(Does anybody feel we've been here before?)
I was checking out a book by by John E. Roemer - A Future for Socialism which is reviewed here:
"Roemer has two proposals. First, to change the structure of ownership in firms. Second, to increase government control over the investment
process. I shall discuss these in turn.
"In Roemer's scheme large firms are first nationalized, and the ownership is then redistributed to the people. All citizens above 21 are supposed to receive coupons which they must invest in firms, but they are not free to sell or give the coupons to each other. They are, however, free to withdraw their coupons from one firm and invest in another whenever they want to (the price of a stock is given by the number of coupons you have to give. This price is allowed to fluctuate freely). The coupon-holders would then own the firm collectively and receive dividends from the coupons in the same way that owners of stocks receive dividends i.e. according to the profitability of the firm. When a person dies the coupons go back to the state for redistribution, for example to those who have just turned 21. In short, the coupons become a kind of money which can be used to buy stocks, the only difference being that you are not free to sell or give the coupons away.
The aim of this coupon-scheme is to increase equality of opportunities by making the income from ownership more equal. Today 10% of the
people in a country often owns 70-80% of all corporate wealth. Under
Roemer's scheme the distribution would be much more equal, and more
people would have the opportunity to live good lives.
The second proposal put forth by Roemer, is to increase government
control over the investment process. This is to be done, mainly, by
creating a system of differentiated interest rates for different sectors. He gives three reasons why state intervention is desirable (p. 90-92). First, because of positive and negative externalities from investment. For example, investment in research and education is under-provided by the market, while investment in processes that pollute is over-provided. Second, to create public goods such as highways and communication systems. This may not be too controversial, but Roemer argues that the government should greatly increase this kind of spending since - he believes - it pays a very high return. Third, to compensate for incomplete markets. For example, there is no market for insurance against unlucky investment decisions. This means that firms do not make enough risky investments - investment which also have a very high potential return. In fact, there is something of a prisoners' dilemma situation: Individually it is not optimal to take a high risk, but socially it is optimal that some firms - more than now - make high-risk investments. These three arguments complete Roemer's case for larger government control over the investment process.
Combined Roemer believes that the two changes - the coupon system
and increased government intervention in the investment process - would
significantly improve total welfare in society. According to his estimates, based on US data for dividends from firms, he believes the income of the poor would increase by about 20%. Moreover, it would move the level and distribution of investment closer to its socially optimal level (reduce pollution, avoid missing markets). Is this really possible? And, is it possible to know whether it is possible?"
Now then - is this 'market socialist' "possibilism" a help or a hinderance?