Thanks for this work. Here are my thoughts.
question 1. SB/SC ratio as a metric of socially responsibility.
“At present, in a worker council the average income per worker wcap (i.e. the avg. effort cap) equals the base WC income per worker wbase times the social ratio:”
As I understand it, Robin has suggested two ways for how a Participatory Economy could decide to set the total income cap of a workplace:
Method 1: The first is as you have it in your document that the total income each worker council gets is: economy base hourly income x total hours worked x SB/SC ratio. In this way, workers in workplaces that deliver a greater SB/SC would get a proportionally higher income than other workplaces.
Method 2: The second suggestion is not to correlate the income cap with workplace’s SB/SC ratio at all, i.e every workplace gets the same total pot: economy base hourly income x total hours worked. In this way, it doesn’t matter if the SB/SC ratio of your workplace is higher or lower than another workplace. You get the same (and any differences are only from internal redistribution).
It might be interesting to ask Robin more about this in your next interview if you get a chance.
I think it’s worth reminding ourselves that the goal in a PE is for any differences in income from work to be due to differences in effort or sacrifice, and not to other factors beyond one’s full control, including the value of the contribution of one’s output.
With this in mind, the advantage of the first method is that it also aims to take into account any differences in effort BETWEEN workplaces, not just within workplaces. It also provides more of an incentive to increase one’s workplace SB/SC ratio. However, it only fulfils this goal IF the differences in SB/SC between workplaces are due to differences in effort or sacrifice and not due to other factors. For example, workplace A has a better machine than workplace B which means it can produce more output. If the pricing of capital is accurate than workplace A will be charged more for their more advantageous machine and the advantage will level out, and if they produce more it will be down to greater intensity, not capital advantage. So it depends on whether pricing is accurate enough to make differences in SB/SC a level playing field.
In your document, if I understand it correctly, you raise that the SB/SC ratio may not always be an accurate indicator of greater levels of effort for other reasons, for example that this indicator is a relative ratio, and doesn’t consider the total absolute figure of SB-SC.
You give the example:
“So a couple of children selling muffins could have a profit margin m of 50% but only make a profit of €10 (silly example but the point is made). Whereas an enterprise producing medical imaging equipment might only make a profit margin of 5% but make a total profit of €10,000,000.
”
Firstly, I think you need to factor in time here and capture worker Income per hour in your equations. Total hours worked will vary from workplace to workplace. So the income the children received (assuming they are above the legal age to work) for selling muffins at a school fair for a couple of hours one weekend would be for the hours they worked, i.e if base hourly income is $40 per hour: $40 x 1.5 SB/SC x 4 hours worked = $240. That’s the comparison to make versus the workers receiving much higher income in total for working full time hours for the medical imaging equipment enterprise.
My next question would be: why would their SB/SC ratio be so high? They don’t set the price for muffins. This is socially set during the planning procedure. Like anyone else, they need to pay for the costs to make the muffins and the margin should be similar to other muffin makers, unless they try to increase their margins by lowering costs and making seriously small muffins, in which case who is going to buy them? I think this also goes back to the above point: If pricing is accurately set during the planning, then differences in SB/SC ratios should be due to differences in effort. The question is: can this be done so accurately during the planning procedure to achieve this situation? I think this can only be answered empirically in the future, but my guess would be that it cannot be done perfectly and why I would favour method two.
The advantage of method two, is that you don’t need to worry about the above and every workplace just gets the same pot for same hours worked, regardless of SB/SC, and as long as they are socially productive, i.e SB>SC. The downside is that it doesn’t attempt to factor in potential differences of effort between workplaces, but for me, I’m not so confident that this will ever be able to be done accurately enough.
There are advantages and disadvantage with either method and ultimately this is one of those questions for people in a future PE to decide which one to go with.
question 2. Separation of the opportunity cost of labour from income from work.
With your second question, I’m afraid I didn’t follow it entirely. You write:
“Because that means, by design, that within a given enterprise there will be workers receiving a wage that exceeds the opportunity cost of their labour (measured as a user fee). And surely, also, there will be enterprises where the total wage bill exceeds the total opportunity cost of labour (user fees).”
As I understand it, the opportunity cost of labour and income from work are independent. In this sense, a workplace doesn’t have a ‘wage bill’. The workplace has a total opportunity cost of labour bill, i.e the opportunity cost for each labour category multiplied by the hours. Similar to a profit and loss account in today’s economy, each workplace would have a SB/SC account. Labour costs would be an expense, like any other expense. However, the key difference is that workers are not paid from this account. The income from work comes from a completely separate accounting entity, which Anders in his book calls the Society Account. E.g. If Sarah works 30 hours a week, her workplace is charged 30 hours times times the opportunity cost of her labour. However, Sarah is credited (30 hours x base hourly income x WC adjustment) in her personal consumption account (that she uses to consume stuff) for the work she is done from the society account, not from the workplace account.
I don’t know if this is helpful or if you could clarify your question?
There are all kinds of “natural incentives” that I think will flourish in a system like this, but I understand from an economist’s perspective you want to assume everyone is lazy and greedy to prove the theories and so on. Regardless, I think the worker’s income cap / distribution side of this is a technical issue that can easily be changed once an economy like this is implemented. If we had to decide this today I would advocate for just paying the workers directly like in the way I described above.