How prices for millions of detailed products will be established?

There are millions of products in this world and thousands of product categories, so I hardly see that each type and category of a product could be presented in an Anual Plan. If the Annual Plan is rather for broad categories, how can we negotiate a price for more detailed products like tea, sugar, cake, or even types of tea sugar and cakes?

Thanks!

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I think this is a fair question. I try to answer this in detail in my book Anarchist Accounting (Routledge 2020). In short, I suggest a way to derive prices for more detailed categories from the prices for the coarse categories that are priced in the annual planning. This method rests on the assumption that producers, as they in most cases do already today, allocate their production costs to the detailed products that they plan to produce.

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Hi Andreas!

I am using a UN’s “Classification of Individual Consumption According to Purpose (COICOP) 2018”

Below are their categories only for the Food division of individual consumption. At what level do you suggest setting prices for the coarse categories that are priced in the annual planning? I think that everything that is deeper than just “Food” is very hard to plan for individual consumers. But even if they will do it, let’s take “01.1.8 Sugar, confectionery and desserts (ND)” category. The sugar, the confectionery, and the desserts may be very different in prices and types. How do you combine a single price for that?

Thank you very much!

01 Food and non-alcoholic beverages

01.1 Food
01.1.1 Cereals and cereal products (ND)
01.1.1.1 Cereals (ND)
01.1.1.2 Flour of cereals (ND)
01.1.1.3 Bread and bakery products (ND)
01.1.1.4 Breakfast cereals (ND)
01.1.1.5 Macaroni, noodles, couscous and similar pasta products (ND)
01.1.1.9 Other cereal and grain mill products (ND)
01.1.2 Live animals, meat and other parts of slaughtered land animals (ND)
01.1.2.1 Live land animals (ND)
01.1.2.2 Meat, fresh, chilled or frozen (ND)
01.1.2.3 Meat, dried, salted, in brine or smoked (ND)
01.1.2.4 Offal, blood and other parts of slaughtered animals, fresh, chilled or
frozen, dried, salted, in brine or smoked (ND)
01.1.2.5 Meat, offal, blood and other parts of slaughtered animals’ preparations (ND)
01.1.3 Fish and other seafood (ND)
01.1.3.1 Fish, live, fresh, chilled or frozen (ND)
01.1.3.2 Fish, dried, salted, in brine or smoked (ND)
01.1.3.3 Fish preparations (ND)
01.1.3.4 Other seafood, live, fresh, chilled or frozen (ND)
01.1.3.5 Other seafood, dried, salted, in brine or smoked (ND)
01.1.3.6 Other seafood preparations (ND)
01.1.3.7 Livers, roes and offal of fish and of other seafood in all forms (ND)
01.1.4 Milk, other dairy products and eggs (ND)
01.1.4.1 Raw and whole milk (ND)
01.1.4.2 Skimmed milk (ND)
01.1.4.3 Other milk and cream (ND)
01.1.4.4 Non-animal milk (ND)
01.1.4.5 Cheese (ND)
01.1.4.6 Yoghurt and similar products (ND)
01.1.4.7 Milk-based dessert and beverages (ND)
01.1.4.8 Eggs (ND)
01.1.4.9 Other dairy products (ND)
01.1.5 Oils and fats (ND)
01.1.5.1 Vegetable oils (ND)
01.1.5.2 Butter and other fats and oils derived from milk (ND)
01.1.5.3 Margarine and similar preparations (ND)
01.1.5.9 Other animal oils and fats (ND)
01.1.6 Fruits and nuts (ND)
01.1.6.1 Dates, figs and tropical fruits, fresh (ND)
01.1.6.2 Citrus fruits, fresh (ND)
01.1.6.3 Stone fruits and pome fruits, fresh (ND)
01.1.6.4 Berries, fresh (ND)
01.1.6.5 Other fruits, fresh (ND)
01.1.6.6 Frozen fruit (ND)
01.1.6.7 Fruit, dried and dehydrated (ND)
01.1.6.8 Nuts, in shell or shelled (ND)
01.1.6.9 Fruit and nuts ground and other preparations (ND)
01.1.7 Vegetables, tubers, plantains, cooking bananas and pulses (ND)
01.1.7.1 Leafy or stem vegetables, fresh or chilled (ND)
01.1.7.2 Fruit-bearing vegetables, fresh or chilled (ND)
01.1.7.3 Green leguminous vegetables, fresh or chilled (ND)
01.1.7.4 Other vegetables, fresh or chilled (ND)
01.1.7.5 Tubers, plantains and cooking bananas (ND)
01.1.7.6 Pulses (ND)
01.1.7.7 Other vegetables, tubers, plantains and cooking bananas, dried and
dehydrated (ND)
01.1.7.8 Vegetables, tubers, plantains and cooking bananas, frozen (ND)
01.1.7.9 Vegetables, tubers, plantains, cooking bananas and pulses ground and
other preparations (ND)
01.1.8 Sugar, confectionery and desserts (ND)
01.1.8.1 Cane and beet sugar (ND)
01.1.8.2 Other sugar and sugar substitutes (ND)
01.1.8.3 Jams, fruit jellies, marmalades, fruit purée and pastes, honey (ND)
01.1.8.4 Nut purée, nut butter and nut pastes (ND)
01.1.8.5 Chocolate, cocoa, and cocoa-based food products (ND)
01.1.8.6 Ice, ice cream and sorbet (ND)
01.1.8.9 Other sugar confectionery and desserts n.e.c. (ND)
01.1.9 Ready-made food and other food products n.e.c. (ND)
01.1.9.1 Ready-made food (ND)
01.1.9.2 Baby food (ND)
01.1.9.3 Salt, condiments and sauces (ND)
01.1.9.4 Spices, culinary herbs and seeds (ND)
01.1.9.9 Other food products n.e.c. (ND)

01.2 Non-alcoholic beverages

01.3 Services for processing primary goods for food and non-alcoholic beverages

02 Alcoholic beverages, tobacco and narcotics

02.1 Alcoholic beverages

02.2 Alcohol production services

02.3 Tobacco

02.4 Narcotics

03 Clothing and footwear

03.1 Clothing

03.2 Footwear

04 Housing, water, electricity, gas and other fuels

04.1 Actual rentals for housing

04.2 Imputed rentals for housing

04.3 Maintenance, repair and security of the dwelling

04.4 Water supply and miscellaneous services relating to the dwelling

04.5 Electricity, gas and other fuels

05 Furnishings, household equipment and routine household maintenance

05.1 Furniture, furnishings, and loose carpets

05.2 Household textiles

05.3 Household appliances

05.4 Glassware, tableware and household utensils

05.5 Tools and equipment for house and garden

05.6 Goods and services for routine household maintenance

06 Health

06.1 Medicines and health products

06.2 Outpatient care services

06.3 Inpatient care services

06.4 Other health services

07 Transport

07.1 Purchase of vehicles

07.2 Operation of personal transport equipment

07.3 Passenger transport services

07.4 Transport services of goods

08 Information and communication

08.1 Information and communication equipment

08.2 Software excluding games

08.3 Information and communication services

09 Recreation, sport and culture

09.1 Recreational durables

09.2 Other recreational goods

09.3 Garden products and pets

09.4 Recreational services

09.5 Cultural goods

09.6 Cultural services

09.7 Newspapers, books and stationery

09.8 Package holidays

10 Education services

10.1 Early childhood and primary education

10.2 Secondary education

10.3 Post-secondary non-tertiary education

10.4 Tertiary education

10.5 Education not defined by level

11 Restaurants and accommodation services

11.1 Food and beverage serving services

11.2 Accommodation services

12 Insurance and financial services

12.1 Insurance

12.2 Financial services

13 Personal care, social protection and miscellaneous goods and services

13.1 Personal care

13.2 Other personal effects

13.3 Social protection

13.9 Other services

14 Individual consumption expenditure of non-profit institutions serving households (NPISHS)

14.1 Housing

14.2 Health

14.3 Recreation and culture

14.4 Education

14.5 Social protection

14.6 Other services

15 Individual consumption expenditure of general government

15.1 Housing

15.2 Health

15.3 Recreation and culture

15.4 Education

15.5 Social protection

Hi Yuriy,
I don’t think there is a definite answer to how coarse the categories in the planning should be and I don’t think the coarse categories are the problem. Theoretically, they could be very coarse and the number of subcategories could be very large without there being a problem. The issue is, I think, to define the subcategories in a logical way. I think the answer lies in how producers already today categorise their products when they do cost allocations etc. for pricing and inventory valuations. That should be the basis and starting point. Possibly, then there need to be some coordination within industries w.r.t. the range of products that are offered.

Anders, I was thinking exactly the opposite. That categories and subcategories for Consumer Councils should look like consumption purposes from consumer perspectives, not producers’ perspective. For instance, the most coarse categories for consumer councils could look like this example:

  • Food
  • Housing
  • Transportation
  • Leasure
  • Education
  • Environmental protection
  • Personal stuff like insurance, medicine, etc
  • Consumption subsidized/funded by public and non-profit institutions.

Then, let’s take a Lesure category - it may include a Gym subcategory. The gym subcategory may have three levels of consumption which consumers must choose from a basic level, middle level, and premium level. Each one has its price, amount of services available, and available days of the weak. Basically, subcategories will be also rather coarse than as detailed as grams of sugars in the tea otherwise it too hard system for consumers. That is why most categories will have consumption levels (living standard) with prices instead of entering the amount of products purchased on a very detailed level. Then, workers councils will break subcategories into detailed products, amounts, and prices. Otherwise, it will be thousands of products that consumers will need to predict or plan demand for, making the procedure dysfunctional. The consumer can predict its living standard and its cost for each subcategory, but how can he know better than the producer what amount of gas and electricity his house will consume in advance for the next year? It hardly possible to plan on this level and this kind of planning signals may mean nothing for the supply chain and be too complex and large for consumers. Creating the right goods classificator makes a critical part of the accounting system, I think.

Hi Yuriy, I put forward my thoughts on the classification of goods in my book. There, I try to address concerns like the ones you have. I agree that this is an important issue. And it is an issue that is difficult to discuss in an accessible way in brief.

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Thank you too, Anders!

This is a great contribution Yuriy to the thinking of how would we categorize goods and services so that they are easy to maneuver by consumers. Anders addresses this in his book by suggesting baskets of goods could be created, such as food items for a vegetarian, which then tells producers they need to grow lots of fruits, vegetables, eggs and dairy products. In this example, it would fall under the main category of Food that you proposed, and baskets of goods such as one for Vegetarians, Vegans, Keto diet, meat eaters, etc. could be created as sub-categories along with descriptions of what each contains. Much thought would be needed in the design of this system so that it is flexible enough to accommodate subtleties. for example, in our household we eat mainly fruits, vegetables, grains and chicken. However the system is designed, it would need to be flexible enough for me to indicate say under the sub-category fruits, to select those that I typically eat, and so on for meat, fish, dairy, vegetables, etc.

I can probably estimate quantities to a certain extent by looking at my prior years consumption of these goods. That would be possible because of the technology we have access to. In fact, this could serve as the basis of filling in the blanks of what I want to consume and the approximate quantities that I think I will need. That would solve the issue you raise about estimating what you think you will consume in an upcoming year be it food, electricity or gas for heating. I could see a software program with pre-populated fields that consumers would just need to revise should their lifestyle have changed, such as fewer people living in a household from one year to the next.

Our spending patterns don’t change much from year to another. We generally eat the same amount and types of food year over year, we pay municipal taxes to pay for water and sewer services, snow removal, etc. Our utilities consumption is fairly constant and is mainly influenced by weather. We may have extraordinary needs when we plan a vacation or we need to replace a vehicle. Otherwise, I would not see the whole process as being very onerous so long as there is a suitable software program in place for consumers to express their needs and that worker councils produce marginally more than what was demanded so that if there are subtle changes in consumption patterns in a given year, there will be some extra supply to accommodate them which is simply keeping an inventory of items in a warehouse.

As for the pricing component, the prior years’ spending on the food category could be provided as a global figure instead of choosing the exact quantities of everything you plan to eat. Prior spending habits on the amount spent on meats can also serve as estimates for specific categories. Alternatively, a basket of goods could have a price tag and as you point out in your example, it could be reflected as a basic, middle or premium level pricing. This may be area where work needs to be done by people designing the system because we have incomes and we need to estimate the cost of food for a year, so that we know how much is left for other expenses. This part could be tricky and would require more thinking as to how to resolve it.

Cheers

C

Dear all, thank you for the interesting discussion!

I feel we have already extracted a number of related questions and would like to adress them separately. I think we have touched on the following issues:

- How many detailed product categories will there be in a free economy?

I think this a very good question, that is also hard to answer in detail. However, i think we should at least try to estimate the involved scales. I can only give you a starting point by giving lower bounds.

Following, Yuriy’s approach id like to start with the UN standard. UN has established the Harmonized System Classification (HS), that is the standard in classifying trade streams and also used by tariff agencies. An HS code is a 6-digit code that classifies a I believe that Yuriys example is quoting from the HS and it gives a good impression of the systems level of detail. The HS contains roughly 5300 categories, but this is certainly a gross underestimation of the necessary categories.
(see https://unstats.un.org/unsd/tradekb/Knowledgebase/50018/Harmonized-Commodity-Description-and-Coding-Systems-HS)

Another interesting lower bound is provided by historical example. Cottrell and Cockshott 1993 provide an estimation of the number of product categories in the Soviet Union. In https://www.jstor.org/stable/40370022?seq=1, they state:
“.This general point is confirmed by Yun (1988: 55), who states that as of the mid-1980s Gosplan was able to draw up material balances for only 2,000 goods in its annual plans. When the calculations of Gossnab and the industrial ministries are included, the number of products tracked rises to around 200,000, still far short of the 24 million items produced in the Soviet economy at the time.”.”

We know reports from the soviet union, that describe complaints about a lack of product differentiation. In addition, the planning system has likely suffered from too abstracted planning, hence we certainly want to be more detailed than the Soviet Union, but how much more detailed do we need to be?

Here im happy on any ideas of how to calculate this, but my gut feeling is that a product differentiation of 10-100 times more diversity as the soviet union should allow a decent standard of living. What do you think of this estimate?

This estimate would lead us to roughly 100 * 20 * 10^6 = 2 * 10^ 9 products.

- How hard is it to plan prices for such a number of detailed product categories?

I can not comment in detail on the planning procedure, but although computations of 10^9 equations are certainly not little, from an algorithmic perspective it seems to be workable. Especially, if we are considering annual planning, which has to be only run yearly. For a modern super computer, a year runtime is a tremendously long time and solving a system of 10^9 equations seems not as daunting as it sounds initially.

However, it is very likely that the problem is not as hard as the worst-case of solving 10^9 equations could be. Planning problems are certainly examples of so-called sparse matrices (see https://en.wikipedia.org/wiki/Sparse_matrix) and most likely also exhibit block-structure (see https://en.wikipedia.org/wiki/Block_matrix#Block_diagonal_matrices). These allow to be solved with reduced effort by sparse solvers and divide-and-conquer algorithms. In fact, its pretty save to be said that problems of this scale need to be well-parallizable to be solved, but if they are i think youll have a good shot at handling the computational effort.

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CCC

I think that the whole product categorization in terms of consumption estimation and production planning will be a challenge for a couple of reasons.

One is the sheer number of potential products that you point out, which I believe is quite high and realistic given what is available to purchase just in a. grocery store alone. But for planning purposes, the challenge is how granular do we need to be? for example, if there are too many products to choose from, then how can we expect consumers to identify each one that they expect to purchase in a given year. It could be a daunting task. But I see it as necessary to have these categories. One way around it might be that if consumers use some sort of electronic card for payment that records all of the products purchased at a given time during the year and saves these onto a database that consumers can access anytime. So when the consumption planning rolls around, consumers can produce a consumption plan based on their purchases in the prior year. Consumers should readily see how many bottles of ketchup or heads cabbage they purchased. Using this as a baseline they can use this information as a means of estimating their purchases in the upcoming year. We usually consume the same items in the same quantities year over year, so it should be a relatively easy task to accomplish.

The discreet categories are also need from the production side of things. Worker Councils need to know how much ketchup or cabbages were in demand in the upcoming year so that they can meet demand and also produce a per unit indicative price for each item.

During consumption planning, there should be a column that shows the item purchased in the year prior, the quantities purchased and at which price. Then there should be another column(s) that indicate the desired quantities for the upcoming year and the indicative price, which may be different from the year prior.

With 10^9 product categories, this is certainly a lot, but probably needed, especially if you take into account the variants i.e. regular ketchup, chilli ketchup, etc. But consumers would likely not purchase 10^9 products in a given year but a select number from that list. We have the computing capacity in this day and age to handle such large numbers of products and users who would access such a database, which would include consumers and worker councils.

I think this would be workable.

Cheers

C

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I think it is important to point out that from an “accounting perspective” the main point of working with subcategories of goods and services is to distinguish between differences in resource consumption in the production. If there is no difference in resource consumption in the production there is no need for a separate subcategory, even though there of course might still be differences in sizes, colours etc. The coarse categories that are used in the planning procedure can be very coarse, while the the subcategories that producers use for their planning can be numerous, and basically be identical to todays ranges of products. As long as the every subcategory is tied to a coarse category and producers identify their production cost for each subcategory, as most producers already do today, the price for every subcategory can be derived from the price of the coares category, which is set in the planning procedure. My point is that this isn’t extreamly different from what is done today, especially with regard to the producers.

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If the whole system will really mostly on the recorded history of the payment transaction from the prior year for every consumer, and the consumer will be required to make only a minor correction, then it will be like a usual market economy which is based on consumption forecast rather then consumption planning. Producers already making their business plans based on marketing forecasts that aggregate this kind of data, all we are adding to the system is non-aggregated individual consumer statistics, which is not very much valuable for mass producers. So, then how can we move from consumption forecasting to true consumption planning?

I believe that reviewing a large number of products or subcategories is pointless, as it will be not much more accurate than current consumer forecasting. And because consumption planning is a good thing for collective consumption it will be better for neighbors to pay collectively for supplying post-scarcity goods like drinks, a cup of coffee or bottle of water, or even local farm vegetables, so then neighbors can take a drink out without any money at all. There will be a lot of post-scarcity goods like that, so much of consumption history will not be recorded on the electronic cards. And it is a good thing, as a desirable economic system don’t need cashboxes to trade lemonade drinks on the street, and money shouldn’t be required everywhere it is not that serious in reality as we used to it in current money-driven life. Also, it is impossible to plan the amount of products on a subcategory level, let’s take a “furniture subcategory”, what number of furniture will you buy next year? It is impossible to set the amount and the price without further details on concrete types of furniture.

To approach these problems, I suggest:

  1. Consumers must be offered to plan a “standard of living” level for each subcategory of goods or the “baskets” instead of exact among of concrete products. The consumer decision is driven more on changes in the subcategory prices and subcategory preferences rather than more detailed prior purchase history.
  2. Consumer councils must be responsible for the supply planning of specific products or brands in local shops and in the annual planning consumer catalogs. Councils must review all the products and brands alternatives and pick the best for their member on behalf of the members who voted for them and communicate with them. Just like a good wife usually makes most of the purchase on behalf of the whole family, the same consumer councils represent the specific product preferences of its members.
  3. Consumer councils and city federation has the final say on planning the level of consumption for all municipal public goods, also individual consumers expressing their desirable “standard of living” for public goods in a manner of opinion pool, the result of the opinion pool are taking into account by the city council, and members of the city councils can be recalled if they vote against pool results without good reason. This is because public goods like social aid to poor, schools for children and city hospital facility are impossible to plan directly by majority rule.
    4.The “price” of most subcategories will reflect a monthly fee rather than the price of a more concrete product amount. That is why we will need a complex system of algorithmic pricing (rather than simple rounds/iterations of trade) that will translate a subcategory monthly fee into demand, supply, costs, surplus and total price for specific products.
    5.Expensive products can be purchased using electronic money and with the concrete product price, while everything else - the individual post-scarcity goods and public goods are purchased collectively, with no money and no cashbox, with a fixed monthly fee or tax, instead of a price for amount, without direct detailed signals from consumers to producers but rather curated supply by consumer councils and federations.

All of this makes me think that realistic consumption planning will be much more difficult than just relying fully on household-level of decision-making and will be more heavily based on co-planning together with consumer councils, city federation, and prices facilitation group.