Home > Teoria > Novas Teorias para Economias Planejadas: O Modelo Parecon

Novas Teorias para Economias Planejadas: O Modelo Parecon

Com o fim do bloco soviético e com a transição de diversos países anteriormente socialistas ao capitalismo, seja gradualmente (como o caso da China) ou via terapia de choque (como o caso da Rússia), o socialismo como sociedade do futuro enfrenta muita resistência por parte daqueles que pensam que a história comprovou o fim do marxismo. Existem várias teorias para explicar o fim da era Soviética, que vão desde explicações a respeito da inviabilidade do planejamento centralizado para economias crescentemente complexas, até aquelas que defendem que foi justamente a dura hierarquia soviética a qual permitiu uma revolução de comandantes (de cima para baixo) durante a era Gorbachev – ainda que pesquisas indicassem que a população russa de fato preferia reorganizar o socialismo do que uma transição completa ao capitalismo. No horizonte surgiram, então, três possibilidades. A primeira foi a transição completa ao capitalismo. A segunda foi a transição para o chamado ‘socialismo de mercado’, como na Hungria, Yugoslávia e China pré-1990. A terceira, a qual justamente nunca ocorreu, foi a reestruturação do planejamento econômico a fim de torná-lo de fato democrático, participativo e iterativo. Aqui  apresento um curto artigo em que discuto o modelo de economia participativa para economias planejadas proposto por Michael Albert e Robin Hahnel. Confira.



The Albert and Hahnel Model of
Participatory Planned Economies

Tomas Rotta


1. Introduction

The new theories of planned economies constituted a response to both the problems of past socialist experiences and also to the rising tide of market socialism theories. After the demise of the Soviet block and of Maoist China at least three possibilities arose in the horizon: (a) transition from planning to full capitalist markets; (b) market socialism; (c) restructuring of planning systems. History hitherto demonstrated that only two countries still keep the authoritarian Soviet style of central planning, namely Cuba and North Korea, and that even though some form of market socialism in fact did take place, such as in Hungary, Poland and post-1978 China, this seems to be just a transition to a more fully capitalist and market-based economy. The third possibility, rethinking socialist planning1, was restricted to the theoretical sphere, and in fact never took place in practice as a nation-wide system, being circumscribed to local experiences such as the Zapatistas in los Chiapas, Mexico.

This paper, in this vein, theoretically explores this third possibility by presenting and critically discussing the Albert and Hahnel model for a participatory planned economy. To limit the scope for a brief presentation we will focus on the three following questions:

  1. What are the main features of this model?
  2. How does the model intent to solve the main economic problems faced by former socialist economies?
  3. How does the model differ from other models of market socialism and planned economies?

To accomplish these tasks this short article is structured as follows. Section 2 presents the main economic problems of past planned socialist experiences. Section 3 presents the main features of the Albert and Hahnel model for planned economies and how it is different from the ‘market socialism’ alternatives. Section 4 briefly compares the Albert and Hahnel model with other models for planned economies. Section 5 concludes.


2. The Main Problems of Past Centrally Planned Economies

In their main writings, Marx and Engels never affirmed that a planned socialist economy was to be conflated with a centrally-planned system. Planning does not necessarily mean centralized and top-down planning. However, as a product of history, of theory and of human action, the main socialist experiences tended to identify ‘planning’ with ‘centralized planning’, even though some exceptions can be pointed out (e.g. Yugoslavia`s self-management system and Mao`s responsibility system).

The demise of the Soviet bloc in the absence of any significant external shock and the gradual transition of China to a market-based economy poses the inevitable question of the sustainability and feasibility of centralized planning of complex large economies. Drawing from the writings of Kotz (2007) and of Nove (1993 and 1991), we could present a brief summary of the central problems faced by the erstwhile centrally-planned socialist economies:

  • Authoritarian top-down central planning;
  • Lack of flexibility and dynamism in certain sectors;
  • Disincentives to innovation;
  • Lack of decision power to the direct producers;
  • Lack of internalization of externalities, with detrimental effects to the environment;
  • Low quality of consumer goods and of industrial and agricultural inputs;
  • Over-centralization implied less flexibility, slow responsiveness of individual units and the emergence of black private markets;
  • Lack of democracy and transparency;

Notwithstanding, beyond social and economic problems, countries with Soviet-style centralized planning also faced some technical problems, mainly resulting from the then prevailing state of the art in computation and communications. Some of them should be stressed (Jeong 2007, p.4):

  • Input and output matrices and inverted input coefficient matrices could not be calculated for all disaggregate levels of production, and calculations could not be delivered on time;
  • Limited computational systems;
  • Poor communications systems prevented efficient transmission of information among economic units;

Taking these core social, economic and technical problems of past socialist experiences into account the next section will present the main features of the Albert and Hahnel proposal for a planned economy and how it contrasts to the market socialism hypothesis.


3. The Main Features of the Albert and Hahnel Model

Albert and Hahnel (1991, 1992, 2002, 2003) present their model of a “participatory planned system” in order to debunk the thesis, mainly defended by Oskar Lange, Alec Nove and Allen Buchanan, that there is no other feasible and sustainable way besides the free-market or the authoritarian central planning. Alec Nove (1991) is known to be a critic of decentralized planning on the grounds that it would supposedly be undermined by problems of coordination and economic efficiency.

Before presenting their own model of participatory planning, let us first start by showing why Albert and Hahnel (1992, p.42-44) dispense the ‘market socialism’ possibilities. Their main charges against the latter are that: (a) they are inherently inequitable due to a failure to reward agents according to personal sacrifices towards the social benefit, as in markets the material rewards and payments are made in relation to results, property and inheritance, and the market value of results will still be very disparate between a brain surgeon and a garbage collector; so those with lesser abilities will always be disadvantaged; (b) because they are inherently inefficient due to pervasive negative and positive externalities, leading to misallocation of resources and under-provision of public goods and over-provision of public ‘bads’ – these externalities also having deleterious effects on people`s evolutionary behaviors, which further aggravates the misallocation of resources; (c) market competition undermines community and social solidarity; (d) market competition makes cooperation individually irrational, as the profit motive is systematically incompatible with altruism; (e) market competition and the profit motive are incompatible with real workers’ management , as it would lead to the emergence of a new technocratic ruling class of ‘experts’ and ‘coordinators’ (as was the case with Yugoslavia, Hungary and Mondragon), and also because the profit motive would undermine individual attempts to enhance the qualitative human considerations; (f) historical experience supports the saying that market socialism is more easily led towards capitalism than to real participatory socialism, as the inequalities generated within competition and within public enterprise market economies breed initiatives to restore private ownership and to accumulation of personal wealth and privilege; (g) market socialism does not nurture ideological and psychological dynamics necessary to participatory planning; (h) desires for consumption of social and private goods are not put on equal footing.

Bearing the above critiques in mind, and also taking into account the main problems of Soviet-style centralized planning – as discussed in the previous section – Albert and Hahnel (1991, 1992, 2002, 2003) introduce their model for a participatory planned economy. This proposed system has the following main features:

  • Planning takes place in a decentralized non-market socialist society (i.e. coordination from below);
  • Planning and collective self-management is participatory and iterative;
  • Payments and material rewards according to effort (where ‘effort’ means ‘personal sacrifice in work and training toward the public benefit’)2 and not according to contribution:

“rewarding either talent, training incurred at public expense, job placement, or tools has no positive incentive effects. These rewards are literally wasted. […] 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. […] On the other hand, paying in accord with improvements in personal best time … gives everyone an incentive to run as fast as they can and in that produces the fastest overall time” (Albert 2003, p.232)

Where effort is valued and rated by workmates or by an ‘effort rating committee’ on a rotating basis. Albert and Hahnel (2002, p.13) asserts that workmate monitoring is more efficient than the imperfect monitoring done by capitalists. Also, “who is in a better position to know if someone is only giving the appearance of trying than people working with him of her in the same kind of labors?” (Albert 2003, p.237).

  • Wages are based on effort ratings, not on opportunity costs of labor (i.e. labor is not remunerated on the basis of their value to the economy):

“Those who could become wonderful composers, playwrights, musicians, and actors (or dentists, doctors, engineers, scientists, or what have you), will not pursue other avenues of work in which they are less apt to excel in pursuit of greater material reward because there is no greater material reward elsewhere” (Albert 2003, p.235)

  • Jobs must be balanced for desirability and empowerment. So even though a certain level of specialization will remain, job desirability and empowerment will need to be equalized across individuals (Balanced Job Complexes – BJC). This prevents a ‘class of coordinators’ to emerge;
  • “Nesting of consumers’ councils” from the neighborhood to the national level, as different kinds of consumption affect different numbers of people at different levels;
  • Councils would be run under the principle that the decision-making power has to be proportional to the degree that one is affected by the decision. So no preference is disregarded or misrepresented;
  • Councils of workers and consumers in different enterprises, industries and regions coordinate jointly and consciously to achieve fair, democratic, and efficient outcomes;
  • Councils of workers and consumers would revise their decisions based on the releases of updated and more accurate information. So planning is democratic and iterative;
  • One council must obtain approval for their proposals from other councils, where none has advantage in pressing its own claims (so, for example, consumer wants would not place heavy burdens on workers and natural resources);
  • Proposals must present projects in which social benefits outweigh social costs;
  • Consumption rights are drawn from work effort ratings, so if a worker exerts less effort she will have a lower claim on consumption plans;
  • A proposal from one consumer council can be vetoed by another council if the proposal entails a consumption vector with higher social costs than the average;
  • Workplaces are governed by workers’ councils in which each worker has one vote, where the majority vote is the ultimate arbiter. Some voting processes can be weighted to reflect differential impacts;
  • Industry councils and regional federations of workers` councils would deal with externalities and economies of scale;
  • Relative scarce factors do have accurate shadow prices;
  • Prices are determined by social costs and social benefits, so there are not externalities; and social costs and social benefits must be reflected in shadow prices of inputs and outputs;
  • Shadow prices are critical to compare the productive endowments and productive capabilities of different workplaces.
  • A national IFB (Iteration Facilitation Board) operates like a Walrasian auctioneer, calculating excess demands and supplies to adjust ‘indicative prices’ accordingly. Iterations among the IFB and consumers’ and workers’ councils produce increasingly accurate indicative prices that internalize all positive and negative externalities, so that prices (for all factors and goods) truly reflect social costs and benefits, relative scarcities, and opportunity costs;
  • Unjustifiable consumer greediness (in relation to scarce resources) and unjustifiable worker laziness (in relation to productive endowments) by certain councils will be vetoed by other councils; so requirements and efforts are reinforced by peer monitoring;
  • Consumption and production plans will be consistent as long as personal decisions to consume and work are made consistent. In this case, the idea is that there are “equal consumption rights for equal personal sacrifices”;
  • Innovation is rated on the basis of peer valuation; so the incentive to innovate comes from social appreciation and social serviceability. All innovations should be made free public goods immediately in order to avoid inefficiencies and inequities and also to avoid free-riding. Material and non-material incentives to innovators will be democratically decided by the councils themselves, but large material rewards are discouraged (even though social esteem and recognition are) as innovations are more often a result of past accumulated achievements and creativity rather than the result of a single individual. Therefore, the incentives for individuals to innovate should be largely non-material, while resulting material improvements should be spread as quickly as possible across enterprises. This is so to minimize free-riding by specific workers’ councils.

In this way, Albert and Hahnel (2002, p.16) expect this system to produce social responsibility even though the councils themselves are allowed to behave in their own self-interest. This happens because the mechanism of iteration and vetoing apply the criterion that proposed consumption and production plans should produce more social benefits than social costs3. The two central processes of this socially responsible system is that workers’ efforts are evaluated and rated by workmates and that consumption plans of a certain council must be compatible with their effort rating.

One important issue is to guarantee that formal equal rights are truly underpinned by effective equal rights. Even though each worker has one vote in the decision-making process, it does not necessarily mean that they are on a leveled playing field while making their decision. The balancing of jobs according to desirability and empowerment and remunerations based on effort ratings serve to place workers on equal social and economic footing while exorcizing their voting power. A clustering of certain groups of individuals in certain empowering and high valued jobs would undermine social equity among workers, and this effective social injustice would be cloaked by the appearance of equal formal rights.

To sum up, the above-mentioned characteristics constitute the main features of the Albert and Hahnel model for a decentralized and participatory planned economy. It was also shown how in their view this model contrasts to the market socialism hypothesis. The next section will then briefly compare how their model is similar to and different from other proposals for planned economies.


4. Comparing Models of Planned Economies

Currently there are three main models of planned economies: (i) Albert’ and Hahnel’s participatory economics (Albert and Hahnel 1991, 1992, 2002; Albert 2003); (ii) Devine’s negotiated coordination (Devine 1988, 2002); (iii) Cockshott’ and Cottrell’s labor-time calculation model (Cockshott and Cottrell 1993; Cottrell and Cockshott 1993). In this section we will briefly compare the Albert and Hahnel model presented in the previous section with the other two.

Similarities. All three models reject market socialism and the three of them are grounded on participatory and democratic direct planning, i.e. coordination from below. For all of them, the market socialism proposal is contradictory in positing a system in which workers` self-management and market would harmonically co-exist – having former Yugoslavia as their historical example of this kind of naivety. In this latter case, state ownership would be made redundant when confronted with markets as the allocators of resources. Contrary to this, all three models point towards direct and democratic mass participation. Therefore, the two elements that are common to the theories of planned systems are their common rejection of market socialism and their advocacy of direct democracy (Jeong 2007, p.10).

It is also worth noting that all three proposals explicitly model planning from below, which in turn allows for the explicit incorporation of ‘tacit’ and ‘local’ knowledge and information in production and consumption plans (Jeong 2007, p.35). This feature is important both for democracy and for efficient allocation and production of goods and services. It solves a major problem inherent in the Soviet style of centralized planning. Additionally, all three proposals also incorporate somehow the Marxian idea that in socialism the unit of account for consumption, production and trade should be labor time.

Differences. In terms of ownership of the means of production, the Albert and Hahnel model supports a worker’s council form of ownership, while Devine and Cockshott support social ownership and state ownership, respectively. The principle of distribution is also different. Albert and Hahnel models an economy in which workers are remunerated according to effort, which is closer to Cockshott’s model in which workers are paid based on labor-time and labor certificates; and in this respect Devine is not very explicit about the distributional principle. In terms of price determination, Albert and Hahnel are closer to Cockshott’s model. In the former, as we have seen above, the IFB operates as an institutionalized Walrasian auctioneer that iteratively adjusts consumption and production plans. Cockshott and Cottrell also have a central agency that calculates relative prices according to labor times and labor certificates in order to make consumption and production plans compatible. In contrast, for Devide firms should set prices at the level of social average cost of production (which internalizes externalities and also sets a markup). In terms of investment decisions, Albert and Hahnel are then closer to Devine, in the sense that workers and consumers negotiate and interact iteratively to reach a final common decision. Moreover, in what concerns market forces, Albert and Hahnel and Cockshott eliminate them completely. This does not occur with Devine, in whose model market exchanges are present, even though market forces as such are not (Jeong 2007,p.22).

Summing up, this section presented some important differences among the three main models for a decentralized planned economy. However, despite their progress, the Albert and Hahnel system still leaves some concerns unanswered. The next concluding section deals with this issue.


5. Conclusion

To conclude our characterization and comparison of the participatory economy model of Albert and Hahnel we raise some critiques and point to some issues that for us were not yet clearly defended:

  • Remuneration by effort and effort rating based on peer monitoring does not completely solve issues related to peer-reinforcement among workers;
  • It is not explained in which units the programming problem for the economy is stated;
  • It is not explained in what units the stated ‘social values’ (Albert and Hahnel 1992, p.47, n.4) are measured;
  • It is not fully explained how money would operate;
  • It is not explained how this planned economy would survive and prosper if this is an experiment in a single country under international competition;
  • It is supposed that the IFB will arrive at a vector of relative prices that entails an efficient and feasible optimal plan for the entire country. This is very close to the Arrow-Debreu formalization of the Walrasian auctioneer. However, Albert and Hahnel (1992, p.53) seem to be unaware of the strong criticisms raised by the Sonnenschein-Mantel-Debreu theorem that demonstrated that under the usual assumptions the equilibrium in not necessarily unique and most certainly not locally stable. And if the equilibrium is not unique, and knowing that each equilibrium would entail different production and distribution patterns, who is going to choose among them?

Notwithstanding, in what concerns effort and productivity – and now we agree that in this case Albert and Hahnel have a good answer -, it is important to stress that when productivity rises in a participatory economy workers will have at least two options: work the same amount of time and consume more, or work less an consume the same amount of goods, or they even might choose any combination between these two extreme cases. In capitalism this option is never raised. Therefore, in a participatory economy, it is possible that society will chose to live better by working less, which would represent a lower growth level in comparison with what a capitalist economy would achieve. But is not this exactly what Marx meant by workers actually collectively controlling their own destinies, instead of letting market forces to determine them (Albert 2003, p.239-240)? But how to avoid a possible economic stagnation? Albert answers by stating that what workers do not like is alienated labor, not labor per se. Labor is what gives a lot of meaning to our lives. Workers indeed try to shirk when their activities are alienated and not controlled by themselves (Albert 2033, p.241).

Therefore, on the overall, the participatory economics model of Albert and Hahnel offers many new insights to the debate of how large complex societies can have democratic and bottom-up planning with no markets operating as the main allocation mechanisms. Several critiques were raised by many thinkers and researches that point to some caveats in the models that still remain unaddressed by its authors (Albert, Hahnel, Kotz, O`Neill 2002). Future research and debate might clear and modify the still existing weaker points.


6. References

Albert, M. 2003. Parecon: Life After Capitalism. Verso.

Albert, M. and Hahnel, R. 1991. The Political Economy of Participatory Economics. Princeton University Press

Albert, M. and Hahnel, R. 1992. Participatory Planning. Science & Society 56(1): 39-59.

Albert, M. ; Hahnel, R. ; Kotz, D. ; O`Neill, J. 2002. In Defense of Participatory Economics / Comments / Reply. Science & Society 66(1): 7-21.

Cockshott, W. and Cottrell, A. 1993. Towards a New Socialism. Spokesman.

Cottrell, A. and Cockshott, W. 1993. Calculation, Complexity and Planning: The Socialist Calculation Debate Once Again. Review of Political Economy: 5(1).

Devine, P. 1988. Democracy and Economic Planning. Westview Press.

Devine, P. 2002. Participatory Planning Through Negotiated Coordination. Science and Society: 66(1).

Jeong, S. 2007. Models of Participatory Planning for Socialism in the 21st Century. Working Paper. Available at: http://iss.gsnu.ac.kr/upfiles/haksuo/SeongjinJeong20070525new.pdf

Kotz, D. 2007. Russia’s Path from Gorbachev to Putin: The Demise of the Soviet System and the New Russia. Routledge.

Nove, Alec. 1993. An Economic History of the USSR 1917-1991: Third Edition. Penguin Books.

Nove, Alec. 1991. The Economics of Feasible Socialism Revisited. Taylor and Francis.



1 This “third possibility” was clearly dispensed by Alec Nove: “In a complex industrial economy the interrelation between its parts can be based in principle either on freely chosen negotiated contracts, or on a system of binding instructions from planning offices. There is no third way. What can exist, of course is some combination of the two” (Nove 1991, p.48).

2 It is important to stress that effort encompasses both effort in work as also effort in training (Albert 2003, p.232).

3 This idea was criticized by David Kotz in Albert, Hahnel, Kotz, O’Donell (2002). Ironically, Albert (2003, p.229) states that in this proposed system “people have not only the means to consider one another’s circumstances but also the incentives to do so”. And that “in a participatory economy, indeed, the best, and in some sense, the only way to earn social esteem related to one’s economic activity is to make notable contributions to others’ well-being through one’s efforts” (Albert 2003, p.236).








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