Editor’s note: discussions topics include how housing is built, distributed, and managed, in Participatory Economics (parecon), the distribution of land in a socialist economy, and economic rent.
[After The Oligarchy] Hello everybody, this is After The Oligarchy. Today I’m speaking with Professor Robin Hahnel. Robin Hahnel is a professor of economics in the United States, co-founder with Michael Albert of the post-capitalist model known as Participatory Economics, and author of many books.
Today’s conversation is in association with meta: the Centre for Post-capitalist Civilization. This is the first in a series of interviews with Professor Hahnel about Participatory Economics, and in particular his latest book Democratic Economic Planning published in 2021. It’s an advanced discussion of the model proposed in that book, so I recommend you familiarize yourself with Participatory Economics to understand what we’re talking about.
The discussion will also continue on the forum of participatoryeconomy.org.
Robin Hahnel, thank you for joining me.
[Robin Hahnel] It’s great to be with you today.
[AO] I finished reading Democratic Economic Planning recently – here it is for viewers – and it’s an outstanding contribution I think. It’s very technical, which for me is a good thing. I really feel that I needed that book, I felt like I was waiting for that book to be published and it came along at exactly the right time. So I’d say if any viewers are similarly inclined, buy the book Democratic Economic Planning,read it. If viewers want a more straightforward and accessible introduction to Participatory Economics, then Of the People, By the People is very good; short, clear, and accessible.
So without further ado, there are something like 60 questions to discuss in total but we won’t go through all of those today, of course. Today, I just want to begin with some questions about consumption in a participatory economy.
[RH] Before you ask me a question, let me congratulate you for actually reading that book. I don’t know how many people have actually managed to do it yet. You are in very select company I can promise you. And it’s because, I mean, it’s long and there are sections that are that are very technical. And I wish there were more people who had managed to take the time and energy to wade through it. I may have to reassess my opinion of economists versus engineers. I understand that you have an engineering background?
[RH] What I thought was, well, economists can read this book but I’m worried about my fellow political activists, where it’s kind of difficult. And actually AK Press is going to come out with a book sometime in about three or four months called A Participatory Economy, and that book is intended for the for the activist audience, you don’t have to be an economist. But I’m going to revise my strategy to think that, well I can address economists and expect them to actually read things carefully. Maybe I should shift over to the engineers and make you my target audience from now on, because at least you’ve demonstrated a willingness to put in the work.
[AO] Yes well I will add one thing, which is that I’ve got a very intense interest in political economy and I’m kind of pursuing an autodidactic course in economics to prepare myself to become an economist. So I’m in a bit of an odd position. However, I will say that in our post-capitalism discussion group in DiEM25 – so I’m a member of the Democracy in Europe Movement 2025 – there are quite a few engineers, it’s something that tends to crop up. What I will say about engineering and politics is that something I think about is – it has shaped my view a lot – I think one benefit is that you have a technical and numerical, mathematical, training but you’re not necessarily indoctrinated into the same presuppositions about economics. So there’s a potential there to engage with political economy that maybe those who were trained in orthodox economics don’t experience.
[RH] I can tell that engineers are more inclined to matter-of-fact thinking and therefore less interested in ideology. And I think that’s a huge barrier in thinking about alternatives to capitalism, you know, if you’re so wrapped up in the ideology. Because I think a lot of what we have to do in the aftermath of the failures of attempts to build socialist economies in the past is, I mean we have to engage in really some very concrete thinking about procedures and, you know, what the implications of deciding things this way or that way are. Less political grandstanding and more matter-of-fact thinking would stand us all in good stead. I think the answer is we need to recruit some more engineers.
[AO] Well engineers are not I completely agree with you. That’s the whole premise of this channel, the more concrete the better. And I’m completely on your side in terms of the necessity of vision, in that, it’s kind of common sense: whenever we want to do anything in life we really need to think about what exactly we’re trying to do. And there’s no reason that that would be less true in politics or economics than in any other field of life. But a lot of us on the left have managed to convince ourselves that there’s something wrong with this.
The first question is about housing. There are a few questions about this, and I will throw a few of them at you and we’ll move through them and maybe come back. How is housing organized in a participatory economy? Because obviously housing is a very important sector, it has distinct characteristics in terms of houses being assets, they’re durable, they’re large purchases, and so forth. If there’s no private ownership of housing and all housing is socially owned, then what are the rights of use? How does society decide who gets to live where, and for how long? And then, is housing rented? If so, how’s the rent calculated? And so on, but we’ll come to that.
[RH] Actually before starting, let me say that when I looked at your questions the first five are the ones that I am least suitable to answering as fully as we’re going to try and do now.
[AO] Yeah that’s all right.
[RH] Actually as you just mentioned, housing poses some particular problems. But I think what I’ll explain is not really from the production side, that’s not where it’s peculiar, it’s different. It’s from the using and consumption side, because it is such a major … I mean a house in terms of an asset or purchase, if you purchased it, dwarfs everything else you buy. And the other problem is that on a regular income you can’t actually pay for the entire thing, and that’s why we have mortgages. So here’s something that we somehow have to figure out: a way for people with sensible incomes to manage to pay sensible amounts as they go.
Now renting is kind of easy, and so my answer could be well ‘what if we just don’t’? What if all housing units are rentals? Then they would be produced by … if you take a look on the production side, compared to a lot of really, really, large firms, contractors who build housing, these aren’t multinational firms. They’re large, many of them are large companies, many of them actually aren’t. So the idea that you can have worker councils, with carpenters, and electricians, and all of the kinds of people that actually work to build housing, including the engineers that design them – well that could be a workers council and that’s the product that they are selling.
That’s sort of straightforward and easy, but it’s the financing and purchasing of it. and when you’re living in it how do you pay for and what are your rights, etc, that that do pose some special difficulties. And I’m just going to say that this is a subject that one of my collaborators … I accuse him of obsessing over it. This is Anders.
[AO] Ah yes.
[RH] Anders who is a member of the collective in … he’s Swedish and he lives in Stockholm.
[AO] That’s Anders Sandström, is it?
[RH] Yes, it’s Anders Sandström. And he’s published a book called Anarchist Accounting, which I think has the most brilliant title of any book I’ve ever heard. Because who would be the least likely people to have anything to do with each other? It would be anarchists and accountants. And here it is. So I’ve declared him to be the most famous anarchist accountant in the history of the world.
And he also obsesses on matters do come into play particularly heavily in trying to deal with a situation like this. I mean it’s amortization and how do you cost all that out. So I’m just going to say that I’m going to give you my answer, but he took up that challenge in his book Anarchist Accounting in more detail and more seriously than I have in anything I’ve published.
Here would be the short side of it. I think if we just had housing always rented, there’d be a fairly straightforward explanation. And the rent would be, people will be charged the social cost of providing the housing. Whether or not they are paying that to the construction workers council that built it, or whether there’s actually an intermediate workers council which is … I mean usually the builders aren’t the ones that are then managing the property, or the sale of the property, or if it’s rental taking care of the rental. Then there’s another workers council that basically is managing that.
But I think that that people sometimes have a legitimate interest in not just being a renter, where, you know, they might be thrown out at any point. And there I think the idea that comes to mind is well there’s a difference between a lease and being a renter. It’s sort of a halfway ground between ‘I’m the owner of the property’ and ‘I’m merely a renter’, and maybe I sign a one-year contract but basically I’m paying rent month-to-month and the rate can be varied as we’re going along. So as far as I’m concerned, I don’t see any reason that we couldn’t be leasing for people who wanted the lease, and that gives you a long-term contract.
And now you’re thinking ‘okay, we have people who still probably are working on family farms’. And so here’s a family farm and the parents die, and should there be some sort of arrangement? Or just if you grew up in a house, and your parents have been there all that time, you’d grown up, and now you want to stay there. I don’t know why we couldn’t write in something like a first right of [refusal]…
So if the person who has the long-term lease – the parents – die, then instead of just putting it up for anybody who wants to now bid on living there, that the children or the descendants who wanted to continue to live there, why wouldn’t we just give them a first right to say, well, at the going rate, at the regular lease, they can take over the lease, essentially? And we wouldn’t basically put them in a situation where somebody else could get the lease out from under them.
My own instinct is all those things are not that difficult to arrange, and don’t look that different from a lot of things that are, sort of, out there. I mean my impression is in Europe there’s a lot more sensible handling of housing, particularly in Germany. But in the United States, we have outfits that are proposing, sort of, communally-owned properties in urban areas. And what they’re trying to deal with is that they don’t want to put people in the situation where there’s an asset that’s the most important asset in your life, and you have to worry about what’s happening to the value of that asset.
So our goal here is to take that out of the equation. We don’t want to make this somehow wealth that you have to carefully manage, the way you have to carefully manage the wealth in your house if you happen to own a house in a capitalist economy. We want to take that out of the equation. And it is a little complicated to do. I don’t think it’s rocket science, I think there are sort of a number of ways that it can be handled. But it is a particularly unique and difficult sort of economic problem that needs to be solved sensibly.
[AO] It is indeed. I haven’t read it yet, I’m going to read Anarchist Accounting and interview Anders Sandström if I can. It looks like a really interesting book. That issue of the first right of rent or leasing was actually a further question, and I think that makes a lot of sense.
I suppose just to ask a couple things more about this. If we break this into a few different components, what we want is to pay worker councils responsible for producing a new building the necessary social costs of doing that. Okay, that much is clear. I suppose the question then is – I’m just trying to make this concrete – it would be perhaps a lease or a rent to the local government? Something like that?
[RH] You know, it could be the local government but it could also be another workers council. That’s where I was saying I don’t see why we couldn’t have two … we basically have the people living in the housing, and there could be two workers councils involved in how it’s provided or supplied. One is a construction outfit that just builds. And then, sometimes builders sell their houses – but we’re not really selling – but often builders don’t sell their houses to the people who live in in them. The builder sells it to another company that then markets those, and/or manages those if they decide to make a rental property. So I think we can do that and that would allow some workers councils to just simply be ‘well, we have our social costs of building, and now what are the social benefits that we are weighing off against that?’. Well, basically, they are they are providing that to this other workers council.
It’s basically like, there are a lot of worker councils who are providing their goods to other worker councils. We usually think of them as intermediate goods. So a steel company doesn’t sell steel to households, it sells it sells steel to automobile companies. So we could essentially set it up that way, where it’s the construction outfit … And so there wouldn’t be a problem with figuring out what are their social benefits that we compare to their social costs. It’s basically an intermediate sale to another workers council and that other workers council, then they have these costs of acquisition. And then they also have the benefits, that their benefits are essentially the rents or the mortgage payments that they are collecting over time.
[AO] I want to think about it as almost the land aspect … I mean I think we can think of housing in terms of … like today, if you buy a house or if you rent you’re paying for the land and you’re paying for the building at the same time.
[AO] And so, if I understand you correctly, it’s almost like you’re talking about … well, actually not exactly. But this would be a workers council for, say, a particular region, and they would be responsible for – after the construction worker council had been allocated its resources through the annual planning process, so that’s been accounted for, that’s relatively simple – that this workers council would then take responsibility for that housing unit and that land. A different one not the construction one. And that this worker council would, I suppose … how would they collect rents and things like that? I thought that’s not really the role of worker councils. That would be more the role of a consumer council. Sorry, that was very unclear. But do you see what I’m getting at?
[RH] In that regard I’m imagining there actually is a worker council whose production activity is the activity of actually supplying and managing the housing.
[AO] Ah, yes.
[RH] Now, I mean, the land poses another reason that housing is an extra-complicated situation. Now let’s talk about the land. So, on the one hand, as far as we’re concerned, all land is communal property. On the other hand, if we use land for one purpose it can’t be used for another purpose, and that means using land has an opportunity cost. and we want to include that as the cost to society of making something available.
So part of what you want people paying for, when they are paying for the housing they’re living in, is well first of all it took a lot of work to make this house. And it was all done in like a one- or two-year time period, but it’s a big, big, item so there’s a cost that was the cost of the work and the cost of the materials, etc. We’re going to need to amortize that over a long period of time, one way or another in terms of the payment system.
The second part of the problem is that, well, there’s another cost to that house and that is that there’s an opportunity cost of using that land. And unfortunately that cost is actually going to change over time, over the 30-year time period. So we have a house, let’s say it lasts for 50 years. Well, we know how much it costs to build it, and we can amortize that over 50 years.
But what about the cost of using the land? I mean, what an economist will tell you is as population grows and as situations change the opportunity cost of using that land is going to vary over time. Well, on the one hand we like the people living in housing to know what their mortgage is. I mean part of the reason you want to own something is you like to have a mortgage where you know what your payment is every month, whereas if you’re a renter they can always raise or lower the rent.
And this is sort of a complicated thing. This is one of the reasons that I’m happy that Anders is stretching his mind around it. Because, on the one hand, we have the goal that we would like the people living in houses, we’d like to offer them a situation saying you can count on the fact that with your just income this is what it will cost you to live in the house that you’re in, or the apartment that you’re in, you can you can own a condominium too; this is what it’ll cost you, and we don’t want you to have to worry about ‘is it going to vary over time?’, ‘am I going to get charged more as time goes on?’, etc.
On the other hand, we do want to signal that there are changes in how much it costs society for you to be living in that same place you’ve been living in. My guess is there’s no magic wand we can wave over this and say there’s a perfect solution. We have to find a happy, comfortable, way to resolve that part of the problem. But that’s the only part of the problem that I think is actually sort of a serious problem. I mean, the rest of it we can have workers councils that build things, we can have workers councils that manage and collect the money on a monthly basis. As you said that could be a that could be a role for government. Certainly we’re going to need government doing zoning, that part we know.
[AO] Just to recap, and maybe just a little bit more on land and we can move on to the next question. From my understanding, some things are clear: that there can be a workers council responsible for constructing the buildings. And there is no matter of buying or selling there, it’s really that that worker council will need certain intermediate goods, capital, resources, and labour, to do that which will be allocated through the planning procedure.
[RH] Right. So that’s the cost side. Their proposal says ‘these are our costs, these are what we’re asking for, and we’re going to build so many units or so many houses in this time period that we are going to deliver’.
[AO] Yes, so that’s taken care of. And then there’s another side, which is essentially the role in the capitalist economy of an estate agent and also a property manager. And then you’re saying, about that, possibly collection as well; so being an intermediary between people who want to live in houses …
[RH] And those who actually built them and then want to wash their hands of it from that point on
[AO] Yes and also possibly managing the property if it’s apartments, you know, the water, the security, and whatever else. Okay, so that’s fine.
So then there’s the issue of land and I just want to ask you this and then we can move on. I suppose there are many different ways to approach calculating that opportunity cost. Of course, it’s not going to be perfect. The obvious way to approach it, being used to living in this society, is that there’s a market, okay?
[AO] And so I’m just going to throw that out there and see what your response is. So people could bid either for rents or for leases, and whoever proposes the highest bid wins and gets the rights to use that property. And that is one way of approaching calculating the opportunity cost.
[RH] So how would we do it in a participatory economy?
[RH] Okay, you’re absolutely right. So, first of all who are the people who are basically saying ‘I want to use land’? Well, that would be the construction company that wants to use land in an urban area to build housing. So when they put in their proposal, that’s effectively where demand to use that land comes from. And it’s similar in agriculture. Suppose you have either an individual farmer, a farmer family, or you have a group of people who are farming as a worker council. Well, they have to basically ask permission to use the land. They have to say ‘we need to renew our application to have these fields that we’re going to be planting these crops in’. So that’s where, in the planning procedure, that’s where the demand to use land comes from.
Now in a capitalist economy who are the sellers of the land? The people who own it. Ah, but it’s owned by everybody. But that doesn’t mean that there’s not a fixed supply of urban land and there’s a fixed supply of agricultural land. So the charge for that, in a sense they’re paying society. They’re not paying an owner. But we can do the calculation in the same way. We have a scarce supply of, in this case, the natural resource land. It’s owned by everybody. People are asking for permission to use it during the year, and they’re essentially bidding on permission to use it. And we’ll end up with an indicative price, an estimate of the social cost of using that land, and we will have charged people for that. And we want to do that because we want to make sure that that whoever the user of the land is they can make the most socially valuable use of the land. That’s why you want to charge them. But the payment doesn’t have to go to anybody and that’s the difference. I mean, in a socialist economy where the land is not privately owned, the payment essentially goes to any and all people. It doesn’t go to any particular person.
[AO] Yes so you’ve highlighted there something that I didn’t actually think about at the time, that there is that opportunity cost of land which enters into the planning process itself on the production side as well as on the consumption side. There will be those wanting to construct it on land or agricultural workers council who wants to use land, and that the opportunity cost of land will have to enter into their social cost calculations during the planning procedure. But that also on the consumption side those who, say, want to rent an apartment will have to do that.
[RH] They’re demonstrating a desire to live in a particular kind of house but also in a particular location. That location has other uses and so there is a social cost associated. The part that’s easy to wrap your mind around is, well, we can calculate the cost of the construction materials, the labour time to build it, etc. But isn’t there a cost of the fact that you now are living on a particular piece of land and that land was scarce and had an opportunity cost? It could have been used for something else and we want to be sure that it gets used for the most valuable thing.
Now, what zoning basically does is say we don’t let everybody bid on a particular piece of land. If you zone land for residential housing only, then the only people who can bid on using that land are people who are going to put up residential houses there. A business that wants to have a gas station there can’t bid on that. And I think zoning can be very sensible, and I think you’re going to want zoning in a participatory economy. And the zoning is basically part of land planning, land use management. We want our cities to be built in a certain a sensible way, so we’re going to use zoning for that purpose. But what zoning does is it just says not everybody is allowed to enter into the process of asking to use that land during participatory planning. Only people who wanted to use that land to put houses there would be allowed to be making proposals to use that land to build houses there, if the land has been zoned for housing only. And sometimes you might want to zone land only for industrial uses.
[AO] Yes that’s a very good point and a good way to put that. And I’m sure as well there will be social housing as part of allowances for people, say, who can’t work and so forth or …?
[RH] We’re not going to have these huge differences in income in a participatory economy. But still presumably there are significant differences between how much I would like to spend out of my income.
You know, I have a reasonable income, I have a friend who has a reasonable income. I know this friend would use a much higher percentage. I mean, we talk about oh well as soon as your rent or your mortgage gets to be more than 40 percent of your income, then you’re housing stressed. If you have reasonable incomes and reasonable housing costs, there are still going to be significant variations between how much do I want to spend on my housing and how much do you want to spend on your housing. So we want to allow for that. That’s what’s going to generate … some housing has more rooms in it, some housing has fancier appliances in it, some housing is located in places where people on average think that’s a nicer place to live, I’ve got a view or I don’t have a view. So we want to create a situation where people can essentially spend different amounts on housing – what kind how much do they want to spend and where do they want to live, what does it look like – and in general we want to charge people for what the cost of society is. And that cost includes the work that went into it, and the materials that went into it, and the opportunity cost of the land that it happens to be sitting on.
[AO] Just before we move on, a critical thing being: in a participatory economy, not having the opportunity to capture the economic rent arising from the land. And that is something that would sharply distinguish participatory economy – or hopefully any socialist society – from the one that we live in at the moment. Housing policy in Europe versus the United States, on continental Europe perhaps, particularly in Germany, but definitely not in Ireland. Ireland is very much like the U.S, and Britain in that regard. It is to a large extent a housing bubble with people living in it.
[RH] It’s totally financialized and it’s the largest part of an ordinary person’s nightmare of ‘how do I manage my wealth situation?’. I mean, I can just promise you that a large part of the thinking that went into coming up with our answer to this was we want to take all of that out of the equation. We don’t want that to be what’s governing how this or this whole situation is being handled in a participatory economy.
[AO] Absolutely, yeah. I mean, private ownership of land is the foundation of feudalism and all of those kind of dynamics.
[RH] There was a famous economist named Henry George and he was famous for something called the single tax. And he probably was wrong, I mean socialists would not agree with him that you don’t need any other tax if you have a good land tax. But his idea of the land tax was actually brilliant, very socialist. And it was: well nobody actually made the land, the land is just there, so we shouldn’t allow people who are the owners of land to somehow reap an advantage and a reward from the fact that they are the owners of the land. So he basically said what we should basically do is just tax the value of land, because they don’t deserve that. And then if we collect enough taxes that way we don’t have to collect any other, that’s where he went off in a direction that most of us were not willing to follow. But in a sense when we say that land is communally owned, that nature just like oil deposits and land is communally owned, what we’re basically saying is the equivalent of what he said, which is nobody has a right to earn income because they happen to own the title to that.
We don’t entitle nature but that doesn’t mean it doesn’t have an opportunity cost when anybody uses it. And we want people to take that into account, and it’s fair to take that into account when we’re figuring out how much people are going to pay for different things, including their housing. As we went over already, the dilemma that generates is that that opportunity cost will vary over time, and therefore one of the bad things about being a renter is you’re never sure they’re not going to change your rent. That’s one of the nice things people like about a mortgage. We can’t totally guarantee people that.
Or we could just guarantee people that and say we know it changed over time, but when you settled in there on your income, and your desires for how much you’re paying for your housing, you wanted to be assured that it would stay the same for as long as you were there. We could just suck it up and say ‘fine, and now you’re being a little undercharged, because actually the opportunity cost of using the land that you’re living on is a little higher than you were charged back when you began’. There would little harm done there? I mean I suspect that actually taking that approach would also not be any great harm. As an economist I could say ‘oh you’re paying a little price and efficiency just to give people peace of mind’ and that’s a that’s a reasonable thing for people to do.
[AO] Yeah certainly and it’d be the exact opposite of society today, where I mean in Dublin people are just paying through the teeth for absolute … you wouldn’t believe. I mean, I’m sure you’ve seen similar things where you are. But it’s ridiculous. You know, people paying for apartments – “apartments” – bedsits without doors, and they’re paying half their income for this. So once you take those dynamics out of the way you’re really just getting into questions of preference.
[RH] In the west coast of the United States this is huge. I mean this is probably the single most talked about economics issue in the west coast of the United States. We have the San Francisco housing market where, you know, absolute ruins are selling for millions of dollars. Now they’re going to be torn down and something be put up that they’re going to sell. So we have the San Francisco housing market. The Portland, Oregon, housing market is probably a third of what the San Francisco market is. Seattle is some place in the middle. L.A. is in the stratosphere.
So you have whole situations where people can’t afford to live in certain cities, but if they can sell a house, if they already happen to be lucky enough to own a house in San Francisco, they can sell it in San Francisco and then they can come up to Portland and they are happy to pay way more than any of us would pay and they bid our prices up. We want to eliminate that. That is just complete and total nonsense. And when you think about the amount of mental aggravation that people are going through because of that economic issue and problem that they’re confronting, and this isn’t even talking about the homeless population. But there are perfectly straightforward ways that we don’t even need a participatory economy to eliminate. I think in Germany they’ve done a fairly decent job of eliminating that kind of real estate insanity.
[AO] That’s the end of Part A of my first interview with Professor Robin Hahnel about Participatory Economics and his latest book Democratic Economic Planning. Stay tuned for Part B where we will discuss consumption.
And as always I want to hear your thoughts in the comment section below.
That’s all for now. The only viable future for humanity is one After The Oligarchy.