Won’t workers exaggerate their effort?

Self-managed worker councils have autonomy over how they go about distributing income between themselves. The only restriction placed on them is that the income each workers’ council receives is capped. This could be done by either giving the same cap to all workplaces or by basing it on the social benefit to social cost ratio of the workplace.

Another way to look at it is that the workplace receives a pie, and they decide themselves how they wish to slice up the pie between themselves. This prevents the possibility of workers over-estimating each other’s effort ratings in return for the same favour, or what could lead to “effort rating inflation”. Remember also that a key difference in a Participatory Economy is that income is not received from a business’ sales revenues like in a market economy. Income is allocated to all workplaces from a different account, called the society account. See anarchist accounting for more information.