared to goods with less than average positive external effects-but there will be a cumulative divergence away from optimal allocations in future time periods as individuals “rationally” adjust their personal characteristics to diminish their needs for goods with positive external effects and expand their needs for goods with few external effects and negative external effects.

These theorems discuss what economists called externalities.  The classic example in economics of an externality is pollution.  For instance, if I buy a car, that car is going to spew carbon monoxide into the atmosphere and aggravate the breathing problems of asthmatics in my neighborhood.  Costs will be incurred by these asthmatics as they now have to seek additional medical care.  However, these costs are not included in the purchase price of my car — they are external to the transaction, paid by asthmatics and not paid by either me or the dealer who is selling me the car.

This makes the car artificially cheap to me to buy, and artificially more profitable for the dealer to sell.  In any market economy, whether one with private-enterprise workplaces like the U.S., or public-enterprise workplaces like the former Yugoslavia, externalities are the rule, not the exception.  By Theorem 7.1, polluting goods will always be underpriced in any market economy.  This means any and all forms of environmental devastation are necessary, systemic, “baked-in” facts of any market system.  And Theorem 7.2 says that this will only get worse over time, as economic actors learn to prefer polluting items to non-polluting ones.

This isn’t just true for pollution, but for all externalities like noise, unsightliness, or even lethality.  But the point about pollution is particularly acute.  The left likes to pretend it’s concerned about the environment.  And contrary to what those on the right may think, the left is actually correct about the dangers of global warming and environmental destruction.

However, what Quiet Revolution shows is that, again, environmental devastation is baked in to any market economy.  Therefore, anyone who is a true environmentalist must also be a market abolitionist.  However, in 2022, market abolitionists are essentially nonexistent (though I myself am one, though I am not a socialist — I am a pareconist).  Certainly, in the environmental “movement,” the next market abolitionist you find is going to be the first.

Central Planning

I’ve intentionally saved central planning for last.  Here’s Quiet Revolution:

THEOREM 9.1: CENTRAL PLANNING BIAS AGAINST SELF-MANAGEMENT.  Centrally planned economies will “charge” individual job seekers more for self-managed work activities compared to other activities than is socially optimal, resulting in less self-managed work being performed than is socially optimal.

Also:

THEOREM 9.2: SNOWBALLING AUTHORITARIANISM IN CENTRAL PLANNING.  In a centrally planned economy not only will self-managed laboring activities be overpriced and undersupplied at some initial point in time, but the degree of divergence from optimality will be greater than indicated by traditional welfare theory and grow, or “snowball” over time. Accompanying the snowballing nonoptimal allocations will be a “snowballing” apathy consisting of “warped” human characteristics which undervalue self-managed work activity.

Self-management is the principle that one should have a say over the decisions that affect one’s life to the degree that those decisions affect one’s life.  If an economy violates self-management, this means that someone is making decisions that affect another person, but that the other person has inadequate say over what’s being decided — a condition most people would describe as authoritarianism (except for the people who are actually making the decisions, of course).

Theorem 9.1 says, though, that in centrally-planned economies, this sort of authoritarianism is the norm.  And Theorem 9.2 says that this authoritarianism will worsen over time, and that workers in centrally-planned economies will warp their own psyches to actually prefer the condition of being ruled over as opposed to being able to decide their own fates.

I saved central planning for last because there was a time in the United States when the left trumpeted central planning as an alternative to markets.  They pointed to the Soviet Union as an alternate way to organize economic, one they claimed was more efficient and more just.  When the USSR went out of existence, there ceased to be an example of an alternative to markets.  The left went from being critics of markets to being mostly agnostic on the subject.

While the left’s praise of central planning was not warranted, its criticisms of markets were generally on point.  It recognized that markets destroy solidarity, that they have their own tendencies toward authoritarianism, that the destroy diversity, and that they are inequitable.  But once central planning ceased being seen as a viable alternative, the only way to criticize markets would be to propose an allocation mechanism that was neither markets nor central planning.  This is what Albert and Hahnel did with their theory of participatory economics.

But the left hates — absolutely hates, loathes, detests, and despises — parecon.  The reason is because the managerial left has zero interest in giving up its managerial class privileges.  It doesn’t want to get out in the fields under the hot sun and do its fair share of picking the cotton.  That’s for the field slaves (the working class), not the overseers (the managerial class — of which the left is inextricably a part).

But I think that one day, environmental break down will be so apparent and damaging that significant segments of the capitalist class will seek to convert to a centrally planned economy.  Note, contrary to what elements on the right like to fantasize about, the United States is not presently a planned economy.  In a planned economy, prices are determined directly by the planners — there is no market component determining what they are.

When the Fed creates money to artificially inflate asset prices for the rich, that’s an admission that we operate under a market system.  If the U.S. economy were planned and the planners wanted asset prices to go up, they would just change them in a spreadsheet and dispense with the show of throwing money to influence prices.

When that day comes, the left is going to party like it’s the 1930s once again.  They’ll be extolling the benefits of central planning to an audience that no longer remembers anything about what the Soviet Union was — an audience that will also be reeling from climate catastrophe and desperate for anything different.

The solution is not to replace one bad thing (markets) with another (central planning).  The solution is for a real, worker-oriented left to begin asking basic questions about what a just economy would look like in a good society.  As always, my claim is that that economy is participatory economics, and that any other model will always necessarily oppress workers.

The theorems of Quiet Revolution prove this.  Even in best-case theory, let alone worst-case practice, neither capitalism, market socialism, nor centrally planned socialism can ever do anything but mismanage economic activity and oppress workers.

I have zero hope that any left will ever take up the implications of pareconish theory.  I know I’m wasting my time with this.  Or, my shitty attitude just means I’m not the right person to do this.  That could be too.  Regardless, any economy with either private ownership, markets, or central planning will produce predictable outcomes.  Alcoholics (of which I am one) cannot stop drinking until they are able to see that they have a problem.  So too, the human race cannot stop avoiding certain outcomes until it is able to answer a simple question:  In a good society, will everyone do their fair share of shit work?

  1. “This is what was to be shown.”

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