Negotiated Coordination

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= A contemporary model for a self-managed, non-market socialism is Pat Devine's model of negotiated coordination. Negotiated coordination is based upon social ownership by those affected by the use of the assets involved, with decisions made by those at the most localized level of production. [1]


Contents

Discussion

Pat Devine:

"A distinction is drawn between market exchange, involving the sale and purchase of the output of existing capacity, and market forces, which in capitalist economies bring about changes in the structure of capacity through atomistic decisions on investment and disinvestment that are coordinated ex post. Market exchange remains an integral part of our model but market forces are replaced by a process of negotiated coordination in which the groups principally affected coordinate decisions on investment and disinvestment ex ante. Negotiated coordination is a process of deliberative democratic decision-making. The social owners of the assets involved in decisions on investment comprise the enterprises in the industry, the communities in which they are located, suppliers and customers, planning commisions, and other groups with a legitimate interest in the outcome. They are able to draw on relevant quantitative and qualitative information in the deliberative process through which they interact and negotiate. They do not seek to aggregate given and unchanging preferences, rather they engage in an evolutionary process of collective learning through which they seek to arrive at an agreed decision. We argue that such a process enables the tacit knowledge of the participating groups to inform the decisions made. Thus, recognition of the importance of tacit knowledge does not vitiate the possibility of planning, conceptualised as a deliberative democratic process, pace Hayek and the Austrian school." (http://ces.univ-paris1.fr/membre/seminaire/heterodoxies/Pdf/Devine2.pdf)


Ex Ante vs. Ex Post Coordination

"Hodgson also argues that it is wrong to think of market forces as coordinating investment decisions only ex post since such decisions involve expectations about the future and in any case futures markets exist. This is to misunderstand the crucial distinction between ex post and ex ante coordination. In the former, of course enterprises contemplating major interdependent investments develop expectations about one another's investment plans and future prices and make estimates of the expected profitability of their investments. In the end, however, the investment decisions are necessarily made atomistically. The extent to which expected profitability is realised depends, inter alia, on the type and amount of investment undertaken in the aggregate, which has not been agreed in advance. In the light of the outcome, each enterprise then decides on its next investment programme, again atomistically, and the process is repeated.

With ex ante coordination, by contrast, agreement on major interdependent investments is reached before the investments are undertaken, thus removing one important source of uncertainty. Of course, other sources of uncertainty remain, captured in the phrase inter alia above[6], and therefore the process of ex ante coordination involves constant revision in the light of past outcomes. It is indeed a dynamic process."


Mobilizing Tacit Knowledge

"While the modern Austrian school emphasises the importance of individual tacit knowledge, it also posits a process though which society is able to discover, to learn, which tacit knowledge is socially useful and which is not.

However, despite the strengths of this modern Austrian position, a major weakness is its individualistic conception of tacit knowledge and the exclusively ex post nature of the discovery process it postulates.[8] It is now widely accepted that tacit knowledge is largely social, residing in the shared experience, conceptions, conventions and routines of groups or teams. This is certainly the position shared by Hodgson and ourselves. However, somewhat tendentiously, Hodgson argues that this "does not save the Adaman-Devine proposal from fatal criticism" since "the question remains as to how the economic organizations encompassing those teams are to be coordinated", a problem not solved by "handwaving in the direction of `social knowledge'" (Hodgson 1998: 419).

Although his text frequently suggests otherwise, Hodgson recognises that we do not propose "completely centralized planning", understanding us instead as proposing "an interlocking network of negotiation committees to formulate the plans". However, he argues that "the same central problem remains. How can these committees discuss and deliberate on matters which individuals (or groups) may `know but cannot say'?" (Hodgson 1998: 418). Although he does not put it this way, indeed seems unaware of it, Hodgson can be interpreted here as raising the important question of the different levels at which social tacit knowledge is generated and the related question of how the social tacit knowledge residing in different groups can be brought together and mobilised in a cooperative undertaking.

In the model of negotiated coordination several different levels, intersecting in different dimensions, can be identified:

the workplace, the enterprise, the industry or sector, the economy as a whole; the locality, the region, the country, the inter- or cross-national region, the world.

To return to the firm, tacit social knowledge is generated and institutionalised at both the divisional and headquarters levels. Shared conceptions and routines are developed to enable these different knowledges to be drawn upon, where appropriate, in order to inform decision-making and implementation at each level. Hodgson seems to be suggesting that committees do not generate and draw upon tacit knowledge, yet decision by committee (i.e., groups of people working together) has long been the norm in the economy and the polity. The question raised by our insistence on participatory decision-making is whose tacit knowledge is drawn upon, whose interests inform the decision-making process. Our general proposal is that, at each level of decision-making, those who are affected by the decisions participate in making them. The decision-making bodies would have available to them two sorts of knowledge: explicit, "objective", frequently quantitative; and implicit, "subjective", tacit, typically qualitative, provided by the contributions of the groups taking part in the process."


Critique

"Since the innovative process is continuous, it follows, according to Hodgson, that decisions on the use of existing capacity cannot be separated from decisions on investment and disinvestment. Since tacit knowledge can only be acted on by those who have acquired it, it cannot inform decisions on investment made by committees. Participatory decision-making would inhibit entrepreneurial initiative and stifle innovation. Hodgson's underlying argument is that innate cognitive limitations severely restrict the scope for deliberative decision-making. Thus, an overemphasis on participatory processes would, in his view, lead to information overload and bureaucracy, threatening rather than promoting democracy." (http://ces.univ-paris1.fr/membre/seminaire/heterodoxies/Pdf/Devine2.pdf)

More Information

  • Article: Participatory Planning as Deliberative Democratic Process. Pat Devine et al.

URL = http://ces.univ-paris1.fr/membre/seminaire/heterodoxies/Pdf/Devine2.pdf


References in the above text:

  1. Adaman, Fikret and Devine, Pat (1994) `Socialist renewal:lessons from the "calculation debate"', Studies in Political Economy 43 (Spring): 63-77.
  2. Adaman, Fikret and Devine, Pat (1996) `The economic calculation debate: lessons for socialists', Cambridge Journal of Economics 20(5): 523-37.
  3. Adaman, Fikret and Devine, Pat (1997) `On the economic theory of socialism', New Left Review 221 (January-February): 54-80.
  4. Adaman, Fikret and Devine, Pat (2002) `A reconsideration of the theory of entrepreneurship: a participatory approach', Review of Political Economy 14(3): 329-355.
  5. Blackburn, Robin (1991) `Fin de siecle: socialism after the crash', New Left Review 185 (January-February): 5-66.
  6. Cockshott, Paul and Cottrell, Allin, Socialism, Nottingham: Spokesman.


From Pat Devine:

  1. Devine, Pat (1988) Democracy and Economic Planning: The Political Economy of a Self-governing Society, Cambridge: Polity Press.
  2. Devine, Pat (2002) `The institutional context of entrepreneurial activity', in F. Adaman and P. Devine (eds) Reciprocity, Redistribution and Exchange: Embedding the Economy in Society, Montreal: Black Rose Books.