Artificial market
Encyclopedia
An artificial market or arket is an economic institution proposed mainly by libertarian socialists as a replacement for currently existing markets based on money and private ownership and control of an economy's means of production
. The concept of the arket has been articulated in detail by political scientist Takis Fotopoulos
within the framework of his Inclusive democracy
project; although the concept itself precedes it.
as a solution to the problem of maintaining freedom of choice for the consumer within a marketless and moneyless economy, an artificial market operates in much the same way as traditional markets, but uses labour voucher
s or personal credit in place of traditional money. Because of the use of a labour voucher system in consumption of goods and services, an economy using an arket would have no actual flow of money and thus the only kind of market that could exist would be a market for commercial goods and services; eliminating capital markets and labour markets.
According to Takis Fotopoulos, an artificial market "secures real freedom of choice, without incurring the adverse effects associated with real markets".
The idea of an artificial market was first proposed by the anarchist theorists Pierre-Joseph Proudhon
and Mikhail Bakunin
with their respective systems of Mutualism
and collectivist anarchism
. who suggested replacing traditional currency with a system of "labour-cheques" while still retaining basic market relations for goods and services.
The arket however is rarely advocated as the only element for the allocation of goods and services by its proponents, as most also support a form of directly democratic planning for non-commercial goods and vital resources, and in some cases regulation of the arket through planning also.
According to Fotopoulos; "the allocation of economic resources is made first, on the basis of the citizens' collective decisions, as expressed through the community and confederal plans, and second, on the basis of the citizens' individual choices, as expressed through a voucher system".
The proposed system of the arket aims at
The former requires that basic macro–economic decisions have to be taken democratically, whereas the latter requires the individual to take important decisions affecting his/her own life (what work to do, what to consume, etc.). Both the macro–economic decisions and the individual citizens’ decisions are envisaged as being implemented through a combination of democratic planning and an artificial market. But, while in the ‘macro’ decisions the emphasis will be on planning, the opposite will be true as regards the individual decisions, where the emphasis will be on the artificial market.
Most arket proponents reject the traditional socialist adoption of the labour theory of value as they believe it cannot be used as the basis for allocating scarce resources. The reason given is that even if the labour theory of value can give a (partial) indication of availability of resources, it certainly cannot be used as a means to express consumers’ preferences. Thus they feel that the labour theory of value cannot serve as the basis for an allocative system that aims at both meeting needs and, at the same time, securing consumer sovereignty and freedom of choice. Instead, the model proposed here is, in fact, a system of rationing, which is based on the revealed consumers’ preferences on the one hand, and resource availability on the other.
, the institution of the arket is rejected by many who see it as continuing the negative relations of market mechanisms even in an economy based on democratic control of the means of production.
Advocates of Participism
and parecon in particular reject markets in all forms in favour of democratic participatory planning. While parecon also uses personal credit
in place of money, prices are set according to the direct requests of consumers in democratic "consumer councils" whose demands are relayed to economic facilitation boards
who determine and set final prices based on a combination of marginal utility
and opportunity cost
. On the other hand, as Fotopoulos argues, "no kind of economic organisation based on planning alone, however democratic and decentralized it is, can secure real self-management and freedom of choice."
The arket is also rejected by libertarian socialists who advocate libertarian communism
; who propose abolishing all prices and remuneration for labour in favour of free access, free association
, with value determined entirely by calculation in kind
.
Means of production
Means of production refers to physical, non-human inputs used in production—the factories, machines, and tools used to produce wealth — along with both infrastructural capital and natural capital. This includes the classical factors of production minus financial capital and minus human capital...
. The concept of the arket has been articulated in detail by political scientist Takis Fotopoulos
Takis Fotopoulos
Takis Fotopoulos , born , is a political philosopher and economist who founded the inclusive democracy movement. He is noted for his synthesis of the classical democracy with the libertarian socialism and the radical currents in the new social movements...
within the framework of his Inclusive democracy
Inclusive Democracy
Inclusive Democracy is a political theory and political project that aims for direct democracy, economic democracy in a stateless, moneyless and marketless economy, self-management and ecological democracy...
project; although the concept itself precedes it.
Concept
Proposed within heterodox economicsHeterodox economics
"Heterodox economics" refers to approaches or to schools of economic thought that are considered outside of "mainstream economics". Mainstream economists sometimes assert that it has little or no influence on the vast majority of academic economists in the English speaking world. "Mainstream...
as a solution to the problem of maintaining freedom of choice for the consumer within a marketless and moneyless economy, an artificial market operates in much the same way as traditional markets, but uses labour voucher
Labour voucher
Labour vouchers are a device proposed to govern demand for goods in some models of socialism, much as money does under capitalism.-Outline:...
s or personal credit in place of traditional money. Because of the use of a labour voucher system in consumption of goods and services, an economy using an arket would have no actual flow of money and thus the only kind of market that could exist would be a market for commercial goods and services; eliminating capital markets and labour markets.
According to Takis Fotopoulos, an artificial market "secures real freedom of choice, without incurring the adverse effects associated with real markets".
The idea of an artificial market was first proposed by the anarchist theorists Pierre-Joseph Proudhon
Pierre-Joseph Proudhon
Pierre-Joseph Proudhon was a French politician, mutualist philosopher and socialist. He was a member of the French Parliament, and he was the first person to call himself an "anarchist". He is considered among the most influential theorists and organisers of anarchism...
and Mikhail Bakunin
Mikhail Bakunin
Mikhail Alexandrovich Bakunin was a well-known Russian revolutionary and theorist of collectivist anarchism. He has also often been called the father of anarchist theory in general. Bakunin grew up near Moscow, where he moved to study philosophy and began to read the French Encyclopedists,...
with their respective systems of Mutualism
Mutualism (economic theory)
Mutualism is an anarchist school of thought that originates in the writings of Pierre-Joseph Proudhon, who envisioned a society where each person might possess a means of production, either individually or collectively, with trade representing equivalent amounts of labor in the free market...
and collectivist anarchism
Collectivist anarchism
Collectivist anarchism is a revolutionary doctrine that advocates the abolition of both the state and private ownership of the means of production...
. who suggested replacing traditional currency with a system of "labour-cheques" while still retaining basic market relations for goods and services.
The arket however is rarely advocated as the only element for the allocation of goods and services by its proponents, as most also support a form of directly democratic planning for non-commercial goods and vital resources, and in some cases regulation of the arket through planning also.
According to Fotopoulos; "the allocation of economic resources is made first, on the basis of the citizens' collective decisions, as expressed through the community and confederal plans, and second, on the basis of the citizens' individual choices, as expressed through a voucher system".
The proposed system of the arket aims at
- (A) meeting the basic needs of all citizens, and
- (B) securing freedom of choice in a marketless, moneyless and stateless ‘scarcity–society’ which has not yet achieved universal autarky (self-sufficiency).
The former requires that basic macro–economic decisions have to be taken democratically, whereas the latter requires the individual to take important decisions affecting his/her own life (what work to do, what to consume, etc.). Both the macro–economic decisions and the individual citizens’ decisions are envisaged as being implemented through a combination of democratic planning and an artificial market. But, while in the ‘macro’ decisions the emphasis will be on planning, the opposite will be true as regards the individual decisions, where the emphasis will be on the artificial market.
Most arket proponents reject the traditional socialist adoption of the labour theory of value as they believe it cannot be used as the basis for allocating scarce resources. The reason given is that even if the labour theory of value can give a (partial) indication of availability of resources, it certainly cannot be used as a means to express consumers’ preferences. Thus they feel that the labour theory of value cannot serve as the basis for an allocative system that aims at both meeting needs and, at the same time, securing consumer sovereignty and freedom of choice. Instead, the model proposed here is, in fact, a system of rationing, which is based on the revealed consumers’ preferences on the one hand, and resource availability on the other.
Criticism
Within libertarian socialismLibertarian socialism
Libertarian socialism is a group of political philosophies that promote a non-hierarchical, non-bureaucratic, stateless society without private property in the means of production...
, the institution of the arket is rejected by many who see it as continuing the negative relations of market mechanisms even in an economy based on democratic control of the means of production.
Advocates of Participism
Participism
Participism is a libertarian socialist political philosophy consisting of two independently created economic and political systems: participatory economics or "parecon" and participatory politics or "parpolity"...
and parecon in particular reject markets in all forms in favour of democratic participatory planning. While parecon also uses personal credit
Labour voucher
Labour vouchers are a device proposed to govern demand for goods in some models of socialism, much as money does under capitalism.-Outline:...
in place of money, prices are set according to the direct requests of consumers in democratic "consumer councils" whose demands are relayed to economic facilitation boards
Facilitation board (economics)
A facilitation board is a proposed economic institution proposed mainly by economists Michael Albert and Robin Hahnel which act in systems of economic democracy as agencies that facilitate information exchange and processing for collective consumption proposals and for large-scale investment...
who determine and set final prices based on a combination of marginal utility
Marginal utility
In economics, the marginal utility of a good or service is the utility gained from an increase in the consumption of that good or service...
and opportunity cost
Opportunity cost
Opportunity cost is the cost of any activity measured in terms of the value of the best alternative that is not chosen . It is the sacrifice related to the second best choice available to someone, or group, who has picked among several mutually exclusive choices. The opportunity cost is also the...
. On the other hand, as Fotopoulos argues, "no kind of economic organisation based on planning alone, however democratic and decentralized it is, can secure real self-management and freedom of choice."
The arket is also rejected by libertarian socialists who advocate libertarian communism
Libertarian communism
Libertarian communism is a theory of libertarianism which advocates the abolition of the state and private property, and capitalism in favor of common ownership of the means of production, a direct democracy and self-governance....
; who propose abolishing all prices and remuneration for labour in favour of free access, free association
Free association (communism and anarchism)
In the anarchist, Marxist and socialist sense, free association is a kind of relation between individuals where there is no state, social class or authority, in a society that had abolished the private property of means of production...
, with value determined entirely by calculation in kind
Calculation in kind
Calculation in kind is a type of accounting based on physical magnitudes and physical quantities rather than a common unit of accounting for economic calculation. Calculation in kind, or valueless calculation, is often described as the form of calculation that would supersede monetary calculation...
.
See also
- Labour voucherLabour voucherLabour vouchers are a device proposed to govern demand for goods in some models of socialism, much as money does under capitalism.-Outline:...
- Mutualism (economic theory)Mutualism (economic theory)Mutualism is an anarchist school of thought that originates in the writings of Pierre-Joseph Proudhon, who envisioned a society where each person might possess a means of production, either individually or collectively, with trade representing equivalent amounts of labor in the free market...
- Collectivist anarchismCollectivist anarchismCollectivist anarchism is a revolutionary doctrine that advocates the abolition of both the state and private ownership of the means of production...
- Inclusive democracyInclusive DemocracyInclusive Democracy is a political theory and political project that aims for direct democracy, economic democracy in a stateless, moneyless and marketless economy, self-management and ecological democracy...
External links and sources
- Takis Fotopoulos, "Inclusive Democracy," Transcription of a video by O. Ressler, recorded in London, Great Britain, 37 min. (2003).
- Takis Fotopoulos, "Presentation: the contours of Inclusive Democracy," THEOMAI Journal, number 10 (second semester of 2004).
- Takis Fotopoulos, "Outline of an Economic Model for an Inclusive Democracy," Democracy & Nature, Vol. 3, No. 3, Issue 9 (1997). {Explanation of the artificial market within Inclusive democracy}.
- Clarence Lee Swartz in collaboration with The Mutualist Associates, “What is Mutualism?,” (1927). Panarchy (A Gateway to Selected Documents and Web Sites).