Artificial Markets

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The artificial market is a concept by the Greek thinker Takis Fotopoulos


Summary by Vasilis Kostakis:

In Takis Fotopoulos' work both "the macro-economic decisions and the individual citizens decisions are envisaged as being implemented through a combination of democratic planning -which involves the creation of a feedback process between workplace assemblies, community assemblies and the confederal assembly- and an artificial market which secures real freedom of choice, without incurring the adverse effects associated with real markets".

Fotopoulos bases his assumption on a voucher system. More concretely, "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 general criterion for the allocation of resources is not efficiency as it is currently defined, in narrow techno- economic terms. Efficiency should be redefined to mean effectiveness in satisfying human needs and not just money-backed wants".

Regarding the meaning of needs he makes a distinction between basic and non-basic needs and a similar one between needs and satisfiers (the form or the means by which these needs are satisfied). The citizens themselves determine what constitutes a need --basic or otherwise- democratically. Then, "the level of need-satisfaction is determined collectively and implemented through a democratic planning mechanism, whereas the satisfiers for both basic and non-basic needs are determined through the revealed preferences of consumers, as expressed by the use of vouchers allocated to them in exchange for their basic and non-basic work." For instance "let's say that planners have estimated that everybody has to work three hours a day so that all basic needs are met. If somebody wants to work more than three hours, either in the same line of activity or in a different one, then he is rewarded for this with non-basic vouchers, which he can use to buy commodities - i.e. goods and services that are of non-basic nature."

More concretely, the distinction between basic and non-basic vouchers:

Basic vouchers (BVs--allocated in exchange for basic work, i.e. the number of hours of work required by each citizen in a job of his/her choice so that basic needs are met) are used for the satisfaction of basic needs. These vouchers -which are personal and issued on behalf of the confederation- entitle each citizen to a given level of satisfaction for each particular type of need which has been characterised (democratically) as basic, but do not specify the particular type of satisfier, so that choice may be secured.

Non-basic vouchers (NBVs allocated in exchange for non-basic work) are used for the satisfaction of non-basic needs (non-essential consumption) as well as for the satisfaction of basic needs beyond the level prescribed by the confederal assembly. NBVs, like BVs, are also personal but are issued on behalf of each community, rather than on behalf of the confederation. Work by citizens over and above the basic number of hours is voluntary and entitles them to NBVs, which can be used towards the satisfaction of non-essential needs.

Hence "prices in this system, instead of reflecting scarcities relative to a skewed income and wealth pattern (as in the market economy system), function as rationing devices to match scarcities relative to citizens' desires, i.e. as guides for a democratic allocation of resources. Therefore, prices, instead of being the cause of rationing, as in the market system, become the effect of it and are assigned the role of equating demand and supply in an artificial market that secures the sovereignty of both consumers and producers. The prices formed in this way, together with a complex index of desirability drawn on the basis of citizens' preferences as to the type of work, which citizens wish to do, determine a subjective rate of remuneration for non-basic work, in place of the objective rate suggested by the labour theory of value." Summarising, in spite of the fact that artificial market does not transcend scarcity, it secures that all the basic needs of the citizens are satisfied. The freedom of choice and the constant flow of information are the foundation stones of this artificial market on which an economic democracy will be based.