This is a very interesting and thought-provoking discussion.
The problem I understand it is this: what if individual consumers erroneously demand too little of a good or service in their annual consumption proposal, such that these individual errors sum to a serious deficiency in the aggregate?
Following Jason, what if consumers - in the aggregate - demand only 50% of the electric drills they need? (I changed it from hammers to drills).
Iād frame the problem in terms of certainty/information: the individual consumer doesnāt know how many electric drills they need this year (for example, they donāt know theirs is going to break in 3 months). However, society does know how many electric drills are needed. It will be the number purchased last year +/- some small percentage (say 5%).
Iād also say that we need to view this problem on three levels: (1) the individual consumer, (2) the individual enterprise, (3) society as a whole.
The question becomes: when this problem arises. what is the practical result?
Scenario 1 - no intervention: Consumption proposals are approved, demanding 10,000 electric drills whereas 20,000 will be needed. This results in a shortage of electric drills produced in January. The shops respond by raising prices. The electric drill producers receive this information and ramp up production, hence requesting additional inputs from other worker councils, the results of which are unclear to me.
The following occurs to me. Firstly, these spurts in production are precisely what planning seeks to avoid. Secondly, such a spurt might be acceptable for one good, but if this occurs for sufficiently many goods it could distort the economy at a systemic level. We cannot just think about whether consumers who want drills will get them. For example, producing electric drills requires steel, wiring, and plastic. If the approved plan under-demands electric drills, it will also under-demand steel, wiring, and plastic. If other goods are under-demanded which also require steel, wiring, and plastic, then the indicative prices will be too low for those inputs and all worker councils and consumer councils will be implementing an annual plan which under-values them. Not efficient.
Here is a good time to think about consumer councils rather than individual consumers. While an individual consumer might not know that will need a new electric drill in 3 months, a consumer council / federation will know approximately how many electrical drills it will need this year. The question is how to bring this knowledge to bear on the planning process.
Scenario 2 - CC intervention: We can begin to think about that by thinking about how exactly this problem could be spotted. For example, letās say a forecasting support unit in the National Consumer Federation peruses the data for the proposed annual plan. They see that aggregate demand for electric drills is down 50% on the quantity purchased last year. The first matter is the threshold: what % decrease is considered problematic? That will depend. Now there is an evaluation: (1) is this a real decrease in demand due to a change in preferences? (2) is this a measurement artifact distorting the plan? The answer to that question will come from historical data and practical sense. It is perhaps plausible that demand for coconut water, a fad item, has decreased by 50%. It is not plausible that demand for electric drills has done so, barring some exceptional circumstance.
One solution could be to authorise consumer federations to modify consumption proposals in specific ways to facilitate a smooth and efficient planning process. So, in this example, the NCF decides to change the total electric drills demanded in the total consumption proposal from 10,000 drills to, say, 20,000 (what it was last year). To take a conservative approach, this could be mandated only for certain types of goods. Experts in consumption patterns will relatively easily be able to demarcate what is likely to change rapidly and what is not, and this knowledge can inform what NCF policy is agreed.
The thresholds for different goods/services will have to be guessed at first and then refined over subsequent years. For example, if the NCF sees demand for car tyres is down 20% from last year and so changes the consumption proposal to demand the same quantity as last year. At yearās end, there is a 15% surplus of car tyres. Well, lesson learned for the NCF and in particular its support units. Institutions have to gain practical experience like that. As for that example, car tyres arenāt perishable so no big deal. They can be sold next year.
As far as Iām concerned, that solves the problem. Thoughts?