Constructing a Socialist Investment Function
Aaron Benanav�Cornell University
SASE 2025 - Montreal
Introduction
This talk draws from a two-part article coming out in the New Left Review—part 1 has just appeared—which provides a framework for a multidimensional economy.
Introduction
Here, I lay out the basic structure of investment in such an economy, which is really its core feature—what gives it its dynamic.
Introduction
This proposal I lay out here is like the one Pat Devine develops in Democracy and Economic Planning.
Introduction
However, I deemphasize—or at least shift the meaning of—negotiated coordination as a mechanism of selection, to favor procedures that still function in the context of permanent disagreement about ways forward.
Introduction
The point of the talk is to think through the theoretical basis and institutional framework for this alternative conception of investment choice in a dynamic socialist society.
Introduction
But before we come to that, I need to say a little something about investment in capitalism.
1. The Limits of Profit-Driven Innovation
In a profit-driven economy, firms are rewarded for getting more output from fewer inputs.
The more they cut costs and raise revenues, the more profit they make.
This pressure to be efficient shapes not only day-to-day operations but also long-term change.
Firms invest in process innovations that streamline production and product innovations that open new markets.
This process unfolds chaotically, but it has a powerful selection mechanism at its core, which keeps the system moving forward.
Because both the costs and expected returns of a project are expressed in monetary terms, firms can compare them directly—typically by calculating the net present value of each investment option.
Capital flows to the projects that offer the highest anticipated payoffs relative to economic costs.
This system is highly efficient—but it comes at a major social cost.
Many of the things we want from innovation have little to do with efficiency.
We want jobs that are less exhausting, products that are more sustainable, public spaces that are more beautiful.
These are what I call non-efficiency innovations.
They improve the quality of life in ways that don’t show up on a firm’s bottom line.
These innovations are largely inaccessible to private firms unless they reinforce a company’s market position—and even then, only if they don’t interfere with the pursuit of market dominance.
A multi-dimensional economy does not reject efficiency. It creates space for and rewards a broader range of innovations.
Pursuing both efficiency and non-efficiency innovations better matches what people actually need and what the economy should be built to deliver.
2. Rewiring Investment
To build a more complex, multi-dimensional economy, we need to get rid of profitability and private ownership of firms—as well as the system of financial that sits on top of it.
Instead, based on the principles of functional finance, society can simply set aside a fixed share of its total economic resources—say, 20 percent—for future improvements.
This becomes a public investment pool, allocated each year to projects that will do the most good: not in terms of monetary returns—these investments earn no such returns—but in terms of sustainability, care, health, meaning, and whatever else people happen to think is important.
Any firm or institution can apply for funding:
This shift doesn’t just change which projects get approved. It changes what people inside organizations can imagine doing.
It liberates engineers and designers to act on ideas they already have for how to improve their work and workplaces.
In that sense, we could say that it unfetters the forces of production.
3. The End of Recessions
Once we make this crucial switch, we’re no longer limited to futures organized around what’s profitable.
A much broader range of possible futures become available to us.
To understand what this means in practice, think of the investment sector as a set of standing capacities:
They are ready to build whatever society needs.
Under capitalism, we use these capacities for projects promising high returns. When profits stall, investments stops flowing.
That creates a turbulent boom-bust cycle.
In a multi-dimensional economy, investment can shift flexibly across whatever priorities seem most important at a given moment—from efficiency to sustainability and back.
That means the investment sector can be put to work fully every year, eliminating recessions.
But it also raises a new challenge: how do we decide what to fund?
4. Choice across Alternative Futures
In this new system, we can still make economically rational decisions—but we must understand economic rationality differently.
Every project can still be said to have a monetary cost, which reflects the real resources required to carry out that project, that is, to build facilities, upgrade equipment, or reorganize operations.
But the benefits—as well as non-economic costs—are no longer measured in money. They come in kind: cleaner air, more livable cities, more meaningful jobs, stronger communities, more beautiful cities.
As a result, we can no longer calculate rates of return in a common monetary metric. But that doesn’t mean we can’t make rational judgments.
Some projects clearly cost more and deliver less—they’re not worth doing. We can rule them out.
That will leave us with a set of best options.
Each best option offers different benefits, each at a reasonable cost.
In identifying these best options, technical reasoning reaches its limit: we can’t use a formula to tell us which to choose.
We have to choose for ourselves.
Sometimes, that choice is about priority: We have only so many resources.
We can’t do everything at once. We have to decide what matters most now, and what must wait.
But often, it’s not just a matter of timing—it’s a matter of conflict. Some projects point in different directions—towards different possible futures.
We can build new public housing to high standards. Or we can repurpose and retrofit existing buildings, trading off quality of living conditions for reasons of ecological sustainability.
There is a real trade-off here. The resulting choice has to be made, moreover, under conditions of uncertainty.
5. Real Trade-Offs, Real Uncertainty
Uncertainty in a multi-dimensional economy is twofold.
First, we don’t know how things will play out.
Will streamlining a supply chain actually reduce economic or ecological costs?
The answer depends on how people respond, how technologies interact, and how systems behave.
This kind of uncertainty—uncertainty about facts— also shapes investment under capitalism.
But a second form becomes central: uncertainty not just about facts, but values.
Should we prioritize sustainability or free time? Local resilience or global integration?
These are ethical and political value conflicts, tied to real stakes.
A multi-dimensional economy cannot eliminate these conflicts.
Nor can it assume we’ll reach agreement by deliberation.
Instead, the economy must be designed to keep us moving forward even when we don’t agree. It has to do so through procedures that help people make choices in spite of conflicts.
6. A Note on Choice Procedures
Focusing on procedures overcomes a major weakness of other proposals that seek to add dimensionality to the economy (especially coming from the Sen and Nussbaum camp).
Those proposals seem to require that we first agree on what the relevant dimensions are, how they are defined and measured, sometimes even how they are to be weighted.
But these are all political questions on which people reasonably disagree.
People need to be able to organize continuously, and politically, around these questions, to fight for the futures they think are worth pursuing—including by creating new values and revaluing or redefining old ones.
Focusing on choice procedures, instead, allows people’s values to evolve in and through the structured decisions that they make.
7. Where Collective Choice Happens
Where are these choice procedures located, and how are they organized?
As in Pat and Fikret’s model, they happens primarily in and through investment boards.
These boards make most new investment decisions. Their role isn’t to micromanage every financial flow—firms in good standing still receive automatic disbursements for maintenance and minor upgrades.
Cross-sectoral initiatives, like the green transition, are handled by separate coordinating bodies.
But the bulk of strategic investment runs through sectoral boards.
That’s because the financial plumbing of capitalism has been dismantled. Firms are no longer responsible for generating their own investment funds through sales or savings.
Instead, all investment flows through a public system.
As noted earlier, based on functional finance, society sets aside a share of its total economic resources each year for future improvements.
These funds are distributed across sectoral investment boards. There might be twenty in all, including healthcare, manufacturing, media, education, energy, etc.
(1) agriculture, forestry, and fishing�(2) mining�(3) non-durable manufacturing�(4) durable manufacturing�(5) energy, water, and waste�(6) retail and wholesale trade�(7) transportation�(8) food services �(9) communication and information�(10) housing, commercial space, hotels�(11) elder- and childcare and social work�(12) business services�(13) safety and justice�(14) defense�(15) education�(16) healthcare�(17) entertainment and recreation�(18) investment�(19) scientific/professional associations�(20) civic associations
How much each sector receives can be determined in different ways—by survey, negotiation, or political process. But once set, that allocation defines the board’s investment budget.
Each board decides how to spend that budget.
Firms submit proposals for new projects: redesigning production lines, expanding services, transitioning to cleaner systems.
And again, proposals include monetary costs, but their benefits are measured in kind.
Technical review helps identify which proposals lie nearer to the frontier. But selecting among them requires a political decision—made through structured voting within each board.
Board members are elected through democratic processes, organized around stakeholder groups: workers, users of the output (whether consumers or other firms), community members, and perhaps technical experts.
These elections could be carried out in different ways, but the key is that they are political.
They reflect real disagreements over which kinds of projects—and which kinds of futures—should come first.
Once elected, board members make decisions under budget constraints, as to which proposals to fund.
Those that receive the most votes move forward, up to the limits of the board’s budget for that year.
People on the boards can deliberate, hear from stakeholders and technical experts, and form coalitions.
They can also support the same projects for fundamentally different reasons. Values enter the discussion at all points, but without any need for agreement about values.
Crucially, it has to be possible to veto projects that are undermine values that people care about.
It also has to be possible to force a run off between incompatible proposals.
This process will be chaotic and to some extent incoherent.
But that is a virtue of the system rather than a vice.
It allows things to move forward, dynamically—and experimentally—in the context of permanent, ongoing disagreement about ways forward.
Conclusion
A major advantage of this system is that a wide range of non-efficiency innovations—those that improve life in ways money can’t measure—are finally within reach.
But they become so only by politicizing the investment function at its core.
This politicization is based on a different account of economically rational choice.
Economic actors pursue multiple goals for their own sake and face partial order problems that limit the capacity of technical reason to help them choose.
As boards make political choices under budget constraints, society reconstructs its provisioning systems, and in turn traces the evolution of people’s values.