A Surplus Co-op

I’d like to propose a form of economic organization that I call a surplus co-op.  It’s kind of like a combination of a food co-op and an all-you-can-eat restaurant.  A surplus co-op is an intentional community where every member “pays” a fixed amount and receives as much as they want of the basic necessities of life.  My list of what is included in basic necessities is:

  1. Food
  2. Clothing
  3. Shelter
  4. Utilities (plumbing, heating, etc.)
  5. Health Care
  6. Child Care
  7. Elder Care

I put “pays” in quotes above because it doesn’t have to be just money.  Members could contribute work instead, young children and the elderly could be exempt from paying, etc.

Sounds idealistic.  How would it work?  One objection could be that if you allow people to have as much as they want then demand would be infinite and thus unsatisfiable.  My earlier post about surplus economics talks about this.  The short answer is that for some commodities demand is not infinite, and all-you-can-eat restaurants are proof of that fact.

But even if it’s theoretically possible, how would it really work?  You still have to decide how much stuff to produce or buy and that has to be at least equal to desired consumption or there will be shortages.

Here is my vision of how it would work.  An intentional community of a few hundred people owns enough housing for all its members.  This could be an apartment building or separate houses, there are many possibilities.  Each member must contribute a certain number of hours of work each year.  Members of the community would do construction and maintenence.  The community would staff it’s own medical clinic and child care center, etc.  There are enough people to achieve economic benefits from division of labor.

It’s not necessary that the community be self-sufficient, but I think a certain amount of the community producing its own goods would provide benefits.  It would lower transaction costs and marginal costs, which would make it easier to provide goods in surplus.  It would also improve stability in the face of external economic shocks by having internal customers for internal jobs.  But it’s unlikely, and probably not desirable, that a community would be entirely self-sufficient so some members would buy down their work hours with dollars from jobs outside the community.  These dollars would be available to buy things that the community doesn’t produce.

Aggregate production would be planned by direct democracy.  The community would come together and figure out how much food will be needed, how many person-hours of maintainence work to expect, etc.  Planning could be done annually, or quarterly, or more often if it proves beneficial.  These plans would be based on past data, requests from members, and problems with previous plans.

What I am suggesting is a centrally planned economy.  Centrally planned economies have gotten a bad reputation due to certain totalitarian states that had a centrally planned economy.  Some would even suggest that centrally planned economies are doomed to fail.  But those people fail to notice that there are plenty of successful centrally planned micro-economies all around us.  Every corporation in America is internally centrally planned.  And so is every family budget.  The important thing to consider is who does the planning for whom and what checks and balances exist to make sure everyone’s interests are taken into account.  I think it would be difficult for a controlling elite or special interests to co-opt a process of direct democracy involving only a few hundred people.

The specific work assignments could be allocated in the plan as well, or a market based system could be used.  The plan lists how much stuff needs to be produced and what service jobs need to be done, and members bid for the work.  I might offer to vacuum the common area in exchange for a credit of 1.2 hours, and someone else who offers to do it for 1.1 gets the job.  But just like the planning process, the market system would have to be well designed to prevent abuse like someone with a unique skill weilding monopoly power, or someone low-balling a bid and then doing a bad job.

Consumption would not need to be planned, regulated, or tracked in accounting ledgers in any way.  Eliminating the work involved in tracking consumption is one of the benefits of this sytem.  Consumption could be handled in many ways.  There could be a community supermarket where you go and pick up the food you want, or there could be a community restaurant where you order what you want and it’s prepared for you with the cooking staff being part of the production plan.  The members of a community have flexibility in deciding exactly what they want to provide themselves, and thus how much work will be required of each member.

I know your head is probably brimming with potential problems this community might have, and I will eventually talk about that.  But first, let me talk about benefits.  Why would someone want to live in such a community?

First of all, let me say that not everyone would want to live in such a community.  But that’s the beauty of an intentional community.  A self-selected group can create the environment in which they want to live, even if it’s not for everyone.  The kind of person that would want to live in a surplus co-op is someone for whom money is not the primary motivation in their life.  It may be someone who wants a comfortable middle-class lifestyle, but not someone who fantasizes about being rich.  It would be someone who would take more free time over a larger paycheck.  This person would be annoyed at the antagonistic nature of a buyer beware system.  Even if they could defend themself they would ask, “Why do I have to defend myself?  Why don’t people just treat each other fairly as a matter of course?”  This person would have strong values about helping others in need and feel ashamed to live in a rich country where some people are homeless.  For such a person it would be a great benefit to live in an environment where economics is seen as a group effort to provide prosperity and fairness to everyone instead of the war of all against all.

In addition to those kinds of benefits, I think this system could be economically more efficient than our current system for several reasons:

1) Lower transaction costs

We won’t need people to stand behind a checkout counter, or stand in line to check out.  There won’t be any billing or collections.  Paperwork will be drastically reduced.  Also, transaction costs can prevent the most efficient transaction from occurring.  For example, small quantities of small items can’t be sold very easily.  If you go into a hardware store you can buy a box of a thousand screws for maybe a penny per screw, but you can’t buy one screw for a penny.  Transaction costs would overwhelm any profit.  So you have to buy a pack of at least 10, and it costs a lot more per screw than if you bought 1000, and there’s extra packaging waste to keep the small package from getting shoplifted.  But if you really only need one screw the other nine are left unused in a junk drawer in your garage.  That’s wasted production that could be avoided if there was just a bin of screws and you took only what you were going to use for free.

2) Higher capital utilization

On an average suburban street with 10 houses there are 10 washing machines that are each used maybe 5% of the time.  That street could get by with just one washing machine.  The same is true for lawnmowers, microwave ovens, etc.  A surplus co-op could achieve the same benefit with less production by getting higher utilization of the goods that are produced.  I’m not saying it could get 100% utilization.  Maybe no one wants to do their laundry at 4 am.  But it could certainly improve on the current utilization of household appliances.

3) Design to eliminate need

Currently, most people have a car that they use to drive to work.  You could say that having those cars is an economic benefit, but most people consider their daily commute an annoying chore.  If you could reorganize things so that people are within walking distance of their work, that would be an even better economic benefit than having those cars even though it means less consumption of material goods.  You won’t be able to eliminate every need in this way, but I think it’s fertile soil for a significant reduction in the production required to provide a good standard of living.

4) Full employment

A surplus co-op won’t need to keep a certain percentage of people unemployed to provide liquidity in an every-man-for-himself labor market.  Instead, everyone will be required to contribute and labor allocation will be a collaborative effort to ensure that everyone is doing productive work.

I said I would address potential problems, and I will, but this post is already getting too long, so I will do it in another post.  Feel free to offer problems in the comments.

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