I am trying to understand the differences between the Parecon annual planning procedure and the “textbook” general equilibrium (GE) model—specifically the production equilibrium model presented in Section 5.3 (“Production Equilibrium”) of Jehle and Reny’s Advanced Microeconomic Theory.
It seems to me that one key difference is the following. In the Parecon annual planning procedure, the total endowments of capital goods (produced in the previous year) are given, but the distribution of these capital good endowments across workers’ councils is determined endogenously through the annual planning process. By contrast, in the textbook GE model, the distribution of capital good endowments across agents is specified exogenously at the outset.
Is this understanding correct? I would very much appreciate your thoughts.
Hi Shujun. Sharing with you Robin’s reply to your question from our PEP online forum:
I can confirm that in our proposal the stocks of capital goods previously produced and available for use are distributed for use by worker councils through the annual participatory planning process. In effect worker councils ask, or “bid” to use them, at the same time that they offer to produce new outputs and ask for intermediate inputs, natural resources, and different categories of labor as well as user rights over capital goods in order to do so. I’m very familiar with the literature on general equilibrium microeconomic theory for private enterprise market economies. But I am not familiar with the particular textbook you cite: Jehle and Reny, Advanced Microeconomic Theory, so I can’t say what exactly they do.