The environment under parecon

I've been reading Robin Hahnel's book Economic Justice and Democracy, which came out last year. The book has some interesting things to say about why libertarian socialists have failed in the past, a strong but not very detailed argument against markets, and one of the more complete responses to critics of participatory economics. But what I want to bring up here is his proposal for how parecon would institutionally deal with the environment.

For those unfamiliar with parecon, it's a proposal for a nonmarket, democratically-planned economy with nonhierarchical workplaces and an egalitarian distribution of incomes. Parecon proponents argue that it's also far more environmentally friendly than capitalism.

The reason markets are fundamentally incompatible with environmental sustainability is that prices are determined exclusively by agreement between the buyer and seller. That means that the ways production and consumption affect other people and the environment is structurally ignored. Thus the price of gasoline only takes into account oil companies' costs to extract, refine, and distribute gas - not the costs incurred by the people who breathe the fumes or the damage to poor Bangladeshis when global warming increases flooding.

A secondary problem with markets is that they're biased towards individual consumption and against collective consumption, which makes collective environmental solutions like public transit much harder to implement.

To the extent that the environmental movement has mobilized effectively, or that elites have begun to fear that wholesale environmental damage will endanger their lives or power, governments intervene in markets thru taxes and regulations to undo some of the environmental damage. But another feature of markets - their tendency to concentrate wealth - allows corporations to manipulate governments and inevitably environmental policies fall short.

Parecon structurally removes the power of corporations by decentralizing wealth and balancing the power of enterprises with that of consumers. It removes the obstacles to collective investment in environmental solutions thru democratic planning. But the key innovation Hahnel proposes is in how prices are determined for environmental damage. (Some knowledge of the participatory planning mechanism is needed to understand the following. A short overview is available here.)
In each iteration in the annual planning procedure there is an indicative price for every pollutant in every relevant region representing the current estimate of the damage, or social cost of releasing a unit of that pollutant into the region. What is a pollutant and what is not are decided by federations representing those who live in a region, who are advised by scientists employed in research and development operations run by the resident federation.... If a worker council located in an affected region proposes to emit x units of a particular polluntant they are "charged" the indicative price for that pollutant in that region times x, just like they are charged y times the indicative price of a ton of steel if they propose to use y tons of steel as inputs in their production process... The consumer federation for the relevant region looks at the indicative price for a unit of every pollutant that impacts the region and decides how many units it wishes to allow to be emitted. The federation can decide they do not wish to permit any units of a pollutant to be emitted: in which case no worker council operating in the region will be allowed to emit any units of that pollutant. But, if the federation decides to allow x units of a pollutant to be emitted in the region, then the regional federation is "credited" with x times the indicative price for that pollutant. (p. 198-199, italics in original)
So the process goes like this:
  1. In the first round of planning, a regional federation names what it considers pollutants and the upper limit of what it will tolerate in its region.
  2. Enterprises make requests for the kinds of pollution they plan on producing and are charged the first-round iterative price on those polluntants, just as they are for other inputs.
  3. If the total request on the amount of some pollutant in that region runs against the limit set by the regional federation, the Iteration Facilitation Board (IFB) adjusts the iterative price upward for the next round to reflect a surplus of demand; if the total is lower than the federation limit, the price is adjusted downward. Regions receive consumption credits according to how much pollution they allow.
  4. Plans are adjusted in light of the new prices and the process continues thru subsequent rounds of planning.

To make it concrete, let's take some pollutant X as an example. The Kansas consumer federation determines that X's effects are most relevant at that level, and decrees that y tons of X are acceptable for the coming year. All enterprises calculate how much X they can afford to produce in light of the iterative prices supplied by the IFB, which took last year's price and adjusted it in light of projected trends. In the first round of planning we find that Kansas enterprises have proposed to produce twice as much X as what Kansas is willing to allow. Given the excess demand for X, the IFB now revises its price much higher, so that enterprises will look for other production techniques that produce less X and so that consumers will switch to products whose manufacture produces less X. (Consumer adjustments will actually take place in the round after producer adjustments since only in the round after reduced production proposals are submitted will the prices of those products go up to reflect lower supply for steady demand.)

In some ways this is a brilliant fix. It not only forces enterprises to take into account their environmental impact at the point of production and normalizes this as part of the production process rather than an as a form of external government interference. It also produces socially-determined prices for the pollution itself, balancing the benefits of pollution with its damage to people and - if there's an active environmental movement - other life. And it has the additional benefit of compensating those who tolerate greater pollution for their sacrifice.

Some questions I have:
  • Could the process be manipulated by federations? E.g., couldn't some federation name an innocuous industrial byproduct to be a pollutant and thereby reap consumption credits for that byproduct's release in its region?
  • Do higher-level regional federations pre'empt lower ones? If the Sichuan provincial federation says that X is not a pollutant but the Chengdu city federation disagrees, what happens?
  • Hahnel doesn't specify at what level the pollutant price is adjusted - is it adjusted for the whole economy, or for each different federation, yielding many different prices thruout the economy? Is either one of these problematic?
  • How does the "polluter pays" principle figure into the pollution caused not by producers but by consumers thru their use of products? The obvious example here is cars - how is car pollution accounted for? Would some surcharge imposed on gasoline be an adequate fix? How does the damage caused by second-hand smoke get factored into prices?
What do yous think about this proposal? Any answers to these questions? Any questions of your own?


Patrick said...

The biggest concernt that leaps to mind is basically a reiteration of your example with Sichuan and Chengdu. I'd like to put a different spin on it, tho: the problem is that (to paraphrase) all environmental impacts are local.

Some can clearly be extrapolated to much larger levels - e.g., wetlands destruction and flood mitigation throughout the entire Mississippi watershed, or nitrogen fertilizer runoff creating massive eutrophication or even large dead zones like that in the Gulf of Mexico. But many impacts are intensely local and small-scale: pollutants can have a nasty habit of being locally persistent in their most serious effects, which is why corporations often seek to site even broadly-polluting activities like incineration in low-income, politically-disenfranchised areas.

A true evaluation of environmental sustainability in parecon, or any other system, would require an extraordinary respect from each institutional level for the impacts at every other institutional level.

The other challenge I'd make is that this system seems predominantly concerned with environmental quality issues, which is to say "environmental issues with a direct impact on human health". It seems far more difficult to evaluate impacts on non-human communities. Leaving aside the serious issue of extinction...how can you economically value the damage to desert bighorn sheep of seismic exploration in an unpopulated area of Utah? How can you value habitat fragmentation through road-building in rural Idaho? What federation would be responsible for making those determinations, and how would they be made?

The second dimension to that challenge is how to deal, broadly, with "the commons". The point in the above example is that the area in question is public, in the sense that it's literally owned by the American public; the government merely manages it on behalf of "the people" (or at least that's the theory...). How would such "resources" be approached in parecon, and how would those management decisions be made? How would input from *all* participants be respected?

Here's a clearer summary of the concerns I tried to raise:

1. Many environmental concerns inevitably involve both micro and macro levels *simultaneously*. How can this be recognized and dealt with?

2a. How does this process value impacts on NON-human communities?
2b. How does this process value decisions related to "the commons", which literally belong to everyone on a national scale?

Chris said...

my instinct is to offer the people most affected by pollution a veto. i guess there is a serious question of just who these "most affected" people are, and i don't know enough about the issue to suggest how this would work out.

but i think that the "most affected" people should probably be the ones that live in the areas that will likely suffer long-term effects from pollution.

it seems like people would always want to veto pollution of this kind, (that's probably not a bad thing) but maybe there could be some kind of remuneration for putting up with all the pollution, so there would be an incentive not to veto. i suppose the danger exists that there will be concentrations of exploited people who could be made to bear the brunt of the pollution, but parecon should hopefully make this unlikely.

on the other end (the commons,) could there be some kind of system for voting on the amount of pollution to allow? i suppose this would affect the amount of total production allowed? maybe this should somehow figure into the work/production bids that people do? i don't know, jake is the resident expert.

question 2a is a really good one, but i think it may be a bit beyond the scope of parecon (or politics?) with questions like this maybe the best we can say is that parecon, at least, offers the possibility of eliminating the abuses (in this case abuse of plants and animals who can't have a voice in political processes themselves.) still far better than under present circumstances.

but as of yet, i cannot think of a way to build a concern for animals/the environment fundamentally into the system of parecon. in a way you can see this as a strength of parecon, or at least as a sort of consolation: it isn't a system that suggests it has all the answers to all the problems, but rather suggests a form of social organization that will make addressing the problems possible. social organization should still be necessary and encouraged under parecon.

but to take a slightly different tack, i suppose there could be an assembly of people elected to look after concerns like this, and empower them to, say, create referenda on issues relating to non-human communities.

jake, is there currently any parts of the writing on parecon that are oriented towards this kind of social policy stuff... issues that are peripherally related to economics?