Robin Hahnel has argued that "participatory planning is not central planning", stating "The procedures are completely different and the
incentives are completely different. And one of the important ways in which it is different from central planning is that it is incentive compatible, that is, actors have an incentive to report truthfully rather than an incentive to misrepresent their capabilities or preferences." Unlike historical examples of central planning, the parecon proposal advocates the use and adjustment of price information reflecting marginal social opportunity costs and benefits as integral elements of the planning process. Hahnel has argued emphatically against
Milton Friedman's
a priori tendency to deny the possibility of alternatives: Friedman assumes away the best solution for coordinating economic activities. He simply asserts "there are only two ways of coordinating the economic activities of millions—central direction involving the use of coercion—and voluntary cooperation, the technique of the marketplace." [...] a participatory economy can permit all to partake in economic decision making in proportion to the degree they are affected by outcomes. Since a participatory system uses a system of participatory planning instead of markets to coordinate economic activities, Friedman would have us believe that participatory planning must fall into the category of "central direction involving the use of coercion." Albert and Hahnel have voiced detailed critiques of centrally-planned economies in theory and practice, but are also highly-critical of
capitalism. Hahnel claims "the truth is capitalism aggravates prejudice, is the most inequitable economy ever devised, is grossly inefficient—even if highly energetic—and is incompatible with both economic and political democracy. In the present era of free-market triumphalism it is useful to organize a sober evaluation of capitalism responding to
Friedman's claims one by one."
Critique of markets Mainstream economists largely acknowledge the problem of externalities but believe they can be addressed either through
Coasian bargaining or the use of
Pigovian taxes—corrective taxes on goods that produce negative externalities. While Hahnel (and Albert) favour the use of Pigovian taxes as solutions to environmental problems within market economies (over alternatives such as the issuance of
marketable permits), he is critical about the
regressive incidence of such taxes. Firms in a market economy will seek to shift the costs of taxation onto their consumers. While this might be considered a positive development in terms of incentives—since it penalizes consumers for "dirty" consumption—it fails to achieve the
polluter pays principle and would instead aggravate "economic injustice." Hahnel, therefore, recommends that pollution taxes be linked to cuts in regressive taxes such as social security taxes. Hahnel is also critical of the mainstream assumption that externalities are anomalous and, on the whole, insignificant to market efficiency; he asserts instead that externalities are prevalent—the rule rather than the exception—and substantial. Ultimately, Hahnel argues that Pigovian taxes, along with associated corrective measures advanced by market economists, fall far short of adequately or fairly addressing
externalities. He argues such methods are incapable of attaining accurate assessments of social costs: Markets corrected by pollution taxes only lead to the efficient amount of pollution and satisfy the polluter pays principle if the taxes are set equal to the magnitude of the damage victims suffer. But because markets are not incentive compatible for polluters and pollution victims, markets provide no reliable way to estimate the magnitudes of efficient taxes for pollutants. Ambiguity over who has the property right, polluters or pollution victims, free rider problems among multiple victims, and the transaction costs of forming and maintaining an effective coalition of pollution victims, each of whom is affected to a small but unequal degree, all combine to render market systems incapable of eliciting accurate information from pollution victims about the damages they suffer, or acting upon that information even if it were known.
Class and hierarchy Although parecon falls under
left-wing political tradition, it is designed to avoid the creation of powerful intellectual elites or the rule of a
bureaucracy, which is perceived as the major problem of the economies of the
communist states of the 20th century. In their book
Looking Forward Albert and Hanhel termed this situation 'coordinatorism'. Parecon advocates recognize that
monopolization of empowering labor, in addition to private ownership, can be a source of
class division. Thus, a three-class view of the economy (capitalists, coordinators, and workers) is stressed, in contrast to the traditional two-class view of
Marxism. The coordinator class, emphasized in parecon, refers to those who have a monopoly on empowering skills and knowledge, and corresponds to the doctors, lawyers, managers, engineers, and other professionals in present economies. Parecon advocates argue that, historically,
Marxism ignored the ability of coordinators to become a new ruling class in a
post-capitalist society.
Innovation Hahnel has also written a detailed discussion of parecon's desirability compared to capitalism with respect to incentives to innovate. In capitalism,
patent laws,
intellectual property rights and
barriers to market entry are institutional features that reward individual innovators while limiting the use of new technologies. Hahnel notes that, in contrast, "in a participatory economy all innovations will immediately be made available to all enterprises, so there will never be any loss of static efficiency.". == Criticism ==