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Social Choice and Beyond
Monday, June 9, 2008
Social Choice Based Economic System Utilizing Range Voting
Mood:  happy
Topic: Social Choice

It has been shown that range voting offers a way out of Arrow's Impossibility Theorem. Arrow's Impossibility Theorem only applies to rank order voting methods and not point value methods. According to Arrow's book, "Social Choice and Individual Values," the field of social choice includes economic systems as well as voting systems. Since he thought social choice was impossible, no further discussion regarding economic systems was necessary. The assumed impossibility of social choice based economic systems was considered by some to be a theoretical endorsement of capitalism. However, Arrow had this to say about potential economic systems based on social choice, and since they are not as impossible as once was assumed, the topic is open for reconsideration:


In the present study the objects of choice are social states. The most precise definition of a social state would be a complete description of the amount of each type of commodity in the hands of each individual, the amount of labor to be supplied by each individual, the amount of each productive resource invested in each type of productive activity, and the amounts of various types of collective activity, such as municipal services, diplomacy and its continuation by other means, and the erection of statues to famous men. It is assumed that each individual in the community has a definite ordering of all conceivable social states, in terms of their desirability to him. It is not assumed here that an individual's attitude toward different social states is determined exclusively by the commodity bundles which accrue to his lot under each. It is simply assumed that the individual orders all social states by whatever standards he deems relevant. A member of Veblen's leisure class might order the states solely on the criterion of his relative income standing in each; a believer in the equality of man might order them in accordance with some measure of income equality.

We will consider a potential economic system which abstracts from the general social choice model which Arrow considers but is related to it. We submit that it is a form of economic democracy in that it's based on range voting. We consider only a very simplified, hypothetical system which is impractical without the many ramifications necessary in the real world. However, it is necessary for the sake of analysis to abstract from many real world ramifications in order to get at the basic structure. In particular we consider an individually based system in which an "individual's attitude toward different social states is determined exclusively by the commodity bundles which accrue to his lot under each." We also simplify each commodity bundle so that it contains only "a complete description of the amount of each type of commodity in the hands of each individual [and] the amount of labor to be supplied by each individual." "[T]he amount of each productive resource invested in each type of productive activity" is determined by consumer demand as specified by the aggregate commodity bundles off all individuals. Furthermore, each individual submits an input regarding only his or her own work-consumption schedules, and not those he or she desires for other individuals. Finally, collective activity is abstracted from so that each possible social state represents the aggregate of the individual inputs regarding only their own work/consumption.

Each individual rates his or her preferred individual state on a scale such as [0-9] or [0-99], for instance, in accordance with range voting procedures. The social state is then determined in such a way as to maximize social welfare or utility as measured by the summation of ratings over individual states such that the following condition is met. In each possible social state, the work to be performed shall be exactly what is necessary to produce the commodities to be consumed. In other words supply of commodities shall be equal to demand for those commodities as specified by the ratings of individuals over all possible work-commodity bundles. For instance, individual A might rate a work-commodity bundle in which he performed 20 hours per week of dentistry (assuming he's qualified as a dentist) in return for a copious amount of goods and services a 99. He might also specify a rating of 50 for a work-commodity bundle requiring 30 hours work per week and a less copious amount of goods and services. He then might assign a 1 to a bundle requiring 60 hours work per week in return for a meager amount of goods and services.


No real economic system could exist without money as a medium of exchange. It's just impractical to think that individuals would accept a system in which they were assigned a certain amount of work in return for a certain commodity bundle even if that maximized social utility. Therefore, work performed must be paid for in money and not by an "in kind" commodity basket. The commodity basket can be translated into monetary terms by pricing it such that the money received by each individual for his or her work exactly pays for it.  Pricing in such a system could be undertaken as follows. Pick some basic, simple and ubiquitous commodity and price it at 1 unit. (The units could be dollars, euros, pounds etc.) Then other consumer items could be priced in terms of that basic commodity considering the quantity and quality of labor and the quantity and quality of materials and other resources involved. For instance, a tube of toothpaste might be priced at 1 unit. Based on this, a particlular kind of automobile might then be priced at 20,000 units. Ideally, the aggregate amount of money dispensed by the system would be just sufficient to buy the aggregate amount of production as specified by aggregate consumer demand according to the the sum total of commodity bundles. Therefore, money supply would equal money demand, and there would be no inflation. Aggregate income could be computed in such a way that the amount of money in circulation would just be sufficient to buy all the consumer goods and services demanded according to the social state which maximizes social utility.

The social choice would then involve an assigment of work and income to each individual. It would be assumed that an individual's work preferences could be quite general involving different kinds of work and different hourly schedules. In general, an individual could do any type of work he or she was qualified for, and, at the lower end of the job spectrum, almost everyone would be qualified whereas at the upper end, only those with highly specialized training might be qualified. In general people would be qualified to do more than one type of work and would be free to submit more than one hourly schedule. Work weeks need not be standardized but could be individualized in accordance with worker demands.

Since individuals might not spend their income exactly in accordance with the commodity bundle they submitted with the corresponding work schedule, aggregate consumption would have to be tracked and adjusted so that there is little or no over or underproduction. Periodically, individual inputs regarding work-commodity baskets could be resubmitted, the social choice recomputed and adjustments made accordingly. Ideally, supply would equal demand both for work and commodities so that there would be no over or underemployment and no surplus or scarcity of commodities.


Fundamentally, the role of government would be to gather information from individuals, compute the social choice, disburse information to individuals informing them of their work-commodity schedules and monetary income (the one that maximized social utility), and oversee and track the production and consumption process making adjustments for the fact that actual consumer demand might not be the same as specified consumer demand. The production units could be either publicly or privately owned. Individual work schedules could be combined to construct a production unit so that production units might represent the collaborative work efforts of many individuals and production output for the enterprise might represent enough commodities to fill many consumer commodity baskets. Individual or enterprise inputs might include capital or other resources as well as labor.

The government would have to employ the services of massive supercomputers to do all the computation necessary. Information collection and work-commodity basket assigments would be centralized. Work schedule and consumer demands would be decentralized and individualized. Assigments would be flexible and subject to change both for work schedules and commodity bundle consumption schedules. The government could track changes in worker-consumer activity and make real time changes in production/consumption. The government might grant every citizen at least a minimum income for which could be purchased a minimum commodity bundle. A minimum amount of labor might also be required. Likewise, maximum work and/or consumer demands might be limited.


A social choice based economic system that utiilizes range voting has been described. Such a system would represent a highly simplified form of economic democracy. Individual work-commodity bundles would be preference rated in accordance with range voting and an amount of money associated with each. The system would then compute that social state which maximized social utility as the aggregate of individual utilites subject to the condition that production equal consumption. The system would also compute the pricing of consumption items and the amount of money to be distributed to each individual in return for the work and or capital resouces input by that individual. Money would just be a medium of exchange, and the total amount of money generated at any particular time would just be sufficient to buy the amount of production generated as specified by the social state which maximized social utility. Individual work-consumption assignments could be updated periodically or, perhaps, in real time in accordance with individual demands. Ideally, there would be no shortages or surpluses of commodities or labor and supply would equal demand. If priced correctly, supply would also equal demand in the money supply so there would be no inflation or deflation. There would be no unemployment by definition because exactly the amount of labor needed for production and no more would be required, and this would be distributed equitably by the maximizing of utility as a result of range voting.





Posted by jclawrence at 11:53 AM PDT
Updated: Monday, June 9, 2008 12:38 PM PDT

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