Bringing in the Future: Strategies for Farsightedness and Sustainability in Developing Countries 9780226029184

Citation preview

Bringing in the Future

Bringing in the Future s t r a t e g i e s f o r fa r s i g h t e d n e s s a n d s u s ta i n a b i l i t y i n d e v e l o p i n g c o u n t r i e s

William Ascher

The University of Chicago Press  c h i c a g o & l o n d o n

w i l l i a m a s c h e r is the Donald C. McKenna Professor of Government and Economics at Claremont McKenna College. The University of Chicago Press, Chicago 60637 The University of Chicago Press, Ltd., London © 2009 by The University of Chicago All rights reserved. Published 2009 Printed in the United States of America 18  17  16  15  14  13  12  11  10  09   1  2  3  4  5 isbn-13: 978-0-226-02916-0 (cloth) isbn-13: 978-0-226-02917-7 (paper) isbn-10: 0-226-02916-6 (cloth) isbn-10: 0-226-02917-4 (paper) Library of Congress Cataloging-in-Publication Data Ascher, William. Bringing in the future : strategies for farsightedness and sustainability in developing countries / William Ascher. p. cm. Includes bibliographical references and index. isbn-13: 978-0-226-02916-0 (cloth : alk. paper) isbn-13: 978-0-226-02917-7 (pbk. : alk. paper) isbn-10: 0-226-02916-6 (cloth : alk. paper) isbn-10: 0-226-02917-4 (pbk. : alk. paper) 1. Sustainable development—Developing countries. 2. Natural resources— Developing countries—Management. 3. Economic forecasting—Developing countries. 4. Developing countries—Economic conditions. I. Title. hc59.72.e5a83 2009 338.9'27091724—dc22 2008017174 ¥ The paper used in this publication meets the minimum requirements of the American National Standard for Information Sciences—Permanence of Paper for Printed Library Materials, ansi z39.48-1992.

For Ariana, Hannah, and Macabee, who deserve to live in a farsighted world.

contents

List of Tables

ix

Preface

xi

Acknowledgments

xiii

pa r t i   The Challenges and Hopes for Farsighted Action 1

The Challenge of Farsightedness

3

2

The Root Causes of Shortsightedness and Their Manifestations in



Developing Countries

29

3

Gaining Traction to Overcome Obstacles to Farsightedness

44

pa r t i i   Structuring Rewards and Risks 4

Creating and Rescheduling Tangible Benefits and Costs

65

5

Creating and Rescheduling Social and Psychological Rewards

91

6

Realigning Performance Evaluation

105

7

Self-Restraint Instruments

119

pa r t i i i   Improving Analytic Frameworks 8

Analytic Exercises

151

9

Deepening Problem Definitions

173

pa r t i v   Framing the Appeals 10 Design Dimensions of Communicating Farsighted Appeals

189

11 The Triple Appeal Principle

205

12 Managing Heuristics

213

pa r t v   Changing the Policy Process 13 Empowering and Insulating the Farsighted Leader

231

14 Structuring Decision-Making Processes

241

15 Conclusions

252

Notes

259

References

273

Index

299

tables

4.1 Design options for structuring material benefits and costs

66

4.2 Strategies of creating or rescheduling tangible consequences

89

7.1 Categories and applications of self-restraint mechanisms

121

8.1 Variations of analytic exercises

152

9.1 Criteria for assessing the policy process

185

10.1 Design dimensions of communications

191

10.2 Tendencies of framing and implications for communication

203

14.1 Objectives and design dimensions of decision-making processes

250

preface

After thirty years of work on how to improve our capabilities to predict and plan for the future, I have turned to the prior question of how to motivate our efforts to do so. My own motivation was partly practical—in many instances individuals, private organizations, and governments of developing countries are distressingly shortsighted (as are their counterparts in developed countries); anyone dedicated to trying to contribute to the formulation of development strategies has to grapple with the reluctance to make appropriate short-term sacrifices for long-term improvements. Yet my motivation was also intellectual—the fascinating work of behavioral economists, psychologists, legal scholars, political scientists, sociologists, and so on, has gone beyond narrow models that focus on material benefits and assume that the relevance of the future diminishes as time horizons lengthen. These developments are beginning to fulfill the promise of the policy sciences’ approach to incorporate multiple values, human subjectivity, and institutional design into our understandings of how to promote farsighted commitment. Initially, the effort of providing practical strategic guidance for promoting farsighted thinking and action in developing countries seemed like a rather straightforward endeavor. Yet it was hardly straightforward—some actions are farsighted but hardly sound, over a hundred specific strategies can be identified, and no strategy can be expected to be advisable in all circumstances. This book should be thought of not as a “how to” manual on how to pursue farsighted action, but rather as a guide to understanding the great range of strategic options and the generic strengths and limitations of the strategies that fall within each broad category.

acknowledgments

This book benefited greatly from invaluable research assistance by Valerie Blair, Jacquelyne Dadakis, Alexis D’Agostino, Healther Holsinger, Aaron Hosansky, Akta Jantrania, Merve Kagitci, Emily Penner, Meredith Stechbart, and Emily Trent. Many people contributed ideas and insightful critiques: Garry Brewer, Daniel Bromley, Ronald Brunner, Terry Daniels, Michael Dove, Robert Fisher, John Hay, Robert Healy, Yuko Kasuya, Jennie Litvack, Natalia Mirovitskaya, John D. Montgomery, Visnathan Rajagopalan, my late dear friend Dennis Rondinelli, Gustav Speth, Toddi Steelman, and Robert Tener. The opportunity to vet and hone the ideas was graciously provided by the students, fellows, and leaders of the Duke Center for International Development, especially Jonathan Abels, Cory Krupp, Francis Lethem, and Natalia Mirovitskaya. Alejandra Mizala and Raul O’Ryan kindly provided a similar opportunity to present the project to the faculty and students of the Public Policy Program of the Department of Industrial Engineering of the University of Chile. The Fulbright Commission supported this visit to the University of Chile through its Senior Specialists Program. Through a fellowship from the Japan Society for the Promotion of Science, I was also able to learn from the reactions of students and colleagues of the Graduate School of Frontier Science and the Integrated Research System for Sustainability Science, both of Tokyo University, especially through the guidance of Jin Sato and the collegiality of Mariko Kinai and Kazuhiko Takeuchi. The Dundee University Centre for Energy, Petroleum and Mineral Law and Policy provided a similarly rewarding learning experience, through the leadership and advice of Thomas

xiv  Acknowledgments

Wälde, Philip Andrews-Speed, and Evelyn Dietsche. The Centro de Investi­ gación y Docencia Económicas in Mexico City, through the leadership of Laura Sour Vargas and David Arellano, permitted me to learn from the reactions of their fine students and colleagues, especially Marcelo Bergman and Eugenio Rivera. University of Chicago Press senior editor David Pervin has been very helpful in guiding the revisions of the manuscript, which is certainly better for the anonymous reviews and David’s advice on how to address them. Finally, I am very grateful for the editing and intellectual stimulation extended by Barbara, David, Diana, and Julia Ascher. They have helped in many projects in the past, and I hope they will continue to do so in the future.

chapter one

The Challenge of Farsightedness

The highway crumbles for lack of maintenance funds set aside when the road was built. The trees on the hillside have all been cut for timber revenues, without thought of the soil erosion and mudslides that someday will follow. The farmer plants only traditional annual crops, neglecting the opportunity to plant trees that would hold the soil better and could bring a handsome price five or ten years later. He had considered planting nontraditional cash crops, but this would entail investment and risk that can’t be borne by the family’s meager savings. Besides, the time and cost of transporting cash crops to market on the crumbling road are excessive. The farmer’s children help him work the farm. They miss out on the opportunity for the schooling needed to develop skills for jobs that would be higher paying and more secure, especially in light of environmental threats to the long-term viability of the farm. Yet without charitable contributions to help defray school fees or a government policy to cover all educational expenses, the future gains of education are outweighed by the additional income that the children can provide today. The farmer’s cousin, already forced by rural poverty into the squalid shantytown on the edge of the city, can’t find employment in an inefficient economy stifled by public policies that protect the immediate gains of favored constituents. She refuses to join community self-improvement efforts to upgrade the sanitation, pathways, and lighting in her neighborhood, doubting that enough of her neighbors will join and fearing that she would lose her home in the long run if the improvements attract well-connected real estate speculators who may displace her. No nongovernmental organizations (NGOs) are available to organize or otherwise assist self-improvement efforts.

  Chapter One

Her teenage son is experimenting with alcohol and glue sniffing and is willing, if the opportunity arises, to engage in unprotected sex. When he is intoxicated or suffering from a hangover, he stays with his older brother, who has built a hut on a steep hillside even further from the city center. They hope that a mudslide will not bury them and the other residents. Their precarious position is exacerbated by the government’s lack of planning for the influx of rural migrants. This dismal scenario is hardly an exaggeration. For developing countries, household savings are crucial for family security, maintaining progress while emerging from poverty, and contributing to total savings.1 Yet Attanasio and Szekely (2000: 5) found that the household savings rates in Mexico and Peru were both less than 10 percent of annual disposable income, compared to nearly 30 percent for Thai households and nearly 50 percent for Taiwanese households.2 Even worse, for each of the three bottom quintiles (i.e., 60 percent of the households), the Mexican and Peruvian savings rates were negative, while for Thailand a negative savings rate was experienced only by the poorest 20 percent of the population, and all of the Taiwanese quintiles showed positive savings (Attanasio and Szekely 2000: 5). For Sub-Saharan Africa, not only are household savings rates and total savings rates low, they have been declining. Aryeetey and Udry’s 2000 assess­ ment for all of Sub-Saharan Africa concludes that “aside from being generally low, [gross domestic] saving rates have shown consistent decline over the last thirty years in most countries, seldom exceeding 15 percent of GDP” (Aryeetey and Udry 2000: 1). The farmer’s exposure to soil erosion represents a worldwide problem: Pimentel (2006: 123) estimates that “currently, about 80% of the world’s agricultural land suffers moderate to severe erosion, while 10% experiences slight erosion.” Part of this erosion is due to deforestation, which in Africa resulted in a 9 percent decline in forest area from 1990 to 2005 and in Latin America amounted to a 10 percent decline over the same period.3 The United Nations Food and Agriculture Organization (2007a) reports that “Africa and Latin America and the Caribbean are currently the two regions with the highest loss­es. Africa, which accounts for about 16 percent of the total global forest area, lost over 9 percent of its forests between 1990 and 2005. Latin America and the Caribbean, with over 47 percent of the world’s forests saw an increase in the annual net loss between 2000 and 2005, from 0.46 percent to 0.51 percent”—the pace of Latin American deforestation has been increasing even as the forest acreage declines. The adolescent’s willingness to engage in risky behavior reflects another disturbing trend throughout much of the developing world, as drugs become

The Challenge of Farsightedness  

more accessible and widely used and sexual abstinence loses its cultural support. Cocaine use is increasing in Africa, Asia, and Latin America; the use of opiates such as heroin is increasing in Africa, Central and West Asia, and India (United Nations Office on Drugs and Crime 2007: 13, 83). Exposure to sexually transmitted diseases through unprotected sex, particularly at young ages,4 has resulted in high incidence of a wide variety of diseases. Despite recent indications that the rate of HIV infections may be declining, 2.5 million people are infected annually, the majority in Africa (United Nations Programme on HIV/AIDS 2006: 2). Regarding cigarette smoking—an even greater mortality risk to health than illicit drugs or AIDS—the World Health Organization estimates that currently two-thirds of the 5.5 million deaths attributed to tobacco occur in low-income and middle-income countries and that this will rise to 80 percent of the 8.3 million deaths in the baseline projection for the year 2030 (Mathers and Loncar 2006: 2025). While these statistics demonstrate the shortsightedness of individuals or families, other statistics demonstrate that the very costly governmental shortsightedness reflected in this scenario is no exaggeration either. If we return to the problems of physical infrastructure, we would see that the neglect of road maintenance in developing countries is extreme, particularly in light of the fact that in developing countries the maintenance and rehabilitation of roads typically have far greater returns than the initial construction.5 A 2006 assessment by the Sub-Saharan Africa Transport Policy Program reports that of the eighteen Sub-Saharan African countries that have established roadmaintenance funds and provide enough data to assess the degree to which routine and periodic maintenance is accomplished, only four countries are meeting the full routine maintenance, and none is fully meeting the periodic maintenance needs; the median level of meeting periodic needs is less than 40 percent. (Benmaamar 2006: 13). Gunter Zietlow’s 2004 assessment of road maintenance in Latin America concluded that “unfortunately, even today, countries in the region are spending normally between 20% and 50% of the funding required for adequate road maintenance only. In addition, these already insufficient funds often are being used inefficiently in a poor state” (Zietlow 2004: 3). Even pressure by the World Bank to require governments to address road maintenance in Bank-funded transport projects has been ineffective. A 2007 assessment of the projects approved during the 1995–2005 period notes: “Despite the Bank’s emphasis on adequate and timely road maintenance, this objective was seldom satisfactorily accomplished. The limited funds allocated to roads were often wasted through inefficient work methods and too much

  Chapter One

spending on new construction at the expense of the maintenance budget. As a result, a high proportion of the roads in developing countries remained in poor condition” (World Bank Independent Evaluation Group 2007: 24). Yet it is not just road maintenance that is underfunded —physical infrastructure suffers woefully from underinvestment in most of the developing world. World Bank infrastructure experts estimated that for the 2005–10 period, developing countries would need US$550 billion to US$650 billion in physical infrastructure development, requiring 6.5–7.7 percent of gross domestic product (GDP), but current infrastructure investment is only half as much (Briceño-Garmendia, Estache, and Shafik 2004). The consequences of underinvestment in infrastructure are severe. One assessment for Latin America estimated an annual loss during the 1990s of 1–3 percent of GDP growth due to infrastructure shortfalls (Easterly and Serven 2003). Inadequate infrastructure is only one of the obstacles that stand in the way of improving economic welfare in developing countries. The low savings and investment rates mentioned above, combined with questionable economic policies, dampen the productivity gains that are essential for economic growth. The International Labour Organization (2007: 15, fig. 18b) reported that as of 2006 output per worker in Sub-Saharan Africa, even adjusting for cost-of-living differences, was only one-twelfth of the levels of developed countries; South Asian labor productivity was less than one-seventh of the developed-country nations; Southeast Asia’s productivity was less than one-sixth; and for Latin America and the Caribbean, the worker-output productivity was less than one-third of that of developed countries. Middle Eastern nations, with relatively high output per worker because of oil production, have actually declined overall in worker productivity over the past decade. Low productivity also reflects low educational levels. High dropout rates in developing countries reflect weak public education funding, difficulties in paying school fees for both public and private schools, and weak incentives for families to encourage their children to attend. For many of the poorest families, school-based feeding programs would provide a strong incentive, but public or private charitable funding is lacking in many countries. Government spending on education in all developing world regions is less than that of North America and Western Europe, even as a proportion of total gross national product (United Nations Educational, Social and Cultural Organization 2007: 9). A consequence is that only a quarter of Sub-Saharan African secondary-school-age children are enrolled in secondary school—with low levels also found in the Arab states (58 percent), Latin America and the Carib-

The Challenge of Farsightedness  

bean (68 percent), and East Asia and the Pacific (70 percent) (United Nations Educational, Social and Cultural Organization 2007: 109).6 The gap left by governments in providing the wherewithal for poor children to attend school is not commonly filled by domestic charitable contributions. Despite numerous calls for “indigenous philanthropy,”7 Acs and Desai (2007: 8) conclude that “there does not currently exist a robust and effective local philanthropy sector in many developing countries.” The tradition of private philanthropy beyond contributions to religious institutions has generally been weak outside of North America and parts of northern Europe. These problems all require greater short-term sacrifice to make longterm improvements. This raises a series of crucial questions: How can families be induced to save at adequate levels and to invest in the education of their children? How can conservation and environmental protection be promoted— to stimulate individuals, collective action groups, and governments to be both proactive and protective about ecosystems and natural-resource endowments? How can people be discouraged from engaging in behaviors that risk health and security, ranging from HIV exposure to building in areas subject to floods or fire? How can the participation of residents in community selfimprovement be increased where these efforts are essential to complement the work of government or NGOs and to instill enough pride to ensure that the neighborhoods will not be allowed to deteriorate? How can firms be persuaded to improve their long-term productivity through investments in appropriate research and development, providing on-the-job training and accepting sound economic policy reforms? How can governments be induced to reform economic policies that discourage long-term productivity gains? How can commitment to improvements in physical infrastructure be promoted despite the long gestation periods for such initiatives? How can the charitable impulses of the wealthy be harnessed to provide for the longterm public good beyond governmental efforts? All of these challenges have two elements in common. First, they call for overcoming the shortsighted perspectives that so often prevail among individuals, governments, and nongovernmental entities. If the essence of sustainable development is the capacity to take sound, farsighted actions, what strategies and institutional arrangements can promote these actions—on the part of citizens, government, businesses, labor unions, and other nongovernmental groups? Second, all of these challenges entail risk and uncertainty. The short-term sacrifices themselves frequently present risks to economic, political, or social

  Chapter One

standing. If the poor farmer invests in seed and fertilizer for a new type of crop or diverts effort from annual cultivation in order to build dams or plant trees, the risk is that current savings or income may not be sufficient to rebuild the home if it is damaged by fire or flood or to meet a health emergency. If the political leader adopts a policy that is unpopular because of the short-term sacrifices required of constituents, the immediate risk is the possibility of loss of leadership position. The longer-term risk is that the initiative will fail, wasting the resources devoted to it and the credibility of the initiator. The uncertainty as to whether these failures will materialize brings the problem into the present: Will people agree to bear today’s costs and risks in light of the uncertainty about the long-term gains? How can initiators of farsighted pursuits either reduce risk and uncertainty, or convince others that the initiative is worth pursuing despite these concerns? As daunting as these challenges seem, many individuals, nongovernmental groups, and governments in developing countries have addressed these longterm challenges successfully. As examples of meeting the challenges, many have noted that family savings rates have increased dramatically in East Asia (Lee, Mason, and Miller 1991). School enrollments in many countries have improved—for the seventeen countries that the United Nations Development Programme deems as “low in human development” that reported enrollment figures, the primary school enrollment rate increased to 69 percent in 2005 from 45 percent in 1991 (United Nations Development Programme 2007: 270). In Brazil, school enrollments rose dramatically during the 1990s, with primary school enrollments rates increasing to 95 percent in 2005 from 85 percent in 1991 and secondary school enrollments rates rising to 78 percent from 17 percent. These increases can be traced, in part, to families’ decisions to limit family size in order to reduce the overall financial burdens of having large families (Lam and Marteleto 2006), which of course includes the costs of sending children to school. While many parts of the developing world are experiencing excessive deforestation, North America, Europe, and Asia have reversed the deforestation trend—Asia because of huge efforts in plantation forests in China. And these government-initiated Chinese plantations, along with the efforts of individual farmers to build dams and terraces and adopt new tillage techniques, have resulted in considerable progress in soil erosion control since the 1980s (Xiubin, Tang, and Zhang 2006: 345). We cannot overlook the additional effort of dam and terrace building, nor the short-term risks of adopting new farming techniques.

The Challenge of Farsightedness  

Indeed, some farsighted arrangements for safeguarding natural resources have been successful for centuries. In Japan, many villages developed communal arrangements for sustainable commons land management by the seventeenth century that are still in effect today (McKean 1982, 1992). Similarly, systems for sharing irrigation water in Valencia, Spain, date back to the fifteenth century or even earlier (Ostrom 1990: 69–76).8 Environmental and conservation movements demonstrated extraordinary farsightedness and dedication long before these topics became mainstream. We see organizations such as the Nature Conservancy thoroughly committed to protecting land in perpetuity. Although some risky behaviors such as illicit drug use are on the rise in the developing world, such behaviors can and have been deterred through thoughtful interventions. The World Bank’s 2007 World Development Report cites Mexico’s Oportunidades program, which “provided incentives for young people to remain in school, where they received health information and periodic health services. . . . In addition to the beneficial effects on schooling, the program led to reduced smoking and alcohol consumption for all youth, and an increase in the age of sexual debut among girls” (World Bank 2007b: 136). Finally, while much of the developing world falls behind in the need for physical infrastructure to accommodate growing populations and commerce, several countries in East Asia have been “building ahead of demand”; China is investing eight times as much on physical infrastructure as India in absolute terms and three times as much as a proportion of GDP (Financial Times 2005). And while many of the Sub-Saharan African countries have failed to provide adequate financial resources for road maintenance, Benin, Ethiopia, Mozambique, and Tanzanaia have managed to create road-maintenance funds that precommit resources to cover at least all of the routine maintenance needs (Benmaamar 2006). The overall picture, then, is that widespread shortsightedness exists alongside remarkably strong potential for farsightedness. Shortsightedness is not inevitable—the question is how to overcome it. In response to this question, this book provides a framework, an inventory, and an assessment of a broad range of strategies to overcome shortsighted thinking and lack of action to enhance sustainable development. Using the multivalue, interdisciplinary approach of the policy sciences (described below), this framework strives to be as comprehensive as possible in crafting an inventory of the remarkably large number of strategies that can promote sound farsighted thinking and action. The phrase “sound farsighted thinking and action” conveys a cluster of three ideas. First, the capacity and willingness to think and act farsightedly

10  Chapter One

is one—but not the only—crucial factor in determining whether people will be able to develop sustainably in the social, economic, and political realms. Farsightedness does not guarantee good results, but shortsightedness is a far greater threat to desirable long-term consequences. Second, because thought generally precedes action, thinking about the long term is more likely to generate actions that take into account long-term consequences, although this does not always happen. Third, the desired actions have to be sound as well as farsighted. Although shortsightedness is often a recipe for unsound actions, not all farsighted actions are wise, either for those undertaking the actions or for others. Many grandiose schemes have been based on unrealistic or even repugnant long-term objectives, or set about to achieve decent long-term goals with unwise means. Therefore, the task is to identify strategies for promoting farsighted action, but without presuming that every such action is to be supported. Of primary concern is the fate of developing countries, although examples also can be drawn from developed countries where effective strategies are employed. Certainly, shortsighted behaviors can be found everywhere, and the shortsighted actions of developed countries can drag the whole world into disasters—developed countries have more impact on global climate change due to their greater production of greenhouse gases and deplete more of the world’s raw materials because of their voracious industrial and consumption appetites. And developed nations’ decisions as to whether and how to intervene in conflict-ridden areas are similarly crucial; many such decisions have been insufficiently thought out in terms of both rationale and execution. Yet the rationale for devoting more attention to less-developed nations is driven by the recognition that developing countries typically face very high stakes that make sound, farsighted thinking and action even more urgent. Whether to engage in sweeping economic policy reforms, shift from centralized to decentralized governance, relocate populations, shift to or from heavy reliance on natural resources, change the fundamental rules of political competition, or refocus on environmental protection at the possible expense of short-term economic growth, developing countries typically face greater opportunities, but also greater risks, than developed countries. When political, economic, or social conditions deteriorate in developing countries, other countries, rich and poor, are frequently dragged into the humanitarian crises or armed conflicts that often occur. For developing countries, the potential for rapid economic development is often enormous, but so is the possibility of disaster. We have only to look at the remarkable recent growth, yet the grave environmental risks, of China and India. We can

The Challenge of Farsightedness  11

examine a country like Argentina, with such apparently impressive endowments, to see how growth opportunities can be squandered, while admiring the recent responsible growth of neighboring Chile. We know that the GDP of developing countries can grow for sustained periods at rates approaching 10 percent annually, compared to a ceiling of perhaps 4 percent for developed nations. In the political sphere, developing countries can make remarkable improvements in democratic development and stability, but many of them are highly vulnerable to political decay when political leaders sacrifice longterm stability for short-term gain. Human rights may be trampled to meet immediate political interests of the government, and programs for the poor are frequently neglected in order to provide benefits to wealthier citizens who can provide political support now. Institutional arrangements that have stabilized in most developed countries are typically up for grabs in developing countries. Whether it will be the best of times or the worst of times hangs in delicate balance and depends on whether actions by governments, nongovernmental groups, and the public can avoid the myopia that is all too common in both developing and developed countries. The dismal scenario introduced at the beginning of this chapter reflects how intertwined the shortsightedness of individuals, groups, and governments can be. All can hold back a nation’s progress and well-being. This gives rise to three distinct levels or targets for strategies to promote farsighted thinking and action. First, individual and family decisions are crucial for sustainability in the economic, social, environmental, and health spheres. When a host of individuals make shortsighted decisions, they compound to national problems. Where shortsightedness reigns, savings rates are often very low, as people spend what they earn out of necessity, impatience, or lack of confidence that deferring the spending will yield longer-term benefits. Short time horizons of natural-resource exploiters encourage hasty natural-resource extraction, exceeding the optimal extraction rate that would ensure that the country (and the world) gain the greatest benefit from these resources. Short time horizons similarly discourage adequate investment in the development, protection and use of resource endowments, especially potentially renewable resources like forests and fisheries. Shortsighted consumption, at the expense of investment, obviously worsens this problem. Shortsighted individuals may defy even reasonable safety, environmental, and conservation regulations in favor of short-term benefits. Many settle in areas prone to floods, mudslides, fires, and earthquakes. Many neglect their health through poor nutrition and avoidable exposure to disease.

12  Chapter One

Second, the enormous potential of collective action over isolated individual effort can only be realized if people are induced to participate in constructive and effective ways. Collective-action groups, whether striving to pursue the interests of group members or the public good, do not arise spontaneously from common objectives, but rather require continual efforts to mobilize and retain the participation of members. For example, many neighborhoods where community self-improvement efforts could make significant differences in quality of life have seen no such efforts. Collective action by workers vis-à-vis employers, typically conveyed through labor unions, can make positive contributions in negotiating employeremployee agreements and in improving working conditions. Yet labor unions are sometimes found wanting in terms of attending to long-term economic viability. They typically resist essential wage adjustments even when a nation’s international competitiveness is compromised. The exclusion of workers trying to enter into unionized occupations may retard a nation’s progress in upgrading its workforce, improving productivity, and reducing unemployment. The stagnation that results from shortsighted union resistance may ultimately weaken the union’s standing and its capacity to defend the interests of its members. Part of the dilemma is that labor union leaders are formally accountable to their current membership, not the potential members who might join in the future. Convincing current members to embrace longterm strategies, typically in the face of skepticism toward the intentions of business and government, is an enduring challenge. By the same token, business associations serve the dual role of public policy advocacy and coordinating the actions of firms within the sector and specific subsectors, typically in a context that is complicated by the fact that such cooperation is limited by competition among firms in the same businesses. While business associations and the business sector in general can be the leading force in a nation’s economic development, they can also be resistant to sound economic reforms, as some firms are prone to chasing after the special privileges provided by tax exemptions and subsidies rather than concentrating on fundamental productivity. Unless collective action among businesses can overcome the problem that short-term profitability is favored over longterm potential, the common pattern of skimping on capital investment, training, and research will prevail. Beyond these organizations that pursue the interests of members, nongovernmental collective action can be devoted to such farsighted objectives as environmental protection and conservation, poverty alleviation and community development, health promotion, and so on, for the public good. The NGOs,

The Challenge of Farsightedness  13

defined by mandates to contribute to the public good, face a different and typically more difficult challenge of mobilizing commitment without being able to rely on the narrow self interest of potential participants. These organizations focus on influencing their members (whose participation is often crucial for the organization’s survival), other individuals (for example, to deter people from engaging in destructive activities that bring near-term rewards at the expense of long-term well-being), or the government (through advocacy efforts). Nongovernmental groups typically do not have the instruments of coercion to impose policies; they have to rely on persuasion, social pressures, and the logic of collective cooperation. Their efforts may founder if participation dwindles or their messages to the broader public fall upon deaf ears. Their advocacy tactics may be shortsightedly aggressive to the point that the government either dismisses their input or simply shuts them down. In many developing countries, conservation movements are very weak compared to developed countries; poverty-alleviation groups get only spotty support; and many low-income communities never reach the point of self-sustaining activism. Of course, these disappointments typically have other causes as well, including opposition by governments, yet the inability to appreciate and act on long-term risks and opportunities is a central problem. Third, governments face both internal and external challenges in pursuing sound long-term goals. Government officials must resolve to pursue these goals, maintain that resolve under pressures of political expediency, and persuade key stakeholders that short-term sacrifices are justified by long-term benefits. Political pressure for shortsighted policies providing immediate rewards can stifle farsighted reforms and frequently are exacerbated by distrust of government stemming from years of shortsighted government actions that have undermined the government’s credibility. Thus in the sphere of economic policy, many governments maintain unproductive subsidies involving cheap credit or other policies to prop up unsustainable businesses that absorb capital and labor that otherwise could go to more productive activities. Many governments tolerate failed banking systems, carrying huge burdens of nonperforming loans, because of the unwillingness or inability to enact the painful short-term sacrifices of writing off bad debt and eliminating failed financial institutions. Government officials may well fear that their efforts to choke off inflation through austerity measures will provoke enough opposition to topple the government,9 deterring many governments from acting aggressively to dampen the inflationary spiral of price and wage increases.10 Of course, the long-term soundness of the various types of austerity

14  Chapter One

programs has been heavily debated,11 but the record certainly shows that policies believed to be of sufficiently attractive long-term benefit have been bypassed in many countries (Calvo 2005). Despite the almost universal recognition that inflation discourages both household savings and private-sector investment, developing countries experience much higher inflation rates than developed countries,12 reflecting an unwillingness to forgo the immediate economic and political advantages of deficit spending and lax monetary policy. Government spending also often reflects shortsightedness. When government resources are flush, many governments squander them on superficially attractive but unsustainable projects.13 The opportunity to conserve financial resources until they can be used more productively is thus sacrificed for short-term gain, and a nasty side effect is greater vulnerability to destabilizing boom-and-bust cycles. Hasty spending also means that development projects that should have been screened out because of low long-term productivity are undertaken anyway. To gain short-term political popularity, many governments engage in overspending that leads to flashy projects and programs with dim long-term prospects, made even worse by the rush to launch these projects despite the lack of study of their ultimate consequences.14 In the sphere of environmental policy, conservation, and the use of naturalresource proceeds, government officials often fail to legislate and implement sensible environmental policies that have adequate, enforceable charges or penalties for pollution or resource degradation. Yet sometimes the short-term pressures to appear to be “environmentally concerned” provoke governments to pass such overly stringent environmental and conservation regulations that they are simply unenforceable. This has been a widespread problem in the former Soviet republics with respect to industrial pollution (Environmental Action Programme Task Force 2003). Similarly, there is a huge clamor to legislate such harsh penalties for wildlife poaching (including the death penalty) that the likelihood that informants would report poaching or that local guards would arrest poachers would shrink.15 Oil-exporting countries are notorious for keeping domestic oil-products prices too low, leading to both overconsumption of oil that could have benefited the country more if it had been exported and greater pollution. Even when these policies are shown to be bad, government leaders frequently hesitate to enact pricing reforms that would eliminate the incentives to overextract and overconsume scarce resources. This excessive depletion of natural resources is often tolerated because of the temporary “resource boom” it may generate, but this comes at the sacrifice of opportunities to enjoy higher future prices for resources that are becoming

The Challenge of Farsightedness  15

scarcer and threatens the potential for natural regeneration of renewable resources. To make matters worse, policy makers in many resource-dependent countries, lacking the patience to facilitate the industries that are truly productive but have long gestation periods, undertake the “downstream” diversification of resource-extractive industries (such as steel-making in countries with iron ore or plywood manufacture in countries harvesting timber), despite the fact that these downstream activities are often money-losing ventures that provoke overextraction of the raw materials (Auty 1990; W. Ascher 1999). Even among countries that have to import their energy, shortsighted government officials, under pressure by interest groups and the public, subsidize the consumption of energy (Kosmo 1987). An even more shortsighted policy is to suppress food prices in order to curry favor with urban consumers and employers (who can keep urban wages lower as a consequence), at the expense of the typically poorer rural sector, despite ample evidence that ceilings on food prices undermine the agricultural sector in the long run (Pinstrup-Andersen 1988). Another category of initially popular but environmentally unsustainable programs has been the massive resettlement schemes in such countries as Brazil, India, Indonesia, and Thailand. These are typically launched without adequate planning, studies of soil conditions, or development of the infrastructure necessary for the settlers to have economically viable farms or other livelihoods (Ascher and Healy 1990). Yet more generally, the long-term environmental consequences of many development projects have simply been ignored by government officials, because if they had to downgrade the projects, they could not respond to the pressure to identify fundable projects. In the social policy sphere, many governments seriously underfund primary and secondary education; excessive proportions of limited education budgets go to higher education, which is attractive to the politically potent “haves,” but neglects the crucial long-term mission of making the “have-nots” productive.16 Similarly, many government budgets neglect preventive health care, providing too great a proportion of the health budget to expensive but popular curative health care. In the broader spheres of institutional reform and the process of policy making, government officials, finding that serious long-term planning takes great effort and exposes them to risk if planning targets are not met, frequently ignore or trivialize the planning process. Without the prod of serious planning to focus attention on longer-term consequences and hold policy makers accountable for charting a long-term path, the prospects for sustainable development are dim, indeed.

16  Chapter One

the argument in brief The search for sound long-term strategies must go far beyond the conventional model that focuses narrowly on material consequences, assumes that benefits and costs are well understood and are devalued uniformly over time, and neglects the emotional aspects that shape the orientations toward future consequences. Material consequences are undoubtedly important, and structuring them to promote and preserve long-term commitments gives rise to a fertile set of strategies. Yet the fundamental argument of this book is that in a multivalued world, social, psychological, and institutional dynamics can be as important as material concerns in influencing the willingness to make shortterm sacrifices for long-term gains. Cognitive psychology expands our range of strategies by emphasizing that the future is not just uncertain—crucial aspects are often unexamined unless efforts are made to strengthen the focus of attention on long-term consequences. From an even broader, institutional perspective, the structure of institutions determines whether farsighted considerations are effectively introduced into decision making; and credible, patient leaders are selected and insulated so they can pursue farsighted initiatives. This commitment to explore the broadest range of factors comes directly from the policy sciences approach that guides the comprehensive analysis of public policy issues. It is also the approach that most explicitly connects psychological factors to the dynamics of the policy process.17 Based on the framework developed by Harold D. Lasswell and his many collaborators,18 the policy sciences recognize that people strive for a host of different types of values, ranging from power, wealth, well-being, and skill to affection, respect, rectitude, and enlightenment. The strategies that involve issue framing and the management of symbols reflect the policy sciences’ insight that there is much beyond the objective array of near-term and long-term benefits and costs that must be taken into account. Subjectivity can be divided into three aspects of “perspectives”: demands, identifications, and expectations. Conventional policy analysis typically considers demands, defined as preferences for particular consequences over others, as fixed. Yet the psychology of the policy sciences emphasizes that demands, which can range in intensity from mild preferences to assertions of inviolable rights, are sensitive to changes in both identifications and expectations. Identifications shape demands by determining whether people will act on behalf of others, who these others will be, and how sharply the “in group” will be differentiated from the “out groups.” Equally important, expectations of what is possible shape demands; if preferred consequences come to be seen

The Challenge of Farsightedness  17

as unlikely, the demands are likely to be scaled back. Thus the degree of confidence that a farsighted strategy will succeed is integral to the ambition of pursuing long-term objectives. Without a comprehensive framework like this, the search for strategies to promote farsighted action would neglect potentially crucial categories.

the seven challenges An examination of the challenges mentioned at the beginning of this chapter will illustrate how these strategies can work and highlight some their limitations. These are by no means the only major challenges calling for farsighted thinking and action, yet they are crucial for sustainable development. Family Economic Security. One obvious challenge is to promote the economic security of families through voluntary savings and wise investment. This can be done most directly through initiatives targeting individual self-betterment by encouraging voluntary family savings. Many African countries have savings ratios of less than 10 percent, less than half that of the typical developed country or developing countries of other regions. In contrast, developing nations with unusually high savings rates, such as Malaysia, have grown rapidly and sustainably (Abidin 2001: 150–53). Similarly, many families invest little in their children’s education, deterred either by school fees or by the short-term gains of having the children work rather than attend school. In Latin America, roughly one-third of secondary-school-aged children are not in school; in Sub-Saharan Africa, more than half of such children are not in school, and in some Sub-Saharan African countries, less than 10 percent of secondaryschool-age children attend school (United Nations Development Programme 2005). Of course, both personal savings and education expenditures require the fam­ ily’s sacrifice of postponing spending on goods and services. Making these sacrifices for the sake of savings also poses the risk that the real value of the savings will evaporate due to general economic conditions or government policy— for example, inflationary policies that erode the real value of savings in local currency. With even longer-term perspective, family economic security depends on social security policies that can require savings and safeguard the social security fund so retirees can count on significant social security income. If social security systems can capture sufficient savings and operate effectively, they can be instrumental in creating the economic safety nets so important for

18  Chapter One

farsighted family decisions. These “forced savings” initiatives raise the question of how difficult policy transitions from the typical weak state pension systems can become more effective. They also engage the problem of temptations facing government officials to divert so much of the social security funds that the intended payments cannot be provided. From an intergenerational perspective, long-term family economic security can also be enhanced by promoting family investments in children’s education. Here, too, the effort calls for economic sacrifices of paying school fees and forgoing the labor of the children to help in the family’s farms or businesses. For parents with little education themselves, the content and advantages of more education may be difficult to understand. There is also the risk that years of education will not result in a better life for the children and the family in general. A final aspect of family economic security worth exploring is family planning. The long-term concern over whether children will be able to support their parents and other family members when the parents are no longer able to provide for themselves often creates both short-term and long-term problems of spreading existing family resources so thin that savings, family health, resources for entrepreneurship, and children’s education are underfunded. For all the efforts of governments and NGOs to “argue” the merits of smaller families, typically little happens to reduce family size until the family’s socioeconomic situation changes: urbanization puts additional economic burdens on families that have to pay more for housing; child mortality declines, leaving parents more confident that they will have children who survive into adulthood; and social safety nets and retirement security are provided to reduce the fears of long-term economic vulnerability. Therefore effective family planning depends not only on the efforts by NGOs and government to provide the awareness, knowledge, and technologies of birth control but also on government policies that lead to more optimistic expectations about the long-term prospects of life with fewer births. Conservation and Environmental Protection. Many initiatives of individual, collective, and governmental action can contribute to conservation and environmental protection. Individual actions to desist from polluting and littering, or to invest in expanding the natural-resource endowment, can be highly significant for both environmental quality and long-term economic benefits resulting from healthier and more abundant forests, fisheries, farmland, and so on.

The Challenge of Farsightedness  19

The collective action aspect of conservation and environmental protection can best be viewed by assessing the challenges facing nongovernmental environmental and conservation organizations. These organizations have the triple challenge of creating public demand for farsighted policy actions, encouraging voluntary restraint on the part of the public, and providing the government with the incentive to pursue farsighted policies. The role of government in conservation and environmental protection includes the obvious policies of undertaking or funding conservation and environmental projects and the regulation of private actions that impact the environment. Yet the frequently more important environmental impacts come about not from “environmental policies” but rather from development policies that have secondary or unintended impacts on ecosystems. These include population resettlement schemes that lead to massive land-use conversions, road building in ecologically fragile areas, support for industrial developments that add to the air and water pollution loads, and so on. One highly illuminating if more specific challenge within the sphere of conservation and environmental protection is to induce farmers to plant and nurture trees on their own land. In many circumstances, tree planting can ultimately be a strong source of income for the farmer, yet the long gestation of tree crops, the area and labor they demand, entail short-term sacrifice. The uncertainties of production, ownership rights and markets add considerable risk as well. Tree planting has, in many instances, a clear public-goods aspect as well, insofar as trees enhance environmental quality and provide economic benefits for the broader community by reducing soil erosion, providing habitat for game, and attracting tourists. Conservation groups can encourage tree planting by focusing attention on the income-earning opportunities, providing technical assistance, helping farmers to join with one another for processing and marketing their timber, defending the rights of those with customary rights to the trees, and so on. Farsighted government policies can also stimulate private tree planting, for example by compensating tree-planting farmers, facilitating markets for timber, guaranteeing ownership rights to the trees, and ensuring that farmers have sufficient economic security to defer immediate income-generating land uses. Averting Health and Security Risks. Hazardous individual behaviors, resulting from ignorance, impatience, or irresistible addiction, pose costs to society far beyond the damage to the individuals who undertake these behaviors. The most direct consequences may fall to the individuals engaging in the

20  Chapter One

behavior—the alcoholic who succumbs to cirrhosis, the homeowner whose house is destroyed by the mudslide—but the secondary costs are borne in whole or in part by the broader community. Indeed, another reason why individuals are more willing to expose themselves to risks is that others bear a significant part of the costs, such as the taxpayers who fund the hospitals for those who cannot fully pay, or the rebuilding of homes washed away by the flood. This so-called moral hazard problem raises the difficult policy question of whether and how governments can credibly signal that they will not restore the losses of those who took unreasonable risks. The short-term political rationale is typically to help in such situations, for both humanitarian reasons and to avoid criticism for appearing to be insensitive. Yet the longterm optimal policy may be to signal that foolhardy risk takers will not be financially rescued. While the most common government reaction to individual-level risky behavior is regulation (prohibiting drug use or prostitution, banning construction in dangerous areas, etc.), the scope of application is limited, defiance of prohibitions is obviously common, and enacting such regulations has to overcome objections that they encroach on personal liberty. If governments try to tax risky behaviors to discourage them by raising the costs (e.g., of alcohol consumption), the opposition from both producers and consumers must be overcome. The individual-level decisions to avoid risky behavior may also depend heavily on collective nongovernmental actions. Risks must be recognized to be consciously avoided—focusing attention on health and safety risks is an important function of many government agencies and NGOs. Frequently the avoidance of risky behavior can be reinforced by inculcating appropriate norms, such as sobriety and marital fidelity, which can be reinforced through exhortations by religious institutions, NGOs, and other respected institutions. Community Self-Help Upgrading. Initiatives to mobilize low-income residents to participate in a self-help community development programs typically focus on the long-term objective of upgrading their housing, sanitation, streets, and so on. Resident participation serves two purposes: adding to the resources of money and labor when the government does not have the resources or the priority to provide much of the personnel or financing and instilling a sense of ownership and pride to reinforce the commitment to maintain and continue the improvements. Community self-improvement requires community leadership, and the capacity of the leaders to mobilize community members to overcome the skep-

The Challenge of Farsightedness  21

ticism that their efforts will come to naught. Perhaps other community members will fail to do their part; perhaps the land will be appropriated by the government or others who wish to take over the improved area. The government faces the challenges of whether and how much to help communities, facing the risk that too little help may leave the residents’ efforts too feeble and the opposite risk that too much support would displace community effort and undermine the community’s sense of ownership. In the many instances of formally illegal settlements, the government faces an even more difficult dilemma of whether to recognize these settlements (the socalled accommodationist option) and provide them with municipal services, or try to evict the residents. This is an especially agonizing decision when the settlement is illegal because of the environmental fragility of the land. And yet the temptation to bulldoze the settlements without a long-term plan for relocating the residents is likely to result in a repetition of illegal settlement. Promoting Productivity. The challenge to encouraging long-term productivity improvements, whether through innovation, human-capital development, or economic policy reform, lies in two problems. First, even if the near-term expenses could be recouped handsomely through later gains in productivity, managers may be under strong pressure from owners to produce high shortterm profits. Second, the productivity gains will be captured only if the gains from the innovations and better-trained workers remain with that firm. In many instances, other firms can take advantage of innovations—particularly process innovations, which are typically difficult to protect through patents. By the same token, trained workers are frequently lured away by other firms. These issues raise the collective action problem: unless other firms also conduct shareable R&D or worker training, a firm considering either investment would bear the costs but not necessarily the benefits. An even more fundamental obstacle to productivity is the behavior of business executives when confronted with policy initiatives to eliminate the subsidies, tax exemptions, and other elements of favoritism that steer investment away from the most truly productive economic activities. Such favoritism creates “rents”—profits in excess of what a fully competitive economy would yield (Tollison 1982). The executives of any firm that currently qualifies for some benefits of this favoritism face the near-term loss of these rents, even if successful economic policy reform would create a more vibrant economy that would benefit them more in the long run. This accounts for the strong resistance to “liberalization” reforms that most economists see as necessary for improving the overall productivity of the economy.

22  Chapter One

One particularly illuminating aspect of liberalization is fundamental tax reform. The prevailing wisdom among experts on the tax systems of developing countries is that a sound, thorough tax reform requires the elimination of special exemptions, broadening the tax base, and tightening tax administration (Thirsk 1997; Rao 2002; Alm, Martinez-Vazquez, and Rider 2006). The logic is that a successful tax reform will improve the efficiency of the overall economy by reducing the distortions that arise when investments are directed to activities that are less productive but are favored by tax exemptions. Not all fundamental tax reforms are intended to increase the government’s revenues, but if they are designed and succeed in doing so, the increased government revenues may improve the educational and health systems, resulting in longterm improvements in human capital, and devote sufficient resources to infrastructure improvement. Thus increasing the “tax effort” is a very important objective for many countries, as long as it is done without discouraging sound investment, provoking evasion and corruption, or creating acute dissatisfaction with unfair treatment of some taxpayers. Many tax reform initiatives include provisions to make tax avoidance and evasion more difficult; that means that for the taxpayer who is willing to comply with the tax laws, others will be more likely to pay their share as well. Yet some taxpayers and their representatives will fear that support or even acquiescence to the tax reform legislation would increase their tax burdens without the long-term benefits ever materializing. The challenge is to overcome the selfishness and self-protectiveness of taxpayers who fear that they could find themselves subject to very heavy tax burdens. They may doubt the dangers and obstacles to economic growth that the initiators recognize. They may also doubt the commitment and capacity of the government to carry through the reform. They may even fear that supporting the reform will show weakness and thereby increase the chances that they will be required to engage in yet greater sacrifices. These concerns may provoke opposition to the reform on the part of legislators who represent the immediately disadvantaged groups or even other executive-branch leaders who question the wisdom of the reform or its impact on their own spheres. If the tax reform legislation is ultimately enacted, compliance by taxpayers may well be another difficult challenge. In short, the tax reform initiators must convince a critical mass of legislators, executive agency heads, interest group representatives, and the public that the reform measures are worth the immediate sacrifices and the longer-term risks. Furthermore, government leaders proposing tax reforms may have to worry about their own commitment in the face of political opposition or even physical

The Challenge of Farsightedness  23

threats. Or they may worry that their successors would abandon the reform, undoing the progress and therefore wasting the previous sacrifices. Therefore this type of initiative may call for self-restraint to resist short-term pressures, imposing commitments on future policy makers, or both. Physical Infrastructure. The construction and maintenance of physical structures, ranging from roads and ports to telecommunications, require farsighted thinking and commitments to overcome the lengthy periods and large financial burdens required to create them, and the even longer (and frequently neglected) commitment to maintain them. The uncertainties of anticipating infrastructure can make transportation, land-use, and communications planning very daunting, resulting in delays that make construction disruptive of the existing built environment, or in exaggerated expectations that lead to overly expensive developments (Flyvbjerg, Bruzelius, and Rothengatter 2003). Major public infrastructure projects may encounter strong resistance if they are to be financed through higher taxes. If instead they are financed through borrowing or related approaches that ultimately require user fees, it may be very tempting for the government to pressure the operators to reduce the fees even if this beggars the maintenance budget and deters others from participating in infrastructure development in that country. Sometimes the priorities for physical infrastructure initiatives cater to shortsighted political agendas. For example, too much of Mexico’s dwindling oil wealth is going into the construction of extravagant sports stadiums instead of improvements in roads, ports, and the irrigation system. More pervasively, the political logic of building and maintaining infrastructure such as roads, rail lines, harbors, and so on, generally heavily favors initial construction over maintenance. Providing a new facility is highly visible and easily redounds to the credit of the government seen as responsible. Yet maintenance is a generally a low-visibility activity, and if the current government is not the one responsible for the initial facility, maintenance may only remind people of the accomplishment of the past. Scrimping on maintenance when budgets are tight is also tempting because of its low immediate political cost, compared to disappointing people by freezing a road-building project or completing a harbor facility. It has long been recognized that for many developing countries, facility maintenance is a more serious problem than initial construction. Charitable Contributions. The final collective action challenge that will be examined in some depth is more purely public interest oriented: to promote charitable giving. Voluntary contributions are not only very important for

24  Chapter One

augmenting government spending for the welfare of economically marginal people, but also to strengthen civil society in both providing public goods and engaging in advocacy. Those contributions that entail transfers from the well-off to the needy may help to reduce the antagonism of poor against rich. Nations, and different groups within them, vary enormously in terms of their generosity beyond the intimate circle of close relatives and friends. In many countries, charitable contributions are largely confined to donations to religious institutions. Contributions for other institutions in the social and environmental spheres are dampened by the attitude that social welfare and environmental protection are the responsibilities of the state. Much of the responsibility for promoting charitable contributions lies with the organizations soliciting the contributions. If public spirit is insufficient in itself, then the appeal must be based on appreciation of long-term benefit for all. Therefore the task of the charitable or advocacy group frequently must be to convince those who can contribute that their sacrifice would indeed bring about long-term improvements. The promotion of charity is also a complicated challenge for the government. On the one hand, the policies that can encourage voluntary giving, most notably the kinds of tax deductions that have been so successful in the United States, may divert resources from the government coffers. They may also lead to evasion schemes until the government has the capability to sort out the legitimate charitable contributions from the false ones.

approaches to addressing these challenges The approaches for addressing these challenges fall into four basic categories: 1. Promoting and Aiding in the Analysis of Future Consequences. The first approach, most preliminary in terms of the decision process, is simply to promote attention to future risks, opportunities, and consequences of action. Even without the promoters specifying particular actions, the efforts to focus attention and provide the wherewithal to choose sound farsighted actions can have the broadest impact on sustainable development. Such efforts as planning, forecasting, and in-depth problem diagnosis all can be means to require or entice individuals or organizations to assess the future. For example, the need for individuals to consider and take actions to secure their long-term financial well-being is not rooted in any single proposal to address the risks of disability, inflation, or simply inadequate savings. Therefore,

The Challenge of Farsightedness  25

whether or not a government or NGO is proposing a reform in the nation’s social security system, initiatives by either may be directed to encouraging individuals to think about whether their personally held savings and their pensions would be adequate to sustain them during their retirement years. By the same token, government officials and staffs of nongovernmental entities of all varieties can be encouraged to think ahead in general ways. All governments should attempt to map out the consequences of various scenarios of global climate change; all businesses should try to anticipate the opportunities and risks presented by future technological advances. 2. Securing Support for Farsighted Policies. A government’s capacity to enact farsighted policies is not guaranteed by its formal authority—it also depends on the support and compliance of stakeholders. The same is true for other organizations with authority to make decisions that are formally binding on others. Virtually all controversial policy reforms call for support and compliance by affected groups that would face increased near-term costs, reduced nearterm benefits, or both—otherwise the policy would have been embraced by all. This means that from a practical perspective, even those with formal authority have to engage in advocacy to gain support for farsighted policies. While the formal decision may be a vote in the legislature or the result of a public referendum, the politics over policy reforms typically start with the announcement of the policy initiative and the initial responses to the initiative. Many such initiatives are stillborn due to negative reactions from key groups, or even from other officials within the government, because of short-term costs and a lack of recognition of the risks or opportunities that the policies are designed to address. If the initiative does proceed, further opportunities for derailing it are typically present in the specifics presented for formal approval, whether it is approved formally, how the approved formulation is interpreted, and how it is implemented. And even after a policy is enacted, its fate still requires compliance by those who come under its provisions. Many a farsighted policy has been undermined when resisted by the public, key interest groups, or other governmental leaders. Consider a policy initiative to create a nature reserve. The successful reserve may improve the environment in the long run and may stimulate or strengthen an ecotourism industry that will benefit the overall economy, and, if structured properly, the local people living in or near the reserve area. Here again the challenge is to persuade other government officials and nongovernmental stakeholders that the policy to create the reserve will have the intended cumulative effects. Conservation policies often fail when people defy prohibitions against

26  Chapter One

cutting trees, hunting game, exceeding fishing limits, and so on. How can farsighted officials promote sufficient concern over the long term and create sufficient trust that short-term sacrifices will produce the longer-term benefit, for these initiatives to flourish? The challenge of trying to enact these farsighted policy reforms arises from the fact that when the government proposes initiatives that will require sacrificing income or opportunities, there is no iron-clad guarantee that those whom the government promises will benefit in the long run will indeed benefit (Fernandez and Rodrik 1991). This exchange between the government and key stakeholders of today’s support for future benefits is, by its very nature, a nonsimultaneous exchange, generally without recourse for those making the sacrifices if the government reneges on its longer-term promises or is simply unable to bring about the promised conditions.19 To make matters worse, accepting a policy reform initiative may reduce a particular group’s bargaining power and may even make it more vulnerable to the imposition of policies requiring greater sacrifices. Faced with such opposition, government officials may scuttle the reform as unworkable or put off further deliberation until “the time is right.” In some instances, the right time never comes, and procrastination becomes essentially permanent. 3. Encouraging Individual Self-Betterment. The third category of initiatives encompasses efforts by government, nongovernmental groups, or individuals to encourage people to engage in private behaviors consistent with their own long-term benefits. These initiatives—going beyond the efforts of the first category of initiatives to encourage a focus on future consequences—may entail promoting sound behaviors, such as gaining greater skills and saving for retirement, or discouraging unsound behaviors such as smoking and excessive gambling. Although governments frequently try to promote or discourage individual behavior through subsidies or regulation, this category of appeals calls for targeted individuals to act out of their own recognition that the farsighted behaviors are better for them, despite the requirement that short-term gratifications must be sacrificed. The importance of relying on these appeals rather than on regulatory prohibitions against shortsighted behaviors has become increasingly obvious, as the high costs and limited effectiveness of regulation alone have been demonstrated in many spheres. The tragedy of hundreds of thousands of people incarcerated for drug addiction is testament to both the ineffectiveness and costs of such approaches. These appeals are also distinct from the first category in the lack of coercive power at the disposal of the persuaders. If they are to be successful, they

The Challenge of Farsightedness  27

must convince rather than force. This is accomplished by focusing attention on the consequences of positive and negative behaviors, helping to overcome the temptations of immediate gratification, and enhancing the attractiveness of the long-term benefits. Because persuasion rather than coercion is called for, government has no monopoly on such efforts. Many nongovernmental groups are dedicated to persuading people to abstain from alcohol, drugs, unprotected sex, delinquency, reckless driving, and so on. 4. Mobilization of Activists by Nongovernmental Groups. The fourth scenario involves efforts by nongovernmental groups to mobilize people to participate in collective action in such programs as improving environmental conditions, conserving forests, improving community sanitation, and so on. These initiatives go beyond isolated individual behavior, such as abstinence from alcohol, to activities requiring group interaction. Like individual self-regulation, they also call for the short-term sacrifice of initial investments of money, time, and other resources; they may also entail risks of attacks from others who oppose their activities. For farsighted leaders of organized groups outside of government, the key is to spread the commitment to farsighted actions to others, as well as to press government for more farsighted policies. This latter challenge is a delicate matter of self-restraint: groups that are impatient in their demands on government may be ignored simply because government officials conclude that they face a no-win prospect in trying to respond to groups that are impossible to satisfy. Therefore, our analysis has to examine not only the strategies that government officials can use to create incentives for other officials, organized groups, and the public to act farsightedly but also the strategies that can be used by nongovernmental groups to promote farsighted actions at the same three levels. As with the second category of initiatives, because nongovernmental groups do not have the instruments of coercion to impose policies, they have to rely on persuasion, social pressures, and the logic of collective cooperation to mobilize people. Sometimes these efforts are led by NGOs, sometimes by “grassroots organizations,” defined by mandates to improve the welfare of their own members.

c av e a t s Several caveats are in order, elaborating on the earlier point that farsighted thinking and action are not always beneficial or necessary. Many development strategies that have required remarkable farsightedness have simply been terribly

28  Chapter One

misguided. The import-substitution industrialization of the 1950s through the 1970s was certainly a long-term strategy, requiring fundamental transformations in comparative advantages and investment; yet it was, in most cases, a clearly failed strategy. The second caveat is to recognize that even laudable goals may be stalled if the perspective is so long term that this is used as a pretext for not taking action. Procrastination is a common problem in addressing issues that can be handled much more effectively before they become crises. The fifty-year perspective on global climate change may mobilize effort on the part of some, but it may stall action on the part of others. Urgency is sometimes necessary to provoke the right actions. Third, actions that may be good in the long run are not necessarily based on long-term perspectives. Some behaviors, such as hard work, frugality, care for children, and so on, arise from norms and habits. The people who behave this way may have no particular vision of the future, but their actions may have positive long-term consequences nevertheless. These behaviors become favored and routine within the societal repertoire because they have been successful and sustainable in the past (De Jouvenel 1967: 9). Fourth, greater certainty of the future does not necessarily encourage farsighted behavior. What if people knew that in some cases their noble efforts will produce only meager results? Under some circumstances, uncertainty can be useful. For example, when a stable, long-term arrangement is being sought, it may be useful if all involved parties are uncertain about their power and position within that arrangement. The late philosopher John Rawls popularized the idea that the fairness of an arrangement can be assessed by asking whether it would be agreed to by parties operating under such a “veil of ignorance.” For example, would not people prefer stronger environmental rules if they did not know whether they would be the polluter or the victim of pollution? Thus the coupling between long-term thinking and farsighted actions is not quite as tight as one might first imagine. Nevertheless, in a vast range of circumstances, getting people to focus on long-term possibilities is crucial for advancing sound development strategies.

chapter two

The Root Causes of Shortsightedness and Their Manifestations in Developing Countries In the vein of “know thine enemy,” we should first explore the basic reasons why people are shortsighted. Four factors, and many interactions among them, account for the strong tendency of people to think and act in shortsighted ways: impatience, selfishness, analytic limits, and vulnerability. Finally, this chapter will review the particular characteristics of each for developing countries and convey why, in many circumstances, they are more formidable in these countries.

p u r e i m pa t i e n c e The first factor is the simple preference for benefits to come earlier rather than later and for unavoidable negatives to come later rather than earlier. To distinguish this from the strategic impatience of cashing out a short-term gain in order to invest it in another venture with a higher expected return or the unwillingness to make short-term sacrifices because of doubts that the longerterm benefits would materialize, economists term this “pure impatience” or “time preference” (i.e., greater time preference means greater impatience). It is also reflected in the preference for consumption over savings and investment, seen at both the individual and governmental levels. While not a universal tendency, pure impatience is undeniably common and must be accepted as a formidable obstacle to the run-of-the-mill strategy of simply pointing out that good things come to those who sacrifice and wait.1 The simplest way of modeling pure impatience is to represent the tendency to diminish the value of a later benefit or cost by applying a constant and

30  Chapter Two

uniform discount rate (e.g., 10 percent per year) to determine its present value. The discount rate represents the shrinkage rate of the value of, and thus concern for, benefits or costs expected to occur farther into the future. A person may be indifferent between receiving a benefit of, say, $1,000,000 next year, compared to receiving $900,000 today. The year’s time lag in receiving the benefit is thus “discounted” or diminished, by 10 percent. If indeed people discount the present value of future benefits and costs at a constant rate, then even moderate rates imply dramatically shrinking concern for future consequences. If next year’s benefit declines by 10 percent compared to the same benefit received today, then the benefit coming after a tenyear delay would be worth less than 40 percent of today’s benefit, and the benefit coming after a 20-year delay would be valued at less than 15 percent of the benefit received today. Impatience contributes to hasty and reckless depletion of natural resources2 and the failure to take advantage of opportunities to find “win-win” complementaries between companies’ efficiency and environmental improvements.3 It has also been implicated as a driving force behind low household savings rates (Masson, Bayoumi and Samiei 1998; Attanasio and Szekely 2000). It is often a major factor in neglecting investment in everything from research and development (National Academy of Engineering 1992) to education.4 In terms of government policy, impatience may be one source of the willingness of some governments to risk the long-term damage of global climate change in order to safeguard immediate economic gains.5 It has also been a factor behind the reckless resettlement schemes mentioned earlier, as documented by Fearnside’s account of decisions to encourage Amazonian settlement prior to conducting relevant economic, soil, and environmental studies (Fearnside 1985) and nearly identical problems with the Indonesian resettlement scheme assessed by Secrett (1986) and Donner (1987). This typically reflects impatience on the part of both the government leaders and the people ostensibly to benefit from these schemes. Impatience has also been blamed for government monetary policies that induce businesses to underinvest in farsighted research and development.6 From impatience also comes the tendency toward procrastination, or the delay in taking actions known to be desirable but in the immediate present outweighed by short-term benefits that are less discounted. Many policy reforms, such as raising energy prices to conserve fuels and force morepolluting vehicles into retirement, have moderately high short-term costs to the public and to businesses, while the benefits are longer term. Many governments understand the need for such reforms, but their immediate political

Causes and Manifestations in Developing Countries  31

costs, undiscounted because they will arise the moment the price increases are announced, often deter action. Good long-term intentions are subverted by short-term temptations or emergencies. Impatience also reinforces the tendency of “goal substitution.” In general, goal substitution involves replacing one objective with another, usually with an objective that is easier or more rewarding to accomplish but of less effectiveness in achieving the original goal. The particular type of goal substitution triggered by impatience occurs when people get near-term rewards for actions that may start out as means to long-term ends but come to be overvalued as ends in themselves. In many situations, this substitution is counterproductive. For example, in proposing and evaluating development projects, government officials may come to regard having projects in the pipeline as a goal in itself, even if filling the pipeline requires including bad projects. Similarly, the downstream processing of raw inputs, mentioned earlier as frequently nonviable from an economic perspective, may be rationalized with the specious logic that increasing the “value added” of a nation’s output is good in and of itself. While added value can lead to greater profitability in some circumstances, in many situations the downstream industries are actually money losers. In the environmental sphere, impatience on the part of government officials commonly underlies the practice of writing overly stringent environmental regulations, as if having the regulations on the books is itself an accomplishment, even though highly stringent regulations may be unenforceable. Sometimes the new goal is simply a less worthwhile end, but the shortterm rewards for pursuing it are attractive. For example, in the Philippines the long-term goal of food security has frequently been replaced by a government priority of food self-sufficiency, which has undermined long-term food security by increasing the reluctance of the government to import food, expanding cultivation into areas where it cannot be sustained, and limiting the incomes of farm laborers who could be more productive producing nonfood cash crops. Food self-sufficiency as a policy goal also restricts the definition of the food problem to the production side, neglecting the issue of whether the poor have enough income to afford adequate nutrition, and restricts the range of government agencies that would be called upon to address the problem (Cabanilla 1999). Nevertheless, a government can appear to be making progress toward food self-sufficiency by restricting imports or extensifying agriculture to previously uncultivated areas. Sometimes the substituted goal is to complete a process that, if done well, would contribute to the long-term goal, but instead the process is conducted with minimal effort and other resources—“going through the motions” in a

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ritualized way. Planning exercises are often subject to such ritualization: the plan can be done quickly and elegantly, with minimal effort or risk. Obviously this trivialization of the planning function will undermine serious efforts to cope with future risks and opportunities. To make matters worse, sometimes people overinvest in ritualized planning because it appears like action and allows them to put off painful decisions that become the challenge of future decision makers.

selfishness To some degree or another, people care more about their own fortunes and those of people “close” to them than those of others. This selfishness has dimensions of degree and scope: the degree to which benefits or costs to the “self ” are weighted more heavily than benefits or costs to others and the scope of how people define the “self,” which may extend only to the individual alone—the ultimate selfish individual—or to immediate family, extended family, or broader communities variously defined. Alice Rossi, using the term “circle of ethical concern,” cites William Lecky’s 1886 concept of “moral unity” that expands from family, to clan and class, to the nation, the coalition of nations, and then humanity (Rossi 2001b: 231). Caring is not the same as identification, in the sense of how people define their own identities (e.g., as liberals or conservatives, as fundamentalists or atheists, etc.), 7 yet they are certainly connected. People speak of “identifying with the plight of others,” which does not necessarily mean that they identify themselves as similar to them, but rather to express in an informal way that they feel empathy or sympathy toward these others. Lecky’s implicit hypothesis is that the more similar people regard themselves to be of others, the more likely that they will care about the fate of these others and act on their behalf. Conversely, selfishness—the lack of caring for others—will often but not always be associated with regarding the others as different, that is, not within the scope of identification (Rossi 2001b). For any given case, a precise description of degrees of selfishness would have to be conveyed by a complicated set of discounting weights for each “other,” perhaps with further differentiation according to the types of consequences at stake. For example, a person may be more selfish regarding wealth than respect. Selfishness is an obstacle to farsightedness for the obvious reason that the finite nature of our lives makes the selfish individual simply less interested in the long-term future, even beyond the effect of pure impatience. The state of the environment fifty years into the future may be of no concern to the selfish

Causes and Manifestations in Developing Countries  33

individual who is unlikely to live that long. Selfishness is clearly at odds with “generativity,” Erik Erikson’s term for the concern for future generations (Erikson 1982). Selfishness also contributes to complacency that deters putting effort into thinking through and wrestling with long-term problems. It is not uncommon for policy makers and influential stakeholders to conclude that the status quo is acceptable because their own circumstances are favorable. Yet every community has people facing worse prospects and greater vulner­ability. Thus selfishness manifested in the complacent disregard for the interests of the have-nots diminishes the impetus to address their problems as a long-term commitment. Selfishness also detracts from farsighted actions insofar as the benefits and costs tend to diffuse, or be externalized, over time. It is generally more difficult to assign responsibility as time passes between the action and the effects, as the causal links between the individual’s actions and the ultimate conse­quences become harder to identify. The passage of time also decreases the chances that those responsible for benefits or damage to others will still be in a position to be rewarded or punished for their earlier actions. Thus conditions that externalize benefits or costs tend to make the selfish even more impatient. In contrast, for the fully unselfish, “generative” individual there are no “externalities,” because the benefits and costs to others are fully internalized, making the reduction of individual gain from farsighted actions irrelevant. It is useful to elaborate on the nature of externalities by outlining the distinctive implications of its two forms: positive and negative. When significant benefits do not yield sufficient rewards for the individual who takes an action—the “positive externality”—this would seem to be good for others, but the problem is that this “leakage” or “spill over” to others reduces the individual’s incentive to take the beneficial action. Of course, sometimes the same actions that benefit society as a whole in the long term can also benefit the positive-externality provider in the short and long term. Greater industrial efficiency can reduce companies’ costs while also reducing greenhouse gas emissions (Schneider and Kuntz-Dureseti 2002); planting trees can often be profitable as well as aiding in carbon sequestration. Yet the farmer who has the opportunity to plant and nurture trees but does not benefit from the wildlife and carbon sequestration will have less motivation to do so; other opportunities, such as planting annual crops, may well be more attractive. The government leader who enacts an economic austerity program that benefits the country five years later is commonly punished politically in the short term and rarely gets the credit for later improvements.

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Thus although actions that result in “positive externalities” by definition contribute to the well-being of others, many potential actions that would be broadly beneficial in the long run are not undertaken because those who could undertake them simply lack the incentive to do so. This uncompensated “leakage” of benefits to others deters natural-resource exploiters from maintaining resource endowments that provide broad ecosystem services (e.g., the capacity of forests to sequester carbon and serve as habitats for valuable species), companies from training people who might go off to be employed by other firms, and health insurers from covering preventive care if the insured might later switch companies.The better-known problem of negative externalities arises whenever people take actions that have costs that are partly or fully borne by others. The most prominent example of negative environmental externalities is pollution. Policy makers face the same situation: shortsighted decisions with immediate rewards are unlikely to be countered by stiff penalties for their longer-term negative consequences that are borne by others. For example, a government analyst in the national planning agency or transportation ministry may be under pressure to get major road projects into the pipeline, even if they are of highly questionable economic merit and strong potential to damage the environment. The compliant analyst can often get credit for moving the project along. This analyst also knows that the project might take many years to be approved, funded, and built—and more years to discover that it contributes too little economically and damages the environment. If the analyst avoids the courageous but personally costly action of challenging such projects, the chances of being held accountable for the broad damage to society are dim indeed. If the analyst does challenge the projects, and proves to be correct, that “proof ” would typically come much later, diminishing the possibility of taking credit and being rewarded. Another variant of the negative externality, the “moral hazard” problem, arises when people undertake unreasonable risks because others will bear some or all of the costs. This has largely been applied to abuses of insurance; in fact, one definition of moral hazard is “the tendency for insurance plans to encourage behavior that increases the risk of insured loss” (Dembe and Boden 2000: 257). The personal risks of building structures in floodplains or in otherwise highly vulnerable areas are less if others bear the brunt of the insurance costs. It is useful to note that while selfishness is a characteristic of individual mindsets—both temperaments and perspectives—externalities are characteristics of institutional arrangements. Some institutional forms, whether pertain-

Causes and Manifestations in Developing Countries  35

ing to formal government structures or markets, leave individuals far more opportunity to impose the costs of their selfish actions onto others, or deny individuals the fruits of the benefits that they create. Government institutions vary greatly in their degrees of accountability, and different market structures may reward or punish those who take reckless risks with other people’s mon­ey. Social movements, cultural practices, or other regularized forms of interaction also display wide variation as to whether individuals can indulge their own interests at the expense of others, and get credit for their contributions. Selfishness also underlies the so-called principal-agent problem (or agency problem) that arises when those entrusted to act on behalf of others (“agents” acting on behalf of the “principals”) pursue their own interests at the expense of the principals. For example, forestry officials are the agents on behalf of the public for providing stewardship of the forests, yet they may benefit, personally or organizationally, from shortsighted decisions that do not serve the public interest, such as permitting excessive logging in exchange for bribes, or, if the forestry agency gets revenues from logging, to increase the budget of the agency and thereby the chances of receiving a higher salary. Another example is the teacher hired by the community to instruct children during school hours who holds back some material important for exams and offers for-pay tutoring to cover those materials. This has been a problem in China, South Korea, and throughout Southeast Asia (Belfield and Levin 2002: 26). The link between selfishness and the principal-agent problem arises from the possibility that agents can gain through actions that impact negatively on the very people they are engaged to serve. The ability of the selfish and impatient agent to gain through shortsighted actions, instead of serving the interest of the principal, extends the consequences of the agent’s impatience onto the principals. The principal-agent problem also exacerbates shortsightedness when selfish agents, reacting to the risk that they may lose their status as agents, behave shortsightedly to extract as much benefit as they can while still holding this status. Government officials in highly unstable political systems frequently extract as much personal gain as they can while the opportunity exists. Finally, selfishness is at the heart of the “collective action problem.” Without strong identification with the collectivity taking action, there is a temptation to evade sacrifices if it appears that the efforts of others will accomplish the task without one’s own sacrifice. If this choice is made by enough people, the collective action will collapse, and the task will not be accomplished, or it will be accomplished inadequately. This “free rider” or “collective action” problem is linked to the problem of noncompensation for positive externalities, in that those who do make the sacrifice provide a benefit for the evaders,

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without any compensation from them. The reality or anticipation of evasion would deter collective action for long-term pursuits. For example, voluntary road building and maintenance typically suffer from the unwillingness of some people to participate in the heavy work involved. Similarly, worker training may be neglected because firms that can hire away workers from those who train them have an incentive to scrimp on their own training programs. As Adam Smith so famously pointed out, under certain arrangements the pursuit of selfish goals can be consistent with societal welfare. However, the conditions that would bring the pursuit of individual interest into congruence with societal interest are sometimes absent. It is not simply a matter of the conditions needed for full competition, which are difficult enough to arrange, but also the structures of government and a large array of other institutions. Yet another source of selfishness comes, paradoxically, from the good faith efforts by agents to pursue the interests of the principals, even when the principals would regard these efforts as too damaging to others, especially future generations. For example, advocacy organizations representing the elderly may press for social security policies that benefit today’s retirees at the expense of the long-term viability of the social security system, although many, perhaps even most, retirees would individually prefer policies that would ensure the sustainability of the system. In short, the principals may not be selfish, but the agents may pursue acts that are selfish on behalf of the principals. This problem can arise for two reasons. First, the principals may not have effective means of conveying their policy preferences to those who represent them. Second, the representatives face the classic ambiguity as to whether they ought to represent interests or preferences.

a n a ly t i c l i m i ta t i o n s a n d u n c e r ta i n t y In a complex world, the capacity to anticipate consequences, assess their significance, and formulate strategies is inevitably limited. Many trends and potentially emerging events simply go unnoticed; even more go underappreciated. Even with good information, many obstacles stand in the way of using it; indeed, a glut of information can make analysis more difficult. When people lack the resources to scan future possibilities or to assess their implications, the problem is even more acute. These resources include expertise, time, and the psychological predisposition as well as relevant information. Herbert Simon (1981: 179–80) observed that “the events and prospective events that enter into our value systems are all dated, and the importance we attach to them

Causes and Manifestations in Developing Countries  37

generally drops off sharply with their distance in time. For the creatures of bounded rationality that we are, this is fortunate. If our decisions depended equally upon their remote and their proximate consequences, we could never act but would be forever lost in thought. By applying a heavy discount factor to events, attenuating them with their remoteness in time and space, we reduce our problems of choice to a size commensurate with our limited computing capabilities.” Heuristics and Biases Arising from Limited Analytic Capacity. Some of the intuitive strategies that people use to cope with limited knowledge and analyt­ic capacity are obstacles to farsightedness. The “heuristics” theory, made so prominent in cognitive psychology by Kahneman, Slovic, and Tversky (1982), identifies the analytic shortcuts that people rely on, either because of lack of capacity to assess the current issue in its own particulars or simply because of their habits of analysis. In many circumstances, these heuristics lead to biases in assessments of risks and opportunities, sometimes magnifying the perceived risk or likely failure of farsighted initiatives. We must appreciate the inescapable need for heuristics in a vast number of circumstances—so many situations are simply too complex, and relevant information too extensive, for comprehensive analysis to be done. Yet these heuristics, insofar as they lead people to assess farsighted initiatives as comparable to prior unsuccessful efforts, can lead to biases in judgment that lead people away from pursing the soundest long-term objectives. For example, people may reject a sound new initiative for community self-improvement, if, instead of subjecting it to serious analysis, they simply presume that the initiative will fail because most such initiatives in the past failed. Analytical Weaknesses of Organizations. For organizations, analytic capacity can be enhanced by putting many minds together, but it can also be weakened through lack of coordination. Information is lost or garbled in the communication of one individual or unit to another, misunderstandings arise when the same term has different meanings to different people, and the glut of information obscures the important amidst the trivial. Many organizations have weak “institutional memory” because of the volume of information and the turnover of personnel. Analytic weakness varies over time and circumstances. Circumstances such as the high stress of crisis can narrow the focus of attention, thereby excluding considerations important for sound long-term strategies, or even paralyze

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the capacity to analyze; situations of mistrust may generate lack of cooperation and deliberately distorted information. On the other hand, attention can help to focus the analytic efforts. Because people often respond to expected gains and losses rather than assuming that these gains or losses will definitely occur, uncertainty diminishes the value that people ascribe to possible future gains and losses alike. Uncertainty about the future, which tends to increase as time horizons are extended (Ascher 1978), thereby washes out the expected longer-term gains and losses and the values that people assign to them. By undermining the hopes that investments will succeed, uncertainty reinforces the impact of pure impatience in reducing the incentives to choose saving and investment over immediate consumption. Because uncertainty diminishes the capacity to know whether a particular action will prove to make long-term sense, it also contributes to the decline of accountability that allows decision makers to indulge their own impatience. The analysts evaluating the road project are even safer in giving a high rating to a truly problematic project if there is considerable uncertainty about the potential economic and environmental problems. Uncertainty can also have psychological impacts that paralyze longer-term thinking and action. Uncertainty can sap the mental energy needed to think rationally and to exercise the self-discipline to resist the short-term temptations (Ascher and Hirschfelder-Ascher 2005: 118). It can also make planning seem futile because of the inability to connect actions and consequences reliably. A particularly vexing aspect of uncertainty facing organized groups and the public arises when government leaders propose policies and programs that call for short-term sacrifices in order to reap longer-term gains. The aspects of uncertainty are in gauging whether the government is serious about following through with the policy and whether the government is capable of doing so and in knowing whether supporting, opposing, or remaining neutral toward the policy initiative would lead to the greatest gains. What if accepting sacrifices today only leads to the need to accept more sacrifices in the future? What if opposing the initiative will lead to better terms offered by the government, perhaps reducing or eliminating the need to make the immediate sacrifices? Policy reform initiatives calling for price increases to market levels for energy, food, water, transportation, or credit typically promise that a less distorted economy will reward people with greater incomes if they are patient, but skepticism about whether the government will really deliver is a major deterrent to supporting these initiatives.

Causes and Manifestations in Developing Countries  39

Actual uncertainty (as opposed to the belief that the future is uncertain) can also exacerbate the misguided optimism arising from short-term abundance or apparent success. Without adequate understanding of problems looming beyond the known horizon, perverse optimism can lead to complacency, overconsumption, resistance to planning, and unwillingness to accept sacrifices for the future. One variety of perverse optimism is based on blind faith and passivity—“Don’t worry; things will somehow turn out well because they have before.” The optimism that benefits will emerge without commitment or sacrifice is more likely to emerge when conditions have been positive and future risks are underappreciated. Prior success and lack of awareness of fu­ture risks can also reinforce another, equally dangerous variety of perverse optimism—the optimism of arrogance that leads people to shirk short-term sacrifice because of an exaggerated belief that they can bring about highly positive results regardless of the shirking. The psychologists Berndsen and van der Pligt (2001: 173) find that some “decision makers prefer immediate gains . . . because they are optimistic that these gains will be followed by addition­al gains in future. In contrast, decision makers prefer to delay losses because they are optimistic that losses are avoidable in the future.” In short, why forgo rewards in the short term if you are confident that you will be able to succeed in the long term?

vulnerability Vulnerability comes in three forms relevant to sustainable development. First, when people are vulnerable to the loss of potential future benefits, they are justified in downgrading the expected value of long-term benefits. Why should farmers take land out of annual crop production in order to plant trees, when their user rights may be stripped away before they can harvest the trees? Vulnerability, like uncertainty, undermines the expectations that investments are worth the sacrifice of immediate consumption opportunities. Second, when people are vulnerable to emergencies requiring immediate access to cash, their discount rates will be high, again reducing the value of long-term gains. Third, if people are vulnerable to punishment for not taking advantage of the opportunities of immediate gains, the long-term objectives are less attractive. Government officials who try to pursue farsighted goals are exposed to the risk of losing the support of impatient publics or interest groups. Business executives face similar risks if they try to invest for longer-term growth at the expense of immediate profits.

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These three types of vulnerability may involve elements of uncertainty (i.e., not knowing whether future gains will be achieved or lost). Yet vulnerability is a separate category because it can exist without significant uncertainty, as when a farmer can expect with quite high certainty that some crisis or another will arise—whether family illness, the failure of one or more crops, a new tax or fee, or the need to replace essential tools, and so on—that requires shortterm access to cash. In many circumstances, the farsighted are more vulnerable than the shortsighted. On the individual and family level, people who save are more vulnerable to inflation or to government policies that keep savings interest rates very low. People who sacrifice in order to educate their children face the risks that the educational credentials that their children achieve may be unmarketable (e.g., India prior to the recent software and back-office boom). On the governmental and corporate levels, those who take farsighted actions requiring sacrifices on the part of the public, stockholders, or employees are more vulnerable to criticism that these sacrifices will not bring about the desired gains or that the gains will simply not be worth it. Vulnerability is particularly important in developing countries in discouraging even moderate risks to improve productivity. This was recognized in the pioneering analyses undertaken by the early development economists (Rosenstein-Rodan 1943; Nurkse 1953; Leibenstein 1954) that identified “low-level equilibrium traps,” such as firms’ unwillingness to invest in modern technology and expensive capital equipment for fear of losing to the competition using cheaper labor, individual workers’ and unions’ unwillingness to tolerate the transitions to more capital-intensive industries for fear of losing jobs, and so on. It has also been well documented in studies on the diffusion of innovations, which have demonstrated that the most econom­­ ically marginal people are the last to take the risks of trying new techniques, whether in farming, adoption of birth control methods, or financial innovations (Rogers 1995). Within governments, particular agencies are vulnerable with respect to the loss of their resources in the competition with other agencies. This is seen in the typical budget process, in which resources allocated to an agency are at risk of being diverted to others unless the money is spent within the budgeted year or even sooner. In many developing countries, so-called repetitive budgeting involves reviewing budget allocations within the budget year. This perverse “use it or lose it” incentive typically plays a major role in hasty and shortsighted government spending.

Causes and Manifestations in Developing Countries  41

t h e n a t u r e a n d s e v e r i t y o f t h e o b s ta c l e s t o fa r s i g h t e d n e s s i n d e v e l o p i n g c o u n t r i e s The fragility of the economies and polities in many developing countries shapes the nature and severity of the four obstacles. Greater impatience and selfishness are not intrinsic to the peoples of developing countries. Yet because objective vulnerability and analytic limitations are typically higher in developing countries, these circumstances bring out particular manifestations of both impatience and selfishness. The most obvious difference is that analytic capacity is clearly a greater problem for developing countries. It is not just a matter of having to devote more attention to immediate concerns—it also reflects lower educational levels and lower informational resources. Governmental planning organs are typically less technically equipped with accurate information and the wherewithal to analyze it. Even a country like India, with a large cadre of highly technically competent administrators and analysts within the national planning apparatus, faces daunting challenges of understanding existing conditions, which requires monitoring trends in the roughly two thousand towns and cities and six hundred thousand villages, and estimating the production of a vast informal (or “unorganized”) sector, constituting more than 90 percent of employment and more than half the GDP (Dutta 2002). By the same token, citizens and nongovernmental institutions alike lack access to the incredibly rich information available in most developed countries, let alone the capacity to assess it. In addition to the challenges faced by governments to assess and provide information, independent media in developing countries face financial limitations and, in many instances, government restrictions on information they can gather and disseminate. It is also reasonable to assume a strong correlation between educational levels and the capacity to analyze the economic, political, and social trends that would shape the consequences of long-term strategies. Equally important, insofar as developing countries are likely to experience greater long-term changes—for better or for worse—the challenge of understanding future consequences regardless of one’s educational level is also greater. Both government policies and economic and political conditions tend to be more volatile in developing countries. Many developing countries experience remarkable turnover in elected officials and political appointees, in contrast to developed countries, in which elected officials with prescribed terms typically serve out these terms. By the same token, the narrower and more

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fragile economies of developing countries are subject to greater fluctuations, reducing the capacity to anticipate the consequences of economic decisions. It is also reasonable to assume that the vulnerability of people in developing countries is objectively greater, although there is no way to determine whether their subjective vulnerability is greater or less than that of people with more to lose in richer countries. As with analytic capacity, the economic and political security of people in many developing countries is challenged by economic volatility and political instability. Economic vulnerability is exacerbated by the fragility of developing countries’ economies, as well as the thinner margin between incomes and resources to meet basic needs in countries with weak social safety nets.8 Singh and Fagernäs (2006), looking at trends from 1960 to 2004, demonstrate that developing countries have more volatile economies in terms of year-to-year changes in GDP and in rates of inflation. Dividing this period into four roughly equal subperiods, they find that volatility has been declining for developed countries in more recent times (i.e., 1992–2004), but, except for South Asia, this has not been the case for the developing areas of Africa, Asia, and Latin America.9 Political vulnerability is frequently exacerbated by irregular government turnover that increases the vulnerability of those who had been benefited by the ousted officials. In many developing countries, political leaders and political appointees must anticipate greater risks of losing their positions before their formal terms come to an end than in developed countries where the typical expectation is that holders of fixed-term positions will be allowed to serve those terms.10 And if a long-term strategy entails challenging the existing government, the greater likelihood of a dissent-intolerant government in developing countries increases the personal security risk. Both economic vulnerability and political vulnerability reflect a weakness in social capital in many developing countries. If we take the oldest definition of social capital as “good will, fellowship, sympathy, and social intercourse among the individuals and families who make up a social unit” (Hanifan 1920: 78), it is clear that a lack of social capital limits the ability of people to rely on others in times of scarcity and emergency (Wood 2004: 55). By the same token, a lack of good will and sympathy exacerbates the risks of leaders engaging in the politics of public policy. One can certainly say that social capital was in short supply when the home of the Guatemalan finance minister was bombed in retaliation for his efforts to enact a tax reform. Insofar as impatience is shaped by the focus of attention, the imminent needs of the very poor in developing countries are likely to elevate the level of pure impatience, as attention must be focused sharply on immediate benefits

Causes and Manifestations in Developing Countries  43

and dangers. In other words, vulnerability engenders impatience. Leaders in less stable political systems are likely to focus sharply on short-term concerns as well, both because of their own vulnerability and because of constituents’ demands. Yet the potential for escape from poverty and vulnerability can give rise to a fierce impatience—Kalman Silvert (1963) used the apt term “expectant peoples” to describe the citizens of developing countries. Selfishness is more complicated. Insofar as identifications, or lack thereof, are related to selfishness and selflessness, the strong family, friendship, and ethnic or caste networks typical of developing countries would support the hypothesis that selflessness within these circles will be high, but sharper class and ethnic divisions would give rise to greater selfishness beyond these circles. Many developing countries are marked by great social distances, and resulting social isolation, among different groups. The urban-dwelling nonpoor are unlikely to find commonalities with poor rural people, or vice versa; the bases for identification are therefore likely to be weak. In terms of the temptation to act selfishly in violation of principal-agent commitments or legal constraints, material want and the greater stakes of great gain or great loss can focus attention not only on the immediate circumstance but can also lead to preoccupation with one’s personal or family circumstances. The opportunity to act on this temptation will also be greater insofar as the analytic limitations in developing countries make it more difficult to attribute responsibility for longer-term consequences, the ideal situation for selfish acts that violate commitments or laws.

chapter three

Gaining Traction to Overcome Obstacles to Farsightedness

Despite this pessimistic litany of the problems and sources of shortsightedness, there are grounds for optimism that farsighted thinking and action can be promoted. We have seen in the examples introduced in the introductory chapter that in some circumstances, people are farsighted in quite astonishing ways. The second basis for optimism is that at least in some respects our capacities and motivations to think and act longer term are stronger now than in previous eras. Nobel Prize laureate Herbert Simon argued that the sciences tracing back our history (archeology, geology, anthropology, and cosmology) have lengthened time perspectives in general; that science has enabled us to detect—and be concerned about—ecosystem changes that would have escaped our attention earlier; and that greater scientific understanding provides a basis for hoping that long-term assessment can be effective (Simon 1981: 182). Simon concludes that “it does appear . . . that there has been a genuine shift in our orientation to time and a significant lengthening in time perspectives (Simon 1981: 183). The third basis for optimism is the multiplicity of points of leverage for inducing greater farsightedness. We can consider the following: Changing the general conditions in which people live, so that they are more motivated (and believe that they can afford) to act more farsightedly. For example, people who are freed from having to worry about day-to-day survival are more likely to think and act for the longer term. Creating or rescheduling both tangible and intangible rewards so that farsighted actions will become more appealing even for impatient people.

Gaining Traction to Overcome Obstacles  45













For example, providing immediate rewards of respect for involvement in long-term pursuits such as neighborhood improvement or environmental activism can overcome the disadvantage that the direct results of these pursuits are farther in the future. Similarly, conducting performance evaluations can give weight to the longer-term consequences of the staff being evaluated, so that farsightedness will yield more positive evaluations and the attendant near-term rewards. Requiring or otherwise promoting the use of analytical methods, such as planning, forecasting, futures scanning, and monitoring. Such exercises can both focus more attention onto future consequences and increases the capacity to select sound long-term actions. Shaping communications to establish climates or moods to be conducive to making the short-term sacrifices that farsighted actions typically require. For example, a climate of crisis and mood of unity against external threats sometimes (but by no means always) provides the motivation for farsighted actions. Communications strategies, such as those that arouse environmental consciousness, are clearly relevant. More broadly, framing communications regarding farsighted initiatives can increase the weight of more distant consequences, associate the initiatives with prior initiatives that turned out well, and enhance the credibility of those leading the initiatives. Enacting self-restraining mechanisms that would bind people to maintain their long term commitments despite short-term temptations, and to bind potentially impatient, selfish, or vulnerable successors to these long-term commitments as well. Creating institutions that select or protect the farsighted, motivate members to act farsightedly, and enhance the capacities to choose sound farsighted actions. For example, regulatory commissions with strong analytic capabilities can, to some degree, protect and enable farsighted commissioners to pursue strategies that are less vulnerable to political pressures. Changing the decision-making processes so as to require or otherwise induce greater focus on future consequences. For example, more drawn-out decision processes, or those with more inclusive participation, may direct attention to the conditions likely to hold once the decisions have been implemented and deepen problem definitions as participants have more opportunities to introduce relevant considerations. Changing the rules of interaction so that people are motivated and enabled to act more farsightedly. For example, when people know that they

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are likely to have ongoing rather than one-shot interactions, or can have the confidence that they are not in “winner take all” situations, they are generally more apt to choose longer-term strategies. The fourth—and perhaps most important—basis for optimism is that the findings of research in psychology, economics, and institutional analysis show how the four root causes of shortsightedness can be reduced or circumvented. These are the points of leverage, or “toeholds,” that underlie many of the strategies that will be outlined in subsequent chapters. What follows in this chapter are the most important findings.

findings on the psychology of temporal choice The complicated psychology of how people actually relate to future benefits and costs lets us escape from the straightjacket of simplistic assumptions about dismissing the future. The fatalism of believing that all people inevitably and consistently devalue the future gives way to a much more nuanced appreciation of highly varied reactions. Declining Discount Rates. When it comes to enjoying benefits or enduring hardships, perhaps the most important and general finding is that the degree of devaluing declines as events are projected farther and farther into the future. A benefit expected to materialize ten years from the present is still of less importance to people than the same benefit expected five years from now, but the rate of discounting is lower for the out-years than the nearer years. For example, if the passage of the first year reduces the value of a benefit by, say, 10 percent, perhaps the passage of the second year will reduce the value of the benefit by only 8 percent more, then perhaps 5 percent, and so on. Declining-rate discounting has been shown to be extremely common in many contexts. Naturally there have been efforts to find a general model to represent the behavioral pattern; the most prominent or which is the so-called hyperbolic discounting, so named because of the bow-shaped curve representing the gradual reduction of the discount rate extended into the future (Mazur 1987; Loewenstein and Prelec 1992). However, several different formulas have been offered to describe the curve, reflecting the fact that there is no reason to expect that all people discount more future events in precisely the same way.1 In fact, there is ample evidence that discount rates and changes in discount rates vary across individuals (Redelmeier and Heller 1993).

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It is important to note that these declining discount rates apply to matters of consumption rather than investment. We can respect the economist’s preference for constant discount rates to assess investments, in the absence of reasons to believe that investment opportunities or the cost of capital will change in a predictable direction in the future. But the logic of considering each investment opportunity in light of alternative investments (which is why discount rates track with interest rates, which in turn reflect alternative investments) does not necessarily apply to preferences for the timing of consumption—we should expect that the rate of discounting will decline for benefits and costs further and further into the future. A concrete example of this tendency can be found in the preferences for health improvements. When three thousand Americans were asked to express their preferences between programs that would save lives today compared to saving more lives five, ten, twenty-five, fifty, or a hundred years in the future, the median annual discount rate was 17 percent for the five-year delay, declining to just 4 percent for the hundred-year delay (Cropper, Aydede, and Portnoy 1994). Interpreting why discount rates typically decline is complicated. For the preference for medical advances, perhaps the decline in discount rates shows that people may be less patient about “medium term” events within their own generation, but more patient—or more giving—when the issue is the survival of future generations. But it may also be that the identification with people twenty-five years from today is simply not much greater than the identification with people a hundred years out. Another possibility is that envisioning fairly long-term futures is nearly as difficult as envisioning far-distant futures. Yet another is that thinking about the near future still engages the individual respondent’s personal time preferences; one might be impatient in waiting for one’s own benefits but take on a more detached and philosophical stance when contemplating longer-term trade-offs between present and future. Final­ly, the compound nature of discounting means that the magnitudes of benefits in the distant future can be huge even at moderate discount rates. For example, at a 5 percent discount rate, saving 100 lives today is equivalent to saving over 1,100 lives fifty years from now. Perhaps this just strikes one as such an impressive accomplishment that it is worth waiting for. When more distant future benefits or costs are not discounted very much compared to near-future benefits or costs, little is lost in focusing attention on a somewhat more distant future that can inspire commitment. The more distant future may entail an order-of-magnitude change—an easily visualizable breakthrough to a different level. Of course, most people would still prefer to see the

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same results sooner rather than later, but the diminishing impact of discounting means that highly compelling future scenarios are not as vulnerable to impatience as the constant-discount-rate assumption would lead us to believe. Savoring and Dread. Strategies for promoting farsighted thinking and action can also take advantage of the findings that some of the pleasure or pain expected from future consequences is felt in anticipation of these consequences. People get pleasure in “savoring” the prospect of future benefits, such as anticipating children’s graduation from secondary school or a university. Perhaps if the consequence is too far in the future the savoring would be too faint, but we can think of many situations in which the savoring is a major factor. The prospect of one’s children rising educationally, economically, and socially can be great solace for people engaged in the day-to-day drudgery of feeding the family and paying school fees, without the help of the children while they are in school. Of course, the anticipation has to be based on strong enough expectations that the gains will be made. By the same token, “dread” brings to present the psychological costs of an anticipated negative future, such as the prospect of the loss of livelihood if a forest is decimated. Such examples of savoring and dread illustrate that psychological benefits and costs can come far earlier than the more tangible consequences that actually occur, and therefore the discounting would not be as great. It is not just the anticipated utility of future enjoyment or gratification; it is also the current utility of anticipating future benefits (Elster and Loewenstein 1992: 224–28). In this way, savoring and dread are natural means for bringing at least the psychological consequences of future occurrences closer to the present. In fact, under some circumstances, people actually prefer to postpone benefits or to hasten costs for the sake of increasing savoring or reducing dread. Experiments show that many people prefer a scenario of rising incomes to receiving more income now and less later, despite the greater value of the more immediate payoff according to the principle of time discounting (Chapman 2003: 407–8). “Saving the best for last” may reflect the understandable preference for progress and improvement, as well as pride in progress. Similarly, while some people would put off a painful surgery as long as possible, others will demand it right away and chafe at any delay. This may reflect the sound logic that fixing what’s wrong sooner rather than later is smart personal health management, but it may well be motivated by the desire to reduce the “dreadful” waiting for the operation. These timing preferences can be represented as negative discount rates.2 They suggest strategies for providing more viv-

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id depictions of the future to stimulate savoring and dread—although there is a risk that very high levels of dread may provoke so much anxiety that people withdraw their attention from looming threats. Differences in Discounting Positive and Negative Consequences. Psychological research shows as well that what are seen as different types of consequences will also affect the discount rates that people will apply. This opens many avenues for framing the appeals for longer-range thinking and action. One potentially very important finding is that people tend to discount positive and negative effects differently. This is not simply an issue of being sensitive to downside risks, which would imply that bad consequences are weighed more heavily than good ones, regardless of timing issues. Rather, psychologists have found that we tend to discount positive effects occurring in the more distant future more steeply than negative ones. Perhaps dread is more potent than savoring. There is a powerful implication: when it comes to deciding whether to highlight the negatives or the positives of a decision with very long-term consequences, emphasizing the negative will often keep up the interest to a greater degree. Other departures from constant discount rates are also worth noting. Less important consequences are generally discounted more steeply than more important ones. So a big effort to emphasize the importance of the consequences may help to combat the tendency to dismiss the long term (Chapman 2003: 402). Rachel Carson’s 1962 book Silent Spring was far more gripping and compelling for painting the long-term scenario of silent woods, rather than the medium-term scenario of quiet woods. Her scenario was one of the disappearance of birds, not the thinning of the flocks. Emotions and Discounting. Psychological research also reveals differences in discounting aspects that arouse high emotion (“hot” states) and aspects that do not (“cold states”). When government or nongovernmental groups try to increase the attractiveness of an appeal by arousing emotions, this would suggest emphasizing the early emotion-arousing aspects over any later ones. For practical appeals, it suggests emphasizing the longer-term practical advantages over the short-term ones. If we have some control over emotional arousal, we should also be aware of the tendency of people in nonaroused “cold states” to underestimate how much an aroused (“hot”) state will affect their behavior and vice versa (Loewenstein and Angner 2003: 371).3 One implication is that if we want to convince people to adopt strategies of self-restraint now, it may be necessary to expose them to the dangerous emotional states so that they

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can appreciate the full magnitude of the danger. These considerations are all relevant to the management of crisis situations. Some governments have been highly successful in using the emotional arousal of crisis to gain the acquiescence of the public to major farsighted reforms. The Mexican government, for example, has enacted significant policy reforms, including raising energy prices and revamping its fiscal-management institutions, especially in times of fiscal crisis. Diminishing the Salience of Temporal Discounting. The mental mechanisms behind discounting can be “deactivated,” or at least diminished. One of the most intriguing perspectives on time discounting is that the time dimension is only one of many that go into the preference for one consequence over another or one action over another. Only insofar as the individual regards the timing as highly salient will the temporal dimension play a major role. In other words, the temporal dimension is only one way that individuals discriminate among options. Thus it is not just the timing and the payoffs, as most of the discounting experiments manipulate, but also whether particular actions are altruistic, whether some actions arouse emotions, and so on (Gattig 2002: chap. 1) This opens up the possibility, explored later, that framing communications can emphasize these other dimensions to the point that people will regard them as more salient than the time delay. Perhaps emotional appeals not only influence discounting rates but can also “turn off ” the discounting mechanism. It may also be that beyond a certain level of uncertainty, the mental exercise of identifying consequences, assessing their likelihoods, determining when they might happen, and then figuring out an appropriate way to discount them is simply too difficult, and people therefore resort to different ways of guiding their actions. These ways may include following established precedents, obeying what are regarded as moral imperatives, or simply following the guidance of respected others.

f i n d i n g s o n t h e i m p o r ta n c e o f t h e f o c u s o f at t e n t i o n Many actions are simply not based on the means-ends process of anticipating all future possibilities, applying some discounting rate—whether positive or negative—and choosing actions. The core premise of the “bounded rationality” perspective made famous by Herbert Simon is that no one’s perspectives are based on full appreciation of all possibilities and all values that are actually at stake (Simon 1987: 31). Therefore focusing attention on particular aspects

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and values can have a huge impact on how people interpret the stakes. Providing information, defining “the problem,” and engineering the thinking about issues can change priorities from short-term issues to long-term issues quite dramatically.

f i n d i n g s o n t h e m atc h b e t w e e n n o r m s a n d fa r s i g h t e d b e h av i o r Both habits and norms can reinforce behaviors that are consistent with far­sighted actions, whether or not individuals directly assess these consequences and their timing. Whatever gratification people get from “being good” and whatever psychological needs people have to continue their habits, a host of actions provide immediate psychological rewards, or at least avoid immediate psychological pain, in addition to the benefits that may occur in the future. Parental and peer approval for hard work, thrift, concern for the young, giving to charity, and so on, provide immediate rewards for behaviors that provide long-term benefits. Of course, not all norms promote farsightedness; in fact, some undermine farsightedness. Conspicuous consumption—such as the purchase of gasguzzling SUVs—may be condoned and even envied, and some societies glorify violence or other destructive behaviors. Nevertheless, a host of norms are tight­ly related to sacrificing today’s indulgences for tomorrow’s gains. Longterm health and safety are enhanced by temper control, danger avoidance, and self-discipline in eating, drinking, and commitment to exercise. Long-term financial security is furthered by a strong work ethic and frugality. Family stabil­ ity and children’s welfare are safeguarded by marital loyalty. Multiple and broad long-term societal goals are furthered by norms as diverse as environmental stewardship and general charity. Where these virtues are admired, respect and affection from others can reinforce the rewards of feeling righteous. Research on concern for future generations shows the “virtuous circle” that people who were nurtured by elders are more likely to express farsighted norms vis-à-vis younger generations (Taylor 2006). All of the psychology exploring how values and habits are ingrained in people becomes relevant.4

f i n d i n g s o n t h e f l u i d i t y a n d va r y i n g sa l i e n c e o f i d e n t i f i c at i o n s Both research (Beyer 1994) and practical experience show the fluidity and variations in the importance of the identifications that shape people’s behavior (Somit and Peterson 1987; Beyer 1994; Dench 2003: chap. 10). Identifications

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can be created, weakened, or strengthened not only through efforts to teach the value of particular identifications (e.g., as caring parents, proud neighborhood residents, or environmentalists) but also by the individual’s own actions that play a role in the individual’s self-perception. Even when identifications are essentially fixed, the nested identifications that exist within an individual at any point in time will be of varying salience from one circumstance to anoth­er (Dench 2003: chap. 10), with the important implication that identifications conducive to the acceptance of farsighted initiatives can be invoked. As identifications are extended to larger collectivities, what was an externality beyond the interest of the individual becomes part of his or her goals. Constructive Goal Substitution. The powerful mechanisms of goal substitution do not always produce perverse behaviors and in fact can encourage farsighted actions. Good habits can be reinforced as well as bad, and organizations can reward the right short-term achievements that are connected to long-term objectives. As the psychology of reinforcement demonstrates, immediate rewards can inculcate habits and norms that are both consistent with sound long-term actions and conducive to farsighted commitments. For example, children who are rewarded for altruistic acts are more likely to continue to behave altruistically.5 In summary, people do not discount future events at a constant rate, nor is the rate uniform across different kinds of consequences. People place different emphases on means and ends, depending on the time frame. They think and behave differently depending on the level of emotion. Appeals to principle—to do “the right thing”—can have a major impact that goes against gaining the favored result. And people do react differently when what they think is at stake is something they already have as opposed to something yet to be obtained. As long as we do not oversimplify our assumptions of human behavior, we can explore how personal selfishness can be replaced by broader identifications with and commitment to future generations. We can rely on the fact that discounting is neither constant nor uniform to frame issues to enhance attention and commitment to the longer term. We could explore how to promote constructive goal substitution over perverse goal substitution. We can learn how to reschedule positive and negative consequences in order to bring some of the tangible results of farsighted actions closer to the present and, on the more subjective level, learn how to promote savoring and dread to accomplish the same objective. In recognizing that emotions play an important role, we can explore how the arousal of emotion and the invocation of moral principles can curb the discounting of longer-term futures.

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findings on the influence of framing and labeling Influence of the Selection of Symbols and Framing on the Acceptance of Appeals. The classic contributions of Harold Lasswell, Edward Sapir, and others on the roles of symbols (Sapir 1934; Lasswell 1952) and the receptivity to psychodynamics of reactions to appeals (Lasswell 1932) have been extended into contemporary policy analysis, to assess how people react to appeals that attempt to stimulate impulsive, rational, or moralistic responses (Brunner 1987) and influence the exercise of participatory democracy (Smith and Tolbert 2004: 138). The appeal to “rational self-interest” is not the only route to people’s hearts. A farsighted appeal can be directed to basic, “primitive” impulses or to conscience and moral sentiments, as well as to instrumental reason. This “triple appeal principle” is key to understanding the framing of communications. Influence of Heuristics in Shaping Expectations. In a quite separate vein of examining decision making under uncertainty, the exploding literature on heuristics reveals not only impediments to analytic capacity but also opportunities to characterize farsighted initiatives in terms that can promote their acceptance insofar as they are associated with other initiatives that resulted in positive consequences.6 In understanding heuristics and biases, we can develop strategies that can benefit from the fact that people use analytic shortcuts. For example, if experiences with recent tax reform efforts within the country have largely been negative, the framing of a farsighted new reform initiative can emphasize the most successful prior efforts, as well as successful reforms in other countries, to promote positive attitudes toward sound long-term initiatives. It may also be possible to get a more favorable interpretation of the chances of the tax reform if it is prominently framed within the broader liberalization efforts within which it is nested. The recognition of how heuristics operate has also opened up promising avenues for “debiasing” expectations that have been distorted by inappropriate heuristics-based inferences.

findings on the influence of institutional arrangements There has been a remarkable and highly constructive convergence on the part of political science, legal studies, and the “new institutional economics” in understanding how structuring decision-making processes changes the stakes and the logic that shape the choices made by stakeholders.

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Credible Commitment despite the Absence of External Enforcement. The “law and economics” literature has generated rich insights into how long-term commitments can be secured without the existence of an external enforcer, raising many possibilities for “self-enforcing contracts” (Kronman 1985) that can bolster the credibility of long-term commitments. The Impact of Decision Routines on the Opportunity for Farsighted Considerations to Be Introduced and Heeded. Because decisions are not simply made at “one point in time” with all information arrayed and fully appreciated, the sequencing, timing and structure of participation of decision making can be pivotal in determining what considerations will be brought to bear, the confidence that stakeholders will have that commitments will be fulfilled, and the opportunities to fend off selfish or impetuous decisions. Routines that require repeated interactions and the provision of better information, and encourage stakeholders to merge interests into relatively few groups, are, according to the logic of the new institutional economics, more likely to engender long-term cooperation (North 1997). The Impact of Decision Routines on Encouraging Farsighted Cooperation. Game theory, which has recently incorporated elements of uncertainty and has relaxed other assumptions of strong rationality,7 has the capacity to show how the logic inherent to the payoff structures of particular stylized situations and decision rules can lead to perverse and myopic choices. Most notably for our purposes, it has addressed situations in which cooperation for the long term is discouraged by the immediate advantages of defecting from cooperative actions (Axelrod 1984; Rabin 1994). Game theory has also been applied to social welfare theory to explore how uncertainty, in the form of the “veil of ignorance” made prominent by John Rawls and John Harsanyi, influences decisions on whether to cooperate (Binmore 2002). This intriguing connection raises the question of whether agreements to enact rules or provide benefits with a significant time delay can contribute to farsighted cooperation because stakeholders would lack information about what their advantages or disadvantages might be in the future.

general conditions There is no doubt that certain general conditions are more conducive to farsighted thinking and action. Promoting these conditions—if and when such promotion is possible—is thus a “farsighted way of promoting farsighted-

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ness.” Yet it must be recognized that favorable conditions do not negate the importance of employing specific strategies. To a certain degree, the general conditions that would permit or encourage farsighted actions naturally mirror the obstacles to farsightedness that have just been reviewed. Conditions that provide greater clarity of long-term benefits and a broad culture that appreciates patience and concerns for future generations would diminish impatience. Broad identifications would counter selfishness, as would strong means for discovering when individuals betray their responsibilities to others. Knowledge and abundant information can reduce analytic limitations. Relatively secure life situations, prosperity, and political stability would alleviate vulnerability. One common thread running through these conditions is predictability, which mitigates impatience, selfishness, analytic limitations, and some aspects of vulnerability. Insofar as realistic optimism is a requirement for farsighted action, the overall level of social, economic, and political stability is clearly important. This is not to say that stasis is desirable, but rather that a modicum of stability is crucial. This would include clear and firm “rules of the game.” A well-educated, well-informed populace would contribute in the same way. This point is commonly enshrined in the justification for more education as the requisite for good citizenship. Of course, creating an effective education system and the conditions that would permit parents to keep their children in school is a huge challenge for many developing nations. The relationship between prosperity and the likelihood of farsighted thinking and action is more complicated. Desperate poverty—for those whose situations and aspirations make desperate—is perhaps the most acute form of vulnerability; in such circumstances alleviating this poverty would enable people to think and act beyond daily survival. However, economic improvement does not ensure farsightedness: in many circumstances, a taste of economic gains can fuel impatience for more. The general conditions that would avoid or overcome the obstacles are not sufficient in terms of the motivation to strive for longer-term goals. The patient individual may be content or even complacent. The unselfish may believe that as much as they would like to help future generations, the opportunities are simply not available, and the knowledge that this is the case can inhibit future-oriented action. By the same token, a lack of vulnerability may be associated with complacency. Some impetus to strive for improvements must also be present. The general conditions linked to the motivation to undertake farsighted actions would begin with the circumstances that promote an expectation of

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achievable progress. Constructive optimism, as opposed to blind faith or hubris, ought to be based on the expectation that effort, planning, and some sacrifice will achieve long-term gains, not that God’s will, without human striving, will suffice, nor that any adverse long-term consequences of shortterm gains can be easily overcome by sheer cleverness. The expectation of achievable progress is typically enhanced by past experience of improvement attributable to planned effort. It may also be strengthened by a general belief in the fairness of society—that deserved rewards will neither be denied nor expropriated by others. Farsighted commitment may also be enhanced by a culture of concern for others, especially future generations (what Erik Erikson [1982] labeled “generativity”). One could speculate that national pride, intact family structures, religious faith or strong humanistic culture, the presence of role models, a widespread sense of efficacy, and numerous other factors could enhance this commitment. Intriguing research on the propensity of developing country governments to undertake farsighted development strategies raises the possibility that clear challenges to sustained economic growth will induce more responsible, farsighted economic policies, such resisting the temptations to overspend in periods of prosperity or to subsidize failing industries in order to avoid the short-term employment losses. The likelihood that a country will be led by a “developmental state”—a government dedicated to promoting long-term economic and social development—has been linked to the general recognition among the nation’s political leaders that prosperity cannot be assured because of natural riches; indeed, the complacency based on such riches may diminish the impetus to make the necessary short-term sacrifices (Auty 2001). One prominent explanation for why some countries squander their naturalresource wealth is that this wealth triggers a combination of complacency and politically convenient opportunities to ignore long-term needs. Reinforcing this insight is the fact that some nations that have faced harsh conditions, including the lack of natural resources and the threat of external enemies, have been surprisingly successful in launching and sustaining farsighted econom­ic development strategies. Japan and Taiwan are, of course, prime examples. However, other countries, such as Haiti and Somalia, have suffered from equally daunting problems of resource scarcity and strife, without the positive consequence of farsighted responses. It should be obvious that relying solely on efforts to engineer these general conditions would be inadequate, as important as they may be. They are typi-

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cally deeply embedded and subject to at best only gradual improvement. It is easy enough to say that a degree of stability is essential, but this does not answer the question of what specific strategies could stabilize without risking stagnation. Some general conditions are necessary and enabling, but they are not sufficient. And some of the conditions, such as overall prosperity and stability, are ends in themselves, requiring the promotion of farsighted thinking and action. For readers committed to promoting farsightedness, more specific strategies must be explored.

m a p p i n g t h e st r at e g i e s Each fundamental obstacle to farsighted action points to a set of strategies to over­ come it. Fortunately, many of these strategies can address more than one obsta­cle. Impatience can either be attacked directly or through efforts to mitigate its effects. Efforts to reduce impatience directly focus on the fact that patience rests on cultural cues, norms, and habits. Therefore strategies of socialization—strategies to inculcate attitudes, usually starting with children— can be employed to promote farsightedness per se or the norms and habits associated with behaviors that are consistent with the achievement of sound long-term goals. Socialization can also promote identifications with others, such as future generations, in order to reduce impatience. In contrast to the multiyear task of socialization, the recently documented variability in the rates of discounting points to the importance of how communications about risks and opportunities are presented in the particular cases now at hand. If a certain amount of impatience has to be taken as a given, another set of strategies entails creating or rescheduling benefits and costs. Sometimes the benefits of farsighted strategies can be increased, and the costs reduced, elevating the attractiveness of the farsighted strategy over the shortsighted options even if the farsighted strategy still requires greater immediate sacrifice. In some instances the timing of benefits and costs can also be manipulated, reducing the devaluation of the rewards of farsighted strategies by bringing these rewards closer to the present, or increasing the discounted costs of shortsighted strategies by bringing these costs closer to the present as well. The strategies that reschedule tangible consequences include basing immediate rewards or punishments for the responsible individual on expert predictions of what the long-term consequences would be. Altering tangible benefits and costs in these ways is a central concern of economics, yet the benefits and costs

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may also be psychological and social. Going beyond the narrow framework of assuming that only tangible consequences matter opens up a host of strategies based on how the framing of issues and appeals can influence the intangible gratifications of pursuing farsighted strategies. Selfishness, like pure impatience, can be addressed either by trying to minimize it or by trying to blunt its impact. In other words, strategies can either attempt to elevate the importance of benefits and costs to others, or to make selfish acts less attractive. The most direct approach to reducing selfishness is to try to instill the norms of caring through socialization that may start with children and extend into many facets of adulthood. The nature of the messages will shape the scope of caring, whether it is broad or confined to the “in-group.” One challenge is to overcome the contradictions between the planned, formal child socialization that emphasizes broad caring, and the informal practices of disparaging “out-groups” in the informal communications from parents, peers, and even teachers. Various organizations try to instill mutual identification and solidarity among their members through deliberately engineered bonding experiences, epitomized by the intense, sometimes very harsh, training of cohorts entering the military. The scope of caring, or acting on behalf of others, can be promoted by increasing the empathy and sympathy toward others. Empathy can be enhanced by portraying the others (whether people or other species) in a more favorable light: people of other nationalities, religions, or ethnicities are law abiding, God fearing, caring of their children, and so on. Sympathy can be enhanced by invoking the vulnerability or suffering of the others. Insofar as selfishness is rooted in narrow identifications, efforts to broaden identifications may help to reduce it. This may entail emphasizing the similarities between the individual and the others: “They are people, too”; “All of we Kenyans face the same challenges, regardless of whether we are Kikuyu, Luo, or others . . .” This even extends to nonhuman species, as evidenced by the efforts by conservation groups to convey the humanlike characteristics of various species: wolves take care of their young, dolphins are intelligent and playful, and even sharks are not as voracious and aggressive as is commonly believed. Additional scope for stimulating caring may lie in promoting identifications that indirectly call for broadening the scope and degree of caring. Such identifications may be able to rely on other appeals, such as the deference accorded to people who express these identifications, or the enhanced feelings of rectitude for holding and acting upon them. General societal respect

Gaining Traction to Overcome Obstacles  59

for identifications associated with caring, recognition within organizations for those who exhibit the greatest degree of caring, and so on, will enhance these personal gratifications. For example, identifying as an environmentalist has great appeal for many young adults during a stage of life that is highly prone to self-centered orientations. Making shortsighted selfish actions less attractive to the selfish can begin with reducing the socially condemned forms of harming others. Of course, a blanket authority to impose broad limitations of the pursuit of even narrow self-interest would be a very dangerous power in any system, yet reducing the attractiveness of causing negative externalities and the agent’s violation of the responsibilities to the principal are far less problematic. Thus negative externalities can be addressed through strategies that enhance the connections between actions and the benefits or costs for those responsible—“internalizing” the externalities. As with addressing impatience, strategies that bring consequences closer also increase the certainty of attributing responsibility. Another shared set of strategies are those that try to expand identifications so that the impacts on others will become more valued. For example, if identifications can be extended beyond self-absorption to identification with individual concern, to strong identifications with the community, the costs of shortsighted actions will be more keenly felt. Broader identifications are likely to be conducive to the formation and strengthening of norms of personal responsibility for impacts on others. The strategies that are distinctive in reducing negative externalities rest on the creative approaches that have been developed through “principalagent theory.” When policy makers or others (the “agents”) are entrusted to act on behalf of the public or their specific organizations (the “principals”), they often face conflicts between their own interests and those of the principals. These strategies address overcoming each aspect of the incentives and the capacity of agents to pursue their own interests at the expense of the principals. Even if the interests of the agent cannot be made fully compatible with those of the principals, some strategies can reduce the capacity of the agent to go against the interests of the principals. To address the frequent problem of limited information available to the principals, the obvious strategy is to increase transparency through more intensive monitoring, so that the principals are aware when agents’ behaviors diverge from the principals’ interests. Analytic capacity can be increased to detect these divergences. More effective sanctions can be developed to punish errant agents. Finally, conducting assessments

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of long-term impacts as a basis for rewarding or punishing agents has shown considerable success, as we shall examine in chapter 6. Apart from changes in arrangements that entail actual merger of interests, some scope may exist for increasing the awareness of already shared interests. This has obvious potential in situations where apparently advantageous but selfish actions will sooner or later harm those responsible. In these situations, it is worthwhile to expand the cognitive maps of the agent—to understand that tempting actions might undermine the agent’s own longer-term objectives. Analytic limitations can be addressed by providing and encouraging the use of richer cognitive maps, both to focus attention and to assist in the selection of long-term strategies. From the perspective of analysis per se, the promotion of deeper problem definitions holds strong promise for demonstrating that longer-term solutions are required. However, communication of long-term risks and opportunities may require simplicity to be understandable to stakeholders. Analysis that emphasizes longer time periods, both historical and into the future, also holds strong promise for orienting both goals and analysis to more long-term consequences. In terms of devices for stimulating longer-term thinking, the instruments include counseling, technical-unit planning through forecasting and/or horizon scanning, planning, monitoring, assessment, full-cost accounting, valuation, discourses, ad hoc commissions, and stakeholder negotiations. Communications strategies also play a huge role in focusing attention and conveying information that may prompt individuals to base their decisions on long-term considerations. These strategies frame objectives and how alternatives are regarded. They also influence identifications, evoke different types of appeals that engage different aspects of the personalities of members of the audience, influence the degree of discounting, and play a large role in determining the credibility of the initiatives and their initiators. Vulnerability can be reduced by a range of approaches to buffer decision makers from economic, political, and other risks, whether these decision makers are acting as individuals and family members or leaders of public or private organizations. Policies that enhance income security or expenditure security of individuals and families permit longer-term thinking and action, insofar as people are more confident that striving for long-term goals would not jeopardize their otherwise precarious positions. Policy provisions that permit people to opt out of coming under a new policy and therefore escape being adversely affected may similarly reduce vulnerability. These opt-out provisions may thereby reduce opposition to the new policy. Initially selective applications, such as prototypes launched as “experiments” by national

Gaining Traction to Overcome Obstacles  61

governments or locally initiated programs and policies, can also reduce the reality and perception of vulnerability. Institutional rules and structures can insulate decision makers from political vulnerability by preventing dismissal or other retributions against taking long-term actions that antagonize others with short-term demands. Certain institutional arrangements can also stabilize the “rules of the game,” buffer people from the kinds of drastic changes that raise levels of vulnerability, enhance trust among stakeholders, and guarantee redress for drastic losses.

* II * Structuring Rewards and Risks

As mentioned in chapter 1, impatience can be accommodated, if not reduced, through two approaches. One is to create new consequences of pursuing shortsighted or farsighted strategies, such that the net utility of sound farsighted initiatives, even if discounted, is attractive enough to tilt decision makers to choose the farsighted initiatives. The other is to reschedule preferred or disliked consequences such that the net discounting of the utility of the farsighted strategies is less severe, the discounting of the shortsighted strategies is more severe, or both. Selfishness, as well, can be accommodated by creating or rescheduling benefits and costs to reduce the payoffs of evading accountability or legal constraints. Accountability relies, to a large degree, on the performance evaluation of people who are acting on behalf of others (i.e., “agents” acting for “principals”). If the future consequences of the agent’s actions are anticipated and rewarded or punished earlier, the attractiveness of evasion can be reduced. The policy sciences’ multivalued framework extends the range of creating or rescheduling benefits and costs into the social and psychological realm. We argue that these benefits and costs often provide more scope for strategy than available material consequences. Yet not all of the creation or rescheduling of benefits and costs is designed to influence others. A surprisingly fertile if complex source of strategies is the insight that self-restraint is not only a way to insulate farsighted commitments from one’s own temptations but also a way to reduce the motivation of opponents and successors to undermine the farsighted initiatives.

chapter four

Creating and Rescheduling Tangible Benefits and Costs

va r i a t i o n s o n c h a n g i n g m a t e r i a l benefits and costs Farsighted actions can be encouraged most directly by rescheduling or changing the tangible benefits and costs expected from these actions and those resulting from shortsighted alternatives. These tangible consequences include wealth, physical well-being (including physical security), skill, and enlightenment (knowledge, insight, and information). For much of what we will be addressing, the wealth dimension is the most salient of the welfare values, although they are all relevant. This chapter demonstrates the remarkably large number of strategies and specific instruments that can accomplish these changes. Since we can address both the early and later costs and benefits of the farsighted and shortsighted actions, there are many points of leverage (see table 4.1). Near-term benefits, if they are affordable, can be added to the payoffs for following farsighted strategies to help overcome impatience and vulnerability. Equally important, early benefits can cultivate a sense of self-generated progress that can be crucial for sustaining constructive optimism.1 Ashkanasy et al. (2004: 285) define a constructive future orientation as “the extent to which members of a society or an organization believe that their current actions will influence their future, focus on investment in their future, believe that they will have a future that matters, believe in planning for developing their future, and look far into the future for assessing the effects of their current actions.” The optimism that underpins farsighted actions is based on the belief that one’s actions will have intended consequences, but also that these actions are required for these consequences. People must have sufficient confidence that

66  Chapter Four ta b l e 4 . 1   Design options for structuring material benefits and costs Encourage farsighted options Altering benefits Altering costs

Increase nearterm benefits Decrease nearterm costs

Discourage shortsighted options

Increase long- Decrease nearterm benefits term benefits Decrease long- Increase nearterm costs term costs

Decrease longterm benefits Increase long-term costs

long-term plans will pan out, making short-term sacrifices worthwhile, but they also need to realize that the benefits will not simply materialize without effort or other sacrifices on their part. If the challenge is to encourage optimism that the future can be better, but only through farsighted action, early rewards for farsighted actions provide a tangible signal that long-term commitments are already yielding progress. While at first glance it may seem contradictory to call for sacrifice while providing rewards, the apparent contradiction evaporates when a fine-grained perspective on the time and the magnitude of the short-term rewards is adopted. In addition, calling for sacrifice and providing early benefits can entail different types of resources; for example, money and materials can be provided to promote commitments of time and labor. Conversely, sometimes it is feasible to reduce the short-term rewards that are responsible for ignoring the long-term benefits of more farsighted strategies. In some instances, these rewards have been inappropriately high because some of the gains result from negative externalities that have not been internalized. Therefore reducing such rewards can serve the dual purpose of addressing the externality while making the shortsighted strategy less attractive. Let us examine these variations by focusing on the challenges outlined in the introductory chapter.

a p p ly i n g s t r a t e g i e s o f c r e a t i n g o r r e s c h e d u l i n g ta n g i b l e b e n e f i t s a n d c o s t s Promoting Family Economic Security Promoting Savings Rates. The most straightforward way to promote voluntary savings—one key aspect of family economic security—is to increase the near-term benefits of savings by raising the interest rates on savings deposits. If savers can see more impressive immediate growth in their savings, the attractiveness of long-term savings would clearly increase. Therefore general­ly

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speaking, the higher the interest rates on savings accounts, the greater the proportion of income that families will put into savings. This may seem too obvious to debate, but the astonishing fact is that many governments have savings interest rates artificially low in order to give firms access to cheap credit at the expense of the depositors. This widespread business-promotion policy is typically problematic both in encouraging poor investments that are privately profitable only because of the credit subsidy, and in discouraging savings on the part of families with few alternatives for productive savings. In other words, the shortsighted approach of stimulating potentially unsustainable investments by squeezing the returns of depositors also undermines the farsighted objective of stimulating savings. These situations typically arise when government monopolizes the available formal savings systems, or regulates the rates that private banking institutions can offer. Therefore in many countries raising deposit interest rates can be accomplished simply by removing the artificial limitations on these rates that governments have imposed in order to make cheap credit available to borrowers. Several examples demonstrate that governments can promote savings by providing higher-than-market savings interest rates. The most prominent example by far has been the Japanese Postal Savings Fund, established in 1875 soon after the establishment of the postal system itself (Calder 1990). Although the Postal Savings Fund is undergoing contentious reform efforts currently, it has undoubtedly contributed significantly to the savings rate in Japan, which prior to the 1930s was quite low; it is now among the highest in the world. During many decades when Japanese of modest incomes had very limited access to commercial banks, the Postal Savings Fund offered very attractive interest rates on savings deposits, often above the rates that small-scale savings could command at the commercial banks. At times, the high interest rates resulted in overall deficits for the system, covered by the Japanese government (Calder 1990: 44). In addition, until the mid-1980s the earnings were tax exempt. (Calder 1990: 50) With these advantages, and the convenience of 24,000 branches across Japan, it is little wonder that the Postal Savings Fund holds roughly one-third of Japan’s bank account deposits and is the world’s largest financial institution. It is important to point out that the concern over the Postal Savings Fund focuses primarily on what is done with the savings, rather than the conditions and rates on deposits. The Postal Savings Fund had financed much of the government-directed industrial development, which has come under increasing criticism in this free-market era. Some critics also argue that the success of the Postal Savings Fund has allowed the government to procrastinate in undertaking a thorough reform of the financial system (Calder

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1990: 52). And the success of the Postal Savings Fund has long been attacked by the commercial banks, which have operated under greater restrictions. In short, the Postal Savings Fund, by its sheer magnitude, has raised many policy concerns related to the overall financial system, but as an example of an effective instrument for stimulating long-term savings, it is an indisputable success. Although time discounting typically undermines the preference for savings over consumption, clever arrangements of decision-point timing can offset this preference. For example, Richard Thaler and Shlomo Benartzi (2004) report on a savings plan that they developed, which was implemented by three U.S. companies for their employees’ voluntary savings plans: Our goal was to design a program to help those employees who would like to save more but lack the willpower to act on this desire. On the basis of the principles discussed so far, we have proposed a program we call Save More Tomorrow. The plan has four ingredients. First, employees are approached about increasing their contribution rates a considerable time before their scheduled pay increase. Because of hyperbolic discounting, the lag between the sign-up and the start-up dates should be as long as feasible. Second, if employees join, their contribution to the plan is increased beginning with the first paycheck after a raise. This feature mitigates the perceived loss aversion of a cut in takehome pay. Third, the contribution rate continues to increase on each scheduled raise until the contribution rate reaches a preset maximum. In this way, inertia and status quo bias work toward keeping people in the plan. Fourth, the employee can opt out of the plan at any time. Although we expect few employees to be unhappy with the plan, it is important that they can always opt out. Knowledge of this feature will also make employees more comfortable about joining. (Thaler and Benartzi 2004: S170–71) A much more modest example of promoting savings, demonstrating that attractive savings rates can be provided on a local level, is the Save the Children–United Kingdom savings and credit program in the Cam Hoa commune of Vietnam’s Ha Tinh Province. Since 1994, this program has offered modestly higher-than-market rates for family savings deposits, while lending for micro-enterprises at market rates. The annual savings interest rate was set at the 16.8 percent formal-sector market rate at the outset, during a relatively high inflation period, and was maintained at that level even after the inflation

Tangible Benefits and Costs  69

rate and the formal market deposit rates fell. The program’s loans have generally been at a 24 percent annual interest rate, which has been attractive for microenterprise borrowers, but still provides a large enough spread to keep the program financially sound. While some critics have questioned the need and viability of higher-than-market savings interest rates, these rates have been defended on the grounds that positive real returns are important both to reduce the vulnerability to inflation and to encourage savings—and the habit of savings—in general. The impact of high savings interest rates on the willingness to increase family savings in this particular case cannot be determined, because the deposits were mandatory for members of the program, giving them access to the program’s credit.2 Nevertheless, the case does demonstrate that savings can be greatly stimulated without undermining the financial viability of the program. It is significant that above-market interest rates for bank deposits in commercial banks have been roundly condemned on many grounds, ranging from the potential for abuse by speculators who take advantage of the favorable rates relative to borrowing rates, to the fact that higher-than-market deposit interest rates may be an indicator that the banks are in such grave trouble that they are desperate for depositors. Most of these concerns, quite valid for conventional commercial banks, are irrelevant for specialized savings-and-credit institutions targeting low-income people on both the depositor and creditor sides. Yet given that depositors are attracted by high savings interest rates, how can the reliability of the savings institutions be maintained, so that people have enough well-founded faith to commit their money to them? In many countries the weaker financial-services institutions are compelled to offer extremely high interest rates and dividends to attract depositors, who then bear some risk of the institutions going bankrupt. Banks and other financial institutions that offer extremely high returns to attract depositors may end up with highly speculative loans that risk bankruptcy in the long run.3 Imposing the near-term costs of requiring the institutions to maintain sufficient reserves, government policy can both reduce the risk and bring the savings interest rate to reasonable levels. If some financial institutions cannot be profitable under these conditions, savings would flow to more reliable institutions. The highly successful Chilean social security system, based essentially on private mutual funds among which individuals must choose to invest their “forced savings,” has been subjected to very rigorous monitoring and regulation to ensure that in the competition for more investors, these funds cannot engage in overly risky speculation.

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It is important to suppress the expectation that government will bail out the failing financial institutions. This particular negative externality—that the cost of an unwise savings decision would be borne by the taxpayers—ought to be borne by the saver (this is, again, the moral hazard problem). A clear policy that a bailout will not be forthcoming is therefore also a way of clarifying the unattractiveness of the shortsighted strategy. This example shows the importance of regulating dangerous competitive behavior. Without such regulation, individuals or companies may believe that the only way to stay competitive is to take actions that put themselves in long-term jeopardy.4 Longer-term family investment can also be promoted by providing “social safety nets” to reduce the economic vulnerability that prompts lowincome people to forgo longer-term investments because of the potential need for ready cash. Families will regard long-term pursuits as less risky if they can rely on government or nongovernmental resources to ride out illness, loss of employment, or a failed crop. Social safety nets can be provided by government—the most prevalent provider in developed countries—but also through private collective action. An excellent example is the “One Baht a Day” Savings Program in Thailand. To maintain membership in a savings group within this program, families are required to make monthly contributions equivalent of US$10 per year; some of the accumulated fund is devoted to microbusiness loans (as with many such funds, most prominently the Grameen Bank initiated in Bangladesh and now spread to other parts of South Asia), but half of the “One Baht a Day” savings fund is reserved for welfare services, including hospitalization cost coverage (Kingdom of Thailand 2005). Forced Savings—Social Security. Where governments have concluded that voluntary savings are not enough to ensure economic security in old age, they have tried to enact social security systems requiring contributions from those covered by the programs. The major motive for resisting these initiatives is to overcome the often-justified fear that social security savings are not worth the immediate income sacrifices. To allay this fear, a few countries have instituted systems that increase the yield on social security savings to make the expected returns attractive enough to gain support for a more ambitious social security system. The Chilean social security system, relying on private mutual fund firms to invest forced savings, was implemented with strong arguments that the returns on savings would be much greater than the defined-benefit program that it supplanted—and the returns were indeed much higher (Piñera

Tangible Benefits and Costs  71

1995). The obvious challenge for these strategies is to make a convincing case that the long-term benefits will indeed be so great. In light of the novelty of the new Chilean social security program—it was the first in Latin America to put asset management in private hands—and the skepticism that many Chileans had toward the military regime, the risks must have seemed very high to many Chileans. The Chilean government addressed this considerable uncertainty by providing an opt-out provision to hedge against the risk. The new system was introduced in 1981, but Chileans had until 1985 to decide whether to opt out of the system and revert to the old defined benefit system. In the event, by 1985, 98 percent of eligible workers had opted for the new system, reflecting the success of the system to that point. Family Planning. Another example of providing immediate benefits to reinforce long-term economic security can be found in the family planning initiatives of Thailand’s Community-Based Family Planning Service (CBFPS), beginning in the mid-1970s. To offset the short-term advantage of having more children to add to family income through their labor, the CBFPS provided, among other things, low-interest agricultural credit for families in which the wife was not pregnant. The program also provided a contribution to village revolving-loan funds for every vasectomy, female sterilization, IUD use, and birth-control use within that community. Although other powerful factors such as urbanization and lower child mortality were involved, these incentives contributed to the astonishing reduction of the Thai birthrate from 3.3 percent in the early 1970s to 1.2 percent by the mid-1990s (Veravaidya 1997: 207). Conservation and Environmental Protection Much of the pollution and the depletion of natural resources results from economic activity, so it is no wonder that structuring tangible rewards and sanctions is particularly important in conserving natural resources or reducing environmental damage. Obviously, the temporal problem is that the intrinsic economic costs are generally long term as well as less certain. By the same token, the economic gains to the polluter (and perhaps to the society) are more immediate and more certain, just as the economic benefits of excessive resource exploitation come before their negative consequences. In addition, natural resource management and the activities that cause or limit pollution are strongly subject to both negative and positive externalities.

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The most fundamental principle guiding environmental policy is the importance of addressing the negative-externality problem. If the costs of environmental damage are not heavily borne by the polluter, the long-term prospects for environmental protection are bleak. However, many conservation policies address the positive externality problem: if resource users do not receive some compensation for maintaining or expanding resource endowments that also benefit the community, the economic rationales for conservation are weak. Therefore the bulk of environmental-protection and conservation strategies involve imposing costs for damage or providing benefits for preserving. In either case, the consequences of pollution, resource use, and resource development are “internalized” by those responsible. Bringing Benefits Closer to Overcome Delay and Uncertainty. To address the dual problem of later and less certain benefits from conservation and proenvironmental actions, three approaches have shown promise. First, access to cred­it can help to overcome the delayed gains of long-gestating natural resources, such as trees,5 for those resource users who otherwise would be vulnerable to emergency needs for cash. Market-rate credit6 may be provided through government auspices, NGOs, mutual-aid societies, or a well-functioning private banking system. Thus this is a strategy of changing the opportunity to gain access to shorter-term benefits if the need arises. This strategy is clearly relevant for addressing the dilemma, mentioned in chapter 2, of low-income farmers who are encouraged to plant trees or desist from harvesting them prematurely, but who fear that family emergencies will require ready cash. The most market-oriented means of providing earlier rewards is to create forward markets for advance sales of long-gestating outputs. The most obvious example is the forward market for timber. This is not the international timber futures markets in which very large-scale logging companies sell futures to sawmills, furniture manufacturers, speculators, and so on. Rather, it is the arrangement whereby a land owner sells the harvesting rights for a predetermined date at a particular price, and receives some or all of the payment at the time the contract is arranged. Sometimes these contracts specify how the land owner will manage the forest; sometimes the harvest-rights purchaser manages the contracted trees from the outset. Commodities future markets depend heavily on sound legal systems that can enforce contracts and on strong financial systems that can provide insurance to reduce the risk of the contract purchaser. Therefore they are still quite rare in developing countries. However, such arrangements are emerging. For example, in the late 1990s the Costa Rican government, with support from

Tangible Benefits and Costs  73

the International Finance Corporation of the World Bank Group, began the development of a timber futures market “to enable small and medium size landholders to receive the fruits of their labour, without having to wait for 15 years. This promises to make sustainable forestry a bankable business even for smallholders” (Dabholkar 1998). Finally, a strategy for reducing risks due to the uncertainty of pursuing long-term natural-resource strategies is to insure the long-gestating outputs against loss. Annual crop insurance has been a mainstay in developed countries, and crop insurance for timber and other longer-gestating crops has also been adopted, albeit less so (Wong and Dutschke 2003: 5). This can be extended to crops of longer gestation: timber insurance can provide coverage against fire, lightning, wind, theft, vandalism, and so on, can reduce the vulnerability of longer-term forest investment. Yet unless the arrangement is carefully crafted, this form of insurance also has pitfalls. Insured tree growers may have less motivation to care for the trees. Especially if timber prices are expected to decline, tree growers may prefer to let their trees be destroyed in order to collect the insurance. Administrative costs may be high, and widespread conditions, such as drought and large forest fires, may bankrupt the insurance fund. The most effective tree growers may not need to rely on timber insurance, leaving the insurance fund to cover higher-risk timber stands. Where premiums must be high to cover actual damages, the poorest may not be able to afford the premiums. The most successful insurance programs are community-managed mutual insurance funds, whose members decide who can join. Such funds reduce the likelihood that the highly risky tree growers will be admitted or that cheating will occur. However, the poorest tree growers may well be excluded from such funds.7 Compensation for Positive Externalities. To address the lack of incentive to take farsighted actions that benefit others, either government or nongovernmental groups can provide early compensation for what otherwise would be unrewarded or insufficiently rewarded. For example, providing farmers some cash to desist from harvesting immature trees may provide enough incentive to overcome not only the low reward for providing the benefits of habitat, soil protection, and other “ecosystem” benefits, but also the impatience and uncertainty that have been the chronic deterrents to tree planting and nurturing (Godoy, Kirby, and Wilkie 2001). This compensation amounts to cofinancing justified by the public goods that afforestation is expected to provide. Other financial incentives such as tax credits are also tantamount to cofinancing, in that these arrangements defray near-term costs for conservation that entails

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both long-gestation periods and positive benefits for others. The experiences of many countries with such incentives have recently been collected and analyzed in a comparative framework (Enters and Durst 2004). However, the subsidies for afforestation (or any other provision of public goods) must be carefully calibrated, in light of the fact that subsidies can attract investments beyond the optimal level: the subsidies should be limited in both total amount and degree of subsidization and must be crafted so as to avoid jeopardizing other goals. For example, Chile’s 1974 Decree Law 701 provided compensation for reforestation up to 75 percent of the costs, elimination of property taxes, a 50 percent reduction in income taxes, and land tenure security for the land qualifying for the program. The result was an enormous expansion of pine and eucalypt forests, with a huge increase in timber and wood-product exports and greater forest cover in areas that had been deforested over many previous decades (Castilleja 1993). However, despite formal provisions against converting native forests, considerable conversion occurred, with the destruction of the ecosystems adapted to the native habitats (Cavieres and Lara 1983). In addition, the program was largely utilized by large-scale forestry companies, leading to a consolidation of the forestry industry (Vincent and Binkley 1992; Silva 1997) and conflicts with small-scale landowners. Because the Decree Law had a twenty-year sunset provision, the policy debate over whether to refocus the subsidies to small farmers and to provide greater safeguards for natural forest began in the mid1990s, but policy stalemate has thus far prevented the passage of a reformed policy (Silva 1997; Neira, Verscheure, and Revenga 2002). One lesson from this case is that subsidies to stimulate positive externalities have to be carefully designed in order to ensure that an appropriate balance of public goods is promoted. This example also demonstrates the point made above about limiting the compensation for positive externalities. Because negative externalities ought to be combated by charging the full damage to others, one might think that the compensation for positive externalities ought to be equivalent to the full benefit. Yet this is both unnecessary and counterproductive. If the provider of the positive externality is compensated for the full value of the benefits, then the rest of society does not gain—obviously both a normative and political drawback. And the more the compensation exceeds what is just necessary to tilt the choice to the socially beneficial activity, the more likely the activity will be overdone by others trying to cash in on the compensation. In some instances, these opportunities have attracted companies with little experience in

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forestry, simply trying to take advantage of the excessive profits. A Costa Rican reforestation program beginning in 1979 provided such attractive tax credits that some firms were removing natural forest in order to plant exotic species, then neglecting the postplanting tasks once the tax credits were obtained (González, Alpizar, and Muñoz 1987). In the early 1990s, the Oscar Arias administration changed the target of the incentive program to provide modest payments to farmers to maintain trees on their small farms. In light of both impatience and uncertainty, which may vary from individual to individual, it is impossible to determine from the profitability of shortsighted alternatives (such as immediate harvesting the immature trees) precisely what compensation will be just enough to stimulate the more farsighted behavior, but consultations with potential providers and a bit of experimentation would help to find the right levels soon enough. Cofinancing can also be extended to organizations, whether governmental or nongovernmental, that provide public goods that otherwise might be unaffordable or not of high enough priority. For example, qualifying Brazilian municipalities receive transfers from the federal government for expanding the conservation areas under their jurisdiction, financed through the “ecological value-added tax” (Mehotra 2005: 130). A market-based means of internalizing some of the benefits of environmental protection can be found in both private and governmental efforts to designate products, hotels, restaurants, factories, and other operations as environmentally friendly.8 Insofar as ecofriendly operations can enjoy greater demand or can charge more for their goods and services, these operations can benefit immediately from actions that will preserve the environment in the long run (Rivera 2002; Thøgerson 2002). Rivera examined the profitability of Costa Rican hotels and resorts with ecofriendly designations as determined by a nongovernmental, not-for-profit Certification for Sustainable Tourism Program. He found that hotels and resorts designated with more “tortoises” (equivalent to the Michelin stars) can command higher room rates, holding other attributes constant. The gains from higher room rates more than makes up for the higher costs of employing more environmentally sound practices that earned them higher ratings (Rivera 2002). This strategy is of particular interest in that it can be employed by nongovernmental entities as well as by governments. What makes ecofriendly designations particularly interesting is that they merge the principled commitment to the environment on the part of the tourists with the economic motivation of the hoteliers. Hotel owners benefit from

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being able to charge higher room rates because their guests—not the government or NGOs—are willing to pay more in order to protect the environment. Compensation for positive externalities also occurs on the international level. The 1992 United Nations Framework Convention on Climate Change and the 1997 Kyoto Protocol helped to create markets in emission rights trading. Nations that commit to reducing the global levels of greenhouse gases have the choice of reducing their own emissions, paying other nations to reduce their emissions, or paying other nations to reduce greenhouse gases through afforestation, among other possible means of removing carbon from the atmosphere. Afforestation has been the main means of carbon sequestration in the still modest but growing transfer of funds through this market. Compensating other nations to expand their forests is not only the least costly option in some circumstances, it is also a politically compelling way to fulfill the obligation. Another international mechanism for compensating to promote conservation and environmental actions with positive externalities is the Global Environment Facility, administered by the World Bank, which provides grants for developing countries to undertake environment-enhancing projects. In effect, the Global Environment Facility is a vehicle for transferring funds from the developed countries to developing countries to preserve or enhance the global environment. Discouraging Excessive Pollution and Excessive Resource Depletion. Economic activities in manufacturing, agriculture, transport, and other sectors inevitably create pollution and use up natural resources. While it is obviously both unwise and impossible to eliminate pollution and resource use completely, both are frequently excessive for the societal benefits that result from economic activity. The economic benefits that provoke or permit excessive pollution or resource depletion come through two major channels. One is the opportunity to pollute without having to pay for the damage it causes, even if one does not have the legal right to pollute. The other is the overuse of natural resources and pollution-causing inputs (such as gasoline, fertilizers, or pesticides) due to their low prices. The first channel reflects the negative externality problem; the second is typically due to poor existing public policies. The classic and generally valid approach to reduce negative environmental externalities is to charge the polluters fully for the damage that the pollution causes. The monitoring and imposition of penalties or charges would also increase the awareness of future costs and their seriousness.

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When the expected damage is so great that the charge makes the activity privately unprofitable, the activity is likely to cease. This may provoke complaints that the charges undermine the economy, but if the analysis of societal damage is accurate, these economic activities should not proceed, unless of course the environmental damage could be reduced by altering the activities. Because delays in imposing pollution charges mean that the costs are further into the future, these delays may leave a polluting activity privately attractive even if it is costly in terms of environmental damage and the later charges will be high. For example, the contamination caused by sloppy mining techniques may take years to result in damage that could be identified and measured; more time to impose the charges or penalties; and sometimes years of litigation. Therefore the temporal problem can be addressed by charging for the projected societal damage. Thus timely development and application of procedures to predict, monitor, and assess environmental damage and impose the charges are very important. Many developing countries face the situation that various firms and facilities are not yet prepared to meet environmental quality standards, but the low penalties for environmental infractions such as air or water pollution are inadequate deterrents against continued infractions and the failure to upgrade environmental equipment. Similarly, the monitoring and enforcement capacities may be weak, requiring a selective approach. In these cases, graduated penalties for environmental infractions may provide an approach to begin selectively while not precluding stronger action in the future. A combination of credible progressions of penalties in the future, and an increase in the penalties for the second or third violation of an environmental regulation will reduce the overall attractiveness of flaunting the regulations. In a very different vein, the economic costs that the polluters or the profligate resource-users face can be increased by extending their ownership of the overall economic activities and rewards. Because members of communitywide entities, such as forestry cooperatives and irrigation user groups, share the property or user rights, these arrangements can promote farsighted selfrestraint because of their potential to collapse if members indulge their shortterm self-interest. Some of these organizations require cooperation so that each member can privately enjoy a share of the common property (e.g., the irrigation water supply or the neighborhood’s improved facilities such as inhome sanitary drains); cooperation in others is necessary so that members can enjoy jointly earned gains (e.g., sales of logs or firewood from community woodlots).9

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Eliminating Subsidies. Many instances of environmental degradation come not from a lack of public policies, as is largely the case with missed opportunities to promote positive externalities, but rather from misguided public policies that actually encourage shortsighted actions. Therefore the first and most obvious set of strategies for promoting farsighted conservation and environmental actions is to terminate these policies. Much can be accomplished simply by eliminating or reducing the subsidies created by keeping naturalresource input prices low. Artificially cheap inputs are often subsidized by governments through the shortsighted logic that such subsidies reduce production costs and therefore will increase production. Yet the real costs of these inputs are a drag on the entire economy. If the producers of inputs are forced to sell at low prices, then production is discouraged, drying up future supplies and making the input-dependent industry even less viable. If the government pays for production (e.g., through a state-owned electricity company), then these subsidies are a drain on the central budget. The excessive use of subsidized inputs such as hydrocarbon fuels, fertilizers, and pesticides also does gratuitous environmental damage. The possibility that the subsidies will be withdrawn at a future time leaves these industries more vulnerable in the long run. Therefore removing the subsidy by allowing input prices to reach their market levels would strengthen the economy in the long run. In the case of a state monopoly, this would mean pricing the input at least to recoup its production and replacement costs. Discouraging Risky Behaviors The creation or rescheduling of tangible costs can deter risky behavior through traditional regulation (prohibitions, enforced by fines), so-called economic disincentives (such as taxes equivalent to charges) or by closing off the opportunities for individuals to engage in moral hazard behavior. Regulation focuses on increasing the short-term costs of the risky behavior, while combating the opportunities for moral hazard behavior focuses on increasing both the short-term costs and the expected long-term costs. Regulation of destructive behavior that does not involve competition for gain is usually addressed through prohibition if the activity risks immediate bodily harm, such as riding a motorcycle without a helmet, or living in an area exposed to the dangers of floods, fires, or other potential disasters. In some cases, the prohibitions on living in highly vulnerable areas are accomplished through land-use restrictions that simply tie up the land for other purposes. For example, Japan’s zoning of “urban control areas” for parks rather than

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construction greatly reduced the potential physical damage and casualties in some of the areas hardest hit by the extremely powerful Tokage Typhoon in 2004 (United Nations Environmental Programme 2005: 11). If the risks are more long term, such as disease from smoking or excessive alcohol consumption, taxes are a more common disincentive (e.g., cigarette and alcohol taxes). Another justification for such taxes is that they partially compensate for the health-care costs that are borne by the rest of society. Regulation of dangerous competitive behavior faces a special challenge: competition may compel dangerous behaviors that are not firmly discouraged by stiff penalties. For example, if an individual miner takes risky shortcuts to seek a promotion to foreman status, others may feel compelled to do the same. Prohibitions with sufficiently high penalties, if applied even-handedly, would reduce the possibility that compliance would be seen as a competitive disadvantage. Increasing the long-term expected costs of risky behavior influenced by moral hazard opportunities requires closing off the two common sources of moral hazard: formal insurance and the less formal expectation of help by government or nongovernmental groups. If available insurance does not impose a high enough immediate cost,10 or reduces the individual’s long-term costs if the insured adverse event does occur, overly risky behavior is more likely to occur insofar as others bear the burden. The classic example is the building homes in areas highly prone to fire or flood because the home owners have subsidized fire or flood insurance. The complication is that insurance per se can be a very farsighted response to reasonable and unavoidable risks, from the individual to the national level. It reflects the willingness to sacrifice the annual premiums in order to ensure some degree of long-term security from catastrophe. Moreover, risk sharing— the essential logic of insurance—does not inevitably open up moral hazard problems. For example, a current World Bank–led initiative to establish a hurricane and earthquake insurance pool for Caribbean nations would require annual contributions from each participating nation, projected to range from US$400,000 to US$3.3 million, according to the levels of hurricane and earthquake risks and the maximum coverages, projected to range from US$25 million to US$60 million. The protection against risky developments comes from the fact that the payouts in case of hurricanes or earthquakes would be capped according to objective measures of the strength of the occurrences (e.g., maximum winds) even if the damage is greater (World Bank 2006). The lesson is that moral hazard can be avoided or at least reduced by appropriate structuring of the insurance arrangements.

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Community Self-Help Consider the initiatives to promote participation in self-help community development programs. One option would be to signal to community members that they are fully responsible for providing the labor and funds for the upgrading, in order to provide a clear signal that self-help efforts are essential. However, that signal would leave the residents with only the long-term prospect of improvement—and that only after and if their own efforts succeed. The very fact that many slum communities remain passive in the face of wretched living conditions would call for a pessimistic prediction about the likely success of this approach. In contrast, the government may provide some early benefits, such as improvements in street lighting, as soon as community residents fulfill some rather easily achievable milestone in their own efforts. Other government-funded improvements could be promised as other milestones of community work are achieved. The prospect and benefits of the governmentally funded improvements would thus add to the motivation for the self-help efforts even if the government outlay is relatively modest. This form of cofinancing is well exemplified by the experience in Orangi, Pakistan’s largest unauthorized urban settlement, with roughly a million people on the outskirts of Karachi. Earlier efforts to improve the desperately inadequate Orangi sanitation system failed, exacerbated by inaction by local residents and exorbitant fees demanded by government agencies in collusion with contractors and corrupt community leaders. In the early 1980s an NGO provided seed funding for voluntary community efforts. The Orangi Pilot Project (OPP) defrayed the costs of technical assistance, training, supervision, and tools; the community organizations, organized at the small scale of lanes, collected the money from residents, while also paying for the in-house facilities. By 1994, 97 percent of the lanes in the area of the OPP had underground sewer lines. The OPP expenditures amounted to only 6 percent of the total cost of equivalent to US$2 million (Khan 1997). If community self-help programs are regarded as too uncertain for residents to devote the time and money to pursue, the government or NGOs promoting the programs may consider enacting smaller-scale, “experimental” initiatives that, if successful, can promote support for fuller implementation. These prototypes could then be used as models for other communities to observe and follow, if the results are indeed sufficiently impressive. This has been a triedand-true approach to diffuse agricultural innovations (Rogers 1995). The success of the demonstration effect depends on the capacity of the promoters to publicize the results, involve residents of other communities in assessing the

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prototype, and overcome the suspicions that success is not simply due to the prototype’s status as a small, “showcase” project. Promoting Productivity Research and Development. The penalty of lower near-term profits for a firm that invests in long-term productivity-enhancing R&D can be at least partially offset by arrangements that hasten the payback period. For example, the government may offer to purchase licensing rights (in essence creating a forward market for the technologies), which could also hasten the diffusion of the innovations. Other arrangements can reduce the short-term costs of R&D, frequently through government subsidies justified on the grounds that the innovations will provide public goods. Government-supported technology incubators can reduce the costs of operating R&D facilities—they have sprouted in many developing areas, with mixed success. In Chile, the nonprofit enterprise incubator, Fundación Chile, founded through a public-private partnership, has led to the creation of more than sixty companies based largely on new product or process technologies. In contrast, the technology-incubation efforts in Algeria have thus far failed (Saad 2004). Government support for R&D does not have to be limited to incubating new companies, however. In Taiwan, the Industrial Technology Research Institute (ITRI), one of several semiautonomous, partially government-funded research centers, facilitates technological advances of Taiwanese firms, operates laboratories conducting research on electronics, mechanical engineering, energy, materials, chemistry, optical systems, computers and communications, aerospace systems, biomedical engineering, and other technologies. Most of its research funding is reserved for medium- and long-term projects. Its operations have benefited both existing and new firms (ITRI established and then spun off firms involved in semiconductor fabrication, automation, and microelectronics). The other R&D time-horizon disincentive, namely, the risk that benefits will leak to other firms, can be addressed fundamentally by strengthening intellectual property rights, whether through stringent laws and monitoring or by purchasing the licenses so that the firm has secured earnings before the leakage can occur. If the government is leery about its own entanglements in the economy, this function can be conducted by autonomous organizations. Job Training. The negative externality that discourages investment in on-thejob training can be addressed by pooling resources and responsibilities to offset both the positive externality problem and the free-rider temptation. On the

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one hand, the factory manager may worry that trained employees would defect to other companies. On the other hand, the same manager may hope that workers trained by other companies can be lured into his or her firm without any training expenditure. Addressing these problems requires arrangements that organize the collective provision of the investments, work out fair burdens, and penalize the free riders. In some contexts the government needs to be proactive in facilitating these pooling efforts, either because competitors are unwilling to share information, or because competitors’ cooperation is deterred by fears of government prosecution under antitrust or anticompetition rules. Even with some assurance that the firm will get a fair share of the long-term benefits of better-trained employees, the question remains as to whether the top-level managers will have sufficient personal incentive to forgo immediate profits by investing in training. This is one of many instances in which the principal-agent problem might deter farsighted action. Various forms of coownership have the potential to “merge” the interest of the firm in having longterm training programs with the manager’s interest—addressing the principalagent problem by providing the agent with a greater stake in the fortunes of the principal. Many firms provide co-ownership incentives such as profit-sharing arrangements, stock-purchase requirements, stock grants, and stock options. By creating these long-term rewards, of greater value if the firm prospers in the long run, the decision makers are more likely to take into account the benefits of job training. These incentives can be further strengthened by sweetening co-ownership benefits for managers evaluated as successful in pursuing farsighted actions such as promoting on-the-job training. The challenge is to structure these co-ownership arrangements so that the incentives are truly aligned with the long-term fortunes of the firm. This challenge is reviewed in chapter 6 on performance evaluation. Improving Physical Infrastructure For major infrastructure developments with huge price tags, such as roads, subways, tunnels, port facilities, yet another strategy for reducing the nearterm costs is the “build, operate, transfer” (BOT) approach, wherein the government contracts private-sector firms to finance, construct, and operate the infrastructure for a fixed period of time, earning the proceeds during this period (Levy 1996).11 BOT arrangements require user fees to compensate the firms; for example, toll roads rather than free-access roads. The costs are

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borne by those who pay for their use of the infrastructure, rather than taxpayers. These fees are usually set ahead of time by negotiation between the government and the firm, often on a formula to adjust for inflation. BOT arrangements can reduce the risk of negative externalities and the principal-agent problem that arises when contractors build infrastructure projects but have little stake in whether the construction is well designed and soundly built. With a BOT arrangement, the private firm’s profit will be greater if the project is completed on time and functions well. If the period prior to the transfer to the government is long enough, the firm will be motivated to build to last. Another virtue of the BOT approach is that the economic viability of the project is “market tested” by the need to have private contractors willing to engage in the project (Flyvbjerg, Bruzelius, and Rothengatter 2003: 125–28). Yet for developing countries, the key attraction of these arrangements is that the financing is secured from outside of the country. For example, in Thailand much of the financing for Bangkok’s transportation expansion has come from Japan, Hong Kong, and Western European sources. Compared to huge budget outlays by the government, the BOT arrangements allow for projects to proceed without the immediate pressure for tax increases or inflation. BOT arrangements do have their pitfalls. Because governments are frequently under pressure to keep infrastructure access fees low, the firms engaged in BOT arrangements have to be concerned about the possibility that the government will insist on cutting the access fees. Or the government may simply appropriate the structures, invoking any number of possible complaints against the firm. For example, the Thai government seized the assets of the Bangkok ring road expressway (the so-called Second Expressway System) just before it was to open in 1993, resulting from the dispute over whether the consortium, led by the Japanese firm Kumagai Gumi, could charge the previously agreed toll (Levy 1996: 372). In order to ensure a profit, the firms may try to offset these risks by requiring a higher fee structure. BOT arrangements also reduce the contribution of today’s citizens to the ultimate aim of sustainable development to make future generations better off. In essence, BOT arrangements postpone a country’s payment for the infrastructure, leaving it to future users to pay for what might have been paid for much earlier. It is not unusual for the “operate” phase to last thirty years. In short, the question is whether the means of avoiding the short-term sacrifices undermines the farsightedness of these approaches to develop expensive infrastructure. As an alternative to BOT arrangements, long-term bonds provide another way of reducing the near-term costs, in comparison with immediate budget

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obligations and either the increased tax burdens or the diversion of funds from other programs. Yet here again the question is whether such strategies dilute the farsightedness and commitment to sustainability by postponing much of the payment and thereby placing the burden on future generations. In addition, projects financed through government-guaranteed bonds do not have the reality check on the feasibility of the project that the private-sector involvement in BOT financing would provide. Government agencies chronically exaggerate the benefits of large infrastructure projects to make them seem more attractive (Flyvbjerg Bruzelius, and Rothengatter 2003: chap. 2), a tendency that is less likely if private investors are motivated to take a hard look at the projections of benefits. Support for long-term investments can be made more appealing if they can be targeted to achieve high-profile medium-term objectives, especially if these objectives have strong emotional appeal. The obvious examples are hosting world fairs, international expositions, or huge sporting events such the Olympics. The physical infrastructure, including transportation systems and buildings, typically captures the bulk of expenditures for such initiatives, with this infrastructure lasting for many decades thereafter. In a sense, these initiatives can be viewed as deliberate invocation of goal substitution: attention is focused on the events, for the sake of strengthening the appeals of longer-term pursuits. The obvious concern regarding this strategy is whether the investments are advisable compared to alternative uses of the investment funds. There is no necessary reason why the transportation system to serve an international exposition or a set of sporting events would be particularly sound for transportation after the event. Clearly, careful planning and a realistic assessment of whether the initiative can indeed have long-term net benefits are essential; the event entrepreneurs cannot be swept up the excitement and rivalry in competing for these events. Of course, the number of huge international oppor­ tunities is very limited, but for smaller locales, more modest events may be able to stimulate investments that are significant in terms of the scale of the community. For infrastructure initiatives that entail significant risk even if expected benefits outweigh the expected costs, the long-term cost expectations can be reduced through policy. For example, construction companies face the risk of losing very costly tort suits, if future accidents are traced back to design or construction flaws. To offset this risk, the companies may require higher profit margins that could render the infrastructure project economically nonviable, or may simply be deterred from taking on the project. These risks can be reduced

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through protection from future legal liability. Note that this is the same principle that justifies tort protection for physicians, hospitals, and pharmaceutical companies, in order to encourage them to make long-term investments in their training, operations, and R&D. Such protection would have to be balanced off against the possibility that the protection would induce irresponsible behavior. Therefore legal protection must be accompanied by careful monitoring. Tax Reform. The most common approach to restructuring and rescheduling to gain support for farsighted tax reform initiatives has been to make the reduction of tax rates a prominent element of the reform. The need to reduce these rates is a recurrent theme in the tax reform literature, largely out of concerns for increasing compliance, based on the assumption that very high tax rates (e.g., the 58 percent top marginal rate in Jamaica prior to the 1986 tax reform) will lead to extreme levels of avoidance and evasion even if the government undertakes strong efforts at enforcement. Therefore, contrary to conventional wisdom, reducing the rates does not mean that revenues will decline, as long as compliance improves. Moreover, very high marginal rates pose three aspects of vulnerability to the taxpayer: if the taxes must be paid, these rates may well be confiscatory. If the taxes are not paid, the individual or firm faces the risk of prosecution. The final vulnerability is that if previous governments had tried to mitigate the impacts of the high rates by granting a host of exemptions, the resulting market distortions may jeopardize any firm in a sector that is inefficient because of the distortions, or because the subsidies may be withdrawn. Therefore insofar as lower rates allow for the elimination or reduction of exemptions, an additional appeal of fairness may also be compelling. A similar mechanism to reduce the immediate costs imposed by a tax reform initiative is to limit the initial effective burden by adjusting the bases of calculating the burden. For example, the 1974 Colombian tax reform introduced the country’s first tax on agricultural land but did so with a parallel strategy to forgo a land-valuation survey, so that at that time the land tax, based on low valuations estimated years before, was a small initial burden. This Colombian tax reform also demonstrated the utility of granting protection from more onerous policies in future policy rounds. The expectations of long-term costs that would otherwise discourage farsighted actions include the risk that today’s sacrifices will increase the vulnerability to further sacrifices in the future (the “slippery slope” of victimization). Tax reforms often pose this risk, especially in the introduction of new forms of taxation on activities or assets previously not subjected to taxes. In light of this, the Colombian

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government accomplished a remarkable policy breakthrough by enacting a fundamental tax reform that introduced a land tax for the first time in the history of the country. The government, believing that tax reform was essential for the economic and political system, gained the acquiescence of the large landowners, despite the precedent that one would expect would be anathema to the land-rich. The large landowners were vulnerable not only to the prospect of being taxed but were also vulnerable to a land reform initiative that might unleash land takeovers unsanctioned by the government, in addition to government-sanctioned land redistributions. The 1972 “Pacto de Chicoral” between the national government and the landowners, which made it clear that the government would not condone or assist in land takeovers, was the necessary precursor of the landowners’ acceptance of the land tax (Ascher 1988). Promoting Charitable Contributions Cofinancing of a rather different nature has a highly successful record in promoting the establishment of charitable organizations and in stimulating farsighted charitable contributions, at least in developed countries. Tax exemption has two potential cofinancing consequences. First, the operations of qualified charitable organizations may be exempt from paying various taxes, thereby increasing the effective value of a contribution. Second, the contributions themselves may be deductible from income taxation. For example, a donor in a 30 percent marginal tax bracket could contribute $10,000 for a net outlay of $7,000; the charitable organization could purchase $10,000 of goods and services for only $10,000 rather than the $11,000 if the 10 percent value-added tax is waived. The $4,000 difference is, of course, a revenue loss for the government. The value of the contribution can be enhanced even more if the revenues from the organization’s economic activities (e.g., offering edu­ cational programs) are also tax exempt. Two questions arise. One is whether the stimulation of charitable giving is sufficient to warrant the government’s revenue loss. In the United States, considerable stimulation has been documented (Boris 1999). However, for countries with significant tax evasion, the tax deductibility is clearly less important. Sidel and Zaman (2005: 49) note that “what is overlooked in these discussions [of tax deductibility] is that tax exemptions and deductions are often beside the point, particularly to donors, and particularly at lower levels of giving in most if not all of the countries of South Asia.” To cite one extreme case, Wikramanayake (1999) points out that for Sri Lanka, “the extremely high level of

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tax evasion, amply evidenced by the fact that there are no more than 150,000 registered tax payers out of a total population of more than eighteen million, makes the fiscal regime practically irrelevant. . . . This is important to keep firmly in mind in evaluating the impact of the fiscal regime, in order to prevent a distorted perception of its role.” The second question is whether the money that otherwise would have gone into the government’s coffers, whether from donors or the organizations themselves, will be used more beneficially for the country than if it were spent by the government. While this obviously cannot be answered in the abstract, it is the source of much debate over the wisdom of tax exemptions for such operations. Social Service Organizations. The bulk of private charitable activity occurs through religious institutions, private foundations, and “social service organizations.” The social service organizations are of particular interest as institutionalized providers of near-term material opportunities. It should be emphasized, however, that the economic opportunities for members of these service organizations do not diminish the worthiness of their contributions. The volumes of contributions and volunteer hours of these organizations are quite significant. Rotary and Lions organizations each have more than a million dues-paying members worldwide, with the dues, other contributions, and volunteer activities going to a wide variety of youth services and other community activities. The Lions Clubs organization estimates that its clubs spent nearly US$450 million in 2005.12 Even the Kiwanis, a somewhat smaller social service organizations with roughly 280,000 worldwide members, spends nearly US$100 million in social service activities; the even smaller Optimist Clubs organization (105,000 members) spends nearly US$80 million annu­ ally. These organizations have become so notable for their community service, ranging from the local to the international, that it is easy to lose sight of the fact that Rotary, the pioneer service organization, was founded in 1904 explicitly to provide business connections for its members. Jeffrey Charles (1993: 10) recounts that seven years after Rotary’s founding, due to “outside criticism for its insular business practices . . . Rotary dropped the injunction that members exchange business with one another and stressed instead the opportunities the club provided for charitable activity—for ‘service.’” Yet five years after Rotary made service its explicit mission, Rotary founder Paul Harris declared, “I think that Rotary’s fundamental purpose will be with business; that civic and charitable activities should not be discouraged, but should be given secondary

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consideration, not because of any lack of importance, but because there are specialized organizations to take care of their needs. Civic and charitable activities seem to me by‑products” (Harris 1916).13 The other major organizations, established over the two decades following Rotary’s founding, learned the lesson and chose service as their explicit mission, yet they, like Rotary, were also clearly vehicles for business connections. They attracted small-business owners and independent professionals, for whom frequent contact and camaraderie with potential customers, suppliers, lenders and borrowers were very important. In fact, the memberships of these organizations remain dominated by small-business owners and independent professionals.

l e s s o n s i n c r e at i n g o r r e s c h e d u l i n g ta n g i b l e b e n e f i t s a n d c o s t s A host of mechanisms can be used to increase the net tangible short-term benefits to overcome both pure and strategic impatience. The same is true for increasing the net tangible long-term benefits, even if the shortsighted do not pay enough attention to the long run. Even the shortsighted are not totally oblivious to long-term consequences—they just have less weight. Therefore increasing the magnitude of negative long-term consequences that would be expected from making shortsighted choices can tip the balance in favor of more farsighted options. It is not difficult to find applications of all of the permutations of moving or creating short- and long-term benefits or costs, as the examples in this chapter have illustrated (see table 4.2). The limitation of strategies involving welfare values is that the benefits to be created or rescheduled are typically more financially costly than other strategies, and the creation or rescheduling of costs is more politically costly. To create a tangible benefit as an incentive for a farsighted effort requires someone to pay for it; to move it earlier requires earmarking resources that could have been invested elsewhere. Moving the costs of the shortsighted actions earlier runs the political risk of a backlash by people angered by the change. If some degree of impatience cannot be eradicated, it is important to consider how to create or restructure benefits and costs that the individual faces, so as to move the relative advantages of the farsighted actions literally closer to the present. This is also important for creating a sense of progress with a tangible benefit pointing to more improvements in the longer-term future. Without a sense of progress, the world simply looks like a series of threats.

ta b l e 4 . 2   Strategies of creating or rescheduling tangible consequences Strategic objective

Applications

Increase near-term benefits of farsighted actions

Allow savings interest rates to reach market levels Low-interest credit for nonpregnant families Cash or credit for long-gestation natural-resource initiatives Create forward markets for long-gestation initiatives Designate “eco-friendly” ventures (e.g., hotels) Compensation for positive externalities (e.g., tax credits for tree growing High-profile vehicles for long-term infrastructure investments Regulate the investment portfolios of otherwise problematic financial institutions Reduce input subsidies that make shortsighted actions attractive (e.g., energy subsidies) Regulate dangerous competitive behavior (e.g., increase penalties for subsequent environmental rule violations Deny insurance for risky behavior (e.g., rebuilding in flood-prone areas) Decrease marginal tax rates as part of a farsighted tax reform Cofinancing of long-term community efforts (e.g., government or NGO cofinancing of community self-improvement efforts) Cofinancing of government conservation efforts (national and international) Tax credits for investments (e.g., for education, R&D, etc.) Tax exemptions for charitable contributions and activities Access to credit (e.g., for poor farmers to encourage tree planting; micro-entrepreneurs) Social safety nets (e.g., same targets as access to credit) Insurance for long-term initiatives (e.g., timber insurance) Build-operate-transfer arrangements (e.g., for major infrastructure) Bonds as financing mechanisms (e.g., for major infrastructure or environmental improvements) Increase social security savings yields Guarantees that compensation for positive externalities will continue (e.g., for tree planting and nurturing) Resource pooling to encourage long-term investment (e.g., preventive health care pooled coverage; employee training consortia)

Decrease near-term benefits of shortsighted actions Increase near-term costs of shortsighted actions

Decrease near-term costs of farsighted actions

Increase long-term benefits of farsighted actions

90  Chapter Four ta b l e 4 . 2   (continued) Strategic objective

Applications

Decrease long-term benefits of shortsighted actions

Antiprotection reforms Initiatives to strengthen environmental regulation enforcement Graduated penalties for environmental infractions Denial of insurance for risky investments (e.g., building in flood-prone areas) Insurance against natural-resource loss Protection from legal risks (e.g., tort protection for pharmaceutical companies) Protection from more onerous policies in future policy rounds (e.g., guarantees that tax burdens will not be increased further) Protection from onerous policies of other current initiatives (e.g., guarantees against land reform initiatives) Prototypes/policy experiments (e.g., export processing zones as a precursor to broader trade liberalization) Opt-out provisions (e.g., option to revert to a preexisting social security plan)

Increase long-term costs of shortsighted actions Decrease long-term costs/risks of farsighted actions

These same strategies also address the problems of selfishness, especially in the context of positive and negative externalities, because creating or bringing benefits and costs closer to the present leaves less opportunity for accountability to be blurred by the passage of time. Bringing rewards or punishments closer to the present adds accuracy and legitimacy to these assignments.

chapter five

Creating and Rescheduling Social and Psychological Rewards

In our first major departure from the narrow framework on focusing on material benefits and costs, we consider the rewards coming from the quality of social relations (respect, affection, righteousness toward society, and power) and the psychological gratifications of doing well in these respects.1 Although any of these values may be employed to achieve material benefits in some circumstances,2 they are often desired for their own sake. Karl Deutsch (1965) pointed out more than fifty years ago that the social and psychological values do not face the same kinds of constraints of limited material resources as do the welfare values that were just discussed. To be sure, the social and psychologically based values of affection, respect, rectitude, and power do have some relative aspects that limit one person’s rewards because of the greater popularity, standing, righteousness, or influence of another. Yet in the hands of astute leaders of governments and other organizations, affection, rectitude, affection, and power can be expanded at limited material cost. The challenge is to expand the social and psychological values in support of farsighted improvements. This chapter focuses on two broad questions: how to define and inculcate the norms (i.e., principles of proper behavior) that are consistent with sound farsighted actions and how organizations can provide social and psychological rewards for farsighted actions. Although people generally view their own values as moral imperatives independent of utilitarian considerations, there is ample evidence that values are formed through reinforcement, whether in material forms or in the values of respect, affection, power, and rectitude.

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Among the social and psychological values, rectitude (righteousness) is the most “internal”—it is the self-assessment of whether the individual is behaving properly. We can presume that there is a gratification or psychological benefit to the individual when he or she acts properly, and certainly there is often a psychological cost of regret and guilt when one realizes that one is acting improperly. Yet even rectitude is shaped by the societal norms that influence what the individual considers to be proper behavior. Therefore the definition and inculcation of norms constitute one crucial avenue for bringing farsightedness and social or psychological rewards into alignment. While rectitude is indirectly influenced by the social interactions that convey norms, the other social and psychological rewards—affection, respect, and power—are directly defined by interpersonal interactions. Insofar as they are products of group interactions, the key to creating social or psychological rewards for farsighted actions is to create organizations and organizational routines that pursue farsighted objectives but also devote some of their resources to providing these rewards.

a p p ly i n g s t r a t e g i e s o f c r e a t i n g s o c i a l a n d p s y c h o l o g i c a l r e wa r d s Promoting Family Economic Security Generativity, and its expression as concern for the family’s long-term eco­ nomic security, receives deference in the regard that people show for the “good mother” and the “family man.” The public policy efforts to promote respect for “good parenting” may be limited to formal expressions of appreciation, such as official celebrations of “Parents Day,”3 but on the face-to-face level, many types of social groups have to the potential to reinforce respect of good parenting. Parents may join “parents clubs” in order to avail themselves of the sociability of like-minded people at the same stage of life, as well as for the explicit organizational purposes of sharing information, assisting schools, and so on, yet an implicit signal transmitted by such organizations is that the role of parenting is important. Savings Groups. Thailand’s “One Baht a Day” savings program (mentioned in chap. 4), Bangladesh’s Grameen Bank, and similar institutions for low-income people also utilize intensive group interaction to reinforce the commitment to savings. Groups providing the opportunity for social interaction among peo-

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ple who otherwise would be relatively isolated have strong potential for inducing participants to accept the mission of the group. Family Planning. A very similar pattern emerges with respect to family planning. Lisa Marten (2002: 106), summarizing research on the impact of family planning organizations in Bangladesh, notes that changes in social institutions, mobility and communications led to new patterns of social interaction in Bangladesh, which may have contributed to declines in fertility. The results of this study offer compelling evidence that more extensive social interaction, and social interaction which is supportive of family planning, are both associated with smaller family size desires and increased contraceptive use in Bangladesh. Furthermore . . . the effect of social interaction is more powerful than that of other factors that are generally credited with influencing fertility behaviour—education, wealth and urban residence. These findings are further supported by the qualitative study which found that women actively discuss issues of family planning with neighbours, relatives, husbands and health workers, before making decisions regarding their own fertility behaviour. They often credited these interactions with helping to determine the point in their childbearing when they become interested in restricting births and whether they successfully accessed and used a method. Generally, increased interaction is associated with support for family planning that leads to desires to restrict family size and assists women in accessing and choosing methods. Conservation and Environmental Protection Similar reinforcement based on group participation can be seen even more vividly in the social and psychological rewards associated with conservation and environmental activism, which depends on commitment to principle as well as expectations of possible material gain. For conservation and environmental organizations with explicit mandates to pursue farsighted objectives, an obvious and central task is to attract membership and participation. To be sure, part of the attractiveness of joining and participating in such an organization is its mission and how well the organization is believed to be pursuing the mission. However, in the competition for people’s time, money, and willingness to take risks, farsighted organizations usually have to provide more in

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order to maintain the commitment of members to both the organization and its mandate. This approach may seem inefficient, or even distasteful, to those who believe that “virtue is its own reward” and that protecting the natural environment and reducing pollution should and could be the sole concerns of these organizations. Would it not be more efficient if such organizations were to put all of their time and money into their main pursuits, without having to indulge the other interests of their members? Would it not be purer, and therefore more protective of the altruistic motive, to have members participate solely for the common good? There are two rather obvious retorts to this position. First, even if “virtue is its own reward,” the question is how people come to be virtuous. Engaging people in virtuous, farsighted pursuits and maintaining their participation in the face of so many other demands on their attention and resources may require other inducements. As people create and modify their self-identifications over time, the social rewards of participating in farsighted activities can reinforce the commitment to being virtuous. Second, insofar as it is important to increase the number of people committed to virtuous, farsighted pursuits, there is no reason to rely on virtue alone. The money going into land conservancies is just as useful if it is given to enhance the community standing of the donor as it would be if given out of pure altruism. It is important to recognize that multiple motives propel many human actions and that the challenge is to make them consistent with one another in the pursuit of laudable goals. The organization may be doing good works today—securing donations to put land into conservancy status, lobbying for environmental protection, and so on—but the persistence of commitment to farsighted endeavors on the part of its members depends on their identification with the organization as well as their identification with the cause. The most successful conservation and environmental organizations promote these identifications through multiple short- and long-term rewards for their members. These rewards can range from opportunities for dating and recreation, to awards in recognition of notable contributions. Consider, for example, the three most successful U.S. environmental advocacy groups: the Sierra Club, the National Audubon Society, and the National Wildlife Federation, each with over half a million dues-paying members.4 The Sierra Club (created as an almost exclusively California-focused conservation society) and the Audubon Society (originally an East Coast bird-watching society) easily could have been marginalized by their narrow origins or by the American penchant for the new. The National Wildlife Federation began as an alliance of hunting and fishing clubs. The three have maintained their promi-

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nence despite a shift in American participation toward ad hoc political and policy participation as issues rise and coalitions of professionally staffed advocacy organizations mobilize support (Rossi 2001a) and despite criticism of their willingness to accept corporate donations.5 The key to all three has been grassroots activity that provides many opportunities for face-to-face interaction in hundreds of local chapters and clubs around the United States. Members engage in fishing outings, wilderness hikes, and bird-watching forays; local meetings strategize against local wildernessthreatening development. They organize youth activities that promote loyalty at early ages, also relying on personal interactions rather than distant appeals. Some Sierra Club groups have “20s and 30s Singles Sections” to appeal to unmarried young adults. Paul Aron (2001: 1) notes that “friendship matters; group experiences, such as the Sierra Student Coalition’s summer training programs for high school students, cement bonds of solidarity as they teach practical skills.” The Sierra Club annually bestows respect through no fewer than twenty-four national awards, invoking the names of renowned figures, such as John Muir, Ansel Adams, and William O. Douglas. Local chapters also bestow awards on their most dedicated members, for contributions ranging from conservation photography to legal work. The immediate or nearly immediate respect, rectitude, and affection rewards are more than ample. This is not to say that local activity is the only factor in the success of these organizations. All three organizations engage in vigorous advocacy on the national level, with offices in Washington, DC, for habitat conservation and environmental protection in general, certainly adding to their appeal as organizations doing important work on both the local and national levels. Yet the success and endurance of these organizations cannot be explained without emphasizing the exceptional provision of social and psychological rewards to their members. After all, there are many other U.S. environmental groups that lobby ferociously in Washington, but very few have the richness of grassroots interactions, and none can surpass the Sierra Club, National Wildlife Federation, and National Audubon Society in membership, money, and influence. Identification as Environmentalists. In addition to the inducement to stay active in environmental organizations because of the social and psychological rewards, a parallel phenomenon shapes the individual’s self-identifications. Identifications (how people symbolize themselves, both the others and to themselves) can shaped by exposing people to experiences that create or enhance identifications, to reinforce the tendency to seek positive self-identifications. Daryl Bem’s “self-perception” theory (1967) posits that identifications come

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partly from interpretations of one’s actions in the continual process of self-definition. Each attendance at a Sierra Club function will add to the attendee’s selfperception as an environmentalist, thereby reinforcing the norms associated with that identification. Self-perception theory does not require “dissonance” between preexisting and new attitudes or behaviors, as does Festinger’s (1957) better-known “cognitive dissonance” theory positing that beliefs change when contradictions among them create enough psychological discomfort. The potential for strengthening identifications by involving followers in related activities is broad because it does not require these contradictions, although cognitive dissonance mechanisms can reinforce identifications: people with environmentalist identifications may indeed suffer some form of psychological discomfort (guilt, embarrassment for their hypocrisy, etc.) if they take environmentally damaging actions. The simplest hypothesis is that the more contact the individual has with the group, whether directly addressing the long-term mission or involvement in socially rewarding activities, the greater the selfdefinition as a member of the group and the greater the discomfort for deviating from the norms that the group represents. Identifications are also reinforced by promoting the emulation of respected figures representing those identifications. Note again that the Sierra Club awards focus attention on not only conservation pioneers (such as John Muir), but also respected notables from other spheres (such as U.S. Supreme Court Justice William O. Douglas) who were ardent conservationists. Commitments to Conservation within Government. The social and psychological rewards that are shaped by professional training can link deference— particularly respect and rectitude—to the norms of farsighted professional behavior. Natural-resource managers in government agencies or state enterprises frequently face pressures to extract resources too rapidly, ignore the rights of local people, and neglect habitat conservation. Social and psychological rewards are important because these pressures can rarely be countered through material incentives, inasmuch as the pressures are likely to be applied by the organizations in which these managers operate. If the managers can be framed as professionals, their training can signal which farsighted norms are deserving of deference. A concrete example of this impact of professionalism can be found in the otherwise troubled Honduran state forestry enterprise, COHDEFOR (Corporación Hondureña de Desarrollo Forestal). Soon after COHDEFOR was founded in the 1969, the government also established the National Forestry School (Escuela Nacional de Ciencias Forestales, or ESNACIFOR), with support from the United Nations Food and Agriculture

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Organization. The ESNACIFOR mission statement is “To train the highestlevel human resources, highly qualified for the preservation and sustainable management of forest ecosystems of Honduras and Latin America.” Through this school, Honduras has produced staff for COHDEFOR steeped in the science and ethos of professional forestry. By the 1990s, COHDEFOR professionals had determined and implemented a maximum sustainable harvest regime for Honduras’s commercial pine forests, though the conservation responsibilities of the enterprise were still largely neglected (Abt Associates 1990). Increasingly COHDEFOR staff members have been pressing for biodiversity preservation, though without much support from the Honduran government, which remains under heavy criticism for ignoring conservation in its efforts to profit from the rapidly dwindling pine forests (Butler 2005). Averting Health and Security Risks As the enormous literature on “socialization” (the processes by which values and beliefs are inculcated) highlights, the most potent cues frequently come from identifications. People look to others they perceive as having the same identification for guidance on appropriate beliefs and behavior. While it is true that religious leaders, political party leaders, leaders of ethnic groups, and so on, are likely to be more effective in signaling appropriate norms to those who share the identification, the strongest signals pertaining to the norms of personal health and safety frequently come from peers, particularly among youth—who are typically the greatest risk takers (Fischhoff, Crowell, and Kipke 1999). This would be discouraging, in light of the limited direct control that elders have over the peer interactions among youths, were it not for the fact that perceptions of peers’ risk-taking behaviors are frequently exaggerated (Bauman and Geher 2002). Drug users tend to assume that drug use is more prevalent among their peers than it actually is, reflecting overgeneralization from one’s own behavior to that of others. Therefore communications campaigns that provide credible evidence of true peer behavior can redress these dangerous misperceptions. Wechsler, Lee, and Kuo (2000) report success in reducing excessive (“binge”) drinking among American university students by exposing them to actual rates of alcohol consumption by peers. Improving Physical Infrastructure Beyond the challenge of devoting enough resources to the long-term development of physical infrastructure is the question of whether the infrastructure

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will be designed, built, and maintained with integrity. Individuals involved in infrastructure planning and execution are often under intense pressure to exaggerate the need for the infrastructure, thereby undermining the assessment of the utility of the infrastructure plan (Flyvbjerg, Bruzelius, and Rothengatter 2003). They also face pressure to skimp on quality, set the pace of construction either too fast or too slow in response to political pressures, and neglect maintenance. This challenge provides a window on how social and psychological rewards can establish norms that encourage people to design, construct, and maintain infrastructure of high utility and quality. For an individual or organization to orient another individual’s sense of rectitude toward farsighted behaviors, the obvious first step is to signal that farsighted actions are indeed admirable and that shortsighted actions are unworthy. The opportunities for shaping norms arise from the fact that people do not simply derive their values and principles from philosophical contemplation—rather, they consciously or unconsciously respond to cues from those whom they respect and from whom respect is an important reinforcement of their own rectitude. Many professional associations have formal or informal codes of conduct that articulate appropriate and inappropriate behaviors, ranging from the behavior of established members of the organization to very elaborate ethics statements. Among the most relevant signals of norms are the ethics codes of professional associations. For many individuals within government and other organizations employing highly skilled people, the professional identification is extremely important. Moreover, there has been a strong trend to “professionalize” many occupations, in the sense that people within those occupations and the leaders of the organizations representing these occupations insist that they are guided by professional standards apart from the regulations to which their occupations are subjected (Wilensky 1964). Professionalization, through training, membership in the professional organizations, or standard setting by these organizations, can add farsighted content to the norms of those who identify with these professions. The most explicit propagator of professional norms related to ensuring high-quality physical infrastructure is the code of conduct of civil engineers. These codes vary from country to country, but in essence the professionalism of civil engineers commits them to principles requiring that the design of buildings and other structures will last for the long term, despite the pressures to design structures that can be built on the cheap. Thus the American Society of Civil Engineers’ Standard of Conduct for Civil Engineers states: “Engineers shall hold paramount the safety, health, and welfare of the public and

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shall strive to comply with the principles of sustainable development in the performance of their professional duties.” Similarly, the Standard of Conduct “prohibits its members to offer or accept bribes, kickbacks, and other similar payoffs and benefits to or from suppliers, regulators, government officials, trade allies, or customers . . . ASCE members and agents should also be prohibited from giving or receiving, directly or indirectly, anything of a significant value to, or from, an outside source in connection with a transaction entered into by the Employer. To offer or accept bribes or kickbacks is a crime, both morally and legally, and could result in disciplinary action up to and including dismissal” (American Society of Civil Engineers 2000: 11, 5). Many young people go into engineering with the primary goals of securing a good career and capitalizing on their creativity and skills. If they are successful, their professional training provides credentials for securing good positions, self-respect, respect from others, a sense of belonging to a community of professionals, and other personal rewards. Yet in addition, acting in a professional manner usually comes to be valued in itself, even beyond the value of the principles of professionalism and the personal rewards. Engineers who identify themselves as professionals take pride in it, and act accordingly. For a profession with strong norms of sustainability, like civil engineering, this goal substitution (from doing well in a career to adopting professional norms) can anchor farsightedness. Promoting Productivity The Potential for NGOs and Social Movements to Promote Productivity. NGOs and social movements engaging in policy advocacy also typically provide the values of respect, affection, power, and rectitude. The identifications of members of these groups are frequently extremely strong; in the extreme, some social movements come to constitute separate subcultures. Such groups often engage in policy advocacy regarding the broadest issues of economic policy. However, aside from the “good governance” movements with highly trained leaders, targeting corruption associated with granting special economic privileges, there is a striking absence of advocacy groups that press for efficiencyenhancing economic reform. It is much more common to see such groups taking conventional leftist positions opposing the reduction of state interventions, even where the overall impact of these interventions favors the politically influential wealthy. For complicated reasons that have not been sufficiently studied,6 pro-poor NGOs and social movements have ­general­ly not apprehended the connection between neoliberal policy reform and

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the elimination of privilege for the wealthy and the powerful. The proponents of neoclassical policy have largely failed to convey the progressive implications of economic liberalization to people without substantial training in economics. However, a few promising examples do exist. In Armenia, the nongovernmental Center for Regional Development/Transparency International Armenia has participated in seminars on “good governance” and its implications for “promoting economic competition.”7 In the Philippines, the Caucus of Development NGO Networks (CODE-NGO) represents more than 2,500 NGOs, grassroots organizations, and cooperatives. CODE-NGO has been active in deliberations over removing the inefficiencies in agricultural policies, although in representing such a broad range of groups, it does not always take the liberalization perspective. However, CODE-NGO is a key member of the Economic Policy Reform and Advocacy consortium led by the Ateneo de Manila University. In both cases, strong connections with sophisticated academic institutions have provided greater awareness of the long-term synergies among productivity, efficiency, and poverty alleviation. Clearly, the linkage between economic policy reform and the emotion- and rectitude-arousing issue of fighting corruption provides a promising basis for mobilizing participation. Tax Reform. The willingness to support a tax reform initiative that will expose an individual to a “fair tax burden” poses an interesting tension with respect to the social and psychological values. One challenge is to inculcate taxpayers with the norms of voluntary compliance—obviously a tall task, but important nonetheless. Bergman (2003), in a comparison of Argentine and Chilean tax compliance, first credits fear of prosecution as the major deterrent to noncompliance, yet he also notes that for many scholars compliance is explained, to a great extent, as a function of citizens’ internalisation of an obligation to conform to tax laws. Many studies have found compelling evidence, where compliance also correlates with trust, adherence to social norms, and moral obligations to abide by the law. In Argentina and Chile this correlation holds. The level of trust and approval of institutional performance in these countries is strongly associated with the rates of compliance. From a 1998 analysis of a survey in Chile the association between a factor that includes trust in public institutions and approval of government agencies is strongly correlated (0.54), with taxpayers reported willingness to pay more taxes in order to alleviate poverty. In Argentina, the correlation between the question “I feel a moral obligation to comply with tax laws” and the will-

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ingness to take [evasion] risks . . . [was] 0.34 and statistically significant. Although causation remains unexplained, the association between socio­ logical variables and compliance suggests that perceptions of risk, detection and punishment are mediated by a social component. On the one hand, the obligations to family would call for minimizing one’s tax burden. On the other hand, the “upright citizen” is willing to bear a “fair share” of the tax burden and to obey the laws requiring tax compliance. The feeling of rectitude may be enhanced by framing the tax reform in terms of horizontal equity—that is, the fairness of burden among those of the same general income level. Both the willingness to support a fair tax reform and the willingness to comply with tax laws can be strengthened by emphasizing the individual’s superior rectitude compared to those who have evaded or avoided their fair share. That is, rectitude is highlighted in the contrast between the righteous self and the unrighteous others. Community Self-Help The rewards of social interaction in solidifying commitment to farsighted action can also be seen in successful cases of neighborhood self-improvement. Active neighborhood associations provide the same combination of opportunities for sociability, reinforcement of the norms of community commitment, and identification that can be seen in “high-touch” environmental organizations and parent groups. One outstanding example emerged from the effort in Naga City, Bicol Province, in the Philippines, to promote the establishment of squatter associations and residents’ participation within them. The Kaantabay sa Kauswagan (“Partners in Development”) program begun in 1989 was a joint local government–NGO initiative that provided incentives for people without land titles for their residences to join the neighborhood associations; in fact, the municipal government made it clear that it would not entertain petitions for formal land rights unless they came through the associations (Prilles 2004). The associations promote residents’ savings to purchase their land, as well as engagement in neighborhood improvement of housing, sanitation, and transport. As with other neighborhood-improvement programs examined in chapter 4, the Kaantabay sa Kauswagan offers cofinancing inducements, but it has also been especially effective in overcoming the typical isolation and rootlessness of urban squatters, who frequently face hostility from government and private landowners, and the risk of having their dwellings bulldozed. As the number of associations grew from nine before the program started to nearly

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eighty by 2005, the participation of neighborhood residents increased impressively. For many residents, their identifications shifted from interlopers residing illegally to community activists. The result has been an internationally recognized success, cited as one of the best examples of collaborative urban policy in the developing world (UNESCO-Habitat 1996; Tumbaga and Sabado 2003; Prilles 2004). Charitable Contributions If the bulk of private charitable works are conducted through religious institutions, private foundations, and service organizations, social and psychological values play a highly significant role in all three. These rewards are of obvious importance for contributions flowing through religious institutions, as the need for rectitude drives much of religious devotion and acts associated with or required by religious customs or authorities. Foundations based on private fortunes (reviewed in chap. 7) may well reflect the motivations of respect as well as rectitude. Here again, the complicated case is the service orgadnization, because it combines social and psychological rewards with economic opportunities that must be calibrated carefully so as not to undermine these nonmaterial rewards. As mentioned in chapter 5, participation in social service organizations such as Rotary, Lions, or Kiwanis provides important business connections that were both early and enduring attractions to members. However, the ethos of service has to be preserved by keeping the economic benefits within certain bounds. For example, Rotary members and their immediate families are not eligible for any of the scholarships or other Rotary program benefits. Every major organization has its statement of principles that emphasizes service over gain.

l e s s o n s o f st r at e g i e s to c r e at e s o c i a l a n d p s y c h o l o g i c a l r e wa r d s Immediate or nearly immediate social and psychological rewards arising from group participation cement farsighted commitments through tightly interwoven dynamics of involvement, identification, emulation, and signaling of norms. No matter how “inner directed” one may regard oneself to be, the receipt of respect, affection and power are typically strong signals that the rewarded behaviors are appropriate. Others, witnessing these rewards, are also likely to be affected by the connection between the behavior and the reward.

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Even if these rewards are of no emotional value to the individual—a rare circumstance indeed—the very fact that particular behaviors are rewarded signals that others regard the behaviors as meritorious. Thus the awards that the Sierra Club bestows not only provide respect to the recipients but also signal what a righteous person ought to be doing. Of course, social and psychological rewards for shortsighted or otherwise inappropriate behaviors sometimes are sometimes bestowed as well. Populist leaders providing immediate benefits for impatient supporters may be showered with power-enhancing affection. The obvious point is that these rewards must be carefully targeted Another function of signaling through social and psychological rewards is to redefine—often by broadening—the scope of existing norms. If we accept that fundamental norms and moral values are established early in life, it might seem very difficult to induce rapid changes in the values associated with farsightedness.8 Yet the prospect of effecting change hinges on whether existing values can be molded to converge with farsightedness. Given that many individuals have some degree of predisposition to care about others, the opportunity exists to channel that predisposition toward broad, long-term societal objectives and to provide the sense of efficacy to encourage action rather than just sentiment in that direction. This may involve defining the content of the norms that are consistent with personality-rooted predispositions. This possibility is based on the plasticity of norms that are congruent with particular temperaments. The psychologist Albert Bandura points out that moral principles that seem clear in the abstract have ambiguous implications in specific applications, that people make moral judgments from multiple sets of moral standards, and that people “display substantial variability in their moral reasoning at any given period” (Bandura 1991: 51). The implication is that even without transforming basic personality, moral sentiments can be shaped to become more consistent with farsighted societal ends. Involvement in certain social activities and signals from government and nongovernmental entities hold promise for diverting narrow “generative” concern for the individual or immediate family to a broader concern for community or nation. Thus the logic of defining or redefining the specific content of broad norms in efforts to induce people to respond to farsighted initiatives can emphasize the compatibility of these norms with the goals of the initiatives. For example, the preexisting norm of care for family can, under some circumstances, be extended to care for broader sets of people. Respect for human beings can sometimes be extended to respect for other sentient beings or to nature itself. Much of the battle over ideas involves convincing people

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that the norms they already hold are consistent with one set of principles over another. For instance, commitment to national pride can be interpreted as requiring support for rapid industrialization at practically any cost—the strategy that seems dominant in China today—or it can be interpreted as requiring respect for the ecosystem, historical sites, and so on.

chapter six

Realigning Performance Evaluation

Performance evaluation provides special opportunities, but also special pitfalls, for rescheduling both tangible and intangible benefits and costs in order to bring agents’ incentives in line with those of the principal. Insofar as performance evaluation determines immediate and near-term rewards, such as maintaining one’s position, salary increases, bonuses, promotions, recognition, honorific titles, and the like, farsighted actions can be rewarded. Certainly, without any performance evaluation, there is little check on the opportunity of agents to pursue their interests when they do not converge with those of the principals. A performance evaluation that actually rewards farsighted performance, whether in terms of welfare rewards or social and psychological rewards, can provide a powerful incentive for choosing farsighted over shortsighted actions. Yet farsighted performance has to be recognized as such—no easy task—and those who are being evaluated have to be aware that the likely long-term consequences will be given greater weight than the shortterm consequences. The design of performance evaluation can address (or exacerbate) all four of the obstacles to farsightedness: Impatience can be addressed by providing near-term rewards for performance judged to be healthy in the long run. Selfishness can be countered by holding decision makers more accountable for long-term consequences that otherwise would have negative consequences for others; this may very well deter decision makers from trying to get immediate benefits at the expense of others in the long term.

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Analytic limitations can be reduced by the analysis that performance evaluation itself entails—decision makers can use the performance evaluation as feedback to improve their own understandings. Many planning functions in cabinet-level organizations also entail the evaluation function. The titles may be “secretary for planning and evaluation,”1 calling attention to the connections between evaluation and planning provides the opportunity to simultaneously stretch out and expand both functions. It also promotes consistency of what to observe and measure as well as encouraging one to use the same tools and methods to do so. Without a close link between evaluation and planning, the theoretical, data, and technical differences limit the opportunity to compare what was promised and planned with what actually happens. Vulnerability can be reduced if the performance evaluation can protect those who take farsighted actions from being punished for the short-term sacrifices that these actions impose. The obvious challenge to addressing the issue of knowing whether performance is farsighted is that the consequences are not yet definitely known. That is why agents often get away with selfish behavior that undermines the long-term interests of the principal. How can the long-term soundness of current decisions and actions be determined in the short term that counts for impatient and selfish agents? The indicators of short-term success, which typically are much easier to measure, may be quite different from those of sustainable, long-term success. Therefore in practice, performance evaluation tends to reward shortsighted actions, or, equally important, is believed to reward shortsighted actions by those who are being evaluated. Metrics of Performance Evaluation. Some performance evaluations rely heavily on quantitative metrics. Even for overall government performance, for which the main reward is staying in office, quantitative measures such as economic growth rates, capital flight, crime rates, and so on, have highly significant impacts. It is easy to formulate and measure metrics of immediate outcomes; the challenge is to find the “leading indicators” of future success. What are the precursors of later-emerging positive effects? Can decision makers be rewarded not only for immediate results but for decisions that can reliably be expected to lead to longer-term success? This question highlights the standard distinctions in evaluation research among input evaluation (the resources being deployed), output evaluation (the immediate results), and outcome evalua-

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tion (the consequences of the outputs) (Dudley, Hockings, and Stolton 1999). Much of the evaluation literature now emphasizes the importance of outcome evaluation (or, in the environmental literature, “cumulative effects” evaluation) over input and output evaluation, on the grounds that strong inputs do not necessarily lead to desired consequences. However, outcome metrics focus on the present, simply because the future consequences cannot be directly measured. Thus an emphasis on directly measurable outcomes and effects would detract from the emphasis on the precursors of future accomplishments. We cannot ignore the input and output measures, although these must be interpreted with considerable judgment.

a p p ly i n g s t r a t e g i e s o f p e r f o r m a n c e e va l ua t i o n Promoting Family Economic Security Although many aspects of promoting family economic security are not engaged by explicit performance evaluation, some evaluative criteria are relevant if family-level or community-level rewards are determined by explicit performance measures. For example, recall Thailand’s Community-Based Family Planning Service (CBFPS), presented in chapter 4. Subsidized agricultural credit for families avoiding pregnancy and transfers from the national government to local community-improvement funds as rewards for vasectomies both hinged on monitoring by CBFPS. The challenges of establishing the specific performance metrics and the monitoring of compliance could have been daunting—the avoidance of pregnancy by which women ought to qualify. How would contraceptive use be verified? The CBFPS very sensibly credited all women, regardless of age (Veravaidya 1997: 207) and apparently relied on self-reports of contraceptive use. The internal check on contraceptive use was the additional incentive of greater access to low-interest credit for those families avoiding pregnancy. Nevertheless, the performance evaluation undoubtedly tolerated some “errors in performance measurement” but avoided antagonizing the local communities. Conservation and Environmental Protection Incorporating Environmental Metrics. Governments—and their personnel— are subject to continual evaluation for their economic performance. The conventional aggregate economic metrics—gross national product, gross domestic product, national income, and so on—are insensitive to environmental

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degradation and natural-resource depletion. Other metrics have been developed over the past several decades to focus attention on long-term environmental and conservation concerns (e.g., in the forestry sector; Lange 2004). As a supplement to the conventional “system of national accounts” that governs the standard reporting of economic trends, the United Nations Statistical Commission and other multilateral agencies have developed a set of “satellite” accounts labeled the “system of integrated environmental and economic accounts” (SEEA). In terms of environmental performance, the SEEA promises to distinguish the costs resulting from air pollution, water pollution, soil contamination, and so on, from “positive” spending for goods and services. In the conventional national accounts, “defensive” or “negative” spending to clean up the environment or to pay for environmentally caused conditions such as emphysema add to GDP; in the adjusted accounts, such spending would be segregated. In terms of natural resources, the “green accounting” or “natural resources accounting” measures of the SEEA bring resource depletion into adjustments of the most commonly-used measures of economic development. For example, the World Resources Institute study of Indonesian growth and resource depletion found that taking depletion into account, the average annual GDP growth rate of 7.7 percent from 1970 to 1984 should be adjusted to only 3.9 percent (Repetto, Beer, and Rossini 1987; Repetto et al. 1989). Using the same methodology, Solórzano et al. (1991) found that 10 percent of Costa Rica’s 1989 GDP was offset by natural-resource depletion; from 1973 to 1987, Costa Rica’s apparent economic growth rate should be reduced at an annual 5.2 percent (Repetto et a1. 1989). Of course, there is the inevitable technical debate on the details of how to estimate the value of the asset base, but the basic logic of the methodology is sound, inasmuch as it rests on the well-established corporate accounting principles that treat asset depreciation as costs, just as nations ought to consider the depletion of natural resources as detracting from long-term economic growth (Repetto et a1. 1989). Two impediments stand in the way of the influence of green accounting: the technical debates have delayed agreement on the standard way of gauging the adjusted growth rates, and the discourse on economic development is still remarkably dominated by the simpler GDP and GNP estimates. The satellite accounts are still very much satellites and will be until national statistical offices around the world put the resources into maintaining consistent green accounts. The evaluation of individual performance related to environmental protection reveals an important caveat to the strategy of limiting the range of evaluative dimensions, even if it is easier to monitor these performance dimensions rather than a broader set. Much research on the pitfalls of performance evalu-

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ation has shown that people overemphasize the more intensively monitored consequences over other, sometimes more important ones.2 For example, if the agricultural ministry puts great emphasis on how many visits agricultural extension agents make to individual farms, the agents have an incentive to concentrate on less remote areas, areas with more farms within easy reach, or areas where visits can be quick because the problems are not severe. In other words, monitoring for performance evaluation runs the risk of perverse goal substitution that was examined in chapter 2. Therefore it is important to examine whether the measures of monitoring will create perverse incentives for those who are being monitored and evaluated. Environmental Protection and Physical Infrastructure. A classic principalagent problem frequently arises when the personnel in government agencies or foreign-assistance institutions believe that they will be rewarded, or at least escape punishment, if they have a sufficient volume of physical infrastructure projects in the pipeline. Such projects may have serious environmental and resource-depletion consequences that warrant canceling or delaying them. Because the major impacts of resource depletion and environmental degradation typically emerge only well after the design, approval, and construction of these projects, the personnel involved face the temptation to underreport and underweigh these long-term consequences. If the full environmental consequences emerge after a decade or more, it is unlikely that these people will be held accountable and in many instances unlikely that they will still be working in the same organization. The World Bank in the early 1990s found that many of its own project appraisals (the assessments of projects proposed by developing-country governments for World Bank financing) were overly optimistic, leading to the funding of projects that ultimately proved to be environmentally destructive or problematic in other ways. For the World Bank in particular, many projects that had received highly positive appraisals have proven to be far less productive than predicted,3 in part because of the neglect of environmental consequences (Ascher 1992, 1993). To be sure, factors other than the short time horizons of the appraisal officials contributed to this problem,4 but there was widespread concern about the temptation to exaggerate the virtues of projects and neglect the problems. The World Bank’s own assessment was that “by the mid 1990’s, OED [Operations Evaluation Department—the internal World Bank assessment arm] evaluations showed that one third of Bank projects were unlikely to achieve their objectives” (World Bank 1992).5 In other words, one third of World Bank projects had been judged as surpassing the minimum rate of

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return (the “hurdle rate”)—which was supposed to take into account all benefits and costs of the project. In 1996, the World Bank management addressed the problem of shaky project appraisals, among other problems, by establishing the “Quality Assurance Group” (QAG), an internal unit comprised of seasoned staff members unattached to country programs. The QAG’s responsibilities encompassed evaluating operations, monitoring of the World Bank’s overall project portfolio, limited training in concert with the World Bank’s main training arm, and, at the request of high-level operations managers, “quality enhancement reviews” of individual operations, usually in the project preparation phase. The operations evaluation includes evaluating the quality of the analysis of new lending proposals, as do the quality enhancement reviews. It is important to note that the QAG’s oversight of new lending proposal appraisals is done on a selective basis. While three hundred World Bank staff and consultants are involved part time or full time in the overall QAG operations, the total budget is only $4.5 million, equivalent to roughly twenty full-time professional staff members. For an organization of over six thousand professionals, this is not an excessive investment. The selective oversight by the QAG presents a significant risk to project appraisers who would be tempted to exaggerate project returns, while it also rewards those who resist pipeline-filling pressures and accomplish high-quality, realistic appraisals. While the QAG’s positive evaluations can enhance the career of the officials involved, a negative QAG assessment can bring embarrassment (and possibly lower career prospects) resulting from analyses rated as poor. The efficiency of the QAG review process is that it does not have to evaluate every project appraisal or other study to deter self-serving rosy appraisals. The benefits of exaggerating the benefits of a project in order to have more work in the pipeline can be countered by the costs of a negative QAG assessment. This deterrence would hold even if the QAG reviews were themselves problematic, although it would certainly be better if the QAG analysts accurately judge the quality of the appraisals and other studies that they review. If the QAG’s parallel appraisal—which is in effect an evaluation of the initial team’s appraisal—is respected, the process is likely to be seen as fair. If the QAG’s own appraisals are suspect, or are overly harsh or overly lenient, then the legitimacy of the process may be brought into question. Even so, the major contribution of the QAG is the deterrence of posing the risk that a shortsighted, self-serving appraisal might be negatively evaluated by the parallel appraisal by the QAG. The generalized strategy is parallel evaluation that

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makes an early judgment of the soundness of the analysis and decisions by the individuals being evaluated. Promoting Community Self-Help Government agencies and nongovernmental institutions that are prepared to assist community self-help efforts typically must judge where there is genuine commitment and capacity. This is a difficult challenge, because of the risks that initial enthusiasm will wane and the common tendency of the neediest communities to have lower capacity. Therefore some initiatives will be launched with considerable uncertainty as to their likely success, and ex post evaluations will be necessary to determine which initiatives should be pursued and which terminated. As suggested in chapter 4, one promising approach is to specify ahead of time a negotiated set of milestones of community accomplishments, along side of the milestones expected of the supporting institutions. However, as the milestone dates occur, the achievements or lack thereof must be judged in the context of the specific conditions that have prevailed from the time of the initial goal setting to the time of evaluation. If the community leaders are aware that truly good performance will be rewarded and poor performance punished, the likelihood of genuine effort will obviously be increased. Promoting Productivity It is reasonable to expect that business managers are more likely to invest in long-term productivity gains if they can anticipate better performance evaluations as a consequence. However, as more and more firms in developing countries become public stock companies, the short-term performance of the company, as reflected in reported quarterly earnings and its stock value, typically rises as a criterion of top managers’ performance. As stock exchanges proliferate in developing countries, a firm’s stock price and latest quarterly earnings are generally available and widely known (barring accounting tricks), but the company’s longer-term prospects are a matter of prediction, always debatable. The most common lament of observers of “business myopia” is that top managers pursue immediate profit and shortsighted efforts to boost the stock price, because otherwise they would be punished by stockholders, boards of directors, and the compensation committees that set their salaries and award their bonuses. As Craig Holden and Leonard Lundstrum (2000: 2)

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note regarding the problem in the United States, “The corporate manager, whose compensation is a function of current and future stock price, avoids projects with long-term cash flows in an attempt to minimize the potential under-pricing of the firm’s current stock price that results from the low level and low precision of long-term information impounded into current stock price.” The incentives are to concentrate on the short-term results, because they are regarded as more reliable, are less subject to external shocks, and are less expensive to gather and analyze. This focus on the short term not only imperils productivity, it also increases the temptation of behavior that is risky from the perspective of the firm. Many of the busts that have occurred in such countries as Argentina, Indonesia, and Thailand that go through cycles of overinvestment and stock-market collapses result, at least in part, from investments made by executives and money managers intent on showing high immediate returns. An important irony of corporate performance evaluation is that recent research shows that stock values do indeed reflect expectations of firms’ longerterm soundness and growth. Ian Davis, managing director of the McKinsey and Company consulting firm, wrote in 2005 that “an examination of share prices demonstrates that expectations of future performance are the main driver of shareholder value. In almost all industry sectors, and in almost all markets around the world, 70 to 90 percent of the stock market value can only be explained by the cash flows beyond the next three years. These longerterm expectations are in turn driven by judgments on growth and—a lesson relearnt after the dotcom bust—on long-term profitability. There is undoubtedly a noisy segment of analysts and traders obsessed by next quarter’s earnings. But many management teams seem to believe that all market participants behave this way, and so neglect the health of their companies” (Davis 2005: 15). However, many high-level corporate executives assume that this is not the case, and these executives act on their assumption. This suggests, of course, a great virtue in making executives more aware that stock prices can and do capture longer-term expectations. Therefore there are two issues for making corporate executive performance evaluation effective in stimulating more farsighted thinking and action: identifying the measures and processes of evaluation that can recognize what is soundly farsighted versus shortsighted and ensuring that decision makers subjected to performance evaluation know that farsighted behavior will indeed pay off for them. Judgment in interpretation is crucial because the connections between even the most solid input metrics and the desired long-term cumulative effects

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cannot be taken as automatic. To take what might seem like the strongest example of a robust connection between input measure and desirable long-term consequence, it would seem intuitively obvious that the proportion of corporate budget devoted to R&D would predict sustained profitability due to new product or process technology, as well as signal that the firm’s top management is committed to the long-term health of the company. In fact, corporate R&D spending is generally used as the key indicator of farsighted corporate behavior (National Academy of Engineering 1992; Holden and Lundstrum 2000). Yet it is clear that investments measured as R&D do not always result in greater long-term market share, profitability, and company value. Corporations might squander resources on dead-end technologies, they may fall prey to the sunk-cost temptation and cling to the development of particular technologies even after their potential has evaporated, and they may be unable to convert R&D into profitable products. An additional problem is that various kinds of expenditures and actions entailing innovation are sometimes excluded from the R&D measures. Process innovation (as opposed to product innovation) is often not captured under the R&D rubric. Different industries have different needs for R&D, whether for product or process innovation. Therefore changes in a firm’s product mix may alter its relative R&D spending without really indicating an increase or decrease in farsightedness. For example, if a telecommunications manufacturing firm diversifies by acquiring a company in the services sector, the R&D proportion may decline without any implication that the firm has become less committed to farsighted objectives. The lesson of all these limitations is not to reject R&D expenditures as an indication of whether a corporation is farsighted but rather to apply R&D measures with enough judgment to place the R&D level and trends for any given firm into meaningful context. The same lesson holds for any other indicator. The widespread tendency of government officials to take shortsighted actions regarding the promotion of productivity can also be addressed by structuring performance evaluations to emphasize longer-term impacts. This is true for both the regime, the support for which will depend in part on the evaluation of its performance, and for individual officials. Consider the two areas of education policy and infrastructure, in terms of their contributions to productivity. Education policy obviously ought to address educating people not only for their personal enlightenment but also to increase their skills to participate in the economy more productively. Yet of the four conventional quantitative metrics—investment levels, school enrollments, graduation rates, and literacy—the first three are input measures, and literacy, as an outcome

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measure, is a highly ambiguous and difficult-to-measure concept that is also subject to manipulation. None of these measures brings educational metrics close to productivity improvements. For the performance of a government regime as a whole, the more useful considerations would focus on the soundness of the human resource policies as well as the magnitudes of participation and investments. Just as R&D investments can be foolish, investments in human-resource development can be unwise as well. Many governments oversubsidize higher education while beggaring primary, secondary, and vocational education (Task Force on Higher Education and Society 2000). Formal indicators to assess the performance of decision makers of particular government agencies on the basis of the farsightedness of their actions are much more problematic. The measures of current performance include the attainment of previously established targets, the speed and number of transactions that can be processed, the number of citizen complaints, and measures of citizen satisfaction. Holistic judgments are more appropriate, as demonstrated by the government of India’s practice of thorough reviews of top-level stateenterprise managers in the selections for higher or more prestigious positions within the state sector. The temptation to move up the promotion ladder by increasing profitability in the short term, at the expense of long-term viability, is tempered by the review, which tries to examine the overall impact of the manager’s performance in all previous positions. Promoting Charitable Contributions The decisions by individuals and corporations to contribute through a charitable organization or to support nongovernmental organizations devoted to providing public goods, depends in part on their perceptions of the organization’s honesty and efficiency. Therefore meaningful performance evaluation of these organizations serves triple duty: it can encourage contributions insofar as it can foster confidence that high-performing organizations will put the contributions to good use, it can steer contributions to where they can be of greatest use, and it can motivate the organizations’ leaders to behave responsibly. Performance evaluation of such organizations has its special challenges. Obviously the “bottom line” of profit or stock value is not applicable. Moreover, gauging the long-term cumulative effects of charitable organizations and NGOs addressing public goods is typically very difficult. Whether improvements in a population’s health, education, security, and so on, can be attrib-

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uted to the actions of a particular charity or NGO will always be debatable. Therefore the performance evaluation metrics tend to focus on output measures, such as number of individuals affected, number of units of service provided, and so on. In addition, evaluations of not-for-profit organizations commonly employ what is regarded as an efficiency measure: the proportion of contributions that go to the organization’s mission as opposed to its fundraising and management costs. As straightforward as this seems, the distinction between mission-relevant activities, on the one hand, and fund-raising and management, on the other, may have a large degree of arbitrariness. When one of the major activities of the head of the organization is to make speeches to mixed audience of potential donors and recipients, how much of the compensation of that leader ought to be attributed to fund-raising and how much to the mission? For organizations that raise funds and then make small grants to families or to other organizations, the staff costs may be considered as “overhead” or as mission related to the degree that the staff is ensuring that the funds go to worthy purposes. Community outreach efforts, insofar as they mobilize donors, assist in fund-raising; and, as Richer (1995: 10) notes, fund-raising activities publicize the issues that the organization addresses. The implication is that these metrics of efficiency, taken in isolation, may be quite misleading, and the organizations willing to shade the measurements to appear more efficient would have an unwarranted advantage. A more subtle approach is to gather information directly from the organizations, assess the information for accuracy, and let the “marketplace” determine which organizations are more worthy of contributions.

av o i d i n g t h e p i t fa l l s o f p e r f o r m a n c e e va l ua t i o n For performance evaluation to provide effective incentives, it must be embraced rather than resisted or “gamed” by the evaluators and those being evaluated. Even when performance evaluation is formally required, required elements are often left undone or are done superficially. Therefore it is important to prevent or overcome the pathologies of performance evaluation that lead to the abandonment or watering down of the importance of specific elements that go into the evaluations. The pitfalls of performance evaluation begin with the goal substitution mentioned earlier: people “overperform” in particular areas in order to excel in the evaluative criteria they believe to be most important, at the expense of other areas. Any use of performance metrics is especially vulnerable to goal

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substitution, because the inevitably narrower range of aspects reflected by the metrics gives clear signals on how the people being evaluated can concentrate on these aspects at the expense of other aspects that are important for overall success. Often, this goal substitution emphasizes the short term over the long term. For example, if the evaluation of police officials is believed to favor those who secure more arrests, there is a greater risk of false arrests, or perhaps a focus on crimes for which arrests are easier while more serious crimes are neglected. This is another reason to use holistic rather than narrow evaluative criteria. The evaluation of policies and programs inevitably imply an evaluation of the entities and individuals involved. Therefore even if a performance evaluation is intended to focus only on the policy or program, it will provoke the defensiveness of the personnel involved. If the targets employed in the evaluation are unrealistic, those in charge of the policies or programs will risk the loss of reputation. The risks of a negative evaluation will, in turn, provoke those evaluated to resist the evaluation process, often providing incomplete or even false information. Another pitfall of performance evaluation is the tendency of the evaluator and those being evaluated to trivialize the effort. The act of evaluation is potentially painful for both, inasmuch as a negative evaluation runs the risk of a painful confrontation and the rupture of collegiality. Unless there are potential advantages to both parties that could come out of the evaluation, the temptation to skirt a serious evaluation can be very strong. For example, many performance evaluation protocols require both those being evaluated and their supervisors to file reports on achievement of previously stated goals, future goals, and so on, followed by face-to-face meetings to discuss the reports and culminating in a report by the supervisor to be submitted to human resource departments or higher executives. In many organizations, the reports and the meetings are superficial or not undertaken by some organization members. These pitfalls can be mitigated by making the evaluation process fair and useful to all parties. Holistic evaluation that avoids reliance on potentially misleading metrics and targets can assuage the concerns about unfair assessments of individual performance. Linking performance evaluation with the possibility of policy changes that would increase the capacity of those being evaluated to achieve long-term goals can motivate greater cooperation in a serious evaluation effort. Performance evaluation can be much more than simply judgmental: it can provide feedback for improvement, guidance for decision makers to

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improve the organizational capacities to perform better, and feedback to the supervisors to improve their own performance. Performance Evaluation Processes. In light of the limitations of using metrics alone as the basis for performance evaluation, it is important to employ processes of evaluation that can put measures, policies, circumstances, and so on, into context. Good evaluation processes apply judgment, not just formulas, to determine whether performance serves the overall interests of the organization. The objective of the process is to develop early, highly credible qualitative evaluations of whether performance is healthy for the achievement of long-term objectives and the decisions are indeed consistent with long-term success. To avoid the tendency of process to focus on immediate outcomes, the process requires parallel decisions as to whether, facing the same situation that those being evaluated have faced, the evaluators would have made the same or at least similar decisions. Such qualitative evaluations are potentially holistic, in that they are not constrained by whatever limitations a fixed set of quantitative metrics might have. Thus the quality of a corporation’s R&D efforts can be assessed judgmentally; the improvements in the capabilities of education ministries, environmental agencies, and so on, can be evaluated in terms of judgments of the soundness of the policies, the efficiency and timeliness of implementation, and the achievement of targets taking into account whether the targets were reasonable in the first place and whether they remain reasonable in the face of changed conditions. The baseline process of performance evaluation is the assessment that principals (voters, boards of directors, etc.) or supervisors make in determining whether individuals or their organizational units are doing well or poorly and what the consequences of performance should be. This requires some assessment, whether explicitly recognized or not, that compares the actual consequences with some expectation of how much better or worse the consequences could have been. Sometimes explicit targets or benchmarks are employed to establish these expectations. However, the status of such targets or benchmarks is questionable: explicitly stated targets may be unrealistically low, in order to make them easy to reach; they may be unrealistically high, to serve as exhortations; they may or may not continue to be at all relevant as conditions change. Additional processes may entail the creation, gathering, or analysis of the metrics mentioned earlier; written or verbal interactions with those being evaluated; and assessments of the wisdom of the decisions made and the actions taken.

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The interactions between evaluators and those being evaluated can be of crucial importance, both for judging the farsightedness of performance to date and for signaling long-term values and goals. If the evaluation or requires those being evaluated to provide self-assessments—a quite common step in the process—the instructions ought to include questions to determine how those being evaluated define their long-term goals and what progress they have seen in pursuing these goals.

chapter seven

Self-Restraint Instruments

Three very different rationales call for self-restricting measures to overcome obstacles to farsighted commitments. In the most straightforward situation, decision makers know that a long-term strategy is sensible, but realize that their own resolve may weaken in the face of temptation. In the case of government policy makers, the temptations are to avoid political losses by abandoning controversial initiatives or squandering natural resources for revenues to spend now even if more careful husbanding would be a wiser long-term approach. The second rationale arises when decision makers are committed to the farsighted action, but worry that their successors may be too impatient, selfish, vulnerable, or limited in capacity to maintain the commitment. The window of opportunity to make a commitment to long-term goals often closes fast. Therefore the farsighted leader will frequently try to seize the chance to insulate the initiative from the short-term pressures that successors will face, through efforts to precommit their successors to pursue these goals. The third rationale arises when initiators conclude that for short-term sacrifices on the part of other stakeholders to be tolerated, people must have faith that the initiators will make good on their promises—their commitments must be credible, in terms of the current and successor governments’ commitment and capacity.1 Farsighted initiatives are often scuttled by the opposition posed by key groups due to their suspicions that leaders may invoke supposed longterm goals only to cover up self-serving short-term motives. Without an external enforcer to ensure that the leaders will follow through, stakeholders may fear that the commitment may be abandoned when leaders decide that the

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commitment is no longer advisable from either a political or policy perspective (Staiger and Tabellini 1987). An even darker fear is that accepting today’s sacrifices would be taken as a sign of weakness, leading to the imposition of further sacrifices. This fear of the “slippery slope” can be seen in resistance to tax reforms, relocation programs, conservation programs calling for voluntary restraint from resource extraction, and so on. Affected groups may also believe that the leaders are simply incapable of delivering on their promises. This skepticism itself can undermine the ability to maintain the commitment. For example, Dani Rodrik (1989: 756) notes that a government that tries to reduce inflation by restricting the money supply may fail because firms doubt the endurance of the policy and therefore raise prices, while unions demand wage increases out of the same doubt. These reactions, in turn, may cause the government to abandon the policy despite a genuine initial commitment. Thus this third scenario requires not only a real commitment but also a demonstration that the self-restraint mechanisms are effective. In assessing the strategies of credible commitment, we also need to ask whether enhancing credibility is worth the possible costs, which can be divided into two categories. One set of costs involves whatever resources the government needs to deploy to enhance commitment. The other costs come from retaining a policy that may no longer be wise choice.

c at e g o r i e s o f s e l f - r e st r i c t i n g m e a s u r e s The challenge of creating binding commitments has received much attention from the fields of psychology, business, economics, institutional design, and legal studies. The broad sets of strategies entail the following: Stimulus control: by structuring activities or rules to reduce exposure to conditions that would trigger the motivation to renege; Hands tying: by creating costs for the initiator for reneging on the commitment; Reputation building: by establishing a record of fulfilling commitments. This chapter will review the strategies within the categories shown in table 7.1. Stimulus Control The avoidance of tempting stimuli is one strategy of self-restraint that has a long pedigree in the treatment of addictions, with surprising parallels in pub-

ta b l e 7 . 1   Categories and applications of self-restraint mechanisms Mechanism Stimulus control Exclusion of information categories

Restricting tempting goods or services Off-limits areas of policy

Hands-tying Create high reneging costs

Relinquish decision-making authority

Precommit resources

Reputation building Fulfill commitments Reward fulfillment of commitments

Publicize commitment

Application

Inadmissibility of information in legal proceedings, performance evaluations, or personnel selection Explicit budget-allocation formulas excluding types of information Banning vice providers (e.g., bars and liquor stores); interdicting drugs Prohibitions against government intervention (e.g., in religious practices); “negative rights”

Conditionalities in agreements with resource providers (e.g., international donors or lenders) Increased promiser’s stake in fulfilling commitments Difficult-to-reverse (e.g., constitutional) provisions Decentralization (delegation or devolution) Checks and balances at same governmental level Increased stakeholder participation Insulated regulatory commissions Binding agreements with external entities Export-earnings stabilization funds Multiyear budgeting Partial budget carryover provisions Budgeting within long-term fiscal planning Conditional grants or sales Independent-revenue funds Trust funds or endowments New institutions with specific mandates Reconstituted units with specific mandates

Avoid reneging in general Incorporate record of commitment fulfillment in performance evaluation Incorporate record of commitment fulfillment in recruitment criteria Communicate past commitment fulfillment

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lic policy. Psychologists, referring to this as “stimulus control,” have developed many addiction treatments based on reducing the addict’s exposure to the substance itself or to stimuli that trigger the craving for the addictive substance. The parallel in the public sphere is that governments or other organizations can ignore or suppress certain information, establish rules prohibiting certain considerations, or use decision routines emphasizing other considerations, thereby avoiding triggering a process that might lead to actions with long-term negative consequences that would increase the vulnerability and uncertainty of affected groups. A government may also declare, through its own policies or through legal or constitutional provisions, that certain spheres are off limits to government intervention. For example, in most countries judges must recuse themselves from cases involving their own family members, their own business interests, or other potential conflicts of interest. The recognition of “negative rights”—that is, the rights to be free of interference or punishment for specified actions, beliefs, or attributes—is an even broader means of reducing the scope for potentially shortsighted governmental action. What kinds of shortsighted behaviors can be averted through stimulus control? The long-term progress toward social, political, and economic justice may be threatened by the temptation of government officials to show favoritism to those of the same ethnicity or religion, to the long-term detriment of societal cohesion. In many countries, religion and other aspects of individuals or groups cannot be taken into account in making official decisions, and governments cannot intervene into the affairs of religious institutions under most circumstances. Thus the “separation of church and state” in many Western countries eliminates, or at least reduces, the possibility of indulging the government’s temptation to favor one religious group over another. Another way to avoid the stimuli is to ignore the information or desist from collecting it. Many governments desist from gathering certain types of information, such as ethnic and religious characteristics, in their periodic censes. Strict civil service selection, based on arms-length evaluation that excludes ethnic, partisan, and other non-merit-based criteria, can also limit the information taken into account, in order to guard against shortsighted favoritism that would undermine government competence as well as social cohesion. In some instances, activities subject to temptation (such as regulation of communications) are delegated to other organizations with less incentive to fall prey to the temptation. For example, in the United States the federal regulatory commissioners, overseeing such areas as communications and fair trading practices, are appointed for fixed terms and cannot be dismissed as a consequence of their legal policy decisions. This arrangement reduces (but

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does not necessarily completely eliminate) the opportunity for the main executive departments, who serve at the pleasure of president, to intervene in regulatory decisions out of partisan motives (more on the strategies of insulating decision makers from political pressures will be introduced in chap. 13). The challenging analytical question is what stimuli must be avoided, taking into account both causal understandings of what triggers shortsighted actions and considerations of ethics. If the identified stimuli are overly broad or are simply mischosen, the flexibility of action is needlessly restricted. For example, gaining information about whether individuals belong to particular ethnic or tribal groups may be inappropriate if used to discriminate against certain groups, but this information may be important for rectifying inequities in the distribution of access and benefits. Tempting information can also be avoided through explicit decision rules. For example, quite diverse countries (e.g., Costa Rica, the United States, and Vietnam) have formulas that allocate funds across different localities according to population, income levels, and other explicit criteria. Introducing political considerations by deviating from the formula does of course occur in some cases, but these deviations may be recognizable as such and therefore pose the risk of accusations of favoritism. However, sometimes the formula is subverted through manipulations of the metrics. In addition, the formulas may not be suitable for all cases. For example, a formula that calls for funding a health clinic in a particular district because of the number of young children living there may be inappropriate if families have access to an excellent clinic in an adjacent district. Insofar as the metrics depend on statistical reporting from the local areas, this sort of situation can provoke deliberately misleading reporting.2 Hands Tying and Its Variations Many substrategies and practical applications involve reducing the scope of the promise makers’ actions by imposing restrictions or costs that they would have to face if they renege on their commitments. While some experts describing these mechanisms use the term “hands tying” more narrowly,3 the term seems appropriate for any strategy that directly deters the promise maker from taking alternative actions. The variants on hands-tying are as follows: Hands tying by increasing the costs of reneging. Hands tying by reducing the capacity of the decision maker to change course. This has two major subvariants: strategies that relinquish, or at

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least spread, decision-making authority, and strategies that precommit resources. Hostaging: by giving those to whom the commitment is made the power to punish the initiator for reneging. Collateral held by the promised parties: by handing over an asset to enjoy until the commitment has been fulfilled. Collateral provided to the promised parties in the case of failure to fulfill the commitment: by handing over an asset if the commitment is not fulfilled. Hands tying No power to reverse or renege

Costs for reversing or reneging Hostaging

Precommitment

Collateral

Relinquishing authority Controlled by promised party

Controlled by promise maker

Hands Tying through Higher Costs There is no shortage of self-imposed costs that can deter reneging. These can range from individual costs, such as the embarrassment of having to abandon a stated commitment, through the loss of the resources involved in the initiative, to even higher costs of breaching commitments with other entities. Political Exposure. A leader can communicate that a long-term initiative is so central to the policy program that the failure to follow through should be viewed as a major political embarrassment. The intended effect is greater credibility by signaling that the leader will be reluctant to abandon the commitment. The obvious risk of this strategy is that circumstances will change so much that the leader will have to confront the no-win choice of persisting with a bad policy or suffering the political costs of an obvious reversal. Rarely can these political costs be fully mitigated by explanations of why circumstances compel a different policy; political opponents are likely to

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seize on the reversal regardless. In the U.S. presidential election campaign of 1988, President George H. W. Bush famously declared, “Read my lips: no new taxes” and was pilloried for the tax increases he signed into law in 1990. Both conservatives, angered by the tax increases, and 1992 presidential candidate Bill Clinton made Bush’s failure to keep his commitment into an election issue that undermined Bush’s reelection campaign. Costs Emerging from Breaching Agreement. Other cost-increasing strategies involve prearranged penalties, or loss of opportunities, for reneging on agreements. There are numerous examples of national governments contracting loans or grants with the World Bank, the International Monetary Fund (IMF), the U.S. Agency for International Development, and other multilateral or bilateral development agencies that would be terminated if the government fails to adhere to specific “conditionalities.” The failure to comply with conditionalities often entails financial, political, and reputational costs. Insofar as others appreciate that these potential costs would be a deterrent to reneging, the commitment has greater credibility. This strategy can also reduce the vulnerability to pressures to renege on the commitment. Insofar as other stakeholders are aware of the costs of reneging, they will be less likely to demand changes. As James Vreeland (1999) argues, resort to international agreements with such organizations as the IMF ties opponents’ hands as much, or more so, than the government’s. The issue of conditionalities is commonly clouded by misunderstanding of the political realities behind the agreements. It is often politically expedient for a government to present the conditionalities as an unwelcome imposition by the external entities, so that the government will not be held accountable for the sacrifices that the conditionalities entail. This requires vilifying the conditionality-imposing organizations as heartless entities that put the health of the international economic system or the nation providing bilateral assistance above the well-being of the citizens of the nations bound by the conditionalities. The assessment changes dramatically when it is recognized that the provisions typically reflect agreement between the nation’s economic policy officials and the external agency on needed economic reforms. Increasing the Initiator’s Stake in the Policy’s Success. The costs of abandoning a long-term commitment can also be increased by devoting resources to investments or programs that would be productive only if the commitment is fulfilled. For example, a government promoting a neighborhood renovation may move some of its own offices to that neighborhood. The government may

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place its own financial resources in currencies that could entail major losses if promises to maintain a particular exchange-rate policy are abandoned. This approach can bind both the initiator and successors, as long as the successors would also find the loss of the stake to be unacceptable. Hands Tying through Relinquishing Authority By placing the option to renege beyond the initiator’s control, hands tying can take the form of transferring decision-making authority to others or making the reversal process so time consuming or otherwise onerous that the shortterm impetus for reneging may no longer be relevant. Binding Agreements with External Entities. Entering into agreements with external entities usually makes the agreement much more difficult to change, in requiring concurrence by some or even all of the other parties. Treaties or other forms of compacts would create such restrictions. For example, nations that have ratified the Montreal Protocol to reduce chlorofluorocarbon damage to the ozone layer would have to go through elaborate procedures, involving representatives of other signatory nations, to reduce their commitments. Relinquishing Authority through Decentralization. Authority may also be “devolved” or “delegated” to entities below.4 The various forms of decentralization, reviewed in more depth in chapter 14 as mechanisms for promoting the merger of interests, may also serve as hands-tying devices. While delegation is not an irreversible transfer of decision-making authority, it generally does increase the amount of time, effort, and political resistance necessary to rescind delegated authority. However, there is often an ambiguity between delegation and devolution that can undermine the longevity and credibility of the commitment. What is formally designated as a devolution is sometimes later reversed by the original authority holder. As long as the central authorities regard the decentralization decision as “granting” control to the lower level, the central authorities may neglect the assumption of irreversibility and withdraw the “grant.” And even if the central authorities have no intention to reverse the devolution, other stakeholders may remain skeptical. Therefore securing the devolution through hands-tying mechanisms can reinforce the credibility of the commitment. For example, this may be accomplished by enshrining the devolution in the constitution.

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Broadening Decision-Making Authority through Other Branches of Government. If the decision to stay the course or abandon the long-term commitment involves a broader range of decision makers, the probability increases that some would oppose the change and would have sufficient veto power to maintain the commitment. One variant of broad decision-making sharing is the structure of checks and balances within the organization. Nobel Prize laureate Douglass North has argued that institutional “checks and balances” within an organization not only make it more difficult to initiate new policies and actions but also can prevent reneging on commitments made by decision makers within that organization (North 1990: chap. 6). The division of powers among the executive, legislature, and judiciary is the most obvious example of checks and balances, but any organization that genuinely requires several decision makers to endorse a decision has some degree of checks and balances. Yet while many governments and other organizations have formal checks and balances, one individual or unit within the organization dominates in practice, while the others only “rubber-stamp” the decision. Sometimes the checks and balances required to initiate a policy or program may not operate in terminating the same policy or program, whether because of sunset provisions within the prescription or the need for future budget appropriations to make the policy or program effective. Participation by Stakeholders in Authoritative Decision Making. Leaders can also reassure stakeholders that the commitments are serious by reducing the likelihood of reversals if the stakeholders oppose such reversals. An obvious challenge is that potentially affected groups can rarely be certain about their capacity to veto a reversal. In addition, broader participation can reinforce credibility by clarifying the government’s rationales for the initiative and its capacity to follow through with them. Of course, this would help only if indeed the leaders can demonstrate their commitment and capacity in the broader, participatory deliberations. Less Reversible Provisions. Credibility can also be enhanced by embedding a commitment within a provision that is more difficult to reverse. Some policies require supermajorities to reverse, involve multiple levels of government, or both, as is typically the case with constitutional provisions. Jon Elster (2000: 96–104) points out that constitutions are almost always more difficult to amend than are ordinary laws.

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Stabilization Funds. The stabilization fund (or savings fund) is an increasingly common mechanism for limiting the money available for immediate spending, especially for countries dependent on a few exports with volatile world prices. Even when export earnings are unusually high due to greater demand and higher prices, a spending formula limits government expenditures, with the remaining windfall going into the stabilization fund. When earnings decline in less profitable years, the stabilization fund releases money to the government to augment its otherwise limited resources. In addition to tying the hands of the government in the face of temptations to squander resources on excessive consumption or on lower-yield investments, stabilizing government spending can also make economic planning more feasible and meaningful. Mandate-Creating Institutional Strategies. Creating institutions to pursue the goals of the initiative can enhance credibility in three ways. First, creating institutions can reinforce the immediate sacrifice strategy mentioned above, in requiring resources that could be devoted to other objectives. The creation of an institution also raises expectations, which, if not met, can tarnish the reputation of the initiator. Second, institutions are among the most visible symbols as the basis of a communications strategy. All of the tasks involved in staffing, developing a mandate, establishing relations with other entities, and so on, signal commitment. For example, establishing an environmental ministry communicates far more than issuing a report on the environment. Third, in creating and staffing new institutions with clientele among the public and private groups, the policy initiator creates a set of individuals with vested interests in the continuation of the commitment and resources to press for it to continue. This commitment can be heightened by creating auxiliary committees, commissions, and boards that include nongovernmental members, thus also contributing to the merger approach. These members would presumably be among the most resistant to abandoning the commitment. In this sense, the creation of the institution is a hands-tying strategy that may be seen as a restraint on both the current and future leaders. It must be recognized, of course, that some institutions are created for show, without genuine commitment on the part of the initiator, and that institutions can be dismantled by successors. However, terminating an institution, especially within government, is a difficult and politically costly act in itself. On the other hand, some government agencies are allowed to survive but are shorn of their influence or given a different mission. These possibilities limit the enhancement of credibility through institution creation.

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A less costly, and correspondingly less persuasive, institutional strategy is to change the mandate of existing institutions, restructure them to pursue the new initiative, or both. For example, in 1978 the Guatemalan government created a Ministry of Energy and Mining stitched together from agencies taken from existing departments, with the implied message that addressing energy problems had a higher priority, justifying a cabinet-level position. In some countries, environmental agencies, or even environmental ministries, are constructed in the same way. Again, the question is whether these environmental agencies will be viewed as having enough influence to carry out the mandate to achieve the initiator’s stated objectives. Hands Tying through Precommitment of Resources Arrangements that precommit resources reflect the logic of both stimulus control and hands tying. Precommitment may be attractive for the additional reason of tying the hands of future decision makers who may not share the priorities of the current decision makers. Financial commitments can be secured for the long term through a large range of difficult-to-reverse general-budget commitments, multiyear budgeting, partial budget carryovers, trust funds, conditional grants or sales, autonomous enterprises with independent revenue sources, and dedicated endowments. Constitutional provisions can secure general-budget commitments. The 1988 Brazilian Constitution earmarks 18 percent of federal spending and 25 percent of state and local tax revenues to education. According to leading experts in Brazilian education, this precommitment has, at least during certain periods, constrained budgeting decisions and did lead to increases in public education expenditures (Schwartzman, Durham, and Goldemberg 1993). Multiyear budgeting has long been recognized as a direct means of overcoming the uncertainty of budget allocations in subsequent years and the shortsighted actions that result from a “spend it or lose it” dilemma.5 Therefore the certainty and reduced vulnerability of a longer-term budget commitment could promote more farsighted spending on projects and programs. Yet except for special earmarked funds, retaining funds for major expenditures beyond the current year is not permitted in the typical annual budget system, whether in government or other organizations. Caiden and Wildavsky (1974) identified an even more shortsighted pattern in many developing countries— namely, “repetitive budgeting” that requires intermittent reauthorizations to proceed with annual spending decisions throughout the year.

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The question is how this can be accomplished in the face of the desire for budget flexibility by higher budgetary authorities. Multiyear budgeting is a planning exercise and, like the other planning tasks discussed in chapter 8, may require periodic adjustments if they are to be appropriate as realities change, sometimes in unanticipated ways. In addition, multiyear budgeting poses painful scenarios for leaders: if the scheduled allocations become politically difficult or unwise for the public interest, abandoning them may impose a political cost, but so too would retaining them. Partial carryovers constitute a less ambitious approach, which nevertheless reduces the agency’s vulnerability and the temptation to spend hastily, by permitting some proportion of funds to carry over into the next year. This approach can provide greater certainty insofar as the carryover funds are sufficient to ensure the continuity of specific programs or projects. The Swedish government has a budget category of reservationsanslag (reserved appropriation) that in theory can be retained indefinitely (Tarschys 2003: 89). Short of true multiyear budgets and carryover provisions, public finance experts have urged that annual budget analysis should be deeply embedded within longer-term fiscal planning exercises, such that the rationale for any particular budget item must rest on longer-term considerations. This approach gave rise to a host of hybrid planning and budgeting frameworks, such as “planning, programming and budgeting System” and “zero-based budgeting” in the United States and Germany’s mittelfristige Finanzplanung (medium-range finance planning) (Tarschys 2003: 85–86). While these approaches may promote serious long-term consideration, they do not eliminate the vulnerability and uncertainty that the lack of commitment beyond the year still creates. Trust funds can precommit resources for farsighted purposes that otherwise might get short shrift because they lack political attractiveness. Creating a precommitted infrastructure-maintenance trust fund is an obvious instrument for trying to ensure that the resources needed for maintenance are available. This can be accomplished by earmarking existing funds to be set aside in a maintenance trust fund or by earmarking particular taxes or fees for such a fund. Conditional grants or sales provide the opportunity to attach conditions on the future management of an asset. For example, after accomplishing environmental cleanup of contaminated sites in the United States, some U.S. corporations such as Exxon Mobil have granted the land to local governments with the stipulation that the land cannot be zoned for residential use. The rationale is that any remaining contamination would pose a risk to any residents who

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would move onto the land. By including the stipulation, with the threat of suing municipal authorities if they were to succumb to the shortsighted temptation of selling the land for residential use, these companies can tie the hands of the municipalities. Autonomous enterprises with their own revenue sources can secure funding when the farsighted commitment is to provide particular services that would otherwise have precarious funding from the central budget. For example, the difficulty of securing financing to maintain roads, ports, irrigation systems, and other large-scale physical infrastructures can be addressed by establishing a road authority, port authority, and so on, with the power to charge fees. The crucial requirement is that the authority be permitted to adjust the fees in the face of inflation, so that the costs of maintenance and reasonable expansion can be covered. Endowments are the final form of financial precommitment. An endowment is a fund that earns from the investment of its assets, rather than fees charged for services. Depending on the rules that dictate the amounts of spending of the endowment’s earnings and its principal, an endowment may be perpetual or self-liquidating. Perpetual endowments, which in practice if not in formal requirement are the norm among the large U.S. foundations, have a spending formula that is calibrated to preserve the real value of the asset base from one year to the next. In contrast, the so-called self-liquidating foundations spend more, typically justified on the grounds that their spending is an investment in future improvements: the resources should be working for the public good as soon as possible.6 Advocates of self-liquidating foundations have also argued that the principle of perpetuity provides sinecures for foundation bureaucrats. Finally, it should be noted that some endowments are established by governments and to varying degrees are under governmental control. These are basically equivalent to trusts and face the same challenges. Establishing institutions with farsighted mandates and long duration is an approach to precommitment that goes beyond committing financial resources. The foundations that oversee endowments are only one form of such institutions—every new formal government agency created to address a long-term issue entails developing a legal mandate, creating a cadre of agency personnel likely to be dedicated to the mandate, and allocating budget resources. In many instances, the establishment of an agency creates the risk of political costs if it were quickly terminated or severely downgraded. In short, there is a “ratchet effect” in the creation of institutions mandated to particular longterm pursuits, such as environmental protection. Anthony Downs’s assessment of the attention cycle, especially as it applies to environmental issues,

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argued that public attention toward a particular issue may wax and wane, but during the period of high attention “new institutions, programs, and policies may have been created. . . . These entities almost always persist and often have some impact even after public attention has shifted” (Downs 1972: 41). The proliferation of environmental ministries and departments in both developing and developed countries creates the basis for ongoing research, policy formulation, and communication about environmental protection at an order of magnitude greater than a few decades ago. Of course, the policy positions of environmental ministries and departments are often overridden by the positions of government agencies calling for economic development at the expense of the environment. Nevertheless, the creation of environmental entities within government (and parallel increases in academic institutions) are largely irreversible, certainly creating more pressure for considering long-term environmental concerns even if these concerns do not always prevail. Similarly, and equally important, nongovernmental environmental institutions perpetuate environmental action. In fact, in important respects they perpetuate continued high interest in the environment. Downs’s prediction that public concern over the environment would decline has been largely inaccurate, if the membership in environmental organizations and the media coverage of environmental issues are meaningful indicators. Hostaging From the perspective of the initiator concerned about reducing his or her own temptation to renege on the long-term commitment, the source of the restraints or costs is secondary. Yet from the perspective of those depending on the commitment, their own control and whether they can recoup some gain if the commitment is not met are very important. They are in a stronger position if they themselves can decide to punish or if they can gain some direct compensation of the commitment is not fulfilled. Therefore the policy analogues to “hostaging” and “collateral” are worth exploring. Conveying seriousness of commitment by giving affected groups the power to punish the government if it does not follow through on its commitment is a “self-hostaging” technique that both contributes to hands tying and enhances the certainty of its effectiveness insofar as the promised party has greater control over the punishment. Hostaging entails giving the affected parties the discretion to impose costs if the initiator’s commitment is not met. It is thus a subvariant on the second form of hands tying, in that it also restricts options that would be attractive to the initiator. As Kronman (1985) points out, hos-

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taging is generally not designed to permit the hostage holder to benefit from holding the hostage, or from killing the hostage; in fact, that may entail significant costs to the hostage holder. The only leverage that the hostage holder has is the loss that the hostage giver would suffer. In democratic systems, the capacity of citizens to vote government leaders out of office creates the potential for hostaging. If the leader makes highly publicized commitments to long-term promises, reneging or lack of progress can lead to voters “punishing” the leader at the ballot box. In parliamentary systems, making commitments to particular party factions can have a similar selfhostaging impact, insofar as the factions have the power to withdraw from the coalition, call for votes of no confidence, or otherwise jeopardize the leader’s parliamentary position. Collateral Held by the Promised Parties Collateral entails a transfer of a contingent claim of an asset to the promised party, to whom the promise maker permanently relinquishes the asset if the promise is not fulfilled. Compared to hostaging, collateral arrangements are advantageous to the promised party because the asset is usable rather than being destroyed (Kronman 1985). In addition to enhancing credibility because the promise maker would lose the collateral should the commitment not be kept, the promised party has less concern about the failure to be compensated as long as that party can take or keep possession of the collateral. In business transactions, collateral has three forms, distinguished by whether the collateral can be used during the period of the agreement or upon its violation, and, if so, who has the right to use the collateral. Thus mortgage collateral, typically the mortgaged property itself, is used by the promise maker (i.e., the borrower) during the period of the mortgage, as long as the promise maker makes the agreed-upon payments. Alternatively, the arrangement may allow the promised party to use the collateral until the agreement is completed or violated by the promise maker (e.g., use of a television until the loan is repaid). In contrast, the collateral for loans from pawnbrokers entails surrendering valuables, such as jewelry or musical instruments, to secure the loan, but generally if the collateral is in the possession of the promised party, it must be safeguarded so that it can be restored to the promise maker if the promise is fulfilled; therefore the collateral holder does not benefit from the collateral during the period of the agreement. Yet in the absence of an external authority to require that the collateral be handed over to the promised party in the case of default, the promised party is likely to insist on holding the asset until

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the commitment is fulfilled. This explains why the pawnbroker requires that pawned items be held in the pawnshop; the transaction costs of wresting the collateral from a defaulting borrower could be prohibitive. In one sense, the collateral of political support is always in play. When the leader asks for support for the farsighted initiative (only one component of the overall support for the leader’s actions and continued status as leader), all support from any particular stakeholder is at risk if that stakeholder judges that the leader has reneged. In other words, stakeholders can withhold support if they believe that the implicit contract has been violated. However, beyond this general point—no different than asserting that stakeholders punish broken promises—the use of collateral to enhance the credibility of policy initiatives is rare. Perhaps this is because the promise of a future benefit if the leader does not fulfill the original promise may very well have the same credibility problem as the original promise. Nevertheless there is some potential. For example, a government may offer clearly superior services or regularly scheduled cash transfers to skeptical residents scheduled to be relocated to make way for infrastructure projects such as large dams, with these benefits to continue until the residents are relocated in acceptable conditions. Independent, external assessments of whether the conditions have been achieved—for example, as judged by multilateral foreign assistance institutions—would help to bolster the credibility of the commitment even more. Collateral Surrendered upon Failure to Fulfill the Commitment Policies involving “collateral” to be surrendered if promises are not kept are also rare, yet a few parallels can be found. For example, Germany’s federal government manages community forests, but the communities have the option to take over this authority if the government fails to meet its commitments. Thus the jurisdiction is the collateral, just as home ownership and occupancy is the collateral for a mortgage loan; either would be surrendered to the promised party (the community or the lender) if the promise maker cannot deliver. Immediate Sacrifice While many hands-tying and self-hostaging tactics entail exposing oneself to future costs for reneging on a commitment, exposing oneself to immediate costs can also enhance the credibility of commitment. The logic is, “Why would this government leader endure a loss if he or she were not truly committed to the policy?” If a policy initiative is likely to be unpopular in some

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circles, then the willingness of the initiator to take full responsibility will at least partially dispel concerns that the initiative will be abandoned in the face of political costs. Reputation Building Finally, the reception for any initiative also depends on the government’s record of honesty, commitment, and capability to that point. Rodrik and Zeckhauser (1988) call this “reputation building.” The truly farsighted government official recognizes that lies and broken promises ultimately undermine the ability to get support for genuinely farsighted initiatives. The logic of making a false commitment now in order to gain short- or medium-term advantage dissolves in the face of the loss of future credibility. The fairly obvious point that credibility rests on perceptions of the past record of fulfilling commitments suggests strategies for reinforcing commitment fulfillment and publicizing this fulfillment. Reinforcement for fulfilling commitments can come through performance evaluation, whether for subordinates within organizations or through the public’s assessment of political leaders. In other words, if the degree of commitment fulfillment is monitored and rewarded, the maintenance of promises would have additional utility for the accountable decision makers. This seemingly obvious approach actually has demanding requirements of credible monitoring of fulfillment and its incorporation in evaluation. An obstacle to incorporating past commitment fulfillment into evaluations of elected leaders is that many people fail to recall campaign promises. Another obstacle is that the well-publicized assessments of whether leaders have kept their promises are also subject to credibility challenges—a common way to attack opponents is to accuse them of breaking promises. On the other hand, a clear and typically highly feasible recommendation for leaders is to publicize the commitments that they did fulfill, especially those that entailed some sacrifice for these leaders.

minimizing costs of reversing unwise commitments through conditional commitments The dilemma facing a government that strives to make credible commitments is that changed circumstances or new information may render the commitment unwise. What can be done to make a good-faith commitment and yet still retain the flexibility to abandon it, and to do so without losing even more credibility? Policy initiatives such as troop commitments, large budget allocations,

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delegation of authority, and so on, may prove to be unwise with the passage of time. The most promising strategy is to make the initial policy a conditional commitment, specifying the conditions that would trigger a policy change. For example, the conditions may be that budget deficits or inflation reach specified levels, or educational achievement falls below a specified level after delegation to local authorities. Conditional commitments can gain more credibility if they involve conditional hands-tying or self-hostaging arrangement. For example, a government may enter into an agreement with the IMF that requires the government to operate under money supply or budget fiscal restraint unless specified conditions arise that would compel policy changes or the IMF later decides that the commitment is unsound in the face of changed conditions and therefore no longer binding. To the degree that IMF conditionalities are seen as binding the government, these arrangements would enhance the expectation that the government will stick to its commitment unless the triggering conditions emerge. Even if commitments that become counterproductive over the course of time have not been qualified by explicit contingencies, decision makers can employ other strategies to reduce the costs of reneging. At the outset they can specify a process of deciding that a reversal of a precommitted policy is justified, with the hope that the process would be regarded by stakeholders as legitimate. It could be a respected commission or organization that would be called upon to decide whether the reversal is justified. It could involve the stakeholders themselves in the deliberations over whether the commitment is no longer in their interest.

a p p l i c at i o n s o f s e l f - r e st r a i n t i n st ru m e n t s Family Economic Security Hands tying to ensure that family contributions to its savings fund will be made on a regular basis may be accomplished through stated commitments by income earners to set aside the money, but in many cases this is not enough. Therefore commitments to an organization beyond the family are necessary to put sufficient pressure on the family. The “One Baht a Day” savings program in Thailand briefly mentioned in chapter 4 is such an example. Families voluntarily join the program, but once in, their commitment to place money into the savings account is essential for maintaining membership and thereby access to the other benefits of membership.

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For people on regular payrolls, the opportunity to have automatic withholding for general savings funds, health insurance funds, or education funds has elements of both hands tying, insofar as it is cumbersome and possibly embarrassing to terminate the arrangement, and stimulus control, in that the individual avoids the temptation to spend these funds. Less direct measures include joining parents clubs (also briefly mentioned in chap. 4 as a mechanism for conveying norms of good parenting) that has a more subtle hands-tying result, insofar as avoiding making negative impressions on other members may motivate admired parenting actions such as keeping the children in school. Conservation and Environmental Protection Hands Tying to Discipline Natural Resource Extraction. The widespread problem of hasty extraction of natural resources such as oil, hard minerals, and timber has been addressed, with varying success, by establishing what are intended to be firm restrictions on rates or sites of resource extraction, on the use of resource revenues, or both. For example, in the 1970s and 1980s the Chilean government limited the state copper enterprise, Codelco, from extracting copper from new deposits—even deposits nominally under Codelco control. On the expenditure side, the government established the Copper Stabilization Fund that holds unusually high copper revenues out of the budget in reserve for periods of lower copper prices and lower revenues. Whether the hand-tying efforts in the natural-resources sphere are wise depends on the technical soundness of the restrictions and the capacity to enforce them. In the Chilean case, restricting Codelco to extract ores from mines already in operation denied the Chilean government of huge returns on investment that could have been realized if Codelco’s other, richer deposits could have been exploited (Tironi and Grupo de Minería CED 1985). In fact, the Chilean government removed the restriction in the early 1990s. On the other hand, Chile has been relatively successful in stabilizing government spending through the discipline of the Copper Stabilization Fund. This has been particularly important in light of Chile’s heavy (but declining) dependence on copper export revenues and the sharp fluctuations in the world copper price. Undoubtedly this reflects the relatively high level of governmental discipline in Chile over the past three decades, which many other developing countries cannot claim. Assessments of the oil or mineral stabilization funds in other countries have revealed that stabilization funds can limit overspending and enhance certainty only if the government’s commitment remains strong enough to resist raids on the fund (Fasano 2000; Davis et al. 2003).

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Hands Tying through Agreements with Same-Level Entities. Multinational treaties mandating cooperation on controlling pollution and sound resource management of rivers, lakes, or seas typically empower a secretariat comprised of member-country representatives. Each member country subjects itself to the constraints formulated through the secretariat, and exiting—even if the other parties were willing to negate or water down the commitment—entails time, effort, and political capital. Significant examples include the North Sea Council, the United Nations Regional Seas Programmes for the Aral Sea, the Baltic, the Black Sea and the Mediterranean; the Canadian-U.S. International Joint Commission for the Great Lakes; and the India-Bangladesh Ganges Commission. Their effectiveness has been mixed. The Canadian-U.S. International Joint Commission has evolved through many decades into a very effective organization, but of the regional seas initiatives, only the North Sea arrangement has been judged a significant success (United Nations Development Programme 2003; United Nations Environment Programme 2003; American Association for the Advancement of Science 2007). Decentralization of Natural Resource Management. Many governments have responded to the poor performance of centrally controlled renewable natural resource endowments (fisheries, forests, and water) by devolving control to local governments or communities within them. The explicit rationale is typically that the local stakeholders have strong incentive to manage their resources sustainably; yet an implicit motivation in many cases is that the decentralization removes the central authorities’ vulnerability for the poor performance. This means, however, that the decision is frequently made when the resource base is already badly degraded.7 An example of ambiguous decentralization of natural-resource control is found in the late 1980s decision of the Colombian government to expand the number and expanse of resguardos, a form of local governance in rural areas designated as environmentally fragile. Local communities were informed that they would have permanent control over the management of the land, but the details of the provisions specified that if local groups cease to use their traditional modes of production, their rights could be withdrawn (Ascher 1995). This qualification can be criticized as trapping these groups in the low-level equilibrium of low productivity, and, insofar as the qualification brings the durability of their user rights into question, the willingness of these groups to manage the forests for the long run is also weakened. Establishing Environmental Protection Agencies. Because environmental concerns are so frequently at odds with more immediately pressing econom-

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ic demands, the initiatives to institutionalize official environmental entities have been crucial in many countries. As early as 1980, the number of national governments that had established environmental agencies was nearly one hundred, compared to only ten in 1970 (Feraru 1985: 65). Establishing these entities, whether as councils, departments, ministries, or otherwise, has precommitted staffing and other resources to environmental protection, increased the potential for political embarrassment of governments that defy the recommendations of these units, and typically provides information that is very useful for environmental NGOs to use to embarrass the government for the same reasons. Endowments or Reserved Appropriations. The precommitment of funds for environmental research has also been attempted through the creation of endowments and reserved appropriations arrangements. Private environmental endowments abound in developed countries, which, according to their charters, may or may not be perpetual foundations operated to maintain the inflation -adjusted value of the endowment. Parallel efforts in developing countries, often partially or wholly funded by donations from developed nations or from multilateral institutions, also exist, and also vary in terms of whether the funding mechanisms ensure long-term viability.8 The limitations of such arrangements lie in the possibility that the same or a successor government may either abolish the arrangement or more subtly change its focus. In Sweden, for example, in the early 1990s the reserved appropriation funds that had originally been earmarked for the so-called Workers’ Fund established under a leftist Social Democratic Party were shifted to establish several semiautonomous foundations, such as the Swedish Foundation for Strategic Environmental Research (MISTRA) and the technology-focused Knowledge Foundation. The expectation was that the government would make further transfers from time to time. The trustees or oversight committee members serve at the pleasure of the government (MISTRA 1993; Swedish Knowledge Foundation 1994/1999). When the Social Democrats again came into power, the government appointed its own loyalists to the board, which in 2005 decided to liquidate the MISTRA endowment by 2012. Whatever commitment to maintain environmental research through a perpetual MISTRA endowment thereby evaporated. Independent-Revenue Funds. In contrast to the MISTRA case, arrangements can earmark ongoing revenue sources, such as user fees, to ensure the level and continuity of the fund. The study conducted for the Secretariat for Eastern

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African Coastal Area Management (2001: 14) notes that most of the coastal management funds examined in the survey relied on user fees to augment the fund resources. Another, quite remarkably farsighted revenue-earmarking case is the Dismantling, Removal and Restoration Fund established for the Trans Alaska Pipeline. Unlike the nightmare of the myopic neglect of the resources needed to dismantle U.S. nuclear facilities and dispose of their waste, the Fund is financed through a fixed portion of the oil royalties (Fineburg 2004). When Prudhoe Bay and North Slope oil is depleted to the point that the pipeline is no longer economically viable, the Fund will be able to remove the pipeline and related infrastructure, as well as restore the lands that it traverses. Because the Fund has legal autonomy to invest and manage its own monies, backed up by the provisions of the court settlement reached after the pipeline was litigated by environmental groups, there is less chance of a raid on the funds by either private or public entities. Exclusion of Information. Legislation that explicitly disregards information in a stimulus control vein has also been prominent in some environmental policy regimes. The U.S. Endangered Species Act requires that if sufficient evidence exists that a species is at risk of extinction, the decision to protect it is mandatory irrespective of considerations of the economic costs of the protection. Several very economically costly cases, such as the delay of the operation of the Tellico Dam in Tennessee to protect the snail darter fish and logging restrictions in the western United States to protect the spotted owl, have demonstrated the seriousness of this restriction. Averting Health and Security Risks Self-Hostaging. A form of self-hostaging has been emerging through employment contracts that have voluntary arrangements that allow or even require the employer to impose a punishment for engaging in dangerous or unhealthy behaviors. The behaviors of drug use, drinking, cigarette smoking, and even overeating may be targeted; the punishments range from denial of modest benefits to dismissal. These are cases of self-hostaging, rather than garden-variety restructuring of benefits and costs, in that the arrangements are voluntary on the part of the employee. Yet the arrangements are likely to have a significant impact only if formally offered by the employer. Stimulus Control. In some communities, stimulus control is accomplished by banning the activities that tempt unnecessary spending through drinking and

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gambling. Of course, these prohibitions are frequently ignored, or people go to other locales for these activities. A related tactic is to have budget decisions placed in the hands of a family members (often an elder or the wife within a nuclear family) who is unlikely to engage in or permit spending on these activities. Community Self-Help Upgrading The challenge of community self-help initiatives is to maintain the level of effort after the initial enthusiasm wears off and the opportunity to free ride may attract more and more community members. This tendency can be countered by establishing “work or pay” agreements at the outset, through which community members commit to make cash payments in lieu of work commitments that they do not honor. On the government’s part, a strategy for reducing the community’s skepticism regarding the government’s commitment to support the initiative is to incorporate it within internationally supported programs. Several United Nations agencies, the World Bank, the various regional development banks, and bilateral foreign assistance agencies have community-improvement programs. Even if any funding from these sources does not go to the particular community-upgrading initiative, the government’s risk of losing resources for failure to meet all of its commitments can provide credibility, in addition to the enhanced status of the initiative. Promoting Productivity Stimulus Control. To reduce customs graft, the Indonesian government put customs collection in the hands of a private Swiss firm from 1985 to 1997 (Krasner 2005: 77). The logic of this action was that the international firm had much more to lose—its worldwide business—than Indonesian customs officials did. Hands Tying to Insulate Economic Reforms. A straightforward example of the double virtue of credibility and insulation from pressures to renege on commitments with external entities can be found in the mid-1980s Costa Rican economic policy reforms, conducted under agreements with several interna­tional entities. The government faced a huge foreign debt, balance-of-payments imbalances, high inflation due to a fiscal deficit, a highly inefficient nationalized banking sector, inefficient industry subsisting on subsidies, bloated state

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enterprises, and highly distorting price controls. Of course, these problems did not arise out of simple ignorance of sound economics—each problem reflected policies that had benefited particular interests, including private-sector firms that had received low-interest loans and tariff protection, state-sector unions, and the general public that had become heavily dependent on unsustainable government spending. Yet because of the obvious need for foreign assistance to address the debt crisis and budget shortfalls, the government entered into more than one hundred “covenants” with the U.S. Agency for International Development (USAID), as well as IMF and World Bank agreements that also involved conditionalities. Each year from 1982 through 1988 the Costa Rican government and USAID entered into an annual “economic stabilization and recovery” agreement that outlined the reforms for that year (Pillsbury 1993: 127). Inasmuch as during that period USAID alone provided $800 million to Costa Rica, with a population of less than 3 million people, it would have been very difficult for particular interests to lobby successfully against the reforms. It is revealing that the covenants did not cover the state electricity and telephone enterprises, and this was one area where the reforms stalled badly. Progress toward Multiyear Budgeting. We see few initiatives in multiyear budgeting that provide a high degree of certainty. The most ambitious move to a multiyear budgeting system has been initiated in Uruguay, where the president, permitted one five-year term, is obligated to submit a five-year budget to Congress. After the first year, the president may request modifications, but the modifications need to be approved by Congress and the presidency must reformulate the entire plan. The modifications, unless accompanied by compelling reasons to deviate from the original five-year plan, could impose serious political costs to the president and the ruling party. Another effort in the United Kingdom mandates a three-year budget cycle, subject to midperiod reviews. The British Treasury reported: “Since the late 1990s the Government has tied the allocation of resources explicitly to commitments by departments to the achievement of specific and measurable performance targets. Since the 1998 Comprehensive Spending Review (CSR) departments have been given budgets for three-year periods and allowed to carry forward money not spent in one year to the next. This has promoted medium term planning by departments and taken away their incentive to wastefully spend money at the end of the year” (Organisation for Economic Cooperation and Development 2002: 2).

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It is important to note that the true degree of commitment of an ostensibly multiyear budget will vary greatly across cases. For example, South Africa developed a seemingly comparable three-year “medium term budget policy,” enacted in 1997. Broad sectoral spending allocations are set for the three-year period, but they are revised annually (Republic of South Africa 1997). While acknowledging that providing a three-year “envelope” adds to the strategic capacity of government agencies and provides the public with more information about the government’s longer-term intentions, Antony Altbeker (2005: 2) points out that uncertainty remains in terms of the changes in years two and three required to adjust to unexpected economic conditions, the status of reserve funds, and the nonbinding character of the guidelines to enable policy makers to “tack when political circumstances dictate that it must.” The consequence of the nonbinding nature of budgetary commitments beyond the first year is that the apparently three-year budget is indeed hardly different from the so-called indicative planning that has been prevalent in many developing countries since at least the 1960s and 1970s, whether inspired by Soviet-style five-year plans or by U.S. foreign assistance requirements.9 Yet many of the calls for multiyear budgeting assume that annually revised budgets will provide both flexibility and enough certainty and motivation to focus on the long term. For example, the Northern Irish not-forprofit group Sustainable Northern Ireland has called for “at least five-year rolling budgets to prevent short termism and patronage at elections. Periodic (annual) reviews could be introduced to update plans and budgets, within this framework” (Sustainable Northern Ireland 2005). Note the parallel between the need for “rolling plans” and for “rolling budgets.” The idea of the periodic review is to allow for the possibility that unanticipated conditions will require adjustments. What must be recognized is that there is an unavoidable tension between flexibility and multiyear budget certainty and that flexibility—though in some circumstances well advised—will erode certainty. The Challenge of Reversing Commitments. Consider the challenge facing the Argentine government in the face of the hyperinflation of the early 1990s. The attractive strategy, adopted in 1991, was to fix the peso to the U.S. dollar, which would put an abrupt halt to the corrosive hyperinflation. Yet there were several medium- to long-term risks. One was that the Central Bank’s dollar reserves would run out, if for whatever reason peso holders preferred to hold dollars. Another was that a strong surge in the value of the dollar

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vis-à-vis other currencies would put Argentina in a disadvantageous trade position. However, the Argentine government, fearing that businesses, unions, and the public would not trust the government’s commitment to the dollarization policy, made no provision for any adjustment—that is, weaning the peso off of the dollar parity—if very negative economic consequences should later emerge. Initially, the policy was a huge success, with a remarkable eco­nomic recovery due in large part to the reduction in inflation. In a 1996 address at a World Bank conference, Economics Minister Domingo Cavallo declared that even compared to the East Asian economies, “Argentina’s average total factor productivity growth of 6.5 percent a year during 1990–94 is a remarkable feat. While the jury is still out on whether this rate of growth can be sustained over a much longer period, the growth in productivity is so remarkable that it deserves closer examination. . . . This seemingly miraculous productivity growth inspired the title of this address [‘From Hyperinflation to Sustained Growth’]” (Cavallo and Mondino 1995: 1). This situation again brings to mind Harold Lasswell’s pithy adage that “short-range success is often the parent of long-range failure.”10 As time went on, the political costs of reneging on the dollarization policy were seen to be so great that successor governments were afraid to revalue, until in 2002 the central treasury’s dollar reserves were so depleted that the government had to abandon the dollarization abruptly, triggering one of Argentina’s worst economic crises. Without a threshold to trigger an earlier devaluation, the successor governments would have been held accountable for the economic problems—though they would have been far less damaging if the devaluation had occurred earlier. Whether the Argentine government could have enacted a dollarization policy with an “escape clause” is a matter of controversy. One argument is that a clear, extreme contingency would have little impact initially, but would have allowed the government to change the policy if the contingency occured, without diminishing the government’s subsequent credibility. The opposing argument is that the possibility of abandoning the dollar-peso parity would have immediately undermined the credibility of the dollarization policy itself. The Argentine case can be contrasted with the more successful recovery from unsustainable economic policy commitments following the 1997 East Asian financial crisis. To address the banking panic, capital flight, and declining foreign currency reserves, the government of Thailand quickly entered into an agreement with the IMF that imposed stringent austerity. The Thai government and the IMF made the expected pronouncements pledging their mutual commitment to the terms of the agreement. Rather soon the resulting

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severe recession and the superior performance of other East Asian nations with less stringent financial policies made it clear that the commitments were inadvisable. The Thai and IMF officials reviewed the results, and jointly agreed to revise the package of measures to lighten the stringency. By and large, the IMF, rather than the Thai government, has been held accountable for the early missteps. Physical Infrastructure Precommitment and hands-tying mechanisms to promote ambitious infrastructure development take many forms, supported by the fact that the use of physical infrastructure can generate its own revenues. Devolution to transportation authorities with the right to charge fees has long-standing precedents. The Port Authority of New York and New Jersey is a public corporation controlled by both states and is the major operator of the ports, ship-to-rail transfer systems, tunnels, bridges, airports, and some railroad lines for the greater New York City metropolitan area.11 Its revenues from operating these facilities are largely insulated from the two state governments. More generally, the remarkable expansion of U.S. highways, even in times of tight national budgets, owes much to the U.S. Federal Highway Trust Fund, funded through earmarked fuel taxes. The funds for maintenance of infrastructure, a crucial but often neglected farsighted imperative, can be protected through trust funds. For example, with the encouragement of international donor agencies, eleven Latin American countries have progressed to varying degrees in establishing road maintenance trust funds financed by road user charges. Once the fund is established, the challenge is to protect the earmarking from subsequent short-term temptations. The German technical cooperation agency GTZ notes that the strategy for the road maintenance trust funds entails the following: creation of autonomous and user controlled road maintenance funds financed by road user charges transformation of existing road administrations into autonomous road agencies establishment of road management companies responsible for managing whole road networks on a long term contractual basis, whereby payments to these companies will be based on pre-established performance standards of the roads rather than on works executed (Federal Republic of Germany 2003).

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The emphasis on autonomy in the first two elements of the strategy reflects the importance of insulating the trust fund from efforts to raid its resources. This is hardly an idle concern. With World Bank support, a parallel effort to establish road maintenance funds in Sub-Saharan Africa has had very mixed success, depending to a significant degree on how much autonomy the head of the road fund has vis-à-vis the chief executive and on the access of the funds to revenues coming from tolls or fuel taxes (Benmaamar 2006). Yet even with such earmarking, these funds can still be vulnerable to raiding by the central government, even in developed countries like the United States.12 Of course, it is possible that the monies accumulated by a fund may exceed what is needed for the operations and maintenance of the targeted infrastructure; this argument has been made about the U.S. Highway Trust Fund by those who support other modes of transportation. Yet this simply reflects the basic point that farsighted strategies may not always be properly designed. That does not negate the usefulness of well-calibrated funds. Charitable Contributions The principle of perpetuity is typically pursued by charitable foundations by setting the spending rate at either a fixed percentage of the asset value or a narrow range around such a percentage, based on knowledge of the typical yield on the investments and levels of inflation. For example, many foundations (as well as many colleges and universities) spend around 5 percent of their asset value annually, which reflects the expectation of inflation-adjusted earnings. Even if the endowment earns 10 percent in current dollars, the lower spending rate leaves more in the endowment in order to offset the reduced purchasing power of each dollar. In the United States, the federal government requires that for such foundations to maintain their tax-exempt status, they must spend at least 5 percent of their asset value, in order to prevent the foundation managers from enriching themselves by underspending on programs, accumulating more asset value, and compensating themselves too handsomely. Yet because the current regulations do not distinguish between program spending and administrative spending, the risk remains that a foundation could spend very little on its mission in order to aggrandize its managers. For this reason regulations have been proposed to require a 5 percent minimum spending on programs exclusive of administrative costs. Foundation leaders have objected to this proposal, on the grounds that with historical inflation-adjusted earnings at 5 percent, any spending above that level would erode the real value of the endowment. This conflict reflects the tension between the motive to guard

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against the agency problem (i.e., the foundation managers acting in their own interest, rather than in the interest of the benefactors and their intended beneficiaries) and the motive to have the foundation carry out its functions indefinitely into the future. While the establishment of an endowment with a spending rate designed to maintain or increase the real value of the assets is certainly a means of precommitment, it should be noted that some foundations are deliberately selfliquidating without necessarily being shortsighted. Jan Alexander (2004: 4) notes that “many founders today design their foundation to spend its endowment within 20 to 30 years—as Bill and Melinda Gates are attempting to do with their institution’s emphasis on AIDS treatment. This enables the foundation to address large projects in need of vast funding.” The rationale for massive Gates Foundation spending on developing vaccines is that hastening the breakthroughs in treating diseases like malaria will enable much greater sustained development by healthier populations, while also preempting, to a certain degree, the agency problem. The contrast between perpetual and self-liquidating foundations raises an important issue of how the degree of farsightedness can be compared across different strategies. Leaving aside the agency problem, are perpetual foundations more farsighted? Are they making a firmer precommitment? Consi­d­er what at first glance would seem like a foundation targeting only the current generation. In 1951, the U.S. food-industry magnate Max Fleischmann established a family foundation that eventually disbursed nearly $200 million. Fleischmann “believed that each generation should learn to care for itself so the life of the Foundation was purposely limited under terms of his will. All funds were to be distributed within twenty years from the date of the death of the Major’s widow” (University of Nevada, Reno, Library, n.d.: 1). Yet the Fleischmann Foundation helped establish libraries, scientific laboratories, significant expansions of the University of Nevada, scholarship funds, the National Judicial College, and many other initiatives that clearly have benefited future generations. Rhetoric aside, the Fleischmann Foundation made investments with obvious long-term payoffs, rather than providing consumption for the generations alive at the time that the Foundation was liquidating its assets. Again it is this investment versus consumption distinction that determines how farsighted an action or commitment should be regarded. It would be very difficult to compare the long-term effectiveness of a perpetual foundation versus a self-liquidating foundation if they commit the same resources to the same ends, without having unrealistically prescient knowledge of whether investments over the next few decades would be more effective than a greater

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number of smaller investments spread over many more decades. Another unknown is whether the investments of a perpetual foundation in operation today will be more necessary decades into the future because of a future decline in philanthropy or less important because of a surge in philanthropy. While these considerations neutralize the advantages that a perpetual foundation might seem at first glance to have over self-liquidating foundations, the Fleischmann Foundation example also demonstrates that self-liquidating foundations do not necessarily address the principal-agent problem of leaving decisions in the hands of later foundation decision makers. Unless a foundation liquidates before the death of the contributor, others will be applying their own interpretations of the guidelines for the foundation’s targets. The Fleischmann Foundation trustees targeted, among other things, rural and mental health care in Nevada, which had not been a significant target during Max Fleischmann’s life. Whether this constituted a negative diversion from what the donor would have done or a positive adjustment to newly compelling needs has no simple answer.

lessons of self-restraint instruments The trade-off of losing some control in order to strengthen a commitment and its credibility is undertaken in a host of instances, through many different instruments. These mechanisms can rarely guarantee full confidence on the part of stakeholders that the commitments will be fulfilled, because the promise maker or successor may renege, if at great cost, and the stimulus control or hands-tying arrangements themselves may be terminated as well—even constitutions change, agencies are dismantled, and apparently well-insulated trust funds are raided by financially strapped governments. Nevertheless, the paradoxical logic of limiting one’s control in order to enhance one’s effectiveness can be remarkably potent in the right circumstances.

* III * Improving Analytic Frameworks

The standard expected utility model made a crucial advance over the simplistic assumption that people choose the option that produces the most preferred likely consequences. The advance came from the assumption that the major impediment in making rational decisions is the uncertainty that brings into doubt whether particular valued consequences will materialize. The expected utility model then posits that the way to address this uncertainty is to apply probabilities, derived from empirical information about the frequencies of comparable consequences, from theoretical insights, or from intuitive judgments. As a model for understanding choice, the application of the expected utility model presumes that people apply either objectively derived or subjective probabilities to the utility of each consequence of the predicted effects of choosing an option and will select the option with the greatest net utility, even if it requires the assumption that people act “as if ” they are applying subjective probabilities (Savage 1954).1 Yet to extend our argument for incorporating more psychological insights into the analysis and search for farsightedness-promoting strategies, we note that two assumptions of this model need to be questioned. The more obvious assumption is that probabilities are invoked, explicitly or implicitly, consciously or not, in choosing among options. Given any choice among different options and knowledge of the utility that the decision maker ascribes to each consequence, the analyst can infer what probabilities the decision maker acts “as if ” he or she is holding, but this does not mean that the decision maker is using expected utility reasoning in making the choice.2 If the decision maker despairs of coming up with an accurate or even reasonable

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probability, he or she may employ an entirely different logic, such as following the advice of others, choosing the option that is most easily understood, or taking no action at all. This implies that the importance of inducing people to engage in uncertainty-reducing exercises is important not only to hone the probabilities but also to raise their confidence in the probabilities they can assign so that they assign probabilities. The second assumption is equally if not more important for our expansion of potentially useful strategies. This is the implicit assumption of fixed utility of consequences. To use Christopher Hsee’s term, the evaluability of the consequences cannot be taken as given or fixed (Hsee 1996). The implication is that exposing individuals to analytic exercises will affect their focus of attention, which in turn will determine the degree to which they evaluate consequences, whether explicitly or not. In the extreme, particular possible consequences may be totally neglected simply because the individual has not focused any attention on them, whether because of a time horizon that terminates prior to when the consequence might occur or because the possibility is unrecognized. Thus a crucial element in inducing people to take long-term consequences into account and to act on them in farsighted ways is the focus of attention, which is essentially ignored in the expected utility approach. Herbert Simon (1987: 31) noted that theories of substantive (i.e., consequentially based) rationality simply have no place for the distribution of the focus of attention, because the consequences that the analyst assumes are perceived by the decision maker are taken as givens. Finally, Part III argues for the importance of deeper and more complex problem definitions. This takes us beyond the standard expected utility model in yet another respect: not even the options for action apparent to the decision makers should be taken as given. The analytic work of gaining deeper understanding of how threats and opportunities arise will contribute to the understanding of how they are shaped by action. The underlying hypothesis is that greater understanding of the complexity of issues will reveal more options that are designed to address persistent problems that are rooted in history, culture, and institutions. Options oriented in this way are likely to have elements entailing farsighted action.

chapter eight

Analytic Exercises

Experts in particular policy areas are frequently astonished to learn of how little pubic awareness, or even awareness by government policy makers, exists for issues that they devote their professional lives to master. This reflects the multiplicity and complexity of the issues that the public or government have to address, as well as the growing complexity of the factors affecting people’s lives in the short and long term. The growing demands for energy in China affect the price of hydrocarbon fuels in Brazil, which in turn affects how much land is devoted to sugar cane and other crops for the production of ethanol fuels. The inability of African governments to require farmers to kill avian-fluinfected poultry may affect the health risks of virtually everyone on earth. Therefore simple awareness is a fundamental element of the cognitive maps of both government officials and the public. Rather than assuming that all relevant aspects of the future are kept in mind by decision makers, we need to recognize the crucial importance of shaping the focus of attention. Beyond that is the task of addressing analytic limitations so that individuals and organizations will be sufficiently confident to choose actions that pursue long-term objective. Therefore the entire range of analytic exercises that induce consideration of future consequences can be useful for both prompting concern for the longer-term future and increasing confidence that short-term sacrifices can be converted reliably into long-term gains. Many mechanisms have been developed to engage people in analysis, debate, and negotiation such that they are required—and usually better equipped—to assess long-term consequences. Engagement in serious planning exercises will extend the “planning horizons” of the participants—the

152  Chapter Eight ta b l e 8 . 1   Variations of analytic exercises Mechanism

Level

Counseling (financial, family planning, etc.) Trend projections/forecasting Horizon (or futures) scanning Planning Assessment Full cost accounting Valuation Discourse Ad hoc commission

Family

Stakeholder negotiations

Within organizations Within organizations Within organizations Within or among organizations and public Within or among organizations and public Within or among organizations and public Among organizations and/or public Governmental and/or among organizations and public Government led involving other organizations

time period in which they have to make provisional commitments and decisions—and thereby extend the period of the future that they will have to take into account. This presumes that the exercises are taken seriously—an issue we will address later in this chapter. The variations of analytic exercises reflect the level at which decisions are to be made: by families, within formal organizations, among organizations, and so on. (See table 8.1). Counseling here entails the typically rather informal interactions between a family and someone with relevant expertise. Financial planners, insurance agents, family-planning counselors, agricultural extension agents, and so on, typically provide this service. As long as they are suitably qualified and their guidance is (and is perceived to be) free of ulterior motive they can be of considerable value in guiding the family’s analysis of long-term consequences. Forecasting and horizon scanning (also known as futures scanning or environmental scanning1) constitute the key analytic input that specialized units provide to the organization’s leaders and to other units within the organization. The analysis may consist of scanning the external environment for threats and opportunities, projecting trends under various assumptions relating to the environment external to the organization or the decisions made by the organization, or assessments of the compatibility of options available to different units within the organization. It does not necessarily entail involvement in the decision process beyond providing intelligence, or involvement by leaders in the process, although both are often advisable. The distinction here is between technical-unit planning as an input to other func-

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tions of the decision process, as opposed to planning that involves broader participation. Forecasting trends and the possible consequences of decisions is obviously an essential step in planning and in most decision making in general. In a sense, forecasting is the essential analytic task of focusing on the future. Yet equally important, the specificity provided by systematic, credible longterm forecasting can clarify the steps needed to address problems that otherwise might simply loom as dreaded possibilities. An enormous amount has been written about long-term forecasting,2 focusing primarily on methodologies. Only three essential points are relevant here. First, although it is common to think of the forecasting task as projecting the consequence in an absolute sense (i.e., given what is known, X is likely to occur), the most useful form of long-term forecasting is conditional (i.e., if action Y is taken, and/or if condition Z prevails, then X is likely to occur). Conditional forecasting, though it may disappoint many people’s yearning for certainty, is important because there are always factors beyond the control of the audience that cannot be predicted with certainty; an absolute forecast does not sufficiently convey uncertainty. Another problem with absolute forecasts is that they imply the irrelevance of the actions of the audience. For example, to say that the GDP of a country would grow at an average of only 2 percent annually for the next decade implies that the actions of the audience—for example, government or business leaders—cannot alter that growth rate. This sort of implied determinism runs counter to the crucial message that choices can make a difference in long-term effects. Second, for forecasting to be useful in focusing attention on farsighted strategies, as opposed to simply focusing on the future in a passive way, it should be linked to strategy through the analysis of how to arrive at a positive conditional projection or how to avoid a negative one. Scenario writing is a commonly used vehicle for accomplishing this, although it lacks the panache of quantitative forecasting techniques. Of particular importance is that the scenarios not simply paint a picture of future conditions and dynamics, but also address how that scenario could emerge from present conditions. In short, the scenario of “how to get from here to there” connects forecasting with planning. The plausibility of a positive or negative scenario is brought into question when the effort to come up with a plausible path to that scenario is difficult and strained. For example, the scenario for a sustained economic reform and recovery for Argentina would require an account of how Argentine leaders could overcome the impatience, cynicism, and distrust of Argentine voters, unions, and other groups toward the government and economic

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policies in general; how the grave conflicts between central-governmental and provincial officials could be resolved; how the low levels of savings and investment could be reversed; and so on. Perhaps such a transitional scenario can be written, but the exercise would indicate how daunting the task would be, how much change would be necessary to succeed, and how the political culture would have to be transformed. Third, forecasting studies have to embrace uncertainty rather than neglecting it or devoting all efforts to reduce it. Uncertainty not only reflects the human potential to change the future course of history, it also guides us to adopt strategies that are farsighted in that they hedge against the variety of possible future consequences. Two examples illustrate this quite vividly. If a Japanese or South Korean industrial planner working in the government of either country were asked in the 1960s through 1980s what industries should receive government support through cheap credit or other subsidies, the planners would be quick to point out what they thought would be the most likely winners. The Taiwanese planner probably would have been more modest: provide opportunities for promising firms to prosper, but do not presume that the world competitive situation, or the capacity of any given Taiwanese sector, could be definitively identified as a sure winner. The Taiwanese strategy of facilitating emerging winners, rather than betting on who would win, resulted in a more resilient economy in the face of regional economic crises and more globalized competition (Wang 2000). Short of full-scale forecasting, systematic scanning of potential long-term risks and opportunities can be important for focusing and refocusing attention, feeding into agenda setting (i.e., what issues should be addressed), providing the rationale for planning, and resetting the priorities for monitoring and more detailed forecasting. Systematic identification of newly salient emerging issues can help to overcome the stagnation and routinization of analysis, especially to flag possibilities that are not yet apparent from conventional monitoring efforts.3 Unlike general forecasting, which occurs in some form in virtually every policy analysis, whether explicitly or implicitly, scanning is typically undertaken by special analytic units that are mandated to look out for the unusual and to be sensitive to what might seem to be low-probability, but high-impact, possibilities. For example, Singapore’s Risk Assessment and Horizon Scanning system has been singled out for praise for its success in considering low probability but potentially high-impact events. The Singapore government has used horizon scanning extensively since the 1980s. All policy makers are encouraged to expose their analysis to pos-

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sible future trends in order better to prepare themselves. During the 1990s, for example, they used one form of horizon scanning—scenario planning—to good effect. They prepared scenarios around possible economic shocks that could hit them. As a result, they were judged to have reacted faster and more effectively than other governments in the region to the Asian economic crisis of the late 1990s. For example, their GDP growth was much less affected than neighbouring economies such as Malaysia, Thailand and Indonesia. (United Kingdom Cabinet Strategy Unit 2002: 53) Planning within an organization is a broader analytic exercise that encompasses clarifying long-term goals, projecting out existing trends, understanding existing patterns, projecting out the likely consequences of different choices, and thereby identifying the choices likely to bring about the best results according to the objectives initially clarified. It should include the input from technical-planning units, such as scanning the environment for both threats to the mission and opportunities to pursue it. The planning exercise essentially writes a positive “scenario” of the future, with the actions necessary to get from here to there, based on understandings of how these actions will unfold. The “products” typically consist of the mission statement (either the existing one or an update), a core strategy, a list of goals to be accomplished at various future dates, and possibly alternative actions depending on different future conditions (“contingency plans”). Part of the logic of planning rests on the process itself. Even if the plans have to be abandoned or radically changed at some point in the future, the cognitive task has been accomplished: the long-term possibilities will be considered. This accomplishment should not be underestimated—some organizations never undertake long-term analysis, let alone develop a long-term strategy. The process can also serve the more subtle functions of signaling to all involved that the longer term is indeed worth considering and putting the shortsighted on notice that their orientation is deficient. The products of planning—the various reports it generates and “the Plan” itself—also can make some obvious and not-so-obvious contributions to farsighted action. The reports convey information about the future; this information is typically accessible to people beyond those involved in the planning exercise. The plan itself typically has some degree of binding effect on those who adopt or endorse it, although it may be unclear who is really committed. Most importantly, if the strategic plan is accepted by those who oversee the people

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whose actions are directed by the plan (e.g., if the board of directors of a corporation accept the strategic plan guiding the company’s top management) and by other stakeholders (e.g., the company’s employees), then the elements of the plan can provide powerful mandates for the organization’s leaders. For example, a national environmental organization may embed objectives in its strategic plan, worked out with its board and membership chapters, that require marketing the group’s name on merchandise—an approach that might not be acceptable to some board members if they had not seen the board as a whole endorse the plan. Or the plan may commit the organization to a different strategy in dealing with government—perhaps one that is more aggressive in confronting government, or one that calls for more collaboration with government. Here again the adoption of the strategic plan provides legitimacy for the leaders to pursue the new approach. Once a plan has been adopted, the leaders of the organization also have a certain degree of obligation to follow the plan, which commits them to whatever farsighted actions the plan holds, as long as the highest authorities and stakeholders still believe that those actions make sense, and to the degree that they have some forms of punishing the leaders for deviating from the plan without good reason. The power to structure the planning process presents very significant opportunities to focus attention, frame the issues, and extend the time horizon. Obviously the time period for the plan itself will influence how far into the future the formal analysis will be, although there is a risk that if the plan period diverges from the time horizon of the people involved in the exercise, they will respond poorly.4 In addition, there is intriguing evidence that if the time metric of the historical trends presented as background information for a planning process is long enough, the audience will be more likely to think in multiyear or even multidecade terms. El Sawy (1983; cited in Das 1987: 207) found that when the attention of top-level executives involved in planning is first directed to the distant past of their organizations, they apply longer time horizons in their contemplation of the future. This is consistent with the more general insight of Harold D. Lasswell (1971a: 441) that a longer historical perspective counters the tendency toward “presentism.” The final contribution of the explicit strategic plan is that as time goes on, the actual performance of the organization can be benchmarked against the targets set in the plan. The usefulness of these targets will depend on how realistic they were in the first place and whether conditions have changed to the point of making them either unrealistically ambitious or not ambitious enough.

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Monitoring, while already examined in chapters 4 and 6 as a strategy for keeping agents in line, also shapes the focus of attention. Obviously a monitoring effort, in focusing on particular trends and performance criteria, signals what the monitors, or those who direct them, regard as important. Generally an ongoing monitoring effort entrenches the resources for a continual focus of attention. The challenge of monitoring is to choose the trends that provide genuinely useful information about long-term risks and opportunities. The first problem is that selecting and maintaining the focus on particular types of events and trends may distract attention from emerging issues. The entrenchment of the monitoring effort sometimes has a downside in routinizing the effort to the point that these emerging issues are neglected. The second potential problem of monitoring is that once it becomes clear what events and trends will be monitored, those whose performance evaluations are affected by the monitoring have an incentive to manipulate the information. Assessments that evaluate present and future risks and opportunities can focus attention on the long term and assist in the analysis even if those undertaking the assessment lack authority to require others to undertake a planning exercise or to dictate how decisions will be made. An assessment independent of a required planning exercise can still be effective as long as it does not provoke rejection by limiting the discretion of the audience. Full-cost accounting entails determining, to whatever degree is feasible, the full range of costs of a project, program, or policy. Insofar as such an effort would compel the exploration of longer-term costs, the time frames of those involved would be stretched beyond what they might otherwise examine. The opportunity costs of using resources for one purpose and thereby making them unavailable for other purposes must be included, as would be future remediation costs. Equally important, full-cost accounting requires an effort to identify not just the obvious financial and economic costs but also the broader range of costs (e.g., environmental, social, and institutional) that could well lead to a richer and temporally broader problem definition (see chap. 9). Even broader definitions equate full-cost accounting with benefit-cost analysis—for example, Barg and Swanson (2004: 3) assert that “full cost accounting refers to the overall exercise of valuing the environmental and social costs and benefits of activities that are external to the market,” but the more specific definition focusing on the cost side is more in keeping with the term per se. Valuation is the systematic effort to estimate the value or magnitude of benefits and costs expected to result from one or more decision options. While any decision reflects, in one way or another, how people value various consequences, the specific benefits and costs are often contemplated without an

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effort to assign values to each aspect of each consequence and to express the benefits and costs with a common metric that would permit a determination of the net value. A concerted, formal effort to value benefits and costs with a common metric (possibly but not necessarily in monetary units) has some easily identifiable virtues in focusing attention onto a broad set of aspects and providing a potential for revealing shortsighted options. Valuation is generally based on the conception of “value” as defined by what the stakeholders regard as valuable to themselves, rather than other concepts of intrinsic merit.5 While the “willingness to pay” is a central concept of value, it does not literally require the opportunity to pay to get more of what is valued. Therefore valuation in principle requires examining the full range of benefits and costs that the stakeholders care about. Valuation as a formal component of a decision process involves (1) identifying what potential changes ought to be addressed to determine how much people value them, (2) projecting possible changes, and (3) assigning values to the various aspects of these changes. The first two of these analytic tasks already accomplish the broadening of the focus of attention, and therefore reduce the likelihood that longer-term consequences will be neglected. The final analytical task of determining how much stakeholders are willing to trade off for a particular benefit can be addressed by examining the individual trade-offs actually undertaken, such as purchasing goods or services, or accepting money or other considerations in exchange for the willingness to accept a cost (so-called revealed preference approaches). These trade-offs can also be estimated from responses to hypothetical questions concerning willing to pay or willingness to accept (so-called stated preference approaches). Discourses are more fluid exercises that engage a specific topic with the hope of generating broad discussion, converging on a plan of action, and mobilizing awareness and resources. Typically, the discourse is conducted through multiple meetings to educate, solicit input, and mobilize support for the general effort. A discourse may be launched by government, but it may also be the initiative of nongovernmental entities such as political parties, nongovernmental organizations, and so on. Substantial psychological research indicates that people tend to assign higher probabilities to future possibilities after they have imagined these possibilities or have had the possibilities explained to them (Sherman et al. 2002). To help visualize concrete future results and to avoid the risk of degenerating into talk without action, discourses typically focus on accomplishments to occur in a particularly prominent future year: a decadal or half-decadal year

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such as 2010 or 2020, an election year, a party congress, or a year of historical significance (e.g., the hundredth anniversary of independence). How can poverty be reduced by a given amount by the year 2025? How can all children be vaccinated by the fiftieth anniversary of independence? How can our region gain autonomy by the year 2020? Some discourses are very broad: The “Armenia 2020” discourse, launched primarily by Armenians living outside of the Republic of Armenia, involves efforts to develop strategies for economic development, democratic strengthening, resolving international conflicts, and so on. Other discourses are much more specific. For example, in Russia the 2008 Movement intended to block the efforts of President Vladimir Putin to encroach further on civil rights and to mobilize opposition to altering the constitution that banned Putin from seeking another term in 2008. The first challenge to discourses is to generate enough attention amid the enormous amount of competitors for the focus of attention. Lacking the organizational structure and imperative of a planning exercise, the discourse depends on generating excitement. The stated or implicit goals must be ambitious enough to stimulate participation, but must also be credible. The involvement of charismatic individuals can be of great advantage. For example, the 2008 Movement was headed by the chess hero Garry Kasparov. In some cases, participation in a controversial discourse may also pose threats to the personal security of the participants, as in the case of Russia’s 2008 Movement. Ad hoc commissions, as distinct from standing commissions with decisionmaking authority, convene notables, often including experts, to examine important issues, culminating with one or more reports. Many commissions have a tight focus on a pressing issue or are mandated to understand recent events (such as riots, military calamities, human rights violations, etc.), but the analysis can still uncover long-term causes and long-term approaches to address them. Many significant commissions have technical staffs that engage in futures-scanning and forecasting exercises. Whether created by governments or nongovernmental entities, “blue ribbon” commissions have the potential to focus attention on longer-term considerations. An underappreciated potential of these commissions is that they can galvanize and legitimize social movements sympathetic to their mission and findings. Establishing a commission is sometimes seen as the window-dressing tactic of government leaders who do not want to take action to deal with a problem—referring it to a commission can postpone the need to take action. And undoubtedly in many cases this is precisely the reason for handing off controversial issues to the commission. But no matter the motives, commissions

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with enough staff and prestige to examine complicated long-term problems and produce widely known reports can be effective at focusing attention and providing analysis of long-term risks and opportunities. Stakeholder negotiations involve people in deliberations over public policies, with some implication that their involvement will serve both to represent their interests in the policy that emerges and increase the likelihood that they will support the policy. Various forms of stakeholder negotiation exist, from ad hoc consultations to formal “concertation” that entails highly structured, multisession participation of a broad spectrum of stakeholders with the intent to find sufficient common ground.6 Chapters 7 and 13 provide more depth concerning the implications of stakeholder negotiations; here it is important only to note their potential in focusing attention on the long term and providing analysis.

a p p ly i n g s t r a t e g i e s o f a n a ly t i c e x e r c i s e s Family Economic Security Promoting Savings. The commitment to family savings may be enhanced through simple assistance by the better educated to demonstrate the growth of savings. This is perhaps the simplest form of planning, which hinges on rudimentary demonstrations of the arithmetic of compound interest. The underlying logic, however, is more general: the audience (in this case, family members) is presented with assumptions (e.g., the savings will grow at 4 percent per year), can alter the assumptions (e.g., can ask to explore the savings if the annual growth rate is 3 percent or 5 percent), and is then presented with the implications of the assumptions. Additional risks and opportunities can be introduced. For example, if a family member is worried the savings being lost—for example, if the savings institution collapses or inflation increases— the analysis can pose assumptions about these possibilities and develop the scenarios that would emerge. Conservation and Environmental Protection The richest illustrations of mechanisms for promoting multiactor analytical exercises (as opposed to the family-level target just reviewed) can be found in the sphere of conservation and environmental protection. One example of each of the mechanisms will suffice to show its potential.

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Forecasting. The cluster of trends relevant to conservation and the environment (natural-resource availability and degradation, energy, pollution, etc.) are very difficult to forecast with accuracy, but the forecasting effort is a crucial instrument of focusing attention on these issues and providing the indispensable input for the further analytic stages in formulating specific environmental and conservation strategies. Without forecasts of the magnitude of problems, gradual declines are easy to neglect, especially if the trade-offs involve sacrificing economic growth. In China, for example, after decades of neglecting conservation and environmental degradation, the combination of energy shortages and environmental damage created awareness of the problems. Yet the requisite for concrete policy action, especially for so cautious a government regarding economic policy, was government forecasting. As Lin Gan (1995: 163) noted more than a decade ago, During the early 1980s, scientists and energy and environmental policy experts called attention to the energy crisis and environmental challenges. The State Science and Technology Commission (SSTC) conducted a series of national symposia held from 1979 to 1982 that were attended by influential energy experts and government leaders. The State Council’s awareness of the need for energy conservation had developed in the late 1970s as energy demands increased and energy shortages became more serious. In 1980, the government began to set annual targets for energy saving and proposed financing, technology, and implementation measures. One important stimulus was the report “The Year 2000 in China” which attempted to forecast trends in fifteen sectors, including energy and the environment. This research project, proposed by the Technology and Economic Research Center, a key think tank in the State Council, was later included in the Sixth Five-Year Plan for 1980–1985 as a priority project. Subsequently the government of the People’s Republic of China has adopted specific policy commitments, most recently in the 2005 Eleventh Five-Year Plan, which gives a much higher profile to environmental protection, energy efficiency, and conservation, and provides authoritative guidance for pursuing these objectives. Robert Marquand reported in early 2005 that as many as 22 major dams and power stations under construction in China, including a key power facility at the controversial Three Gorges

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Dam, have slowed or stopped work pending an environmental review. In the first instance of its kind, top Chinese leaders appear to be throwing their clout behind laws requiring environmental-impact statements for large energy-related projects. Even if the projects, which total more than $14 billion and span 13 provinces, soon go back online, Beijing’s public support of the State Environmental Protection Agency (SEPA), long considered a mere showpiece, seems an official nod to growing numbers of Chinese who support tougher policies to protect nature. Of course, the palpable environmental degradation in China (with six of the ten most polluted cities in the world) and the energy-supply challenges to continued economic growth would have heightened awareness of these issues in any event, and how much importance the government will actually accord to the environment, in light of the intense pressure to continue the economic growth trajectory, remains to be seen. Yet the technical forecasting efforts that identify the specific sources and magnitudes of environmental and resource vulnerabilities have certainly played an important role in gearing up the policy deliberations that have generated specific measures. Futures Scanning. The Swedish Institute for Futures Studies (Framtidsstudier), originally founded in 1973 as the Secretariat for Futures Studies, reporting to the Prime Minister’s Office, has been a pioneer in futures scanning, including, but certainly not limited to, trends in conservation and environmental protection. Bruno Héroult (2006: 65) notes that the Institute now is an independent organization and its mission is to stimulate debate on the threats and opportunities for the development of society. It often works on a 10 or 20-year perspective, but the very long-term (50 to 100 years) makes its work particularly novel: its research on women’s place in society, child labor or the consequences of ageing are worth noting. To deal with such distant time scales, the Institute combines various methods: scenarios, quantitative tools (econometrics, simulation, modeling) when long series are available, and a qualitative approach when it is a matter of detecting changes in behavior (mobility, family, beliefs). Note here how fuzzy the line between futures scanning and the further stages of forecasting specific trends can be. If there is a definitional distinction, it is that futures scanning identifies the trends and conditions that bear scrutiny,

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even if of rather low probability, so that more concerted forecasting efforts can be directed at them. Scanning is the “early alert” exercise. Many other Swedish agencies (such as the Swedish Environmental Protection Agency), government-funded “independent” foundations such as the Foundation for Strategic Environmental Research (MISTRA), and think tanks engage in futures scanning and forecasting environmental trends, with considerable success in focusing attention on the long-term issues. Hérault (2006: 64) concludes that “in Sweden, ecological futures studies are an integral part of the debates that, irrespective of the people who drafted and commissioned them, are instrumental in putting new issues on the political agenda.” Assessment. A currently very prominent example of a general environmental assessment is the international “Millennium Ecosystem Assessment,” initiated in 2001 in response to the request for this effort by United Nations SecretaryGeneral Kofi Annan. With a board comprised of academics, nongovernmental organization leaders, think-tank presidents, foundation chairs, government ministers, representatives of treaty secretariats, United Nations agencies, scientific organizations, the World Bank, and the Global Environment Facility, the Millennium Ecosystem Assessment has the potential for remarkable prominence. It is noteworthy that the Millennium Ecosystem Assessment is not attempting to establish guidelines, investment targets, or other policies; rather, it is documenting where natural resource endowments and ecosystem services are being degraded. By sponsoring global and localized assessments involving more than 1,360 experts, the Millennium Ecosystem Assessment can focus attention on long-term risks and can easily document the overarching message that in terms of natural assets, we are “living beyond our means (Millennium Ecosystem Assessment 2005). The restraint of passing up the opportunity to specify particular policies is consistent with the political insight that advice from outsiders—even highly prominent outsiders—runs the risk of being rejected insofar as it ties the hands of policy makers.7 Full Cost Accounting. With the rise of environmental concern, government agencies have been under increasing pressure to incorporate environmental costs into their analyses of government investments. These costs include the overt costs of mitigation that are actually incurred (e.g., moving people away from heavily contaminated areas) but also the societal costs that are borne without easily identified payouts (e.g., poor health and lower productivity caused by the increase in malaria and other diseases worsened by dams that

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create mosquito-breeding grounds). When the business notion of full-cost accounting is applied to estimating the total environmental costs, long-term environmental degradation is less likely to be neglected. Thus full-cost accounting applied to environmental concerns entails a thorough environmental impact assessment, as well as taking into account other costs. The compelling rationale of full-cost accounting regarding projects with environmental consequences is that only an exhaustive inventory of costs will maximize the likelihood that projects or programs with low or even negative net societal returns will be recognized as such. If the analysis of the return on a road project has to take into account the possibilities that forest degradation and air pollution will increase or that populations gaining access to new areas because of the road might change the ecosystem in undesirable ways, decision makers will have to confront broader definitions of the trade-offs between expanding the transportation system and protecting the environment. Recall the example of exaggerated rate-of-return estimates of World Bank projects prior to the establishment of the Quality Assurance Group (see chap. 6). Without fully accounting for costs, many of these projects seemed to have high ex ante rates of return, when in fact the actual returns will be very low. Beyond the perverse incentives that played a role in these exaggerated estimates, technical/methodological reasons were also present, especially the difficulty of gauging the net impact of multiple low-probability problems with significant costs (Ascher 1993). Another use of full-cost accounting is the calculation of the full charges that ought to be imposed for the provision of natural resources, such as water and energy. For example, the Canadian-Indian collaboration between Canada’s government-funded International Institute for Sustainable Development (IISD) and the Energy Research Institute of India has been calculating the full-costs of electricity generation, transmission, and environmental impacts, in order to determine both the most efficient sources of electricity and the appropriate pricing. The IISD explains that “full-cost accounting quantifies the environmental externalities associated with electricity generation based on modified life cycle analysis. The basic objective is to make explicit the magnitude of direct environmental costs borne by society from electricity generation, thereby promoting power sector investment decisions that are indeed least cost” (International Institute for Sustainable Development 2007). The cost components of full-cost accounting vary greatly in terms of the difficulty of obtaining accurate estimates. In considering the electricity case, for example, the direct costs of operating coal-fired generating plants versus hydropower plants are relatively easy to determine, but the environmental

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costs are much more challenging to estimate, and even the societal costs of the fuel inputs, if their nominal prices are subsidized, are difficult to gauge. By the same token, the estimation of the full-costs of nuclear-generated electricity must take into account the future costs of both radioactive waste disposal and the dismantling of obsolete plants—both subject to great technological and political uncertainty (National Research Council 2001). Nevertheless, the requirement to go through the full-cost accounting exercise cannot help but to focus attention on these long-term “life cycle” considerations. Valuation. The effort to make a valuation as comprehensive as possible in terms of the possible benefits and costs may reveal that the longer-term environmental costs of shortsighted industrial or agricultural initiatives outweigh the benefits. For example, typically the development of shrimp farming in Southeast Asia involves removing mangroves, supported by government subsidies motivated in part by simplistic analysis of the profits for those who control the land use. A quite comprehensive valuation study done on Thailand shows that while that the value of the shrimp greatly outweighs the value of the mangroves, the value of the mangroves goes up considerably if ecological services are taken into account, and if the subsidies that typically go from government to the shrimp farms are deducted, the “societal profit” goes down considerably. Even worse, because shrimp farms typically have only a five-year life span, land restoration needs to be taken into account—putting these costs into the analysis shows that the societal value of shrimp farming is indeed negative (Barbier 2003). Thus while the methods of valuation are technically challenging, they do demand that the planners and policy makers have to grapple with at least rough approximations of a broad range of impacts and their values. The potential pitfalls of quantitative valuation in applications to environmental and conservation issues lie first in the possibility that its technical aura will freeze out other considerations that may more fully recognize long-term concerns. For example, resource-user rights, so important for reducing vulnerability and enhancing certainty, may be undermined by a benefit-cost analysis based on a valuation. Second, even proficient quantitative valuations have difficulty in incorporating less tangible benefits and costs. In terms of ecosystems, for example, the values that people would assign to the long-term concerns over biodiversity conservation, in part reflected by the values assigned to the existence of particular animals (e.g., Central American jaguars) are more difficult to gauge and are at risk of being relegated to secondary status in the analysis (Ascher and Steelman 2006).

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Discourse. Conservation efforts that require multisectoral and even multinational cooperation will benefit from an ongoing, institutionalized discourse with an explicit long-term time frame. Yet unlike the Russian 2008 discourse (mentioned earlier in this chapter), which has its own weight because it is crucial to Russia’s political future, many discourses require a vehicle to muster sufficient attention and effort. One such recent example is the Greater Mekong Subregion Biodiversity Conservation Corridors Initiative, sponsored by the Asian Development Bank and with a time frame of 2005–14 (Asian Development Bank 2006). As an international program designed to link all of the countries within the Mekong River Basin (Cambodia, China, Laos, Myanmar, Thailand, and Vietnam), this initiative is intended to focus attention and gain commitment to the specific task of conserving habitats for particular migratory species. The program itself, with funding from a very wide range of bilateral and multilateral assistance, provides money for the local people to participate in maintaining the corridors (thereby combining the conservation and povertyalleviation objectives), and some funds for infrastructure, research, and so on. These financial incentives, while important in and of themselves, are also vehicles for the discourse among governments, experts, and NGOs through a series of meetings, supported by technical work allocated to governmental and nongovernmental research teams, to clarify the stakes and encourage cooperation on conservation policies. The emphasis on long-term thinking and planning is reinforced by a phasing strategy: a first phase (2005–8) of assessment of “the poverty situation and offering interventions with the aim of contributing to poverty reduction” through engaging local people in surveying and conservation; then two more three-year phases to implement various components of the strategy. Commissions. A more straightforward approach to undertake long-term analysis of environmental issues is to form a commission with sufficient prestige and expertise to command widespread attention. The World Commission on Environment and Development, an effort launched by the United Nations under the leadership of Norway’s former environment minister (and later prime minister) Gro Harlem Brundtland, created far more attention than ever before to the links between conservation and continued economic development, with both its studies undertaken from 1983 to 1987 and the publication of the report “Our Common Future” in 1987. Of course, for such a commission’s work to achieve widespread attention requires considerable fanfare, and in many instances already reflects a commitment to explore long-term futures. The United

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Nations resolution establishing the Brundtland Commission was entitled “Process of Preparation of the Environmental Perspective to the Year 2000 and Beyond.” It is also possible that the work of a prominent commission will be ignored if no follow-up is executed. In the case of the Brundtland Commission, the United Nations resolution in receiving the report instructed “the Secretary-General, through the appropriate existing mechanisms, including the Administrative Committee on Co-ordination, to review and co-ordinate on a regular basis the efforts of all the organs, organizations and bodies of the United Nations system to pursue sustainable development, and to report thereon to the General Assembly through the Governing Council of the United Nations Environment Programme and the Economic and Social Council”; it also “reaffirm[ed] the need for additional financial resources from donor countries and organizations to assist developing countries in identifying, analysing, monitoring, preventing and managing environmental problems in accordance with their national development plans, priorities and objectives” (United Nations General Assembly 1987: 3–4). Productivity Because selecting a farsighted technology policy depends on understanding the potentials of emerging technologies, technological forecasting is especially important for sustained productivity. In developed countries, scanning has been used extensively for identifying emerging technologies that otherwise might be overlooked outside of research labs, in order to determine whether government should facilitate their development. The government of the United Kingdom has made particularly strong systematic efforts to scan technological developments to identify opportunities (e.g., in biotechnology, information technology, and nanotechnology) as well as threats (e.g., genetically modified organisms). Miles and Keenan (2003) chronicle the sustained efforts by the Director General of Research Councils, the Department of the Environment, Food and Rural Affairs, and the Environmental Agency. The use of scenario writing is notable in its emphasis on “success scenarios” to envision the potentials of new product technologies. For developing countries, technological forecasting will typically focus more on emerging process technologies and resilient appropriate technologies, but the strategy of focusing attention on opportunities rather than solely on threats is just as relevant. An equally important point is that scenario writing has strong potential for promoting vivid visualizations, beyond the more abstract quantitative trend projections.

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l e s s o n s o f a n a ly t i c e x e r c i s e s This brief taxonomy and review of the analytic routines involved in assessing future possibilities demonstrates the considerable overlap of the routines, both in their definitions and in their operations. It is not surprising that one analytic exercise would often flow into another, as in the cases of futures scanning and more elaborate forecasting, forecasting and strategic planning, valuation and benefit-cost analysis, and so on. Yet the distinctions are important for gauging whether any of these routines need greater emphasis in particular cases. The distinctions are also useful in highlighting that analytic functions within organizations can be reinforced by efforts entailing multiple organizations and individuals. Our review also demonstrates that the analytic routines will generally be most effective if they are embedded within decision processes of significant stakes. The “carrot” of the Great Mekong Subregion Biodiversity Conservation Corridors Initiative is the funding for poverty alleviation, infrastructure, and technical analysis. The often indispensable incentive for strategic planning is that the plans, if done seriously, provide greater resources for those undertaking them. The importance of this point is reflected in the prevalence of assessments of strategic planning exercises as hollow. With all of these potential benefits to farsighted action, it may come as a surprise that many planning initiatives are very disappointing. In many cases the people required to undertake the planning exercise simply go through the motions in a ritualized way, without any real commitment to the process or its recommendations. In an assessment of planning efforts in developing countries in the mid-1970s, Caiden and Wildavsky (1974) found a plethora of examples of vacuous planning exercises. Experiences since that time have not shown remarkable improvements (Agarwala 1982; Toye 1990; Dalal-Clayton and Bass 2002). Even in the United States, where planning systems have been highly technified and routinized, there is strong evidence that many such efforts have been superficial (Schick 1973). When planning is superficial and the plans are vacuous documents that neither direct nor bind in any meaningful way, the time and money that go into the effort are wasted and, worse, discredit the idea of planning. The vacuous script of some strategic plans is as follows 1. Mission: We are committed to do the best possible job; 2. Analysis: the future lies ahead; and 3. Actions: We will take the appropriate actions with the greatest commitment and efficiency.

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In the extreme, as shown in the Soviet Union before its collapse, the plans may consist of false information and fictitious targets that can be met with trivial effort. In many developing countries, national economic plans, usually with four- to six-year time horizons, have had little impact on economic policy, or simply echo policy decisions made outside of the planning process (Rondinelli 1993). On the other hand, a plan can be a constant threat to the leaders who are committed to it, if the plan remains in effect even as its required actions and targets become less and less desirable or feasible. Even in favorable circumstances, a serious planning process brings conflict out into the open, tempting the participants to take the easy way out of substituting platitudes for truly strategic decisions. No wonder so many people enter the planning exercise with such trepidation. Clearly, planning has numerous pitfalls and limitations that need to be reviewed. These problems occur for four reasons. First, serious goal setting almost inevitably triggers conflict. A strategy begins with a mission—typically requiring not just what goals are laudable, but what the priorities ought to be. Then, in selecting objectives, goal setting determines who within the organization, or served by the organization, will receive how in much resources and benefits. Which business divisions will be downsized, which university departments will be bypassed for expansion, and which environmental activists will be told that their strategies will no longer be endorsed by their organization? Conflictaverse leaders can easily take the path of least resistance of evading serious goal setting and specifying actions on a level that reflects hard choices. Second, the planning exercise exposes those held accountable to the plan to the risk that their capacity to predict the impacts of possible strategies and to choose the right actions will come under criticism. Frequently the plan’s targets are exaggerated in the first place, as higher authorities insist on more impressive targets to impress the public of the organization’s commitment. Once the plan is adopted, it poses a threat to those bound by it, whether it is the punishment for deviating from the required actions or missing targets or simply the inability of the leaders to make what they consider to be necessary changes in the face of opposition by those who cling to the plan. In situations where the stakeholders have widely differing objectives, even the plan that is approved by those with authority to do so is likely to be criticized by those who disapprove of the implications. The U.S. Forest Service, which by law has to go through a very elaborate planning process for all of the more than one hundred national forests, has had nearly every one of its strategic plans challenged in court (Steelman 1999). For a while, the Forest Service was using an elaborate computer planning model (dubbed “FORPLAN”) to find what

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they claimed was the “technically optimal” mix of recreation, conservation, and logging for each national forest, in the hopes that the technical analysis would trump the political battles among loggers, conservationists, hunters, and other interests. None of the groups backed off; the Forest Service was heavily criticized for marginalizing nongovernmental stakeholders from the planning process (McQuillan 1989). Third, unforeseeable changes do occur. If the plan is not kept flexible, those committed to it, and judged by it, may be compelled to stick with actions that no longer make sense. It is often said, with justification, that a strategic plan is at least in part obsolete by the time it gets back from the printer. Even targets that are reasonable when the plan is written may become impossible as conditions change. Finally, for those required to undertake the planning exercise, it is not only costly in time and the pain of dealing with conflicting outlooks but is also is financially expensive. In addition, the highest authorities (boards of directors, ministers) may regard themselves as “too busy” to get adequately involved and find it convenient to regard the exercise as managerial or technical so as to reduce their own commitment to put in the time and engage in the battles over priorities and strategies. It is therefore tempting for the plan writers to substitute cookie-cutter analysis for serious analysis, anticipate what the highest authorities and stakeholders want rather than wrestle with what is really necessary, and trivialize the exercise in order to get it done quickly and with the least pain. In short, unless they get something in return, people required to write and enact a strategic plan will be understandably reluctant to engage in a serious planning exercise. So what can they get in return? The keys are in the strengths of the mandates and the potential for fair assessment and later adjustments that will also have the strength of a mandate. This has to begin with agreement that plans have to be reviewed and revised on a regular basis. For these “rolling plans,” the highest authorities, plan writers, and stakeholders must be prepared to take the time and effort to undertake the reviews. Once the review process is in place, those accountable under the plan can take its strategies, actions, and targets as updated mandates, knowing that they will not be bound to obsolete mandates. The periodic review process would then consist of reporting on actions and accomplishments, with explanations to put them in context, and then requesting the endorsement of any revisions to the plan that they deem advisable. The highest authorities can accept or reject these explanations and the requests for new directions. Even core strategies can be changed, if the highest authorities can be persuaded. The incentives

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for the accountable planners, then, are to be able to operate aggressively with initial mandates and to have the flexibility to change strategies when the reasons are compelling to the overseers. Of course, the planners may try to put the best face on the performance to date or may suggest changes in the plans that are in their interests but not justifiable to the highest authorities. Yet an involved overseer would have the authority (and can bring in additional expertise, if necessary) to assess whether the explanations for shortfalls and strategic changes are justified. The stakeholders may also have their experts to keep the leaders honest when they try to explain why goals are not met or new objectives are proposed. Beyond these issues, planning also has serious challenges on the more technical side. It is easy to think about what are considered to be the more likely consequences, but more difficult to think through what seem to be the lower-probability scenarios. Often wishful thinking plays a role in the neglect of these other scenarios. A major reason why the ex ante appraisal of development projects are frequently overly optimistic is that low probability risks are neglected, even though a large number of such risks add up to significant probabilities of delays and cost overruns (Ascher 1992). What is believed to be the “most likely” scenario—in this case the most hoped-for scenario—crowds out considering and planning for other possibilities. It is therefore important to build in the consideration of alternative future possibilities, whether by insisting that the whole team of analysts consider the multiple possibilities, or by assigning different teams within the planning group to do so. Each analytic component of planning also has its vulnerabilities. For instance, the early experience of the Swedish forecasting and scanning efforts points to the financial and political fragility of such government sponsored entities. When business-as-usual conditions prevail and the low-probability occurrences do not materialize, justifying spending on specific horizon scanning operations in the face of tight budgets is difficult, as is preparing for contingencies that do not emerge. When futures-scanning sounds the alarm on possible risks but the government leaders are unwilling or unprepared to take action, the scanning can become an embarrassment. The early years of the Swedish Institute for Futures Studies were highly politicized—the Institute was established by Prime Minister Olof Palme, reporting directly to the Prime Minister’s Office. In 1980 it was incorporated into the Swedish Council for Planning and Coordination of Research; in 1987 it was reorganized as an independent research foundation, funded by government and private sources. These multiple reorganizations reflect, in part, the tensions between having a futures-scanning mechanism directly tied to incumbent policy makers. For the

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researchers, close connections with government can be an advantage for access to information, understanding what will be regarded as relevant, and impact of their work. This may, however, be balanced off by risks to autonomy. Yet by now futures scanning has become a well-entrenched part of the Swedish government’s organizational culture, permeating far beyond the Institute for Futures Studies. The Customs Office alone published more than 120 scanning reports since the year 2000, on topics ranging from the trends in drugs and arms trafficking to the physical fitness of the Swedish workforce (Swedish Customs Office 2004). Any effort at analysis may face credibility challenges based on the perceptions of who is funding and conducting the analysis. One way to enhance this credibility is to have funding from multiple, balanced sources. For example, research on the long-term risks of oil spills, funded by both environmental groups and oil companies (Busenberg 1999). Yet for the purpose of focusing attention, the real and assumed impartiality of a given study is not always so important for focusing attention. A one-sided study of long-term futures may trigger counterstudies, with the net result of at least creating intense interest in the battle over who is right. The global environmental studies of the Club of Rome in the 1970s, with dire warnings of environmental deterioration unless drastic cutbacks in industrial production were undertaken, provoked opposing studies by other organizations, such as the Hudson Institute’s much more rosy projections of continued economic growth with environmental collapse held at bay by improved technologies (Kahn 1976). The obvious risk of these “dueling forecasts” is confusion on the part of the public and policy makers as to what the future may really bring. Even so, the impact on getting people to focus on the long-term sustainability issues is undeniable.

chapter nine

Deepening Problem Definitions

The way a problem is defined can have a major impact on the time horizon for addressing it. The promise of redefining problem definitions lies in the expanded understanding of both implications and causes. People certainly recognize that some problems are more dire and urgent than others, but the weighting or ranking of problems is not fully fixed. Our incomplete awareness of different types of impacts in fact plays a huge but greatly underestimated role in how we define problems and how much concern we have for near and distant results. Expanding the implications increases the likelihood that some will be long-term consequences; expanding the causes increases the likelihood that some of the approaches identified to address the problem will require longer-term actions. In posing the question of how positives can be gained or negatives reduced, problem definitions highlight particular value dimensions. More complex problem definitions are more likely to cover more value dimensions, some of which may require more farsighted attention. The challenge is that people tend to take problem definitions as given, as if they are “out there,” preestablished, waiting to be addressed (Schon 1979: 261; Bardach 1981, 2000; Dery 2000). If the prevailing problem definitions are simplistic, in focusing on immediate concerns and causes, the ease of understanding may reinforce accepting these definitions as obvious. Certain simplistic problem definitions are also compelling because they reduce anxiety. For example, “pilot error” as the accepted cause of a plane crash may be less frightening to many people (“Well, that pilot will never fly again”) than contemplating a problematic air traffic control system that provokes pilot error.

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A “problem definition” typically has two basic elements: a focus on particular values to be pursued and protected and a diagnosis of the obstacles for pursuing these values. A problem definition is, thus, “How can we achieve X in the face of difficulties Y?” Broadening and deepening the problem definition can occur on both levels: expanding the range of values may bring in objectives that can only be achieved with longer-term efforts, and expanded diagnoses of difficulties are likely to introduce considerations of obstacles requiring longer-term attention. A final element of many but not all problem definitions is the inclusion of one or more particular strategies presumed to serve further ends. The problem is framed in terms of how to make the strategy succeed, in the face of obstacles to the strategy.1 The problem definition comes to be “How can we accomplish strategy Z, in order to achieve X, in the face of difficulties Y?” The often underexamined question is whether the strategy is in fact the best way to pursue the goals. This frequently remains underexamined because framing the problem as such implies that much thought has already gone into selecting the means or the means comes to be regarded as the goal in itself (a case of goal substitution, as reviewed in chap. 2). Deepening the Problem Definition to Policy-Making Institutions. Another dimension of deepening problem definitions has been the increasing awareness that in some cases policy failure lies not in the obstacles of the “world out there” that the policies are supposed to address, but rather in the policymaking institutions. Internal stalemate, vested interests, poor communications, and a host of other limitations may prevent policy makers from effectively addressing soluble problems. This means that the solutions may lie in changing the policy process itself. Strategies. As an aspect of intelligence or analysis, it should not be surprising that encouraging the deepening of problem definitions has considerable overlap with the analytic exercises. However, institutional arrangements can also promote such deepening. Articulating the deeper problem definition, optimally through credible channels and timed when the relevant decision makers are receptive to rethinking their perspectives, is the most straightforward approach. Often this will be when efforts to address the problem have been frustrated. The analytic exercises reviewed in chapter 8 can include directions or at least encouragement to examine the adequacy of problem definitions.

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Rebecca Morss (2005: 189) suggests building examinations of goals, assumptions, and differing perspectives into the analytic exercises. Ronald Brunner suggests emphasizing “case-wise analysis” that identifies types of individuals in particular circumstances (e.g., retirees on fixed incomes who, because of their age, are susceptible to such diseases as emphysema), rather than relying solely on aggregate statistics that tend to obscure the realities that face stakeholders in different situations. By assessing the challenges faced by each type or cluster of cases, the analysis can determine how problems are defined for each.2 Assessing whether the problem definition is too narrowly constrained by an embedded “implicit solution introduced by semantic carelessness” will help to ensure that solutions will “be evaluated empirically and not legitimated merely by definition” (Bardach 2000: 7). Joint planning and execution by multiple units with mandates covering different aspects of problems can help to overcome the tendency of fragmented policy-making processes to fragment their problem definitions. This is an institutional approach to increasing the likelihood that the analysis Morss suggests is actually undertaken. Requiring that decision makers solicit input from the stakeholders themselves can often generate deeper understandings by revealing the constraints that these stakeholders face. This “bottom-up” approach can overcome the narrowness in problem definition that frequently occurs in the evaluation of organizations with narrow formal mandates.3

a p p ly i n g s t r a t e g i e s o f d e e p e n i n g problem definitions Each of the following cases illustrates particular challenges and approaches for overcoming them. Family Economic Security The promotion of farsighted thinking about family economic security frequently requires a shift in problem definition concerning family size. Especially for rural families, the problem of family budget shortfalls is typically seen as the lack of income, rather than the excess of expenses. Therefore additional children are regarded as a plus, in that they bring in income, even if it is very limited. Shifting the problem definition to focus on the expenditure side

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can sensitize partners to the costs of having more children. Presenting budget scenarios can convey the impact that having younger children would have in reducing the disposable income that can be devoted to investing in the productivity of existing children. Family-planning counseling that projects the implications of family size can provide the analytical basis for considering expenditures, risks to educational opportunities, and other liabilities as well as the shorter-term income gains. Conservation and Environmental Protection Defining the Problem of Deforestation.The problem definition surrounding forestry policy has frequently reflected the narrow institutional mandates of the government agencies involved. Forestry departments or ministries, typically charged with the responsibility of generating logging revenues, have viewed the problem of deforestation as the loss of trees,4 as measured by classifying parcels into categories ranging from intact through various degrees of degradation—frequently with considerable arbitrariness or inconsistency in the designation (Grainger 1993) but essentially defined according to the availability of harvestable trees. With logging production as the focus, and reinforced by official land classifications, for many years this problem definition neglected rapacious logging,5 but instead settled on the damage attributed to local people: those involved in swidden or “shifting” cultivation,6 those who move into newly opened areas intending to establish permanent farms on the poor soils typically found in forests, and those who plant on steep terrains. This problem definition has frequently led to efforts to exclude local people, whether from harvestable lands or from ecologically vulnerable ones. Although the protected areas are sometimes surrounded by buffer zones ostensibly designed to provide livelihoods for local people, the exclusions have rarely succeeded in preventing further deforestation.7 NGO leaders, anthropologists, and forestry experts have articulated much more complicated explanations to account for deforestation and deeper problem definitions to define what is at stake. Logging, infrastructure development, and forest clearing by land-poor people are connected, as it is the highways and logging roads that provide the access to people seeking land. In the case of shifting cultivation (commonly given the negatively connoted label of “slash and burn agriculture” [Dove 1983]), the problem of sustainability arises only if the overall area in which the farmers move from one locale to another shrinks, such that by the time they move to the next area, natural regeneration has not been sufficient to maintain the productivity of the same amount of burned for-

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est. The cause, then, may be encroachment of other activities into the original forest land. Similarly, planting on steep hillsides is rarely a choice by farmers, but rather a necessity brought on by their expulsion from flatter, typically more fertile lands. In short, the deeper problem definitions refocus attention onto the interactions among shifting cultivators, commercial loggers, population growth, agricultural policies, government resettlement agencies, and so on. By expanding the range of causal factors implicit in the definition, policy makers would be sensitized to trends and dynamics of much greater time horizons, both past and future. The goals of forest policy ought to include consideration of protecting the user rights, cultures, and communities of local people, not simply the question of livelihoods. The broader problem definition would be, “How can forestry policy best balance conservation and the multiple aspects of timber production, conservation, and the well-being of the people who depend on the forest, in the face of the vulnerability of many of these people and the difficulties of protecting forests if they are compelled to resist these efforts at protection?” The problem definition would have to include consideration of the importance of customary user rights in tension with conservation concerns. Nomadism and Desertification. Livestock-based nomadism in arid areas shows the same limitation in conventional problem definition. The nomads are blamed for overgrazing, despite the fact that their range has been reduced in many of the countries of the Middle East and North Africa. The policy implication seems to be that governments must force the nomads into permanent settlement, to have them adopt sedentary agriculture, or to have them engaged in nonagricultural pursuits. In many countries, these policies have been abject failures: nomads resist permanent settlement; areas continue to be degraded; many who are forced out of their traditional folkways migrate to cities, without the capacity or resources to adapt to urban life; and governments are resented for their heavy-handed efforts (Emadi, Fisher, and Woog 1992). The deeper problem definition, focusing on the encroachments and the predicaments faced by the nomads themselves, point to the need for long-term solutions for maintaining the cultural integrity that is severely threatened by policies that force or encourage sedentarism, the autonomy of the nomads even as they are further integrated into national life through the provision of social services and regulation, and the internal governance of nomadic groups.8 To promote this shift in problem definition regarding nomadic herders in Iran, Mohammed Emadi organized workshops for government officials and representatives of nomadic groups, providing the opportunity for the nomads

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to express their perspectives. Robert Fisher (2006: 7) reports that “although the changes in [natural resource and environmental management] practice and policy discourse brought about by this research were limited and the broad issues remain unresolved, I can say confidently, on the basis of a recent trip to Iran more than ten years after the research, that the policy dialogue about nomadism has been significantly altered and remains so. At least there is now an alternative policy discourse about nomadism within government agencies.” Nuclear Waste Disposal. Another problem definition issue related to environmental concerns illustrates the importance of the time frame of the policy options themselves. There is a paradoxical trap in trying to address very long-term problems with the presumption that immediate, once-and-for-all solutions are available, rather than a sequence of actions to be planned now but potentially adapted in the future. Consider the problem of nuclear waste disposal, which more and more nations are now discovering was not adequately anticipated when nuclear power plants were given a major role in providing energy. In the United States, the problem was defined as “How can we find locations and storage technologies that would permit the underground storage of nuclear waste for the next 50,000 years?” Although at first glance this would seem to be a very farsighted action, in fact this was conceived as a once-and-for-all solution that in fact would require little further planning and action once the locations and technologies were established. After many years and great expense, what was seen as the best option— permanent storage deep under Yucca Mountain in Nevada—has proven to be technically problematic as well as highly contentious politically. While the plan is still progressing, the earliest the repository would open is 2017— probably much later than that, if ever (Tetrault 2007). Uncertainty remains as to whether Yucca Mountain’s geology and hydrology would prevent water leakage, the corrosion of the nuclear-waste canisters, and therefore the release of radiation. This uncertainty and the political fallout have stalled the development of the Yucca Mountain facility, leaving nuclear waste inadequately stored at 126 reactors across the United States. Critics of the Yucca Mountain approach have pointed out that defining the nuclear-waste storage problem as the challenge of developing a permanent and irreversible approach is inadequate for addressing the inevitability of technological uncertainty as well as the potential for technological progress in the future (National Research Council 2003). No technology or prediction of geological patterns over fifty thousand years can gain such absolute certainty

Deepening Problem Definitions  179

as to avoid scientific skepticism, which in turn will legitimize the safety concerns on the part of local people. This is an example of the pitfall of conflating the problem definition with an implicit solution (Bardach 2000: 7): how to accomplish the permanent irretrievable storage option has been the problem definition, rather than how to find ways to store nuclear waste in more open-ended but very highlymonitored ways that would permit the replacement of leaky canisters and would permit more secure storage technologies as they are developed in the future. This deeper problem definition draws attention to the ongoing development of storage technologies, the task of establishing a sustainable monitoring system, and even research on reusing fissionable materials that under the Yucca Mountain proposal would be irretrievably lost. In this case, the shift that is finally occurring in problem definition certain­ly reflects the frustration with the increasingly daunting technical difficulties that the “once-and-for-all” solution presented, the lawsuits demanding cessation of the project, strong opposition from the State of Nevada, and increasing negative publicity. The 2001 National Research Council report advocating a shift in problem definition has given credibility and some visibility to the alternative conception, but the inertia of a project for which nearly a half billion dollars is still appropriated annually for the Energy Department’s development of the site, has not permitted full acknowledgment of the need to redirect the effort. Global Warming or Global Climate Change: Recognizing the Inevitability of Uncertainty in Problem Definitions. Another crucial deepening in problem definition is the recognition that part of any long-term problem is to cope with uncertainty. This is obvious in the poorly defined debates over global climate change. When the issue is framed in terms of how to respond to “global warming,” people are steered into thinking that greenhouse gas emissions will inevitably lead to global warming, and therefore the challenge is to reduce the emission of greenhouse gases, plan the protection or abandonment of areas made less productive or less hospitable because of excessive temperatures, begin the adaptation to higher sea levels caused by the melting of the polar ice caps, and take other steps to reduce or cope with rising temperatures. Yet the most policy-oriented climatologists are more likely to define the issue not as global warming, but as global climate change. Human impacts on the atmosphere, seas, and land may indeed lead to global warming, but they may also lead to global drying or shifts in rain and snow patterns or even to

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global cooling. Some models focus on the impact of aerosols and dust in increasing the reflectance of the atmosphere (the “albedo”) and the resulting reduction of solar radiation that reaches the earth (Myhre, Myhre, and Stordal 2001). Other models point to the potential cooling due to changes in ocean salinity currents that the melting of the polar ice caps may bring about; such changes may have caused the last Ice Age (Barber et a1. 1999). The impacts of redistribution of moisture may be as important, or more important, than temperature changes per se. Redefining the problem definition from “What should we do about the possibility of global warming?” to “What should we do about the possibility of global climate change?” leads to examining the broader range of possible costs of human impacts on climate and the ecosystem. The broader the range of possible impacts, the more compelling the appeal for short-term sacrifices to rein in climate-influencing actions. Many climate scientists and environmental activists are concerned that this redefinition would undermine the pressure to achieve reductions in industrial processes producing greenhouse gas emissions. However, the narrower problem definition has played into the hands of government officials and interest groups intent on resisting these measures; they invoke these other possibilities to cast doubt on the scientific claims of those insisting that global warming is the predominant threat. There is, in fact, a core strategy that can be adopted to address climate variability: reducing the set of human actions that contribute to variability; strengthening building codes to withstand more extremes in weather, regardless of the nature of the extremes; discouraging settlement in more vulnerable areas such as floodplains; improving early warning systems; and increasing the institutions of cooperation in addressing the various threats. The key is to learn how to cope with uncertainty, which will always be present, not to assume that a certain consequence is guaranteed (Brunner 1996; Schneider 2001; Webster et al. 2002). Promoting Productivity Integrated Rural Development. The importance of including weaknesses of the policy-making process as part of the problem definition is illustrated by the history of the “integrated rural development” (IRD) initiatives popular in the 1970s and 1980s for promoting rural-sector productivity, especially among small-scale farmers. The low productivity of small-scale farming families in many developing countries was (and still can be) attributed to the lack of a range of “inputs,” including credit, seeds, farm equipment, fertilizer, pesticides, family nutrition, training, technical assistance, and efficient transporta-

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tion. The many failures of prior governmental and foreign assistance efforts to provide single inputs, or providing different inputs at different times, led to the diagnosis that the lack of one or more of these inputs can limit the usefulness of the others. The IRD strategy, then, is to provide the full range of these inputs. This strategy was popular among bilateral and multilateral development institutions, in its focus on both productivity and poverty alleviation. The initial implementation of the IRD strategy called for the multiple government agencies providing these inputs to coordinate their efforts to provide an integrated “package” of inputs. Thus the institutional problem definition came to be, “How should the various ministries and subagencies, with the support of external advisors and donors, coordinate their provision of goods and services to rural areas?” However, actions taken under this problem definition also failed in many instances, because of the inability or unwillingness of the various government agencies to work with one another, the sheer complexity of the coordination challenge, and the top-down nature of the required decision process that was often unresponsive to the specific needs of particular locales. Each time the provision of inputs proved to be uncoordinated or the wrong mix of inputs was provided, the typical reaction by relevant governments and external agencies was to examine the bureaucratic obstacles to agency coordination or simply to lay blame on specific decisions, actions, or inactions. The long-term focus was thus largely limited to thinking about national bureaucratic restructuring. Despite the failures and the overall decline in the reputation of integrated rural development during that period, one element of the strategy—relying on national-level decision making—was at that time largely unexamined; yet the overall strategy of providing coordinated inputs was dismissed in many circles. Perhaps the lack of examination of the problems of relying on national-level agencies arose from the fact that the problem definition was cast in terms of how to make the agencies work together, rather than questioning whether they could effectively work together. The redefinition that has emerged in the last two decades has gone back to the more fundamental question of how the multiple inputs can be provided without presuming that the key decisions and actions would be made by national agencies and external donors. If the challenge is simply conceived as finding the best means for deciding on what inputs would be provided and finding the best vehicles for providing the inputs, without embedding a strategy within the problem definition, other solutions emerge. In particular, attention has been focused on the capacity of local governments and communities to determine what mix and timing of inputs are needed and on the authority and ability of these local people to arrange for the delivery of these inputs. A

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recent meta-analysis by the U.S. Agency for International Development, examining more than seventeen studies of the record of IRD over the past thirty years, concludes: Over this period, the original excitement development practitioners had that they could transform undeveloped rural settings into cohesive communities with profitable productive opportunities and where members enjoyed basic public and social services has settled into a realization that outside-initiated transformation does not come easily. Keen practitioners have learned that target communities—not their national, nor regional governments, nor even just their village headmen—must have true ownership over this process and they must have the capacity to sustain and manage new infrastructure and operational and maintenance systems (sometimes even these are ignored at the onset) that are established. Realizing that necessary community mobilization requires intensive work, that donor resources are limited, and that often the real causes of underdevelopment are systemic, e.g. based on governmental policies, more development experts focus on programs that target systemic reforms that put into place the proper institutions and incentives for development rather than work in IRD. (U.S. Agency for International Development 2006: 1) The questions raised by this focus include how to alter authority relationships (e.g., through decentralization of authority) so that local people can contract with local or external sources to obtain the inputs, how to enhance the capacity of the local institutions to take over this authority, and how to restructure fiscal arrangements to provide local people with the financial wherewithal to reduce their dependence on national-level decisions. These are all issues requiring a significantly longer-term focus than the older top-down strategy linked to the original problem definition. Technical Skills. It is rather common to attribute the shortage of skilled technical workers to inadequate resources going into secondary and higher education. The government institutions involved in funding and overseeing secondary and higher education would typically benefit from this diagnosis, as would the high schools, universities, unions of high school and university instructors, and so on. Insofar as secondary and higher education opportunities are enjoyed largely by higher-income sectors of society, this diag-

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nosis also typically serves to protect their privileges—in many countries, the wealthy, who are more likely to make it to the high school and especially university levels, are heavily subsidized by the national educational spending. A deeper problem diagnosis emerges from examining the “production chain” for skilled technical workers, first going back to primary education, then going forward to ask whether the industries (some of which may have emerged through government subsidies) are compatible with even the optimistic possibilities of skill development. In some countries the planning for higher education is largely confined to a ministry of higher education, which has neither the analytic capacity nor the incentive to explore how higher education should best articulate with lower levels. Because typically such a ministry would try to maximize its budget, as would the ministry mandated to promote lower levels, the decisions on how much resources to allocate to each has to be made at the cabinet level, with input from the central budget and planning offices. They, too, typically lack the analytic capacity to de­ velop an integrated, long-term strategy. In recognition of the fragmentation that having two such ministries entails, in 1999 the Ministry of Higher Education in Thailand was absorbed into the existing Ministry of Education. The strategic planning within that ministry now has the potential and mandate to define the development of a technically skilled workforce in the broadest perspective. Philippine Food Policy. Recall also the example of Philippine food policy mentioned in chapter 2, conceived by several Philippine administrations as a problem of the lack of food self-sufficiency. The deeper definition of how to overcome food insecurity calls attention to the long-term challenge of increasing the incomes of the poor, so that food, whether domestically produced or imported, is affordable to them. It calls for attention to the long-term need to improve the food distribution system, rather than focusing attention on the aggregate balance of domestic food supply and domestic demand. Here the approach of beginning with the “bottom line” result—whether people have enough nutritious food to eat—enriches the problem definition by pointing out the long-range efforts that must be undertaken. While these criteria are certainly complicated, the point is that policy-making institutions (which run the gamut from those that are involved to setting agendas to those that actually implement policies) can be systematically assessed to determine the degree to which their structures, processes, personnel, or relationships with other institutions ought to be part of the problem definition.

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lessons for deepening problem definitions These examples give us a sense of the dimensions of deepening problem definitions: expanding the set of goals or values, expanding the time frame of causes and consequences, incorporating uncertainty, enriching the explanations that account for existing conditions and possible consequences, and opening the range of strategies embedded within the problem definition. Efforts to broaden and deepen problem definitions often face obstacles that have to be anticipated and addressed. Our cases reveal the prevalence of strong resistance to changing problem definitions (which is why Bardach [2000: 3–7] emphasizes the importance of establishing a sound problem definition in the first place—though too late in many instances). A problem definition that directs attention to the long term is vulnerable to the rhetoric that faults it for ignoring the dangers of the present. This is true even if the policy based on the broadened problem definition does not shift the focus completely away from addressing the immediate threat. Because problems call for resources, vested interests grow up around problem definitions. These vested interests may consist of the influence and reputation of the analysts and policy makers who have formulated the existing problem definition or have taken the actions that have flowed out of it. Others with vested interests may be those whose power, wealth, and other resources are enhanced or protected by the current problem definition. Going back to the example of defining the problem of deforestation, casting the problem as land clearing by “slash and burn” subsistence farmers relieves the pressure on commercial timber companies to change their logging practices. It also strengthens the forestry agencies’ claims to budget resources for forest guards and may buffer the agencies from any criticism for dealings with the commercial loggers. Yet while existing problem definitions may be perpetuated by these considerations, it is also true that some people and institutions would benefit from the rise of new problem definitions. Even within governments, certain ministries or agencies may gain greater resources and jurisdiction if problem definitions shift attention and action toward their responsibilities. Going back to the example of defining the technical-skill shortfall problem as a shortage of resources for secondary and higher education, other governmental agencies and nongovernmental groups have an interest in raising various other problem definitions: that a more basic problem is inadequate primary education; that vocational skills are lacking; that the skill shortage stems more from what is taught and how it is taught in the secondary and university levels than from a lack of financial resources; that the problem is in the economy and the kinds

Technical quality and efficiency Relevance to pending decisions Honesty and loyalty of analysts Flexibility to adjust to change Credibility Deliberateness and responsibility Dependability Comprehensiveness Selectivity Creativity Openness Rationality and realism Integrativeness Stability of expectation Timeliness Nonprovocativeness Uniformity Balance Ameliorativeness Independence Continuity

x x x x x x x x x x x

Intelligence

ta b l e 9 . 1   Criteria for assessing the policy process

x

x

x

x x x

x x x x x x

Prescription

x x x x x x

Promotion

x x

x

x x x x x x x

Invocation

x

x

x x x x x x

Application

x x

x

x x x x x x x x

Termination

x x

x

x x x x x x x x x

Appraisal

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of jobs it is generating; and so on. Insofar as these diagnoses win out, the resources may shift to primary education, vocational education, or other purposes. Such debates are usually healthy for clarifying what the long-term strategies ought to be. The Policy Process as Part of the Problem Definition. If we recognize that the policy process consists of analytically distinct though interconnected functions, we have greater capacity to identify where the process problems arise. One prominent and enduring categorization of the functions (Lasswell 1971b: chaps. 2 and 5) proposes the following functions: Intelligence: gathering, processing, and disseminating information; Promotion: efforts to secure preferred policies or policy results; Prescription: formulation of policies, rules, and so on, that establish expectations of the sanctions to be imposed if they are violated; Invocation: characterizing a concrete situation as to whether particular prescriptions ought to hold; Application: characterizing the concrete consequences of implementing a prescription; Termination: canceling a prescription and addressing the claims of those damaged after acting in good faith under the prescription; Appraisal: assessing the results of prior and existing policies (Lasswell 1971b: 29). The effectiveness of each of these functions can be assessed according to the criteria shown in table 9.1 (adapted from Lasswell 1971b: 86–93).

* IV * Framing the Appeals

The following three chapters focus on strategies of “framing”: how an issue or appeal is presented, limiting the concept to matters of communications strategy rather than the substantive commitments and constraints of the initiative. Yet it is easy to underestimate the importance of framing strategies if one looks at framing as “merely” spin. The framing may be the most important element in how long-term proposals are perceived, and masterful framing is often quite inexpensive, in that it generally does not involve expenses beyond the costs of presenting proposed actions. Our basic argument that a fixed-utility model is too restrictive is borne out by four dynamics elaborated in the following chapters. First, the utility (or disutility) of future consequences is not fixed. The framing of issues shapes how much savoring or dread, which add earlier utility or disutility, will be associated with anticipated consequences. Therefore the overall utility for decision makers can vary, sometimes quite dramatically. Framing can also focus attention on future benefits or costs that otherwise may be overlooked. Second, the rates of discounting, as we shall see from findings in the psychology of discounting, are variable as well. This is not only matter of stimulating savoring or dread; it is also a matter of reducing the rates of time discounting. Third, framing can strongly influence the emotions that color actual decision makers, as opposed to the “rational” calculation of fixed utilities and probabilities. This is not to say that it is irrational to respond to the utility or disutility that emotional pleasure or pain creates but rather that evoking emotion can change utility. Fourth, the multivalue framework offered by the policy sciences approach opens up the strategies of appealing to conscience, which will enhance

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the utility of consequences that entail affection, respect, and rectitude—as well as a host of impulses that can be harnessed for farsighted action. The importance of how issues and initiatives are framed rests on the remarkable range of interpretations and connotations that can be applied to any given current situation or future scenario. A thorough technical analysis would strive to find the balance of positive and negatives, but the attitudes and emotions toward the present and future are not based on this balance—they are based on the selective emphasis that comes about from the observers’ predispositions and the efforts by various sources to shape the emphasis. Most obviously, every situation has positives and negatives, opportunities and risks. It is up to historians to decide whether an era was one of overall prosperity and peace or a prelude to disaster; people living through what would later be considered a golden age may well be focusing as much on the threats as on the accomplishments. At any point in time, some people will be advancing while others are declining. Whose circumstances will be highlighted? Every advance triggers some worries: economic expansion holds the risks of environmental decline and natural-resource depletion, and usually the specter of inflation. Similarly, any initiative can be characterized in many different ways. For example, a change in tax laws can be expressed as an isolated measure, the leading edge of a more comprehensive tax reform, a small piece of a broad liberalization, a temporary component in an austerity program, a small price to pay for the government’s decision not to impose an even heavier tax burden, or the first step in a redistributive program. By the same token, an initiative usually can be linked to a host of different historical legacies, connecting the initiative to any number of past leaders and circumstances. Given the daunting complexity of the framing issues, it is useful to introduce three lenses for understanding how framing can influence the predispositions to farsighted action: an analysis of the design dimensions of communications that are particularly relevant to focusing on long-term futures and building the impetus to action; the “triple appeal principle” that employs the classic psychoanalytic distinctions among id, ego, and superego appeals to understand what appeals will be particularly compelling; and the heuristics framework to either discipline or capitalize on the analytic shortcuts that people employ to assess new initiatives.

chapter ten

Design Dimensions of Communicating Farsighted Appeals

The presentational aspects of framing involve a host of design dimensions that require choices by the communicator. These dimensions relate to any communication designed to persuade, though some raise special considerations if the purpose is to promote farsightedness. Communications framing is relevant to many functions to enhance farsightedness. Perhaps the most obvious function is to focus the audience’s attention on the longer term simply by emphasizing future events, conditions, risks, and opportunities. We have seen in chapters 8 and 9 that engaging people in analytic exercises can accomplish this, but so too can immediate communications. The audience’s ability to envision the future, by communicating enough detail, explanation, and context, can strengthen analytic capacity as well as gaining more attention. A related function is to minimize the discounting or devaluation of these future consequences. Because positive and negative consequences are known to be discounted differently, as are important and less important ones, the flexibility in depicting future consequences gives rise to strategies to choose the framings that will reduce time discounting. The rich literature on temporal discounting provides many insights on how the framing of an appeal can reduce the devaluing of distant benefits and costs. Yet another function is to broaden identifications. The basic hypothesis is that emphasizing the connections between the audience and others— whether fellow citizens, future generations, all living things, or other foci of identification—will strengthen the identification links to these broader collectivities. As a consequence, the audience’s interests would come to encompass those of others. Broader identifications, as mentioned earlier,

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can help to offset both positive and negative externality problems by incorporating others’ benefits or costs into the concern of the audience. To the degree that these are identifications with future generations, they obviously would enhance the predisposition to think and act more farsightedly. Finally, framing is crucial to the receptivity to farsighted initiatives. Framing shapes how an initiative will be perceived in the minds of the audience and whether its champions will be regarded as credible. From the perspective of promoting farsighted decisions, successful framing would paint shortsighted proposals in a negative light, and farsighted proposals in a positive light. The Dimensions. The communications dimensions can be organized by modifying Lasswell’s classic model of “Who says what in which channel to whom with what effect?” (Lasswell 1948: 37) for use as a guide to the dimensions of design rather than a guide to the researcher’s assessment of impacts. This requires an emphasis on the design dimensions that influence perceptions (e.g., how the source depicts itself ) as well as the reality and the dimensions that may be chosen for their intended effects. Table 10.1 distinguishes between the actual nature of the source and how it portrays itself; the selection of the channel or medium of the message to shape how the source and the message will be perceived; and the content dimensions that can influence the time frame, scope of identifications, analytic capacity, and impulse to action. The challenge, then, is to design communications along these dimensions to focus attention, moderate the temporal discounting tendencies, broaden identifications, and promote a positive reception to specific initiatives by enhancing credibility. Focusing Attention. The design dimensions most likely to influence the degree of attention to distant future consequences include several obvious aspects: the frequency and volume of communication about these consequences and the time frame of the communications. The simplest hypothesis is that the more future consequences are invoked, the more attention will be paid to them. This is sensible up to a point, yet in many instances the constantly repeated invocation of the distant future will lead to attention fatigue, fatalism (if the consequences are negative and the repetition leaves the impression that they are inevitable), or both. For example, the problem of corruption, which has become such a huge staple for the popular media in many countries, runs this risk. Emotional arousal has an obvious if not always consistent connection to the degree of attention. Communications can arouse emotions not simply by

Design Dimensions of Communicating Appeals  191 ta b l e 1 0 . 1   Design dimensions of communications Source

People and/or organizations creating the communication Labeling of the source as technical or nontechnical Labeling the source as neutral or taking an advocacy position

Medium

Technical vs. nontechnical Neutral vs. advocacy Targeted audience

Content

Time frame of past and future events and conditions invoked Identifications invoked through the degree of inclusiveness of identifications and the degree of intergenerational emphasis Specificity of conditions, opportunities, risks, explanations, examples, recommendations, and linkages to other issues and initiatives Emotional intensity and valence (positive or negative) expressed through the degree of emotionality, the emphasis on positive or negative examples and consequences, and the depiction of current situation as crisis or noncrisis, prosperity or scarcity, or threatening already-held assets Mobilization of audience through inclusion of action recommendations, and/or emphasis on importance of audience’s actions in determining consequences

conveying the aroused state of the source of the message but also by the choice of symbols that are invoked. Certain symbols, ranging from vulnerable children to past national humiliations, can be particularly effective (Sears 1993). Framing challenges as serious and urgent and strengthening the identifications with affected stakeholders can also arouse emotion and thereby stimulate attention. Yet while the degree of emotionality is obviously relevant to the impact of a message in affecting impatience, solidarity, willingness to take action, and many other predispositions, there is no reason to expect a general ten­ dency of heightened emotions to increase or reduce the predisposition to take farsighted actions. Here the specific context and the nature of the emotions make all the difference. For example, the framing of an issue as a crisis can have contradictory impacts. One possibility is that crisis concentrates attention, thereby narrowing the focus of attention to the immediate problem.1 For example, Lasswell (1935b: 65–66) points out that the specter of war can relegate other considerations to much lower levels of attention. If the narrowing of attention onto a crucial issue provokes enough thought and action to address long-term risks, it can have a salutary impact. However, by shortening the time horizon, crisis may also provoke and legitimize shortsighted, stopgap measures. The impulse to take immediate action may weaken the resolve

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to put thought into developing a sustainable solution. It is even possible that the resulting anxiety will suppress rational thought about the issue or drive individuals into even greater selfishness.2 Less obvious but also relevant for focusing attention is emphasizing the importance of the audience’s decisions in determining the outcomes. Here the hypothesis is that people are more likely to attend to consequences over which they realize they have some control. Therefore the degree to which communications can emphasize the importance of the audience’s decisions in determining the future is of obvious relevance to “attending” to the issue. However, the most challenging cases involve decisions that must be made by large numbers of people, each of whom may be tempted to opt out of making the sacrifice because that individual’s impact is small. Reducing greenhouse gases, excessive energy use, littering, and so on, are all among these cases. Overcoming this collective-action dilemma often requires appealing to moral commitment as well as the specific results of the actions: “True, your littering is a tiny portion of the total, but you know that it is wrong to litter.” Communicating the potential demonstration effect of each stakeholder’s action can also be helpful: “If you conserve, others will follow your example.” Reducing Temporal Discounting. Contrary to the Samuelson model of a constant temporal discount rate, which is appropriate for most private investment decisions, research in psychology and behavioral economics demonstrates that people discount future benefits and costs at rates that vary according to how far into the future they are, the nature of the consequences, and other contextual factors. Some of the most relevant findings—which should be considered as “strong tendencies” rather than universal patterns—derive from the fact that future discounting depends on the perceived nature of the stakes. Although the dynamics underlying these rates are extraordi­narily complicated,3 the findings most relevant to our concerns can be summarized as follows. As mentioned in chapter 3, a common finding is that the importance attributed to far-future consequences is only modestly less than the importance attributed to medium-future consequences (Chapman 2003: 402). This declining-rate or “hyperbolic” discounting implies that although earlier benefits and costs may be weighted more heavily, the salience of delay is not as great when they are extended further into the future. A reinforcing finding is that people often prefer that the most favored consequences come later than the less favored (“saving the best for last”), even if this requires sacrificing earlier benefits for later ones or choosing a shorter du-

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ration of benefits. Similarly, people may prefer spreading out benefits even if some would come later.4 That is, people may prefer particular sequences of improvement and pacing that do not call for maximizing early benefits. In addition to the obvious example of preferring growing incomes rather than initially high but declining incomes, these “sequencing” and “spreading” preferences can be seen in attitudes toward health (Chapman 2003: 403–4), workload, enjoyment of entertainment, and many other aspects. Clearly a sense of progress plays an important role in the satisfaction from rewards. The implication for framing is that, contrary to the standard constant-discounting model, the payoff from conveying a sense of progress is often not so severely countered by the discounting of benefits that are postponed. Important consequences tend to be less susceptible to steep discounting than less important ones (the “magnitude effect”) (Chapman 2003: 402). Therefore emphasizing the most important results, whether positive or negative, may be called for even if they are farther in the future. Rachel Carson’s Silent Spring (1962) was far more gripping and compelling for painting the long-term scenario of silent woods, rather than the medium-term scenario of quiet woods. All of the communications elements that contribute to conveying the seriousness of risks, from the source of the communication and its content to the channels through which it is communicated, are therefore relevant: the source of the communication, the medium, the presentational style, and the valence of the communication—insofar as all of these can convey greater seriousness of consequences. The explicitly expressed linkages to other issues and initiatives imply the range of the stakes involved. In many circumstances the actual linkages are worked out in private negotiations (e.g., in discussions that determine whether a group will accept a particular sacrifice in exchange for immunity from another) and are not expressed in public communications, but making the linkages explicit can deepen the problem definitions as well as signaling the importance of the consequences. Another important finding is that in a great range of circumstances, distant but important negative consequences are discounted less steeply than distant but important positive ones (Rothman and Salovey 1997; Chapman 2003: 402–3). The implication for a framing strategy is that highlighting threats can be more effective than highlighting opportunities. Of course, in some situations both can be emphasized, yet when the amount that can be communicated is limited, emphasizing the negative will often have greater impact. Because most issues can be conveyed accurately as either the danger of averting negative consequences or to opportunity to create positive ones, the emphasis on the negative is both strategic and legitimate.

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Two seemingly contradictory findings reinforce the emphasis on threats rather than opportunities. The first is that the prospect of losing what one already has tends to be discounted less than the prospect of failing to gain benefits of equal value. People become attached to status and objects rapidly upon possessing them (the “endowment effect”) (Kahneman, Knetsch, and Thaler 1991). The second finding is that the more of an asset that one has, the less it is valued (the “inventory effect”) (Wertenbroch 2003: 495–99). People tend to consume and spend more when they believe that they have abundant supplies, a pattern that seems to be at the heart of the profligate spending during commodity booms. The apparent contradiction lies in the implication of the inventory effect that what is currently scarce—what one does not have but desires—should be more valuable than what one already possesses in abundance. However, the difference may lie in whose actions result in gains or losses: one’s own control over the consumption of assets does not pose the threat of others taking control. In other words, in many circumstances people respond more strongly to external threats to existing assets than to either future opportunities or threats to future gains, even if they are of the same magnitude of “utility.” This suggests that invoking the risk of losing current possessions through the actions of others is more powerful than invoking the possibilities of failing to obtain more. Therefore the design of farsighted programs can take advantage of the greater concern over avoiding a loss than realizing a gain by focusing the short-term sacrifice on imminent gains rather than on the existing endowment. Emphasizing the limits or fragility of current prosperity may also offset tendencies to discount heavily. Discounting can also be reduced by bringing the psychological pleasures or pains into the present (Elster and Loewenstein 1992). The current psychological pleasure (savoring) or pain (dread) from contemplating future consequences can produce immediate if intangible benefits and costs that bring the emotional impact of the benefits or costs into the present. Frequent and strong visualization of benefits may also enhance savoring (pleasure in contemplating future benefits) that would bring psychological gratification into the present. Some design elements, such as the valence and emotionality of the message, can heighten the sense of dread that brings psychological costs into the present. However, the psychological pain of extreme dread raises the danger that the audience will disregard the message.5 Forty years ago Irving Janis (1967) pointed out that in many cases the effectiveness of fear appeals follows an inverted U-shape, such that moderate fear is more effective than either low or very high fear.

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The past can also be savored or regretted. To mitigate the regret of abandoning a prior choice, whether a wise one or not,6 people often stay with the original strategy. Therefore if past sacrifices are consistent with pursuing farsighted objectives, invoking them in the appeal can strengthen the commitment. The challenge of whether “our (or our forebears’) efforts were in vain” can be highly compelling. Broadening Identifications. Identifications with those most affected by longterm consequences can be influenced by the inclusiveness of the terms referring to “us.” “We Kenyans” obviously has different implications than “we Kikuyu.” Invoking common history, characteristics, and circumstances can also extend identifications. The framing of “we-they” distinctions is often a more aggressive way to reinforce identifications: “We are environmentalists; they are resource wasters.” The other task of shaping identifications is to associate the initiative with symbols that resonate because of existing identifications. The use of positive symbols (“miranda” in the policy sciences framework [Lasswell and Kaplan 1950: 117–18]) and negative examples (which can be termed “antimiranda”) can strengthen the attitudes—positive or negative—toward various options, depending on how much the audience accepts the validity of invoking these symbols for the case at hand. For example, an Indian initiative that invokes “Gandhi’s long-term vision” may redound positively to the initiative—if it is truly seen as consistent with the stakeholders’ understanding of the initiative and Gandhi’s vision. By the same token, negative examples, such as citing the shortsighted follies of Ferdinand Marcos’s industrial programs in the Philippines, can heighten the disdain for unsustainable approaches. Receptivity to the Specific Actions. Even if stakeholders are willing to be mobilized, they must reach some threshold of confidence that the proposed actions will the proposed measures will serve them well. Communications strategies must reinforce the credibility-enhancing strategies outlined in chapter 7. For those farsighted initiatives that require sacrifice by others, the perception that the government is constrained from abandoning its commitments after the sacrifice has been made can arise only if the conditions that impose self-restraint are well publicized. The government must not take for granted that its constraints are known to the public or to interest groups, especially in light of the lack of knowledge that many have concerning policy implications.

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Another important communications approach is to emphasize the reasons why the initiatives fit well within the government’s long-term objectives. Otherwise stakeholders will lack the basis for knowing how serious the government’s commitment, based on its own goals, really is (Rodrik 1989: 757). As mentioned in chapter 7, the skepticism of stakeholders frequently centers on doubts about the leader’s own commitment to bear sacrifices to achieve the long-term objectives, as well as making the highly publicized self-committing pronouncements. Communicating these reasons may require a major educational effort to demonstrate the connections among the policy, the likely effects, and the government’s objectives. The elaborateness of explanation, which can range from minimal to extensive, also has an impact on credibility, depending on the degree to which audiences require confidence that messages are based on solid analysis. A more elaborate analysis can also capture more of the richness of future consequences, encompassing more dimensions that may strengthen a future orientation. A heavy investment in providing more information on the magnitude of consequences and fleshing out all the values involved may also reduce the rate of discounting by enhancing the appreciation of the seriousness of the stakes. However, greater elaboration may also confuse, intimidate, or go beyond the patience of the audience. Shorter messages tend to be interpreted as signaling greater urgency. If confidence in an initiative is challenged by its complexity and therefore the audience’s uncertainty about its effects, another communications strategy is to couch the initiative as simple formulas or decision routines consistent with apparently self-evident principles of high symbolic and ideological potency. “Maximum sustainable yield” in logging or fishing is one such example examined later in this chapter. In order to enhance the perception that an initiator has the capacity to bring about the long-term rewards that justify short-term sacrifices, wellarticulated plans that avoid extreme objectives and targets can go far to signal that the long-term objectives are feasible rather than wishful thinking or pretexts. This seemingly obvious point is more controversial than one might think. Dani Rodrik (1989: 738; emphasis in original) argues that “achieving credibility will always require a larger policy reform than would have been dictated in the absence of the credibility problem.” Yet the logic of Rodrik’s argument is that the only way the public can decide whether the government is committed to the policy is by contrasting the proposed commitment of a “serious” government with that of a government feigning commitment in order to redistribute income to favored groups. His argument is that if the early

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measures are so extreme that the intended favored groups would actually suffer net harm, there would be no reason for the insincere government to implement a policy with such great early costs to favored groups, but a seriously reform-minded government would do so—and relevant groups would understand all this. This logic does not apply, however, when governments have other means for demonstrating commitment, such as the restraining strategies reviewed in chapter 7. Equally important, the audience must be persuaded either that committed government officials will remain in office or that likely replacements will hold the same commitment. Insofar as the initiative has general support by potential successors to the current leaders, a joint declaration of commitment would reinforce the credibility of that commitment. Enhancing Commitment to Action. The stress toward long-term action, often so necessary for overcoming complacency and the sway of immediate pressures, depends on the perception of the stakes, the level of emotion, the sense of urgency, clarity as to what actions will be constructive, and which components of personality are mobilized. Insofar as commitment to action depends on confidence as to what actions are correct, more credible communications, by those with sufficient information to guide the audience in choosing credible paths, will enhance this commitment. Some research shows that specific action recommendations will heighten predispositions to act (Halpern and Bates 2004). However, if a communication is seen as limiting the discretion of the audience, or if the specific recommendations are rejected even if the general approach would have been embraced, such specificity may reduce the likelihood that desired actions would emerge.

a p p l i c at i o n s o f c o m m u n i c at i o n s f r a m i n g st r at e g i e s Family Economic Security Insofar as promoters of family savings can induce strong visualization of future prosperity, children graduating from school, and so on, the preference for progress may be stimulated over the preference for the sequence of improvement rather than immediate consumption. This can be reinforced by evoking future images (graduation ceremonies, opening the family-owned shop, etc.) that stimulate savoring of the ultimate consequences.

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Conservation and Environmental Protection Support for Conservation of Ecosystems. Consider a campaign to get enough support for restoring an ecosystem such as a degraded forest or coastal system that would have modest results ten years from now but much more impressive results in twenty or thirty years. If people would value the twenty- or thirty-year consequences far less than the ten-year consequences—because they would discount each future year equally—the campaign would have to highlight the ten-year consequences, even if unimpressive. Yet, if in fact people regard the later consequences as nearly as valuable as the ten-year consequences, then the more exciting scenarios are worth emphasizing. Framing the more distant future can be embellished by highlighting benefits for future generations, to appeal to the conscience of the public and policy makers. Energy Pricing Reform. The remarkable turnaround in the 1980s of Mexico’s domestic energy pricing brought prices of gasoline and other hydrocarbon fuels closer to the world levels, leaving more for export and reducing air pollution. The reform of heavily subsidized energy prices—a reform that has led to serious riots in many countries—was accomplished in part by framing the crisis as the threat of loss of export potential and thereby Mexico’s international economic and political standing, rather than the threat of losing a cheap energy supply. The Miguel de la Madrid administration capitalized on the 1982 financial crisis, as well as the specter of energy dependence, to embed the pricing reforms within the “Immediate Program for Economic Reorganization”; soon thereafter de la Madrid’s Six-Year National Development Plan (1983–88) instituted a crucial mechanism of automatic fuel-price adjustments (Guzman 1988: 412–15). The administration of de la Madrid’s successor, Carlos Salinas, built on the “threat of loss” theme by publicizing arguable statistics on Mexico’s declining oil-production potential.7 Credibility and Prominence of Communications regarding Conservation. A striking case of sophisticated labeling and framing lies behind the success of the still highly prominent Club of Rome, which began in the early 1970s to emphasize the possibility of devastating global pollution and resource depletion unless severe reductions in worldwide industrial production are undertaken. The Club of Rome portrayed itself as a group of businesspeople who had become convinced of the dangers of unbridled industrial expansion when confronted by compelling computer models developed by the Jay Forrester team of “systems dynamics” modelers. This depiction greatly contributed to the

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credibility of the models, even though they were roundly and correctly criticized by other experts for the lack of consideration of technologies that could mitigate environmental damage or conserve natural-resource inputs. It was also more compelling than the reality, which was that the Club of Rome founder, Aurelio Pecchi, had been an ardent no-growth advocate who had written his own, largely unheralded 1969 book (The Chasm Ahead; Pecchi 1969) and had sought out the Forrester team knowing that both their preconceptions and their models would reinforce the highly negative assessment of the impact of industrial expansion (Greenberger, Crenson, and Crissey 1976). The image as a businessperson’s organization also reinforced the impression that the Club of Rome’s was committed to a farsighted, self-sacrificing position. The Club of Rome example also highlights the importance of the medium to the credibility of the source. In some circles, the extraordinary reliance on the output of computer models increased the credibility of the Club of Rome studies. Yet some audiences are skeptical of technical presentation, believing that technical analysis is used to confuse the less technically proficient. The medium may have different impacts on different audiences. For example, the credibility of technical reports depends on the faith or skepticism in technical analysis. Rachel Carson’s landmark Silent Spring (1962), arguably the most important catalyst of environmental consciousness in the United States, was a straightforward prose work. Conservation Doctrines: Maximum Sustainable Yield. The “maximum sustainable yield” (MSY) doctrine is an excellent example of a simple conservation concept translated into a seemingly simple and compelling doctrine or formula. MSY, as a guide to renewable natural-resource extraction, calls for a rate of resource extraction that is as high as possible without allowing a reduction in stock that would reduce future yields. In forestry, this means logging at a rate that does not reduce the effective stock of harvestable trees; in fisheries it means limiting the catch to permit a more-or-less constant fish population. The understandings that underlie the MSY formula are that the resource can be extracted without a collapse, that the resource endowment ought to be maintained, and that the current stock is at the appropriate level (as opposed to shifting to other resources). Insofar as MSY is embraced as a resourcemanagement and policy commitment, it is a straightforward, intuitive formula that is likely to be accepted on its face as intrinsically good. Experts can exercise their technical acumen to calculate the details of what it means to adhere to the formula—for example, calculating the optimal yield in light of variability and other aspects of uncertainty—but the important thing is that the formula

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becomes an anchor for the commitment to follow a farsighted approach. In the battle over ideas and strategies, the onus is then on the shortsighted to show why the formula should not be followed. This holds for MSY despite the fact that the doctrine is, in some circumstances, not an optimal long-term strategy. MSY implicitly assumes that the current population or density is appropriate, preempting the question of whether it should be increased, or whether other species should replace the existing ones. Moreover, the maintenance of the target stock may undermine the sustainability of other stocks. Averting Health and Security Risks The willingness to desist from personally risky behavior (smoking, excessive alcohol use, speeding, etc.) requires envisioning future states of health or disease, injury, freedom or incarceration, and so on—all in the context of the more immediate benefits from engaging in the risky behavior. Psychologists have explored “preference reversals” brought on by framing the consequences of engaging in or desisting from the risky behaviors in terms of either benefits or costs. “Prospect theory” (Tversky and Kahneman 1981) predicts that emphasizing the loss of health or security will be a more powerful motivator than emphasizing the positive gains of desisting from dangerous behavior (e.g., emphasizing the cancer and emphysema risks of cigarette smoking would be more effective than emphasizing the benefits of greater capacity for physical activity, less coughing, etc.). Another approach, keyed to the fact that important consequences may be less heavily dis­counted than unimportant ones, is to combine communications about multiple smallmagnitude consequences into one communication (Chapman 2003: 409). For example, communications that separately link cigarette smoking with lung cancer, cigarette smoking with heart disease, excessive drinking to cirrhosis, and excessive drinking to heart disease would be more effective as communications that link smoking and drinking to all of these illnesses. However, the research results on the effectiveness of any particular framing strategy on health and safety behaviors are quite mixed. For example, Robberson and Rogers (1988) found that the health-based appeals to young American nonexercising women to increase their physical activity were more effective if fear was used rather than the positive health gains, but the self-esteem-based appeals were more effective if conveyed by emphasizing the positive rather than the negative. Chapman, who has conducted dozens of studies on discounting and health behaviors and who has conducted meta-analyses on many more, concludes that “recent studies have found sur-

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prisingly little relationship between discount rates and preventive health behavior, perhaps because discount rates are very sensitive to context” (Chapman 2003: 413). However, this conclusion must be interpreted carefully. For one thing, most studies rely on choices among hypothetical options, with questionable similarity to real-world choices. To find that people who seem to have lower temporal discount rates do not exhibit more farsighted health behaviors may reflect the weakness of measuring time preference through hypothetical choices.8 By the same token, if a particular strategy intended to reduce discounting, such as negative framing, does not work in all circumstances, the appropriate conclusion is not necessarily that the framing strategies are ineffective but rather that the impacts vary from one specific context to another. It should not come as a surprise that the particulars of each health or safety challenge will shape the balance of dread and savoring, as the magnitudes of each will vary from one situation to another, and that the salience of the risks will vary as well. Promoting Productivity Some governments and nongovernmental groups in developing countries have combined multisector planning processes with the effort to publicize the highly optimistic, very long-term plans that emerge from these processes. In Trinidad and Tobago, the 2004 “government-civil society dialogue” culminated in a document labeled “Vision 2020.” The national government launched a broad publicity campaign, asserting that the Government of Trinidad and Tobago has initiated a progressive vision to transform the country into a developed society by the year 2020. In presenting “Vision 2020,” Prime Minister Patrick Manning stated that “the vision of Trinidad and Tobago becoming a fully developed country means that all citizens will enjoy a high quality of life in all areas including housing, health, education, transportation, telecommunications, water and electricity.” Mr. Manning added “it is envisaged that the society will be one which is inclusive, cohesive and caring with strong spiritual and ethical values, imbued with a deep sense of nationalism. The Government will be effective and exercise good governance with integrity in all spheres of public life, while the public sector agencies will be efficient, results oriented and customer focused.” (Government of the Republic of Trinidad and Tobago 2005)

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The “Vision 2020” encompasses apparently concrete steps, such as major financial investments and training to create an integrated communications and technology network; a program to make Trinidadians bilingual so as to enhance interactions with the rest of Latin America as well as the English-speaking world; liberalized management of international banking to enhance Port of Spain as an international banking center; major investments in health, education, and other aspects of human capital; and numerous other elements to make Trinidad and Tobago “developed” within the next fifteen years. While one might imagine that Trinidadians who are convinced of the reality of this vision would savor being a part of this transformation, it is tempting to dismiss such communications as bluster, with such a distant horizon that no accountability is imparted. However, a broader assessment reveals significant impacts. The government has framed the discourse to focus on progress toward long-term goals. Vision 2020 also frames the appraisal of future governmental actions in terms of its explicit goals, among them universal primary and secondary education and the eradication of extreme poverty. It is likely, barring a natural disaster such as a devastating hurricane, that the Trinidadian governments will be judged in terms of progress toward these goals. International organizations such as the Caribbean Development Bank have publicly recognized these goals as the commitments of the current and future Trinidadian governments (Caribbean Development Bank 2004: 17). The coverage of Vision 2020 by the media and official bilateral and multilateral organizations has made it a benchmark, albeit without precise specificity, of what the Trinidadian government may be expected to be able to accomplish.

l e s s o n s o f c o m m u n i c at i o n s d e s i g n a n d managing temporal discounting The dimensions of communications strategies are unavoidably complicated, if only because the characteristics of source, content, channel, frequency, and audience must all be taken into account. The tendencies (but not necessarily applicable to a particular case at hand) reported in the psychological literature on framing and on temporal discounting imply several strategies to be considered (see table 10.2). A commonly voiced complaint is that deliberate framing of issues and initiatives is ethically problematic because it misleads and manipulates. To be sure, certain framings of any issue can be objectionable insofar as they diminish the dignity and the opportunity to make life-enhancing decisions of those who are misled. However, because every communication effort has limits in

ta b l e 1 0 . 2   Tendencies of framing and implications for communications Tendency

Implication for communications

Exposure to references to future consequences increases the focus on these consequences

Increase references to future consequences

Emotional arousal regarding future consequences increases the perceived importance of these consequences

Invoke strong emotion in communicating about future consequences

Exposure to strong symbols of identification increases emotional arousal

Invoke strong symbols of identification in communicating about future consequences

Exposure to symbols with positive or negative valence heightens attention and commitment to future consequences associated with these symbols

Invoke symbols of positive or negative valence in communications about future consequences

Perceptions that the initiator is constrained from reneging increase the credibility of the initiative

Communicate the constraints that limit the initiator’s capacity to renege

Perceptions that the initiator is capable of achieving promised long-term consequences increase the credibility of the initiative

Communicate the capability of the initiator to achieve the promised consequences

Perceptions that potential future leaders are committed to achieving long-term consequences increase the credibility of the initiative

Communicate the commitment of potential future leaders to achieve the promised long-term consequences

Perceptions that the initiator has strong interests in achieving the promised consequences increases credibility of the initiative

Communicate the interests of the initiator in the promised long-term consequences

Detailed explanations increase attention to future consequences and confidence in the feasibility of promised long-term consequences

Provide detailed explanation of how promised long-term consequences can be achieved

Discounting less severe from one future period to the next

Emphasize impressive if later consequences

Specific recommendations increase attention to future consequences and confidence in the feasibility of promised long-term consequences

Provide specific recommendations to achieve promised long-term consequences

Discounting less severe for important consequences

Emphasize the importance of consequences

204  Chapter Ten ta b l e 1 0 . 2   (continued) Tendency

Implication for communications

Discounting less severe for negative consequences

Emphasize negative over positive framings of consequences

Savoring or dread provides immediate psychological utility or disutility

Vividly characterize long-term benefits or losses

Long-term costs of depleting currently abundant resources are undervalued

Emphasize potential future scarcity of currently abundant resources

Inversions of early benefits preference sometimes occur

Emphasize and praise improvement and progress

how much can be conveyed and every audience has limits in how much it can take in, communicators have no choice but to be selective in what is conveyed. In short, framing is unavoidable. Moreover, seriously misleading framings are generally pragmatically unwise, in light of the importance of maintaining the credibility of the source (see chap. 7 on credible commitments). Finally, the advocates of shortsighted actions are usually busily engaged in their own framing efforts, with less concern about losing credibility, which is typically less important for short-term initiatives. Propaganda defined broadly—that is, communication intended to persuade by being one-sided (Lasswell 1950)—is ethical when the capacity to persuade is widely spread and is used in the service of society’s long-term benefit.

chapter eleven

The Triple Appeal Principle

The “triple appeal principle” was introduced by Harold D. Lasswell (1932) as the nexus between psychoanalytic concepts and the communication of compelling appeals. The classic distinction of id, ego, and superego emphasizes the fact that because people may act out of such different types of motivations, their behavior can be shaped by appeals to impulse, reason, conscience, or some combination of these. A communication’s balance of appeal to these distinct “personality components” shapes how compelling the communication will be, the stress toward action, the preferred options, and the mood in which the initiative will be received. The distinctions are roughly equivalent to impulse, reason, and conscience. Therefore the choice of appeals will influence whether the communication will trigger raw impulses (such as aggressiveness), calculated measures (such as maximizing one’s own expected income), or moral sentiments (such as commitment to future generations). In many circumstances, a communication that appeals to all three personality components will maximize the impact of the communication. However, the triple appeal principle does not dictate that the combined appeal to id, ego, and superego is always effective. In some circumstances, the appeal to reason or impulse may sully the appeal to conscience, when it is reinforced by a sense of self-sacrifice. The id appeals are targeted to primordial emotions such as aggression, competitiveness, love, retribution, and so on, which may be stimulated by framing issues to emphasize these appeals. Many of these id (or “impulse”) appeals are negative: Will our people ever be able to oust the oppressors who conquered our land? Will we be able to avenge the injustices and indignities

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imposed upon our grandparents? Will doing the right thing demonstrate that we are better than the others? Yet id appeals can also evoke positive impulses of pride and affection toward family, nation, religion, lovable and charismatic animals, and so on. Ego refers to the rational self, rather than to self-centeredness or arrogance, as the term is used popularly. Ego appeals, then, try to tap into the rational, calculating, instrumental interests that the individual holds. Yet they may be interests on behalf of the individual’s family, friends, community, or broader group. Ego appeals are utilitarian but are not necessarily appeals to selfishness. For example, stressing that a policy will help the overall economic situation of the country is an ego appeal. Superego appeals target the conscience and the individual’s striving to be upright, emphasizing the value of rectitude. Freud (1923/1960: 79) painted this in darker terms, posing the superego as the stern punisher of expressions of the id and ego, so that the ego reduces the pain of guilt by conforming to superego. For our purposes, the internal dynamics are less important than the fact that to follow one’s conscience has the two advantages of avoiding guilt and bringing the gratification of “doing the right thing.” The disadvantages arise when conscience runs counter to raw urges or the pursuit of instrumental gain. Id Appeals. At the outset it should noted that even the id impulses that one might consider to be “negative” can have constructive purposes, even in situations that do not involve mobilizing people to defend their country. Competitiveness, for example, is frequently a healthy motivation for greater commitment and better performance. The obvious challenge is to avoid the excessive provocation of destructive impulses. If the communicator intends to activate raw impulses (with or without appeals to ego or superego) in order to focus attention and heighten the commitment to action, a provocative presentational style with a high level of emotionality will often be more effective than an emotionally neutral one. Certain media such as radio, television, posters, and pamphlets can deliver condensed messages that can convey emotion and urgency. The time frame of the communication may focus on the most compelling threats or opportunities, even if they occur in the more distant future. Id appeals, like superego appeals, may be directed to broaden identifications, including intergenerational commitments, but the dynamics are quite dif­­ ferent. While some impulses are positive, the id appeal typically emphasizes “us against them,” to strengthen identification within the circle of identifi­

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cation. Therefore calibrating the inclusiveness of identifications expressed in the communication may be a crucial design consideration, especially for those appeals to impulses of rivalry, dominance, and so on. The id appeal is more likely than ego or superego appeals to arouse “hot” emotional states, a focus of much more recent research. One finding is that for early consequences, aspects that arouse emotions are given greater importance, but the weight given these aspects will fade as the consequences are extended into the more distant future, where practical considerations will have greater weight (Loewenstein and Angner 2003: 371). Yet this is not really an argument against the use of emotional arousal through id appeals to gain support for farsighted objectives. Early actions may be crucial for the pursuit of long-term objectives, and early emotional commitment can be reinforced through other means, such as social movements developed around the early commitment. While “hot” states may provoke impetuous, shortsighted actions in some circumstances, eliciting the commitment to long-term goals that are not in the personal interest of the individual may require id-based emotionality as well as superego appeals. Invoking extreme positive or negative examples (“miranda” and “antimiranda”) may be particularly important for id appeals, to heighten the emotional impact of the appeal. The mention of heroes, especially martyrs, evokes both love toward the hero and hatred toward the hero’s persecutors. Recounting harm done to the admired can kindle the impulse of resentment, sometimes masked as moral indignation to rationalize the increased aggressiveness and rivalry directed against the “other.” The British philosopher Peter F. Strawson (1974: 15) diagnosed moral indignation as “resentment on behalf of another.” The potency of painting the enemy as thoroughly evil has long been recognized (Lasswell 1935a; Finlay, Holsti, and Fagen 1967). Ego Appeals. Reasoned acceptance of an initiative requires that the audience assess, first, whether to invest the effort into responding to the initiative and, second, whether the initiative will have advantageous results. In light of inability to focus on everything, a sufficient degree of attention to a given issue and initiative cannot be taken for granted, even leaving aside the natural avoidance of anxiety-provoking topics. Therefore a farsighted proposal appealing to reason must meet the attention threshold. Certain design elements have straightforward connections to inducing attention to more distant consequences. The volume or frequency of communication will clearly have some impact on the prominence of particular trends and issues and the attention that they attract, as the research on advertising suggests. However, the simple

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hypothesis that more communication will prompt more attention is challenged in those cases in which the audience becomes either inured to the message or comes to the conclusion that the problems are so widespread or entrenched that effort would have little impact. For example, the problem of corruption, which has become such a huge staple for the popular media in many countries, runs this risk. The focus of attention is also influenced by the explicitly expressed link­ ages to other issues and initiatives. In many circumstances the actual linkages are worked out in private negotiations (e.g., in discussions that determine whether a group will accept a particular sacrifice in exchange for immunity from another) and are not expressed in public communications, but in other circumstances making the linkages explicit can deepen the problem definitions as well as signal additional benefits that cooperation with the current initiative might bring. The medium through which the communication is conveyed is also relevant to the amount of attention it can attract, as well as differentiating the audiences most likely to pay attention. Some forms of communication are more available and more easily understood by particular audiences. The time frame of the communication itself will lead attention to the specific dates or events in the message, but the focus on more distant futures can also be conveyed by the ambition of the goals or the magnitude of the risks that the communication invokes. Thus the discussions within countries preparing to join the European Union or other regional groupings bring into play such questions as the prospects for serious economic policy reform and the long-term trends in human rights, industrial strategies, and migration. For instance, the political and economic discourse in Turkey has been more future oriented than in the nations that are already members of the European Union. Another tactic for promoting a broader time frame is, perhaps surprisingly, to invoke more of the historical past. As mentioned in chapter 8, El Sawy (1983) found that inducing U.S. executives to focus on the more distant past of their organizations promoted longer time horizons in their planning. There is also the possibility of connecting fealty to past generations with care for future generations, in the vein of preserving legacies. For example, the renovation of the old town section of Phuket, Thailand, has been reinforced by the motive of respecting the legacy of ancestors (Bassett 2006: 20). When an issue or initiative receives adequate attention, the next challenge is to ensure that the initiator has sufficient credibility such that the audience will accept the problem definition and proposals to be honestly and compe­tently presented. Thus both the perceptions of the source and the content of the

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communication are relevant. Credibility is often sensitive to self-labeling. To a perhaps surprising degree, sources can select their labels and self-portrayals; therefore how they are perceived is a design dimension rather than a fact beyond the control of the communicator. Some circumstances dictate that the sound farsighted proposal is decidedly unattractive emotionally. In many developing countries the wise long-term course is to resist the economically problematic “prestige projects” that may boost national pride—until they fail or cause serious budget problems. Examples abound: the N250 airplane initiative in Indonesia, Ferdinand Marcos’s boondoggle industrial projects in the Philippines, the Mahaweli dams in Sri Lanka, and grandiose airports and government buildings in many countries. Therefore the challenge for the ego appeal is to counter the emotional appeals of such proposals. The design elements to support the restraint against these id appeals often entails scientific communications that can credibly reveal the weaknesses of unrealistic claims, reinforced by more popular communications that expose how and why special interests would gain from the pursuit of these projects. Superego Appeals. Appeals to conscience can be directed at two different levels: adherence to specific behavioral norms, or the pursuit of more abstract imperatives such as justice, respect for nature, or intergenerational responsibility. Appealing to specific behavioral norms that the audience already accepts (either as a conclusion of their own moral reasoning or to follow the guidance of sufficiently respected authority such as clerics) entails reminding the audience that the norms are relevant to the issue at hand and are supportive of the initiative being proposed. In short, it is a matter of focusing attention on the link and reinforcing the moral imperative. For example, if reforming the education system to provide greater opportunities for lower-income people requires reducing the subsidies to higher education, this would have to be clearly conveyed, in terms of benefits to the society as whole, to those who are likely to benefit from the subsidies. However, heavy-handed moral suasion may trigger the impulse to reject it. Particular institutions and channels of communication are particularly apt for appeals to conscience, in that they are perceived as dedicated to upholding standards, making sacrifices, assisting others, and other pursuits reflecting the values of rectitude and respect. Religious institutions, in particular, often have this aura. Many of the most effective leaders of movements with long-term objectives have been clerics who are perceived as lacking the self-serving motives that would otherwise make an audience cynical about appeals to conscience.

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An image of asceticism can also reinforce appeals to conscience, by conveying the model of self-sacrifice. Leaders as diverse as Gandhi and Che Guevara have accentuated their moral appeals through personal sacrifice. Emphasizing intergenerational responsibilities is a clear superego appeal, reinforcing the impulses of affection for and protectiveness of children. The degree of intergenerational emphasis of the framing will influence the focus of attention and the time frame. The simplest hypothesis is that the greater the intergenerational emphasis, the greater the appreciation that the audience will have for the challenges of providing opportunities for future generations. However, it is also possible that an impatient audience would be less attentive to an initiative if the benefits are conveyed as redounding to distant generations.

a p p l i c at i o n s o f t h e t r i p l e a p p e a l p r i n c i p l e Conservation and Environmental Protection. The triple appeal principle applied to conservation is clearly illustrated by U.S. President Jimmy Carter’s famous April 1977 “energy speech.” Carter cast the struggle to reduce oil consumption as the “moral equivalent of war,” combining superego and ego appeals in the same short phrase. The delicate international relations with oil-rich nations made it injudicious for Carter to target foreigners directly in the speech, but he did state that “if we wait, we will live in fear of embargoes. We could endanger our freedom as a sovereign nation to act in foreign affairs.” To further stimulate id impulses, he identified enemies to target with hostilities: the oil companies (“Many of you have suspected that some supplies of oil and gas are being withheld. You may be right.”), “the citizens who insist on driving large, unnecessarily powerful cars,” and the “special interest groups [who] will attack the part of this plan that affects them the most.” He evoked conscience not only by using such charged language as “the moral equivalent of war” but also by tying his energy plan to our aspirations to “give our children and grandchildren a world richer in possibilities than we’ve had. They are the ones we must provide for now. They are the ones who will suffer most if we don’t act.” Yet much of the speech was a pragmatic, ego-targeting dollarsand-cents rundown of the economic costs of continued increases in oil consumption. The speech has been credited as a major contribution to Carter’s early popularity as president. Dennis Anderson (1988: 545) cites opinion poll data demonstrating that “a positive rating of Carter’s handling of the economy and energy situation” was a major factor in his early popularity. However, it is important to note that within a few short years, Carter’s popularity and

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support for his initiatives had plummeted, in part for lack of action to follow through on his rhetoric. His energy plans were excoriated for lack of concrete actions to take advantage of the crisis and his initial support. Tax Reform. The appeal for support of tax reform initiatives is typically cast in ego and superego terms (“a better tax system will improve the economy for all”; “you should pay your fair share”), yet a less obvious but often compelling appeal is to the resentment against equally wealthy or wealthier people who have been paying less tax. The appeal of so-called horizontal equity—that everyone at a given income level should bear the same tax burden—taps into the moral indignation mentioned earlier in this chapter. Charitable Contributions. The obvious appeal of charitable contributions is to conscience. Yet for many people, part of the attraction of making taxdeductible contributions is the id gratification of control over money that otherwise would be controlled by the government. Another potential id appeal is the attraction of besting others by contributing more than they do. In several contexts—some social circles, religious communities, voluntary organizations, and universities—fund-raisers communicate through awards or designations of levels of contributions (“patrons,” “benefactors,” etc.), cultivating an intense sense of competition.

lessons of the triple appeal principle The existence of three different bases for appeals would seem to imply an obvious strategy of emphasizing them all. Indeed, in many circumstances, the triple appeal of evoking id, ego, and superego would indeed gain the strongest support for the cause. The energy conservation appeal reviewed above targets the superego by casting conservation as our responsibility to future generations, the ego by emphasizing the economic benefits of relying less on increasingly expensive fuels, and the id by emphasizing how this would discomfit our enemies. Yet as compelling as it is in some circumstances to engage impulse, reason, and conscience at the same time, three considerations challenge the wisdom of using the triple appeal in other circumstances. First, the instrumental gains that farsighted action might bring to the target audience may simply not be as high as the short-term costs. Involving the instrumental gains of an initiative that is truly only justifiable on impulse or conscience grounds could risk the credibility of the appeal. An honest depiction of instrumental

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considerations would only remind the audience that what is being proposed is in fact not in its rational interest. Second, the sober mindset needed to accept the reasoned ego appeal may be undermined by messages that provoke raw impulses. Third, appeals to impulse or reason can undermine superego appeals by seeming to compromise the moral righteousness of acting out of conscience without ulterior motives.

chapter twelve

Managing Heuristics

People cannot engage in a fully comprehensive expected utility analysis of an appeal to make immediate sacrifices for uncertain long-term gains. Even if the issue is strongly at their focus of attention, the inevitable limitations of analytic capacity (the “bounded rationality” of Herbert Simon [1984]) preclude a full analysis focusing solely on the risks and opportunities of the appeal. If they form expectations about the initiative, it is likely that these expectations will reflect some analytic “short cuts” drawing from existing beliefs and emotions tied to prior experiences, emotional states at the time that the initiative first comes to the focus of attention, and how the new information fits within existing understandings of causality. These short cuts, more formally labeled “heuristics,”1 were initially identified as the sources of biases in judgment that frequently lead to deviations in the assessment of risks, as compared to the more intensively evaluated risk assessments made by experts. Yet for the purpose of shaping appeals for farsighted initiatives, the value of recognizing that these heuristics are at play lies in the importance of how farsighted appeals are presented. Different presentations will evoke different heuristics, leading to different assessments of the risks and opportunities of a given farsighted appeal. The strategic premise is that the use of particular heuristics can be promoted or suppressed and the biases of particular heuristics can be reduced or heightened. Therefore we can consider the examination of heuristics from two perspectives. First, if the operation of a particular heuristic is leading to poor analysis of long-term risks and opportunities, the mischief of this heuristic should

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be addressed by “debiasing” the bias of that heuristic. Second, if particular heuristics could contribute to a favorable reception of sound farsighted initiatives, they should be promoted. While there is a large overlap of these objectives, they are not identical, in that some stakeholders’ interests will not be furthered by initiatives that serve the common good. Each of the six “general purpose” intuitive heuristics identified by researchers within the “heuristics and biases” school of thought presents challenges to farsightedness, but also suggests strategies for strengthening more farsighted perspectives.2 The availability heuristic is the tendency to base expectations of the case at hand on the characteristics of the category of cases that most readily come to mind, whether because they are the most recent, the most vivid, or are otherwise particularly notable. Insofar as the most recent cases are more available, the availability heuristic contracts the time horizon in focusing on the immediate. For example, the success or failure of recent economic policy reforms will drive the analysis, rather than the broader range of historical experience with reforms. Because appeals to make immediate sacrifices for long-term improvements often rise from the need to address recent policy failures, the coincidence of recency and availability frequently leads to heightened expectations of risk. For those countries beset with broken promises or suspected corruption on the part of government officials, these negative generalizations will reinforce the pessimism even toward sound farsighted initiatives. Moreover, the availability heuristic leaves the public open to negative media coverage of current reform efforts and to efforts by reform opponents to invoke previous reforms that ended badly. Especially for developing countries that have suffered many policy setbacks, it is usually very easy for the media or opponents of the initiative to publicize apparently similar policies that imposed unexpected costs or that did not produce the promised results. Yet the availability heuristic can reinforce the optimism toward farsighted initiatives, if the communications strategy can heighten the visibility of previous, positive cases with relatively successful impacts, or heighten awareness of past failures of shortsighted alternatives. The similarity heuristic pertains when the individual presumes that the current case should be assessed according to the characteristics and fate of a prototypical case or category.3 The case at hand is treated as if it is part of a general class of cases, with the expectation that the outcome will be typical of such cases. The result is an exaggerated subjective probability that the current issue would have the same fate as those in the class deemed most similar or representative. This in turn can lead to the underestimation of the uniqueness of the current case, thus closing off thinking about the potential multiplic-

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ity of alternative futures. For example, if a big rise in export earnings is interpreted as “yet another commodity boom,” the possibility that a new pattern is emerging may be overlooked. If the category of cases has had a poor history, it is more likely that the audience will have more pessimistic expectations about the success of the current initiative. Here, again, the framing of the initiative can make it more likely that the audience will choose a category of parallel cases that raises more optimistic expectations that farsighted initiatives are worth the short-term sacrifices. The affect heuristic entails the carryover of the initial emotional reaction of a situation or proposal to its subsequent evaluation. In other words, what is regarded positively at the outset is more likely to be assessed in positive terms later as well (Slovic et al. 2002).4 The earliest information that forms a preliminary opinion will thus have an exaggerated impact on later expectations. For example, an earlier pessimistic judgment of the capacity of a particular group to benefit from a reform is likely in many circumstances to have an inordinately pessimistic impact despite strong current information of the group’s capacity. The bias resulting from such anchoring imparts rigidity and lack of realism in thinking about future possibilities. The fluency heuristic refers to the tendency to assess situations according to the easiest, most familiar mode of thinking. If a proposed policy requires an unfamiliar logic (e.g., that minimum wage regulations in some circumstances inhibit poverty alleviation, because they deter employers from hiring the unemployed), the tendency to think in the more familiar terms (i.e., that minimum wage regulations benefit low-wage labor by giving them higher wages), the presentation of the appeal must provide ample explanation, in understandable terms, so that the audience will be comfortable with the logic underlying it. This reinforces the importance of providing explanations to enhance the credibility of the message. The causality heuristic is the tendency to expect consequences on the basis of ideas of causation, neglecting the base rates of consequences (Tversky and Kahneman 1982). For example, if NGO support for a community group is believed to be an important cause of success when community groups do succeed, the expectation of NGO-supported community group success will often be judged as higher than the actual success rate. Conversely, when the connection between conditions and consequences has no clear causal link, their correlations would tend to be underestimated. Insofar as people use the causality heuristic, appeals that can invoke causal explanations should highlight them. If not, the communications should emphasize the actual base rates in order to offset the tendency to ignore them in favor of causal assumptions.

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Finally, the surprise heuristic pertains when unexpected consequences are given more importance in how people think about issues at hand, becomes the central focus of understanding the issue, and has a greater than statistically justified impact on expectations of consequences. It is indeed a good strategy to focus on surprising consequences in order to orient one’s efforts to get a better understanding of a given situation. The surprises direct us to what we do not yet fully understand. For example, if a particular community with meager resources is very successful in improving its physical environment, focusing on that community may yield very useful insights. However, the preoccupation with surprises may lead to underweighing the impact of the more common, well-understood factors. When surprising consequences attract a lot of attention by virtue of being surprises, the availability heuristic comes into play, focusing attention on exceptions rather than the more common effects. The framing implications are that surprising consequences can be powerful instruments for changing perspectives, yet unrealistic expectations based on surprises may have to be countered with reminders of the more prevalent patterns. “Debiasing.” To the degree that heuristics impart biases that undermine the support for farsighted initiatives, it is worth enumerating the strategies for “debiasing,” while recognizing that some deviation from the details of the case at hand is unavoidable. The following strategies should be considered: Identifying the heuristic responsible for the bias may be able to enlighten those whose expectations have been distorted by it (Fischoff 2002: 741). Clarifying the principles that experts would use to assess the likelihood of consequences may enlighten lay people of the shortcomings of their inferences (Nisbett et al. 1982). Clarifying how the mental models that lay people are most likely to use yield biased assessments will help people to identify and correct these biases (Nisbett et al. 1982). Clarifying how the circumstances to which the most available or representative case(s) were atypical can reduce the “attribution error” of assuming that observed behavior is typical rather than contextually shaped (Nisbett et al. 1982). Clarifying the multiple pathways by which positive or negative consequences can arise can help to offset the frequently observed “underadding” of probabilities.5

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Screening out stimuli believed to be distorting can reduce associated bi­ ases (Wilson, Centerbar, and Brekke 2002: 195). For example, avoiding publicizing atypical cases can reduce the misleading use of the availability and representativeness heuristics. Clarifying the differences between the case at hand and misleading prior cases can also preempt their choice as available or representative cases. Promoting the consideration of different consequences can offset the overconfidence in expecting the outcome regarded as most likely, because it would provide pathways and explanations to counter those that produced the over-confidence (Wilson, Centerbar, and Brekke 2002: 197). Presenting the set of possible causal factors (through a formal “influence diagram” [Fischhoff 2002: 746]), or less formally through extensive presentation of possible causes) can help to clarify the probabilities. Presenting true base rates can offset the distortions of the availability heuristic (Fischhoff 2002: 747). The actual base rates will counter the tendency of the availability heuristic to exaggerate the importance of extreme (and therefore often more highly publicized) cases. Concrete examples of base rates as opposed to abstract statistics can increase the attention to and intelligibility of the actual base rates (Fischhoff 2002: 747). It also provides more information about how generalizable the information is likely to be. For example, a communication that “of the fifty-two villages in the province that entered the self-improvement program, forty-two built their schools on time” may be more effective than “the school-building program had an 80.8 percent on-time completion rate.” The latter does not signal whether the sample is large or small, nor whether the cases were all villages. Exaggerated Certainty. Several of these heuristics contribute to the widespread phenomenon of overconfidence or exaggerated certainty. “Overconfidence” in this sense does not mean overoptimism that one’s efforts will be successful but rather the belief that one’s expectations, positive or negative, are more likely to be correct than they really are. Overconfidence in one’s beliefs may reduce the openness to alternative futures beyond the one regarded as most likely and make people resistant to arguments that conflict with their prior beliefs; however, it may also reinforce long-term efforts that require a high degree of dedication and belief that ultimately the efforts will prevail. The heuristics theorists argue that “intuitive judgments are overly influenced by the degree to which the available evidence is representative of the hypothesis

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in question” (Griffin and Tversky 2002: 231), such that selective prior experience that fits the expectation dominates thinking about future possibilities. It is ironic that people are overconfident despite the analytic limitations that everyone faces. However, it is consistent with the fact that new information and arguments are difficult to assess, while one’s lifetime of experience has been filtered and (at least in the mind of the individual) confirmed over the years. Moreover, it is not surprising that people cannot gauge the impact of factors about which they are unaware and therefore tend to believe that the available information and understandings are more reliable than they actually are. Once a policy has failed—or succeeded—it is easy to say that it must have turned out that way and therefore to view such consequences in a deterministic way that minimizes the potential for effective intervention. Finally, people tend to exaggerate the predictability of events after they have occurred and misremember their own incorrect predictions (Fischhoff and Beyth 1975), also leading to an exaggerated sense of confidence in the accuracy of one’s beliefs. Overconfidence can work to the advantage of a farsighted appeal when people’s expectations are that the initiative will succeed. In such cases it would be advisable for communications to emphasize the connections between understandings and positive consequences. However, exaggerated certainty in predicting consequences can be a crippling impediment to changing perspectives, if beliefs are so entrenched that new problem definitions and expectations are resisted. Overcoming this resistance may require great effort to provide explanations as to why the accepted wisdom is flawed. Consider again the belief that minimum wages alleviate poverty in labor-surplus markets. Overcoming this expectations would require careful explanations as to how higher wages discourage employers from hiring more workers, how workers effectively covered by minimum-wage regulations tend to be significantly privileged over other workers, and so on. The heuristics research also shows, however, that under certain circumstances underconfidence will prevail: if there is extensive information that confirms one’s expectation, but the arguments in favor of the expectation are only mildly more compelling than those on the other side (Griffin and Tversky 2002: 242). In other words, plausible alternatives will overly offset compelling data. This finding also reinforces the importance of providing explanations for the expectation that the initiative will produce positive results. Employing and Disciplining Heuristics. The analysis of heuristics yields several insights into how to overcome some of the biases that heuristics sometimes cause and how to bolster the support for farsighted initiatives.

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The most straightforward recommendation based on the affect heuristic is to use positive labeling in characterizing the farsighted initiative. Yet as obvious as this may sound, it is not always so clear how to do this. If the initiative is introduced through an invocation of the negative consequences that would occur unless farsighted actions are taken, painting this negative picture may lead to an overall negative affect in contemplating the issue, even if the initiative is portrayed as positive. Moreover, determining what would be the most emotionally compelling positive labeling requires further analysis. To address the possibility that anchoring will reduce the audience’s estimation that the farsighted initiative will be successful, it is important for the advocates of sound farsighted initiatives to strike first, so that the anchoring can be set at levels that contribute to the optimism about the initiative. In other words, let positive information about the farsighted initiative anchor the initial estimations. For example, if the initiative is a reform of the social security system, intensively publicizing valid optimistic projections can inoculate against subsequent negative information. Insofar as the audience uses the availability heuristic, the initiator of a farsighted strategy should give prominence to cases that support the expectation of long-term success. When the similarity heuristic is operating, the strategic promise rests on the fact that the category that people will regard as most representative is not predetermined but rather depends on the labeling of the new initiative and how it is described. Chapter 10 briefly noted the importance of labeling the initiative—and the flexibility to do so. This can be extended to the labeling of the initiative in order to induce the audience to regard it as belonging to a category of measures that would instill optimism in the likely consequences. There is nothing dishonest about labeling strategies, as long as the chosen labels are genuine descriptors of the initiative. Any initiative can be characterized in narrower or broader terms; different aspects of the goals and consequences can be emphasized. For example, providing tax-exemption subsidies for ethanol production can be labeled as an energy security measure, a support for the farming sector, an R&D policy experiment, and so on. A pro­ posal to eliminate these tax exemptions can be labeled as a liberalization measure, a tax reform, a retrenchment of environmental commitment, a crusade against special interests, an austerity measure, and so on. Policy advocates often try to convey all of the virtues of their policy preferences by using all of the potential characterizations, yet this approach frequently leads to confusion in the minds of the stakeholders. Sometimes choosing and emphasizing a narrow set of labels will be the most effective way to promote the most compelling and optimistic choice of the representative category.

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The initiator of a farsighted measure can also take advantage of the operation of the availability or similarity heuristics to discourage support for the shortsighted alternatives, by casting these alternatives as parallel to the prior failures resulting from decisions to avoid needed sacrifices. It is typically easy to find and invoke past examples of economic collapses, wasteful naturalresource extraction, environmental degradation, decaying neighborhoods, or disintegrating roads traceable to shortsighted decisions. For example, the pessimistic expectation that a tax reform proposal will fare as badly as previous tax reform efforts can be ameliorated by framing the tax changes as part of a broad governance or liberalization reform, if either of those has fared better. If environmental regulations have been widely regarded as onerous and ineffective, new forms of environmental regulations can be labeled to distinguish them from the previous ones. This relabeling has been employed in presenting the “market-based charges,” which focus on the extent of pollution as opposed to requiring specified pollution-abatement equipment. Insofar as people are influenced by the affect heuristic, the obvious communications tactic is to present appeals along with the most affectively positive symbols and initiatives. For example, the new initiative can be presented as an extension of a successful prior initiative. Another implication is the importance of timing an initiative to avoid a pessimistic reception driven by a general mood of pessimism. This is a useful caveat to the intuitive notion that people are most easily mobilized when the situation urgently demands action. While crisis sometimes spurs action, it can also lead to paralysis, or to the preference for short-term solutions (Lasswell 1965a). Efforts to rely on the affect heuristic as a communications strategy run the risk that putting such a positive face onto the farsighted initiative will backfire because it will be seen as blatantly manipulative. In many instances debiasing the perceptions resulting from the affect heuristic will be more effective than relying on it. The existence of the fluency heuristic suggests that initiators ought to equip stakeholders with the capacity to easily analyze the farsighted initiative. Policy advocates and analysts are all too often so conversant with the logic of their preferred policies that they fail to recognize the importance explaining the premises and dynamics of the policies. Strategic planning exercises and engaging stakeholders in the formulation of policy options (so-called concertation) are often useful for this purpose. In general, an important approach to reducing biases arising from any of the heuristics is to provide information and explanation that will offset the misleading characterizations (Kahneman and Frederick 2002: 58; Tetlock 2002: 590). In short, unconstructive analytic

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shortcuts can be rectified, at least to a certain degree, by providing and supporting more accurate analysis and by sensitizing people to the inappropriateness of their attributions and inferences. By the same token, specifying the events, conditions, benefits, and costs entailed in each relevant policy scenario is essentially the “unpacking principle” that Amos Tversky accorded such great importance in overcoming the conjunction fallacy (Tversky and Kahneman 2002; Tversky and Koehler 2002). The potential of the surprise heuristic to refocus attention and to increase the receptivity of stakeholders to new initiatives calls for bold, explicit challenging of the assumptions supporting shortsighted positions. Publicizing specific facts that challenge preconceptions can be very effective. Perhaps the best instance of this tactic is the dramatic success of the campaign to ban chlorofluorocarbons, which culminated very quickly in the Montreal Protocol: the “surprise” was the dramatic discovery of blind rabbits in the Southern Hemisphere, which shattered the complacent view that the atmosphere would easily dampen anthropogenic impacts.

a p p l i c at i o n s o f m a nag i n g h eu r i st i c s Conservation and Environmental Protection Global Climate Change. The very troubling example of communications about global climate change illustrates how communications strategies as well as poor policy design can fail to take advantage of available heuristics. A highly constructive interpretation of the challenge of global climate change is that it is a global environmental risk, with many possible but uncertain negative possibilities, caused by alterable human actions, requiring concerted international effort. An obviously more negative framing of global climate change is as the just deserts for profligate economic development and energy use. Yet another negative framing is the international confrontation over which nations or sectors must bear the brunt of the sacrifice. All three of these framings, as well as others, have been available for assessing the Kyoto Protocol, the major initiative within the framework of the the 1992 United Nations Framework Convention on Climate Change designed to orchestrate international cooperation to reduce greenhouse gases. As constructive as the first interpretation is, it is surprising that the opportunity to connect global climate change initiatives with the 1985 Vienna Convention and the Montreal Protocol, banning chlorofluorocarbons to protect the atmospheric ozone layer, was missed. The Montreal Protocol, negotiated in 1987 and put into effect

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by 1989, quickly and decisively addressed the thinning of the ozone layer, which was only confirmed definitively in 1985.6 Former United Nations Secretary General Kofi Annan declared it “perhaps the single most successful international agreement to date” (Rohrer 2007). Yet Elizabeth May, executive director of the Sierra Club of Canada, laments that “it has been virtually impossible to communicate through the media the precedent of the Montreal Protocol” (May 2002). Part of the problem is that the architects of the Kyoto Protocol process recognized the parallels to the Montreal Protocol process but cast the Kyoto Protocol as a draconian measure to address what many stakeholders regarded as an uncertain risk. Calling for a 5 percent decrease from 1990 levels of greenhouse gas emissions of developed countries by the end of the first five-year period (2008–12) would mean reducing these emissions by roughly 30 percent of expected emissions in 2010 without adherence to the Protocol. Although the Kyoto Protocol went into force in 2005, without the ratification of the United States and Australia, nearly half of global greenhouse emissions are not covered by it. As it is, the global climate change initiative has been snagged on three problems. To be sure, one is certainly not a communications issue but rather the Kyoto Protocol’s design: overly ambitious targets, from a political perspective; serious uncertainties as to how to measure 1990 emissions levels; the exemption of developing countries from compliance; and so on. The second problem, which may bear some responsibility for setting the negotiations of the Protocol onto such an extreme course, is that the lack of recognition of the essential political logic of the Montreal Protocol was neglected in both communications and consideration in the Kyoto process. Marvin Soroos, referring to both the Montreal Protocol and the acid-rain-reduction conventions, noted that “the process [of formulating such treaties] is iterative in that negotiating cycles are repeated, with what is learned at earlier stages informing later rounds of negotiations. . . . It is also incremental in the sense that many states will only gradually accept stronger regulations on pollutants. Thus, each agreement becomes the basis for continuing negotiations on a further tightening of regulations. Furthermore, the process of establishing regulations can be expected to continue indefinitely because there is not a general agreement on a desirable final outcome” (Soroos 1991: 119). For reasons not altogether clear, the champions of the Kyoto Protocol ignored this long-term perspective on the multistage approach of beginning with moderate restrictions, even though it was explicit in the Montreal Protocol. Third, as reviewed in chapter 9, the predominant framing of global climate change as essentially a global warming issue gave an opening for

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opponents to capitalize on the uncertainty of the specific impacts of greenhouse gas emissions. A more compelling and less vulnerable framing would have been to argue that changing the atmosphere is highly likely to trigger significant climatic changes, and because the activities and infrastructure of each location on Earth is more-or-less adapted to its current climatic conditions, these changes will be dangerous and costly. Nuclear Energy. Much of the literature on the operation of heuristics has focused on risk management and risk communication in the health sphere. Lay people’s estimates of the magnitudes of health risks frequently deviate considerably from the actual base rates, for several reasons. One dynamic that exaggerates risks arises because the labels or characteristics of the risk-causing actions or conditions have misleading connotations. For example, “nuclear power” has associations with nuclear weapons that imparts a much more negative view of nuclear power plants, reinforced by the operation of the availability heuristic in highlighting Chernobyl and Three Mile Island accidents. In light of the increase in greenhouse gases caused by hydrocarbon fuel use, the economic problems that some countries face because of petroleum dependence, and the pollution caused by hydrocarbon production and use, nuclear energy may play an increasing role in a farsighted energy strategy—at least it should be given a fair hearing without biased notions of the risks and costs. Yet Robertson (2000: 1), a strong advocate of nuclear power, argues that “the vastly different perception of a serious reactor accident by members of the public stems, in the first place, from simple and subconscious word associations: atomic bombs and atomic energy in the early days, and nuclear weapons and nuclear energy now. Many people are still unaware that nuclear reactors simply cannot explode like nuclear weapons. These associations are reinforced by the media which, either deliberately or out of ignorance of the science involved, illustrate features on nuclear energy with images of mushroom clouds.” Similarly, the Nuclear Energy Agency of the Organisation for Economic Cooperation and Development (2002: 28) asserted that “although the corresponding infrastructures are fairly separated, the applications of nuclear energy outside the electricity sector, i.e. nuclear weapons and use of isotopes mainly in medicine, remain interconnected in the minds of most members of the public. The perceived association of military uses and the risk of weapon proliferation with peaceful applications of nuclear energy is a key issue for assessing social risks and benefits of nuclear technologies.” These associations are exacerbated by the additional associations of nuclear energy with “big government,” owing in part to the need for centralized

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regulation of nuclear reactors, and the secrecy that has characterized the nuclear industry. The secrecy has increased suspicion about assertions of the safety of nuclear reactors. To address these perceptions, the new communications strategies of the nuclear industry and the agencies that support and regulate it are to increase public participation in nuclear energy planning, provide more information to overcome the perception of secrecy, and to publicize baseline rates. The OECD Nuclear Energy Agency (2002: 35) recommends that “normal reactor operation emissions should be further put into perspective with accidental emissions, and the public ought to be better informed about the relative proportions of natural versus man-made artificial radioactivity.” This second recommendation harkens to the potential for expanding the representative class to all radioactivity, with the implication that insofar as the public understands that some radioactivity has always been present in nature, the negative associations will diminish and the affect improve. Averting Health and Security Risks Acting on Radon Risk. Having homes tested and if necessary decontaminated for the radioactive gas radon requires not only knowledge that above certain thresholds the gas poses health risks but also that these actions would be useful. Fischhoff, Bostrom, and Quadrel (1993: 13) cite studies finding “that many people know that radon is a colorless, odorless, radioactive gas. Unfortu­nately, some also associate radioactivity with permanent contamination. However, this widely publicized property of high-level waste is not shared by radon. Not realizing that the relevant radon byproducts have short half-lives, homeowners might not even bother to test (believing that there was nothing that they could do, should a problem be detected).” The challenge, then, is to counter the presumed but false representativeness of the more commonly known radioactive materials, such as uranium or plutonium used in nuclear reactors or bombs. The approach tested by the prominent “mental models” research program centered at Carnegie-Mellon University is to interview individuals in order to determine their mental models of the nature of the risk, level of exposure, possible impacts, and possible mitigation measures. These models are compared with parallel models developed from interviewing experts, and the discrepancies are then analyzed to develop a communications strategy to disabuse the lay public of misleading assumptions (Fischhoff, Bostrom, and Quadrel 1993: 195–97). In the case of radon, brochures that used a “decision tree” displaying homeowners’ options, probabilities of consequences, and benefits and costs

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or displaying the expert model were shown to be more effective than the Environmental Protection Agency’s question-and-answer brochure in improving the public’s capacity to understand the issues and give explicit advice to others. (Fischhoff, Bostrom, and Quadrel 1993: 198). Community Self-Help Upgrading The communities that governments or NGOs typically target for collaborative help are those that need it the most—and therefore typically have had the least favorable past experiences with such efforts. Presuming that the most likely representativeness heuristic would refer to the community’s own prior experiences, a promising strategy is to refocus on the successes of other communities. One approach for overcoming the self-referencing representativeness heuristic is to heavily publicize the “best-practices” cases in other, reasonably comparable locales. For example, in the Philippines both the League of Municipalities of the Philippines and the Galing Pook Foundation (with financial support of the Ford Foundation) have publicized the best-practices examples in urban development, including the Naga City case reviewed in chapter 5 (Galing Pook Foundation 2005). Indeed, many organizations have embraced the strategy of judging and publicizing best practices. The huge United Nations Habitat “best practices database” is probably the most extensive, with “over 2,650 proven solutions from more than 140 countries to the common social, economic and environmental problems of an urbanizing world” (United Nations Human Settlements Programme 2007). Two obvious challenges arise in the use of these best practices inventories. The first is that both the status as “proven solutions” and the applicability of any particular “best practice” may be questionable. The second challenge is to bring appropriate best practices to the attention of local people. The United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) (2005) has devoted considerable effort to identifying best practices, supporting demonstration projects, and publicizing these through regional advisory services. And in terms of breaking the cycle of pessimism because of failed prior attempts, the publicity per se can refocus attention onto successes. Productivity Tax Reform. How can fundamental tax reforms to reduce economic inefficiencies and impose fair burden sharing be successful in the face of the usu­­al skepticism and hostility toward tax reforms in general? It is reasonable to

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expect that the moment government leaders announce a fundamental tax reform initiative, many stakeholders will assess its burdens and effectiveness on the basis of prior tax reform efforts—as one possible outcome of the representativeness heuristic. The fact that a tax reform is needed often means that previous efforts failed. Yet there are many categories into which the new initiative can be placed: a crusade against special interests, an austerity measure, part of a liberalization package, a restructuring and reduction of the bloated tax bureaucracy, and so on. The point is not that stakeholders will be deluded into thinking that no tax reform is envisaged, but rather that attention and the reference cases may be shaped to give the reform proposal a fairer hearing. An alternative strategy is to debias the assumption of likely failure by highlighting how the current proposal differs from the previous ones.

lessons of managing heuristics We have seen that the operation of heuristics as intuitive analytic shortcuts poses both problems and opportunities. As Baruch Fischhoff (2002: 748) notes, “reliance on heuristics can produce both good and bad performance.” When biases are likely to undermine the support of farsighted initiatives, a range of communications approaches outlined above can be considered. They are largely based on providing information and explanation that will offset the misleading characterizations. The opportunities arise when shifting the references or models on which a pessimistic assessment of a farsighted initiative can be effected, taking advantage of the operation of heuristics to lead stakeholders to a better appreciation of the benefits and viability of farsighted actions. It is important to overcome the unfortunate perception that heuristics are so inextricably linked to bias and false conclusions that they simply ought to be suppressed. Most of the progress in the study of heuristics has grown out of the “heuristics and biases” research program of Kahneman, Tversky, Slovic, and others, which for more than thirty years has relied on “using biases to diagnose heuristics” (Kahneman and Frederick 2002: 32). Kahneman, who tellingly combines “heuristics and biases” into one term to characterize the research program, asserts that because “the target attribute [i.e., the new case under consideration] and the heuristic attribute [the characteristics of the prior case(s)] are different, the substitution of one for the other inevitably introduces systematic biases” (Kahneman and Frederick 2002: 53). In order to demonstrate experimentally the operation of a heuristic, there must be a departure from the choices predicted by the baseline of conventionally rational calculus. Noll and Krier (1990; emphasis in the original) assert that “heuris-

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tics and biases refer to cognitive shortcuts people use to solve complex problems. The shortcuts cause ‘mistakes’ in the sense that they lead to decisions inferior to the decisions that would have been reached had the shortcuts not been used. Use of the shortcuts is not necessarily irrational, however, because it saves information-processing and decision-analysis costs.” Moreover, there is the concern that “taking advantage” of susceptibility to the biases that heuristics create is inappropriately manipulative. Carol Heimer, focusing primarily on the availability and representativeness heuristics, writes, “If we are so influenced by how questions are framed, an ingenious framer of decision opportunities wields considerable power [through] . . . purposive attempts to influence our perception of risk and our choices through the clever highlighting of vivid examples and the juxtaposition of general facts about a broader class with descriptions of a relatively narrow subgroup, skillful selection of reference points, and cunning manipulation of frames” (Heimer 1988: 504). The term “cunning manipulation” gives this assessment a strongly negative connotation: is it inappropriately manipulative to steer stakeholders to the heuristics that favor supporting the initiative? Four considerations address the issues of bias and manipulation. First, the apparent choice of engaging in comprehensive analysis of the current initiative or employing analytic heuristics is illusory: certain heuristics will be employed in any effort to analyze the initiative under consideration, because fully comprehensive analysis is impossible, and the predominant modes of projecting the effects of a given initiative converge with several heuristic routines. Heuristics are “fast and frugal” compared to elaborate analysis of all relevant considerations of the new case at hand (Gigerenzer and Goldstein 1996); therefore people will use heuristics of one sort or another. If the risks and opportunities of a farsighted initiative can be explained in comprehensible terms so that the stakeholders’ comfort with it increases with their fluency of understanding. Second, some heuristics are more constructive than others; therefore the challenges are to identify which ones are indeed more constructive and to point to strategies for promoting their use, and the biases that characterize a given heuristic can often be prevented or reduced by particular strategies of presentation. For example, the affect heuristic departs sharply from the sober consideration of short-term and long-term consequences. Third, the manipulation of frames is so widespread in the promotion of policy options that a farsighted leader who does not engage in it is at a serious disadvantage vis-à-vis the opponents of farsighted initiatives. Fourth, the importance of enduring credibility to support confidence in farsighted initiatives will typically discipline the manipulation of heuristics on the part of farsighted

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leaders. A sound initiative should be supportable by sound analysis, even if by necessity it entails analytic shortcuts. Kahneman’s point that prior cases will differ from the new case is a tautology: given that the case at hand is not identical to any previous case or combination of cases within a particular category, inferences drawn from the heuristic attribute will have to differ from the target attribute in some respect or another.

*V* Changing the Policy Process

The final part of this book examines the institutional arrangements that determine whether farsighted leaders and farsighted initiatives will be able to withstand the impatience and selfishness of other leaders and stakeholders. Their impatience and selfishness account for much of the vulnerability of the farsighted leader and the impetuosity and egoism that are frequently unchecked unless mechanisms exist to limit them. The chapters are intrinsically political, in that they focus on changing the decision processes, which inevitably affects the distribution of power and influence. These chapters demonstrate that a framework that views the decision process as having multiple, iterative functions can point to strategies that go beyond the static conception of a given set of decision makers making choices within a fixed decision process. These chapters also demonstrate additional contributions of some of the strategic categories covered in other chapters: hands-tying, performance evaluations, modifying the stakes of the decisions, and required analytical exercises that extend and deepen deliberations before decisions can be finalized.

chapter thirteen

Empowering and Insulating the Farsighted Leader

How can farsighted leadership be identified, developed, given authority, and protected? It is clear that some people are likely to be more farsighted than others—by temperament, role, training, experience, or circumstance. Therefore in addition to the efforts to induce particular individuals to become more farsighted and to cultivate their potential as farsighted leaders, strategies may be able to place particularly farsighted people into positions of leadership and to capitalize on their predispositions to address the future more constructively than others would. These strategies would encompass the multiple tasks of vesting farsighted people with the power to make decisions on behalf of themselves and others, inducing them to be as soundly farsighted as possible and reducing their vulnerability in making farsighted decisions. The approach of empowering the farsighted hinges on both knowing who they are and devising the means to direct power and other resources to their discretion. A related challenge is to fashion institutions that will be attractive to farsighted leaders. It is not obvious that farsighted people will choose to participate in institutions that oversee crucial aspects of economic policy, the development of physical infrastructure, and the management of natural resources, if playing leadership roles in these institutions is unfulfilling or dangerous. Another pitfall is that potentially farsighted leaders may be ground down by the bureaucratic inertia of their organizations, resulting in lowering their sights and the energy they are willing to devote to fighting the battles for more farsighted actions. The challenge of reducing their vulnerability is somewhat distinct from the general obstacle of vulnerability that might deter anyone from taking far­sighted

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actions because of concern over short-term emergencies. Rather, the question is whether more shortsighted people will retaliate against the decision maker for taking actions that threaten their short-term benefits. In some cases, the retaliation comes from long-standing opponents, as in the case of the Guatemalan government minister whose home was bombed when he tried to launch a tax reform. Yet in other cases, the retaliation may come from those to whom the individual is legitimately accountable. This vulnerability is the negative side of accountability: when an otherwise farsighted decision maker is accountable to an impatient superior or an impatient public. On the positive side, placing individuals into positions in which they can pursue farsighted objectives may strengthen their commitment to these objectives. The mandate, and the insulation consistent with the mandate, may signal that farsighted actions are both feasible and expected. Daryl Bem’s self-perception theory would lead us to expect that individuals entrusted with responsibilities calling for patience and farsighted vision would in many instances come to define their roles accordingly (Bem 1967). For example, it is hard to imagine that upon being appointed to the U.S. Supreme Court, a new justice would fail to internalize the responsibility to act on behalf of the integrity of the Constitution and the well-being of the country—though opinions will vary widely as to what decisions would further these goals. Several widely discussed dimensions of leadership styles can be linked to the potential for farsighted leadership. One is the distinction between “transactional” and “transformative” leadership (Avolio 1999: chap 2). The former is based on the explicit exchange of tangible rewards or deprivations between leader and followers. The exchange typically entails the welfare values of the sort reviewed in chapter 4 but may also involve power, as in receiving a promotion for supporting the leader’s initiative. As mentioned in chapter 4, the limited nature of these tangible resources for exchange makes it difficult, or at least expensive, to overcome the resistance to initiatives that call for shortterm sacrifice. Transformative leadership entails providing the inspiration for followers to look beyond the exchange of tangible rewards; it is more closely related to instilling farsighted norms, as reviewed in chapter 5. In many circumstances, transformative leadership requires empowering the followers, so that their commitment to the higher goals is of their own volition.

w h o a r e t h e fa r s i g h t e d ? It is tempting to presume that particular categories of people will be more farsighted: the wealthy because they are less vulnerable to short-term finan-

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cial emergencies, grandparents because of the generativity of caring for the future of their grandchildren, members of voluntary organizations with farsighted mandates, and so on. Yet because farsightedness reflects individual temperament as well as unique combinations of life situations and external circumstances, no individual within any broad category can be assumed to be particularly farsighted across the entire range of circumstances. Some of the rich are desperate to compete with others by taking reckless actions for shortterm gain; some grandparents are embittered in their familial relations or have reached the age of self-absorption; some members of organizations with farsighted mandates have joined for immediate gratifications of social interaction or respect. And even if individuals in particular roles are like-minded, different circumstances may reverse their predisposition to act farsightedly. Many individuals are drawn to politics by a long-term vision, only to be caught up in the immediacy of winning the next political contest.

investing broad classes with decision-making authority Nevertheless, in specific contexts a larger proportion of individuals within a certain category will be more farsighted than others. If, in the specific context, it can be confirmed that members of this category are indeed more predisposed to sound farsightedness, strategies for giving them more decision-making authority are feasible. Gender: Channeling Financial Resources to Female Heads of Households. For example, as the literature on “women in development” has documented, in developing countries there is a strong tendency for mothers with children still in the household to act more farsightedly than fathers. For example, a UNICEF study in Tajikistan revealed that “when women keep control over the family budget, a larger proportion of these resources is spent on health protection and food for children” (UNICEF 2001: 33). Government transfers, foreign assistance programs, and credit sources can direct financial resources to women who head households or share in this responsibility. Age. Impulse control—one of the bases of the capacity for patience—tends to strengthen as individuals move through childhood and adolescence to adulthood, although the late onset of various conditions, such as diminished cognitive capacity, side effects of medications, and social isolation may lead to declines in patience and lower concern for future consequences for

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some people of advanced age. Awareness of a broader range of consequences and knowledge of deeper problem definitions also tend to deepen as individuals mature, though again with the caveat that for some, old age brings diminished intellectual capacity. Insofar as older people are more likely to have children and grandchildren, there may also be greater identification with future generations. Beyond a certain age, undoubtedly varying from culture to culture, older people may also be less preoccupied with their own advancement. The obvious policy manifestation of the premise that older people will be more farsighted is the minimum-age requirement for holding various public offices. The prevalence of these requirements reflects the widespread view that age—up to a certain point—brings maturity and therefore brings a stronger possibility of farsighted behavior. Yet dynamics with opposite implications could come into play: younger people may be more idealistic and therefore more committed to trying to make fundamental, long-term changes in society. Whether their initiatives are mature approaches is, of course, another question. Age limits for holding positions of responsibility also reflect the presumption that competence declines beyond a certain age, which could encompass the competence to think and act with sufficient foresight. Another approach with respect to age is to counter the several forms of impatience of the young and any selfish old by instituting a mixed age distribution. The young may be impetuous. Some of the elderly may be impatient and selfish in seeking only short-term payoffs (Brennan and Kliemt 1994). The mixed distribution may increase the importance of intergenerational considerations by having multiple generations present at the deliberations. This may be due simply to focusing attention on the existence of multiple generations or to the social pressure to accede to the interests of participants of other age cohorts. Lower Situational Vulnerability. If people who are less preoccupied with the day-to-day struggle for existence have more capacity for long-term thinking and action than those immersed in this struggle, why not grant the less vulnerable more decision-making authority? The obvious risk to capitalizing on these differences is the unfairness of reducing the voice of those whose situations already impose greater hardship and vulnerability. If a fair strategy is to be based on the insight that the less vulnerable are likely to be more farsighted, it would be to develop programs to reduce the roots of the vulnerability. The strategies outlined in chapter 4 for decreasing the near-term costs of farsighted strategies for the poor—through access to credit and social safety nets—would

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be fairer and ultimately more effective than stipulating that the less economically vulnerable will dominate decision making. However, other strategies can be based on the fact that some decision makers within complex decision processes may face lower situational vulnerability than others. As chapter 14 will explore, many decision processes involve several different entities or elements, whose relative influence depends on the structure and rules of the process. It may be a process involving the executive, legislative, and judicial branches of government. Public-private partnerships involve decision makers from both government and the private sector. Different government ministries or departments may have to hammer out mutually agreeable policies. The decisions of an NGO or not-for-profit company may reflect the preferences of the board of trustees, officers, and rank-and-file employees and members. Often the decision makers in some of these entities or elements are less vulnerable. Therefore whether the decisions coming out of those processes are farsighted depends, at least in part, on whether those entities or elements have enough influence in shaping the decisions. For example, as argued below, a regulatory commission can be insulated politically through fixed terms, but the equally important question is how much influence such a commission has over the decisions in which it participates.

s c r e e n i n g f o r fa r s i g h t e d n e s s Given the lack of any one-to-one correspondence between farsightedness and individual characteristics other than personality factors, the burden of endowing the farsighted with leadership roles falls largely to the screening mechanisms. Any selection process will weigh particular kinds of information about potential position holders. The question is whether the information will be sufficiently revealing of the predisposition to be farsighted. Life histories, insofar as they can be reconstructed from interviews, references, and known past behaviors, can be enormously helpful. This screening to take on new positions often rests on the evaluations of prior performance. Therefore fair performance evaluations (discussed in chap. 6 and in the following section of this chapter) that give due weight to longer-term impacts would help to offset the common bias in favor of those who have had impressive short-term successes. The transparency of the actions of leaders as they rise through the ranks is similarly crucial, insofar as these actions will reveal how leaders balance their own immediate needs against the longer-term needs of others.

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i n s u l a t i n g t h e fa r s i g h t e d from political pressures Decision makers chosen for their farsightedness often need to be protected from political and social pressures or even from fear of physical retaliation. There is no guarantee that politically insulated decision makers will all be more farsighted, but the political insulation may enhance the willingness to be farsighted by conveying that the rationale for political insulation is to enable the decision maker to withstand pressures to choose shortsighted actions. One of the most obvious pressures is the risk of dismissal. However, a less blatant risk is the loss of decision-making power without losing position, as some individuals or subunits may be marginalized if they are not responsive to the shortsighted demands of higher authorities. Environmental agencies may appear to be highly influential on paper, but they are frequently shorn of their power when other government agencies propose politically compelling initiatives in industry, agriculture, forestry, and so on, with serious environmental consequences. Nondismissible Positions. The most common means of insulating decision makers from political pressure is to eliminate the possibility of dismissal in reprisal for any official decision. Many regulatory commissions have specified terms that make the incumbent commissioners immune from dismissal during that term. This does not guarantee that commissioners will be immune from political pressures, but it does reduce the vulnerability to such pressures. A recent trend in many countries is to grant monetary authorities (typically the central bank) far more autonomy from the executive branch than before, sometimes with nondismissible terms for the central bank governors. At very high levels, such as the supreme court, some constitutions insulate decision makers by giving them lifelong tenure without risk of dismissal except for crimes unrelated to their roles. While there are all too many cases in which dictators have abused such provisions to declare themselves “president for life,” in other circumstances these arrangements have been crucial in ensuring that decision makers can pursue farsighted policies without fear of termination or other reprisals. Because of the importance of such insulation and the obstacles it throws in the way of higher government authorities to dominate decision making, the standing of such insulated entities is typically subject to political contention. Thus in many countries the autonomy of the supreme court is a matter of political struggle.

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Hands-Tying Mandates. Even when reprisals are not a risk, a more subtle form of vulnerability arises out of economic, political, or social pressures to cater to the immediate preferences of stakeholders. Short-term sacrifices may be met with strong disapproval, even if the long-term goals are regarded as laudable. Several strategies can counter such pressures. One is the hands tying resulting from explicit mandates that would render shortsighted actions clearly inappropriate. For example, in the United States, the American Civil Liberties Union (ACLU) takes certain positions that are widely regarded as petty and out of touch with pressing needs such as national security. The ACLU strongly opposes national security measures that impinge upon personal privacy, which has provoked withering anti-ACLU criticism and the loss of support by at least some of those who otherwise would contribute time, money, and prestige to the organization. Therefore the ACLU leadership, like that of any other not-for-profit organization that depends on fundraising, is under some pressure to tailor its actions to serve the immediate needs of fund-raising. How can it maintain farsighted discipline as an organization and insulate its leaders from these pressures? Here again we see the power of hands-tying mandates. The explicit mission of the ACLU calls for the strict separation of church and state, and every element of its mission addresses the objective of opposing government incursions into the exercise of civil liberties.1 The ACLU leadership must consider current issues in terms of the precedents they set for issues that will arise in the long-term future; what may seem to be a trivial matter in the short run may be very significant in a precedent-based legal and governance system. Performance Evaluation. To the degree that the risk that individuals will be dismissed or marginalized is based on their performance evaluations, these evaluations can either protect or threaten the farsighted. The review of performance evaluation issues presented in chapter 6 in the vein of motivating farsightedness can be applied with equal relevance to protecting those who are so motivated. It is important to keep in mind that performance evaluation is not just an intraorganizational function—it goes on constantly in the public arena. Therefore the integrity of evaluations conducted by the full range of institutions that influence stakeholders are relevant. For farsighted government leaders, insulation from attacks by narrow interests can be provided by mass media with the desire and capability to report on the purposes and potentials of the farsighted initiatives; a supreme court that can reassure the public that legal farsighted actions are indeed legal, even if opponents challenge their

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legality; and nongovernmental groups that express appreciation for courageous government leaders. Institutional Opportunities for Hands Tying. Institutional arrangements that permit hands tying provide farsighted leaders with the opportunity to insulate themselves from shortsighted pressures, as illustrated by the Costa Rican policy reforms recounted in chapter 7. The conditionalities “imposed” by the International Monetary Fund, the World Bank, the regional development banks, and bilateral foreign-assistance agencies provide a typically underappreciated protection for the leaders who are committed to farsighted reforms, even if the public pronouncements of these leaders are sometimes hedged out of the political necessity to distance themselves from the immediate sacrifices. Representative versus Direct Democracy. The alternative conceptions and arrangements of democratic practice have different implications for the vulnerability of farsighted leaders. The first-level distinction is between representative and direct democracy, the latter giving citizens formal opportunities for input beyond elections. Referenda, citizen membership on official commissions, public-hearing and comment periods, and stakeholder negotiations are among the many modes of direct (or “participatory”) democracy. In contrast, purely representative democracy would put all decision making in the hands of elected officials and their appointees, with accountability to the citizenry coming solely at election time. However, one conception of representative democracy provides a central role for citizen policy preferences (so-called delegate representation), in contrast with the conception of “trustee” representation, holding that representatives are chosen to pursue what they believe is best for their constituents.2 The simple hypothesis is that the more limited the citizens’ role beyond voting in regular elections, the more insulated the policy makers are in the pursuit of their initiatives. This insulation would reduce the immediate political costs of pursuing policies that impose short-term sacrifices on significant stakeholders, at least until the next election. Direct democracy provides the least insulation; and trustee representation, where accepted, provides more insulation than delegate representation. The fact that the trustee representative has the opportunity to pursue long-term objectives with fewer encumbrances from stakeholders could provide the motivation and feasibility for more farsighted action. As Elkin (2000: 1) observes, the rationale for this arrangement within a social democratic state is that

Empowering and Insulating the Farsighted Leader  239

the principal concern of social democracy is equality, not self- government. A social democratic regime relies on strong political parties, bargaining among political elites, and a disciplined civil service that will do the bidding of its political masters while acting as a custodian of the public interest. These features of the regime allow it to pursue major initiatives by insulating political leaders from the views of the citizenry. The citizens make their views known at elections; in between elections, it is the job of political leaders to lead and to listen to citizens only when they are deeply divided, or when leaders have few other choices. However, several factors could negate these virtues. The trustee representative may be too preoccupied with winning the next election to take advantage of the opportunity to exercise the prerogatives of trustee. The trustee representative may be obligated to impatient stakeholders who have the resources to finance the next election campaign or to provide other benefits for the representative. And, of course, the trustee representative may not be farsighted at all. Here again it is important to note that the potential of such institutional arrangements will be actualized only if reinforcing conditions hold in particular contexts. Term Limits. If concern over winning the next election obliges representatives to cater to the impatience of the voters or to those who back the representative’s reelection campaign, eliminating the possibility of reelection has the potential to free the representative of these hindrances to farsighted action. This is not the most visible rationale for term limits, which are invoked as protection against the stranglehold of entrenched politicians whose control over elections precludes meaningful competition; in the extreme, de facto dictatorships of presidents or their equivalents. Yet service in the last permitted term does free the officeholder from the pressures of the next election, while of course the trade-off is that the officeholder is no longer accountable to the electorate in the next election for that office. Many nations have term limits on national and subnational office holding, typically limiting tenure to one, two, or three terms.3 The terms themselves may be quite long, such as Mexico’s six-year single-term presidency (el sexenio); in theory, at least, Mexican presidents have had six years to pursue their visions for Mexico. Term limits are often highly controversial, in that they deny the electorate the opportunity to reelect its favored candidates (assuming fair, competitive elections), reduce accountability to the electorate, may be ineffective in reducing

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the power of dominant elites if they simply shift from one type of office to another, and may limit the expertise of officeholders who cannot stay in office long enough to master the procedures and issues. And term limits cannot fully insulate officeholders from external pressures, whether from their political allies who are still concerned about the next election even if that officeholder cannot run, or from the stakeholders who may be able to employ the officeholder once the last term is finished. Munck (2005: 6) argues that “though term limits have been promoted as a way to avoid the capture of the state by a political class, its implementation frequently creates an incentive for elected politicians to ignore voters and to start looking for career opportunities as lobbyists for the business they are regulating.” Yet this does not justify a blanket condemnation of term limits, but rather is another instance in which the specific context determines the wisdom of the arrangement. As Munck goes on to say, “it is a sign of responsibility to acknowledge that things are usually complex, that the effect of a single institution depends on a range of other frequently poorly understood factors, and to avoid naïve and costly social experimentation” (Munck 2004: 36).

chapter fourteen

Structuring Decision-Making Processes

The ways that decisions are made can have a major impact on the focus of attention, the people involved in making crucial decisions, the considerations they will take into account, and the time horizons they will be induced to consider. Many authoritative decision processes, whether in government or other types of organizations, either do or can require conditions or procedures to enhance farsighted thinking and action. This is the realm of “constitutive policy making”: policies on how decisions will be made. They can be found in constitutions, organizations’ bylaws, agency regulations, laws, administrative rules, and other mandatory prescriptions. The design of decision-making processes can address several problems. The most obvious is the presence of shortsighted temptations. Another problem, as we saw in chapter 13, is the dominance of more shortsighted individuals in shaping the decisions. Yet another is the narrowness of considerations taken into account, which in turn may reflect shallow problem definitions, a narrow range of interests and perspectives represented by dominant decision makers, or a crisis mentality that shrinks the focus of attention (Lasswell 1965a). Finally, shortsighted strategies may arise because of processes that put individuals or groups into situations of rivalry or conflict that create expectations that early losses or compromises would lead to irreversibly negative net effects. Therefore beyond embedding cognitive exercises within decision-making processes (reviewed in chap. 8), the strategies of structuring the processes should focus on promoting greater comprehensiveness of participation and analysis, enhancing an emotional climate that deters urgency from overwhelming long-term

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considerations, and reducing gratuitous sources of conflict. In contrast to the cognitive exercises, the strategies for pursuing these objectives ought to shape the conditions of decision making, such as timing, nature of participants, constraints on the degree of conflict, and the magnitude of the stakes involved.

r e d u c i n g t h e e x p e c ta t i o n s o f t h e s h o r t- t e r m s ta k e s One fundamental connection between the nature of interactions and the incentive to engage in long-term strategies is the expectation of the magnitude of short-term benefits or losses. The basic hypothesis is that if the short-term stakes are very high, the favored strategy will focus on immediate success— while limited short-term stakes will be more conducive to longer-term strategies. For example, if immediate tax measures are believed to involve such significant stakes that particular economic groups could be greatly advantaged or harmed, the groups will be less willing to seek cooperation with others facing opposite impacts, or to accede to making sacrifices now for later gains. One set of strategies, then, consists of formal or informal mechanisms to limit or redress any large losses to individuals or groups impacted by the decisions. This is not to say that such limitations always lead to better policies, but rather only that affected groups may have less fear of long-term strategies because the their short-term exposure is limited. These strategies are a subset of the approaches of restructuring tangible benefits and costs introduced in chapter 4 but are limited to those approaches that limit the costs or risks of pursuing farsighted objectives. Formal Limits on Short-Term Losses. Formal mechanisms might include rules that specify a ceiling on losses. For example, the confrontations in the United States between environmentalists and industry over water quality issues related to aquaculture operations is limited by the terms of the U.S. Clean Water Act, which requires not the cleanest possible technologies for reducing water pollution but rather the cleanest technologies already employed within the industry. As a consequence, the environmental costs of aquaculture operations are limited to a burden that is affordable to at least some of the existing aquaculture operations. Checks and Balances. Significant power sharing reduces the likelihood that extreme positions favored by the top executive leaders would go unchecked by

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either the legislature or the judiciary, whether in presidential or parliamentary systems. Therefore power sharing established through checks and balances not only can reduce the likelihood of reneging (see chap. 7) but may also provide some degree of reassurance to otherwise vulnerable stakeholders that acceding to farsighted initiatives will not subject them to unacceptable losses. The obvious trade-off is that confrontations between branches may lead to stalemate and immobilism just when strong, farsighted actions are needed. Comparative studies of so-called divided government—the situation that prevails when the executive’s party does not hold a majority in the legislature— produces mixed results, ranging from policy paralysis to constructive joint action.1 The advantages of a strong and independent judiciary are less problematic. A supreme court that can defend against threats to fundamental rights may be essential for keeping vulnerability within bounds. Mutual Accommodation and Adjustment. In addition to the formal and expli­cit limits on stakes, some interactions are marked by informal “mutual adjustment” or “mutual accommodation” that reinforce a self-fulfilling expectation that losses will be limited. This expectation typically reflects understandings within the political culture that in turn are based on the broad set of decisionmaking institutions and the history of interactions among the groups and their representatives (Lindblom 1965). For example, Robert Shafer’s landmark study of Mexican economic planning under the dominant party, Partido Revolucionario Institucional (PRI), highlights that technically rational economic planning gave way to the accommodation of interests of virtually all key stakeholders in the broad PRI “family” (Shafer 1966). Similarly, while the 1986 U.S. tax reform was much more sweeping than most observers would have predicted, with various economic interests exposed to much higher tax burdens, subsequent adjustments soon mitigated these burdens. The key point is the widespread expectation among industrial groups, legislators, and executive-branch officials that as these large increases in burdens became obvious, they would be at least partially redressed.

t i m i n g a n d d e l ay s Many decision processes require long time periods before a decision can be made. Delays reduce the chances of impetuous decisions. For example, in Switzerland, widows are not permitted to remarry within a year of the death of their husbands (Frey 2001: 48). While such a gender-biased policy may be unfair and unwise, it is an illustration of the kinds of mandatory delays intended

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to block impetuous actions and provide the opportunity for further thought and the introduction of longer-term considerations. Delays also provide more time for multiple considerations to be taken into account as the issues are subjected to lengthier examination. Problem definitions can broaden over time as issues are examined and debated. In addition, lengthier deliberations provide more opportunity for various groups to express their views. Lengthier decision processes also provide more opportunity to balance the priorities of the day with the priorities that arise during the period of delay and to induce considerations of the more distant-future conditions likely to hold when the decision is taken. Formal Delays. Some processes formally require a specified amount of time before a decision can be made or enacted. In the United States and other developed countries, many regulatory decisions require a deliberation period (e.g., 30 days) so that stakeholders can be heard. In 2000, the reform of South Korea’s Prior Environmental Review System applied a thirty-day deliberation period to a nearly comprehensive range of proposals with environmental impacts (Republic of Korea Ministry of Environment 2001). Multiple Stage Policy Making. Significant periods between initiation and decision can also be engineered without a formally specified delay, simply by the complexity of the procedures and the number of entities involved. In the United Kingdom, for example, a significant legislative bill is typically preceded by a preliminary “green paper” and then a “white paper” specifying legislative intent, both subjected to consultation outside of Parliament as well as parliamentary debate. The bill, laboriously drafted by specialized lawyers, is then presented in the House of Commons in a first reading; debated after a second reading, and sent to committee for detailed examination and possible revision (for major bills the committee typically meets more than ten times over a month and a half ). Another debate and the vote follow a third reading; then three more readings, with parallel opportunities for revision, occur in the House of Lords. Following the House of Lords vote, it is returned to the House of Commons if reconciliation between the two versions is required, and then the reconciled version is submitted to the queen for royal assent. Many other countries have similarly complicated procedures. In the U.S. Congress, not only are lengthy hearings required but also any legislation requiring spending has to go through both authorizing committees and appropriations committees of both houses. These laborious procedures not only

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inhibit impetuous decisions but also provide for input from a host of sources and improve analytic capacity. Unsurprisingly, the more important the decisions, the more complicated the procedures are likely to be. Thus the process of amending a constitution is typically very elaborate and therefore involves even greater time periods than altering regulations or laws. In the United States, constitutional change requires both state-level and national-level actions. Delayed Implementation of Agreements. Delays are often built into the implementation of decisions, typically to permit affected stakeholders’ adjustment to the new situation, to overcome the reluctance of decision makers to bear the short-term costs, or both. If leaders are too impatient (or under too much pressure to act decisively) to build in a suitable delay, the resistance to the initiative may be unnecessarily stiff. Establishing farsighted political arrangements may call for a far less utilized rationale for building in a delay. Even when new rules of the political game would be beneficial for the polity as a whole, the consequences of its immediate implementation would typically provide an obvious advantage for some groups, provoking others to oppose the changes. For example, shifting from at-large legislative elections to district-by-district elections may provide more accountability to local people, but leaders of one or more political parties will fear that this shift will mean fewer of their candidates will be elected. A strengthening of legislative power vis-à-vis executive power is likely to be resisted by the political groups with greater influence in the executive branch. From this short-term perspective, farsighted changes in the political formula would face continual opposition from those expecting to lose. In situations in which the change would give the winners enough advantage to wrest even more power (e.g., if one group gains enough legislative seats to change the constitution), the threat to others is even greater. However, in light of the variability in political fortunes, political factions may be willing to support farsighted changes in political formula if the changes would go into effect far enough into the future that none of the groups could be confident that they would be advantaged or disadvantaged by that time. The result could convergence to a formula that is acceptable and sustainable because all have the incentive to make the arrangement fair both to those who end up with advantaged or disadvantaged situations. This is, in effect, a practical application of John Rawls’s principle that a “veil of ignorance” about a particular party’s situation will induce greater concern for overall fairness—insofar as that

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party will be less certain about his or her position in the future state (Rawls 1971: chap. 24). Consider, for example, a constitutional convention in a country like Haiti, facing the challenge of formulating new electoral rules and civil-rights guarantees in a context of great volatility in the relative strengths of highly antagonistic political factions, partisan control over mass media, and high potential for whoever controls government to marginalize opposition groups. Those with the current advantage would be likely to press for rules that would consolidate their position; others would be likely to oppose such rules. If, however, the date of enactment were three or even five years in the future, the currently strongest faction is more likely to moderate its preference for governmental dominance, and a mutually agreeable set of rules would be more feasible. Continuity of Interaction. Another fundamental connection between farsightedness and the duration of process hinges on the expectation of continuity. Game theorists have demonstrated in many contexts that ongoing games encourage cooperation over conflict and strategies to establish longterm agreements and understandings.2 Here again the underlying premise is hardly surprising: stability of expectations is conducive to longer-term strategies. In many countries the emergence of labor unions was initially met with extreme efforts by employers and employer confederations to crush the labor movements, which in turn had to resort to violent countermeasures. Yet in many counties the official recognition of unions and their rights to negotiate on behalf of workers led to more long-term patterns of employer-and-union negotiations.

i n c l u s i v e n e s s o f pa r t i c i pa t i o n If we focus on selfishness in the decision-making process as one source of shortsighted decisions and unsustainable policies, we can see why more inclusive participation in policy deliberations has the potential of broadening problem definitions and better representing the interests and well-being of important stakeholders. The premise is justified not only on equity grounds but also on political grounds: the excluded can often undermine an initiative that was formulated without their participation. Recall the Philippine case of addressing the issue of squatter settlements in Naga City (presented in chap. 4). The early efforts of municipal authorities to eradicate the settlements suffered from the shortsighted neglect of the realities of urbanization and the unwillingness of squatters to participate in community upgrading without secure

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property titles. The “Partners in Development Program” begun in the early 1990s encouraged the development of squatter associations and facilitated the entry of these associations into the policy deliberations with government, NGOs, and the business sector. With greater understanding of the dynamics of squatters’ incentives and constraints, policy attention shifted to securing land tenure through various modes, as well as collaborative upgrading of housing, sanitation, and transport. The more inclusive participation has been an important factor in the success of the program (UNESCO-Habitat 1996; Tumbaga and Sabado 2003). Decentralization.The difficulties of motivating officials of national governments to share interests with local people strengthen the appeal of various forms of decentralization beyond the hands-tying motive discussed in chapter 7. Whether control over a particular good or service ought to be decentralized depends on many factors: the efficiency of its provision, the level of decisionmaking authority that will ensure proper equity in its distribution, the best way to control negative externalities, and so on. Yet as far as farsightedness is concerned, the major consideration is whether decentralized control will ensure greater common interest between the decision maker and the people to be served. In chapter 7 delegation or devolution of authority to subnational governmental levels were presented as hands-tying approaches to gain greater support from local people.3 Here it is useful to point out another, perhaps more fundamental impact: greater merger of interests between decision makers and stakeholders. The officials of lower governmental units or community groups are more likely to originate from the area, to be more dependent on the good will of the local people, and have contact of longer duration than the national officials subject to rotation in their assignments. Yet there is no guarantee that subnational officials will find common cause with the community, and in some instances their very connections with particular groups within the local area may worsen the discrimination against other groups. Ownership or Co-Ownership of Decision-Making Prerogatives. One alternative, then, is to devolve ownership to local people, away from national or subnational government. This resolves one principal-agent problem, insofar as the government official is considered the agent, with the hopes that the local people’s leaders will pose less of a principal-agent problem because of their stronger identifications with the community and that the community will be able to engage in constructive collective action.

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The most straightforward approach is simply to hand over decision-making authority. As mentioned in chapter 7, this approach has been prevalent in recent decades in the movements to devolve authority of natural resources to local communities in rural areas, by recognizing their preexisting full user rights or granting such rights. This full devolution of authority would reduce some aspects of uncertainty, such as the uncertainty regarding the future actions of others currently holding or sharing decision-making authority. However, devolution does not completely eliminate this uncertainty, as long as the possibility remains that these others may reassert their authority to participate in decision making. In the cases in which government officials ostensibly acting on behalf of the local communities to safeguard natural resources have instead engaged in corruption for their own gains, the devolution reduces the negative externalities of agents’ behavior by eliminating or reducing the roles of the agents. An even more modest form of decentralization, the deconcentration (i.e., relocation) of government officials out of headquarters and into the communities, can at least partially integrate the officials into the community, to the degree that living in or close by a community will foster common interests. Locally based officials may also have the technical advantage of more intimate knowledge of local conditions and the desires of local people. Yet the effectiveness of deconcentration in this respect also has a crucial psychological and moral dimension: officials should believe that their success is intrinsically derived from the success of the community they serve. How to socialize officials to identify with the population is a perennial challenge for government. It is exacerbated by the gap in the educational and social standing of officials and the public, with ethnic differences as well in many cases. For example, in Robbins’s diagnosis of the “rotten institution” of forest regulation in India, the self-interest of the government officials is not mitigated by any sense of identification with the local people (Robbins 2000). As a result, the pattern of bribes remains unrestrained by identifications with either the local people or the broader public. It is also exacerbated by the low pay received by government officials in many countries, reducing the chances that they would have pride as public servants, and increasing the rationale for disaffection and selfishness. Multisectoral or “Stakeholder” Negotiations. The formal use of multisectoral or stakeholder negotiations, introduced briefly in chapter 8 as a means of prompting consideration of future effects, is even more relevant as a mechanism intended to increase commitment. Often decision making in the formulation of policies comes to be shared, rather than fully devolved. When

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individuals or groups play a significant role in decision making, they also reduce their risks of uncertainty, as well as reducing their vulnerability to decisions that otherwise might be taken by others at their expense. The motivation to increase analytic capacity is also likely to be enhanced when knowledge can be useful for making more rewarding choices. Formal authorities may bring in individuals and representatives, otherwise without official authority, to participate in developing official policies. A recent example can be found in the Argentine government’s effort to involve key industries in its plans for economic recovery. In 2001 the federal, provincial, and Buenos Aires governments convened a deliberation with representatives of the chemical industry and the relevant unions, leading to a pact that committed the various governments to providing tax exemptions to components of the chemical industry; the industry associations committed to maintaining employment; and the unions committed to labor peace (Argentina, Equipo Federal del Trabajo 2001). Sometimes the decisions emerging from these interactions are formally official; sometimes they are subject to further, more official decisions. Often their status is problematically ambiguous as to how much authority they have and whether they are negotiations, consultations, or merely opportunities to express preferences. Yet these interactions, sometimes referred to as “stakeholder negotiations” or “concertation,” may also provide greater certainty and less vulnerability to those otherwise without official authority. These negotiations sometimes suffer from a lack of legitimacy and acceptance. Objections may be lodged by those who are excluded, those who believe that the process does not give them enough weight, those who do not get their way, or those who find the decisions overruled by higher levels of authority. With the government ultimately responsible for the structure of the interactions, and no universally accepted distribution of influence among stakeholders, there will always be some basis for criticizing the government and the process. For example, the Costa Rican concertation process in the 1980s, mounted with high expectations for coming to agreement on liberalizing the stagnant state sector, failed dramatically upon the denunciations of sectors that disliked the policies emerging from the process (D. Ascher 1999). Mixed Policy-Making Bodies. A related strategy is to add continuity or even permanence to co-ownership of decision-making authority by establishing ongoing decision-making bodies, sometimes labeled “commissions,” that include representatives from different sectors. Mixed public-private bodies with some official decision-making authority are common in many developing as well as developed countries. Although no particular group has full control over the

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decisions, some degree of ownership is provided. For example, emerging from the 2001 Argentine pact between the government and the chemical industry was a commission to implement the agreement and to elaborate a strategic restructuring plan. The commission membership includes representatives of the Industrial and Petrochemical Chamber, the Fertilizer and Agrochemical Chamber, the Chamber for Agricultural and Fertilizer Health, the Federation of Chemical and Petrochemical Workers, and the three levels of government. Here again, the potential pitfalls of such arrangements arise from the question of representation. Quasi-governmental commissions exclude some segments of the citizenry; insofar as their decisions are official, or affect official decisions, they operate outside of the standard legislative and executive processes of representative democracy. One of the major grievances of the unions against the pre-Allende governments in Chile was that so many policy decisions apparently were being made by quasi-governmental entities with more representation by the business sectors than any others (Ascher 1984: chap. 7).

lessons of structuring decision-making processes Some decision-making processes can address analytic limitations and vulnerability by expanding the opportunities for considerations to be taken into account, limiting the extent of short- and long-term costs for stakeholders worried about losing out, and broadening the interests represented in decision making (see table 14.1). ta b l e 1 4 . 1   Objectives and design dimensions of decision-making processes Reduce short-term stakes

Formal limits on losses Checks and balances Mutual accommodation

Increase considerations/induce cooperation through extending the decision process



Formal delays Multiple stages Delayed implementation Continuity of interaction

Increase inclusiveness of participation



Decentralization to other governmental levels Devolution to local communities Deconcentration Stakeholder negotiations Mixed policy-making bodies

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Fortunately, the specific strategies for pursuing these objectives are also often useful in the pursuit of other objectives that reinforce farsighted appeals, such as relinquishing power to enhance credibility, restructuring short- and long-term benefits and costs, and protecting the farsighted. The most difficult challenge for designing the policy-making arrangements is the generally clear trade-off between limiting the potential risks of stakeholders to get their support or at least acquiescence and permitting bold action when needed. And even if the farsighted leader has the wisdom as to what arrangements will promote farsighted decision making, the challenge of enacting these constitutive changes remains. Constitutive changes are intrinsically political—they shape the distribution of power and hence the potential to achieve all the other benefits that power can bring. However, there is cause for optimism in knowing that policy-making processes sometimes do evolve in the face of frustrations with existing routines that reinforce myopia and stagnation.

chapter fifteen

Conclusions

The most obvious conclusion to be drawn from this effort to classify, inventory, and assess strategies for promoting farsightedness is that the number and variety of categories and specific strategies are much greater than one might have imagined. By expanding the search for strategies beyond the narrow confines of expected utility calculations of material benefits, we can see strategic opportunities to restructure incentives, reframe communications, and reorganize decision processes in situations that might otherwise seem doomed to shortsighted actions. This is certainly a heartening result. And in many circumstances, these strategies have been successfully applied, accounting for the fact that amidst the depressing prevalence of shortsighted actions, some farsighted initiatives have prospered. On every continent of the developing world, some nations have demonstrated impressive long-term initiatives, whether in insulating natural-resource revenues from the pressures of immediate spending, investing more in education, raising household savings rates, accomplishing a tax reform that eliminates special privileges even at the risk of short-term risks of political retaliation, or other initiatives. Bangladesh has millions of households with greater commitment to savings because of the efforts of the Grameen Bank, as do other countries exposed to similar efforts. Botswana, Chile, and other natural-resource-rich countries have managed to insulate export revenues As the cases of Naga City in the Philippines and Orangi in Pakistan indicate, even the poorest shantytown dwellers have responded to long-term self-improvement opportunities. The cleverness of those who succeed in promoting farsighted commitments often rests on their appreciation of the fact that farsighted initiatives

Conclusions  253

can be structured in many different ways to pursue the same objective. Even if some degree of pure impatience will persist despite efforts to reduce it, restructuring tangible and intangible benefits and costs can tilt the balance in favor of taking the greater long-term payoff over the short-term one. Despite some degree of selfishness, rewards can be restructured to internalize what would otherwise be externalities—and the “self ” can be broadened through changes in their identifications. Analytic capacity can be strengthened so that long-term benefits can be better appreciated, and the various forms of vulnerability can be lessened to make attractive farsighted actions feasible. The cleverness behind many of the strategies also rest on the fact that people are complicated. People do not simply discount the future at a constant rate no matter what the expected effects—they respond to framing of consequences as risks or opportunities. They are sensitive to emotional arousal, appeals to their sense of progress, and potent symbols. Their identifications are malleable, and their priorities are not fixed. While these potentials for change crucial for overcoming the obstacles to farsighted actions, their basis in psychological reactions also means that the effectiveness of such strategies depends on the nuances of perceptions and the details of predispositions. While context matters for the attractiveness of tangible rewards, it matters even more for intangible rewards. For the policy maker proposing initiatives calling for short-term sacrifice, the lessons are that the content of the initiative matters in how the material rewards are structured and timed. Along with the content of the initiative, the nature of the initiator’s commitment is also important in order to maintain credibility. A strategy of self-restraint may need to accompany the initiative, as well as a communications strategy to convey the credibility of the commitment. Beyond the material rewards, we have seen how some organizations capitalize on the relatively inexpensive strategies of according respect, affection, respect, rectitude, and power to reinforce farsighted behaviors. These social and psychological rewards to promote farsighted actions have been shown to have impressive potential in both potency and cost effectiveness, but they are particularly sensitive to context. The deference accorded to “sharp dealers” in New York business circles may be condemned elsewhere, just as acting on behalf of broad community interests at the expense of family or clan loyalties will be admired in some contexts but viewed as a betrayal of appropriate loyalties in others.1 Both material and nonmaterial rewards can be directed to farsighted individuals if performance evaluations, which are commonly very powerful in shaping behavior, can overcome the fact that in many instances the metrics

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used to measure performance provoke shortsighted behavior. Remedies are often available: some measures can capture longer-term progress, and some “second-guessing” approaches can deter shortsighted behavior even if these approaches are applied only selectively. How policy makers present initiatives is also crucial, because the emotions evoked by the presentation will influence both time discounting and the degree of mobilization to address longer-term considerations. In addition, the framing of presentations shapes how the current initiative will be associated with prior initiatives, which is important because stakeholders’ analytic limitations drive them to conclusions about the current proposal in light of the fate of what they see as comparable prior proposals. Recognizing the very large number of potentially relevant dimensions of communications does not directly lend itself to tightly defined strategies, but it does direct the initiator to the importance of examining all of these dimensions that their potentials for promoting or discouraging more farsighted reactions. Another lesson is the pivotal role of the focus of attention and the potential that many strategies have for shifting that focus. Contrary to the common assumption that issue priorities are known and fixed, it is clear that greater awareness of long-term risks and opportunities can change priorities. Drawing attention to the more distant past to change the metric of individuals’ time scales, presenting deeper problem definitions, and inducing people to engage in serious long-term planning or other analytic exercises are just a few of the strategies to address the cognitive challenges to farsighted action. The institutional lessons begin with the insight that the creation of organizations with farsighted mandates can itself reinforce both the identifications with farsighted goals and the material and nonmaterial rewards for pursuing them. Institutions, whether formal organizations or simply regularized patterns of interaction, also shape the expectations that determine whether people are willing to make the short-term sacrifices to achieve these goals. Other institutional dimensions are the capacity of the leadership selection processes to elevate farsighted individuals to positions of authority, and the arrangements that insulate them from retaliation for making the hard choices. This can be seen in both governmental and nongovernmental organizations, from Supreme Court justices with life tenure to the leaders of civic organizations who are protected when they have to take unpopular positions to uphold farsighted goals by the uncompromising mandates of their organizations. Yet another institutional dimension is the variety of consultation and authoritative decision processes that tend to discourage or encourage behaviors that are fed by impatience, selfishness, analytic limitations, or vulnerability.

Conclusions  255

Some processes afford more opportunities than others to defeat impetuous decisions or at least to delay them until more deliberation or changed conditions can lead to reconsideration. Some processes are better than others at holding the selfish accountable. Some provide more space for solid analysis. And some provide enough participation to reduce the vulnerability of stakeholders whose support or acquiescence is required for the farsighted policy to succeed. Finally, our optimism is reinforced by the fact that many of the strategies can reduce or circumvent more than one of the four obstacles to farsighted action. For example, support for savings groups such as Thailand’s “One Baht a Day” program or the Grameen Bank reduces economic vulnerability while also improving analytic capacity of participants as they are exposed to the logic of savings and investment. Similarly, the performance evaluations that rely on reviewing project appraisals to ensure that the original appraisers are not inappropriately putting poor projects into the pipeline, as exemplified by the World Bank Quality Assurance Group’s review process discussed in chapter 6, can address impatience and selfishness at the same time. * How is a farsighted individual to navigate through the myriad of potential strategies? It is useful to note that the strategies can be arrayed across different categories, each of which could be engaged by particular leadership roles but not all. If initiators are involved in designing policies requiring support beyond their organization, then creating and rescheduling tangible and intangible benefits and costs (chaps. 4–6); policies imposing restraints on the initiators themselves (chap. 7); and communicating about policies in terms of design dimensions, symbol selection, use and debiasing of heuristics (chaps. 10–12) are all relevant. If initiators are involved in shaping intraorganizational structures and processes, then intraorganizational analytic exercises (chaps. 8–9), strategies for shaping intraorganizational rewards (chaps. 4–6, 13), and strategies for shaping intraorganizational culture (chap. 5) should be considered. If initiators are involved in altering the overall structure for decision making in the society, then strategies that entail shaping broad institutional culture and broad policy-making processes (chaps. 5, 14) are relevant, as are strategies for creating policy processes the impose restraints on initiators (chaps. 7, 13–14) and stakeholder analytic exercises (chaps. 8–9).

256  Chapter Fifteen

Another important dimension for selecting strategies arises from the fact that different strategies employ different resources, which may be abundant or scarce for the initiator of the farsighted effort. In a fascinating application of the policy sciences’ framework to development challenges thirty years ago, Harold Lasswell (1976) demonstrated how each category of valued resources could be employed to pursue any of the value categories defined by the same eight categories.2 For example, those who have the capacity to endow others with respect (possibly because they themselves are respected) can increase the skill levels of others by “increas[ing] recognition for excellence in new methods” (Lasswell 1976: 270). Thus endowing respect can enhance the skills of managing household savings (e.g., the respect emerging from the success of poor women who are praised for responsible management of loans from Bangladesh’s Grameen Bank), managing ecosystems sustainably (recall the impact of the Honduran national forestry school in inculcating the professional norm of sustainable forestry), or designing buildings to last (recall the code of ethics of the American Society of Civil Engineers). By the same token, those who have wealth at their disposal can invest “in enlarging capability for public information” to enhance enlightenment and power (Lasswell 1976: 268); this can serve to make the public more aware of long-term risks and opportunities and to reduce their vulnerability to policy changes that might otherwise deter them from making short-term sacrifices. Investments in community radio (Madamombe 2005) can be very important in this respect. With eight broad categories, sixty-four combinations of resource types and rewards could be explored. While it would obviously be very tedious to illustrate all combinations, the important point is that recognizing the whole range of values opens up an immense range of “investment” opportunities. Given the connection between resources and strategies, it is worth revisiting the distinctive resource endowments of developing countries in considering the viability of various strategies. Any taxonomy of strategies that aspires to comprehensiveness will include strategies that may exceed the capabilities of individuals, groups, or governments in particular countries or locales within these countries. The choice of strategies ought to recognize the abundance or scarcity of particular resources and the implications for the strategies to be selected. In particular, some strategies are likely to be more difficult to support in less economically developed countries insofar as they require high levels of information richness, analytic capacity, strong communications systems, financialsystem maturity, economic stability, or economic surplus. The institutional development that ensures contract enforcement and organizational capacity in

Conclusions  257

general is frequently weak as well, further limiting the strategies that require institutional strengths. Insofar as many developing countries also face more severe political challenges, the strategies requiring political stability, the rule of law, and social capital must be regarded with caution. In those countries with less stable political formulas, the political vulnerability of government leaders is likely to be greater, possibly cutting off the strategies that require leaders to take on additional risks, such as the self-hostaging strategies or deliberately bear immediate political costs in order to enhance the credibility of the initiative. Yet even if champions of farsighted initiatives in developing countries are less equipped to back up their initiatives with credible assurances of both short- and long-term material benefits, or strong and stable institutions, they may be in a better position to take advantage of many dimensions of fluidity that characterize many developing countries. Where identifications are still fluid, it may be possible to broaden existing narrow identifications, as reviewed in chapter 5. This is obviously a compelling question for Iraq, Rwanda, Sudan, and other countries that must overcome sectarian strife in order to make long-term economic and political progress. Similarly, professional norms are likely to be most malleable as professionalization of various occupations first emerges. In terms of restructuring decision-making processes to incorporate a broader range of considerations and reduce the risk of impetuous decisions, the fact that the overall political and institutional formula in many developing countries is still open to change presents more opportunities than in developed countries. Although many examples demonstrate that these strategies work in particular real-world cases, it is also obvious that the applicability of any given strategy will depend on the details of each specific situation. Many of the catalogued strategies will be worth considering, but that by no means guarantees that they would be effective, or worth whatever costs are entailed, in a particular situation. Many of the strategies operate through changing the subjectivity of those whose cooperation with farsighted initiatives is being solicited, and this subjectivity is highly context specific. Once a strategy is identified as promising, it must be “tested” in several ways. Allies highly familiar with the political and emotional circumstances should be consulted for their views on its feasibility. If possible, the strategy should be vetted with focus groups comprised of people to whom the efforts are targeted and then tested through pilot efforts. Yet even if this inventory is regarded as only a guide or a mapping of possibilities, the hope is that those of you who are committed to long-term sustainability will be fortified by the knowledge that so many approaches may be at your disposal.

notes

chapter one 1. Attanasio and Szekely note that “due to the absence of efficient credit and insurance markets, household savings are a crucial determinant of welfare in developing countries. On the one hand, without savings, households have few other mechanisms to smooth out unexpected variations in their income, and so, shocks may leave permanent scars, such as interrupting the process of human capital accumulation at early ages. On the other, since savings are one of the only means to accumulate assets in the absence of credit and insurance markets, the capacity to save becomes one of the main vehicles of social mobility and of enhancing future income-earning possibilities” (Attanasio and Szekely 2000: 5). 2. The figures for Mexico and Peru, among the few Latin American countries with reliable time series on household savings, were only 9.5 and 9.6 percent of disposable income, respectively, in the mid-1990s, compared to 29.7 percent for Thailand and 49.1 percent for Taiwan (Attanasio and Szekely 2000: 60). 3. Based on statistics provided in the United Nations Food and Agriculture Organization (2007b), Statistical Annex. 4. The World Health Organization (2007: 25) estimates that “quite apart from other sexual activities in which they may be engaged—one-quarter or more of young adolescent boys in some [developing] countries (particularly in Latin America and the Caribbean) have engaged in vaginal intercourse before the age of 15.” 5. For Africa, see Benmaamar (2006) and Hook (2006: 3); for the transitional economies of the Balkans, see Hörhager (2006: 10), citing European Investment Bank estimates of the rates of return on road maintenance projects at 20–70 percent, compared to returns on road construction of only 5 percent. 6. Statistics for South and West Asia are unavailable. 7. See, for example, the report of the Conference on Indigenous Philanthropy (2000).

260  Notes to Pages 9–15

8. Many other examples of long-standing communal arrangements for resource management can be found in Bromley (1992), Ostrom (1990), and Tang (1992). 9. Even under a fairly authoritarian South Korean government, “labour resistance to austerity measures was a contributory factor in the fall of the Park regime in 1979” (Kong 1995: 638). 10. Calvo and Vegh (1999: 58) clarify that there are different temporal costs involved with different types of austerity or stabilization programs. They find that “exchange rate-based stabilization leads to an initial boom in real GDP, private consumption, and durable goods consumption. The recession typically associated with disinflation programs appears only later in the programs. . . . Money-based stabilization leads to an early recession, suggesting that the timing of the contraction depends on the nominal anchor which is used (the ‘recession-now-versus-recession-later’ hypotheses.” 11. For a concise summary of the critiques of austerity programs of the sort recommended by the International Monetary Fund and the World Bank, see Rowland (2003). For a summary of the defenses of these programs, see Vreeland (1999) and Hopkins et al. (2000). 12. The International Monetary Fund estimates that the median consumer price inflation rate of emerging market and developing countries was more than three times greater than the median for advanced economies during 1989–98 and more than twice the advanced economies’ median for the 1999–2008 period. Because of hyperinflation in some emerging market and developing countries, the average inflation rate differences between these nations and developed nations was even greater: 50.3 vs. 3.5 percent for the first period; 6.2 vs. 2.0 percent for the second (International Monetary Fund 2007: 223). 13. Many such cases are documented in Ascher and Healy (1990), Auty (1990), Karl (1997), and W. Ascher 1999. 14. Flyvbjerg, Bruzelius, and Rothengatter (2003) documents this tendency for major infrastructure projects in both developing and developed nations. 15. For example, in 2003 Mr. Plodprasop Suraswadi, permanent secretary of Thailand’s Natural Resources and Environment Ministry, said, “It’s time to amend the law. Those who kill (endangered) wildlife, particularly the big and important animals, deserve the death penalty” (Agence France-Presse 2003). Excessive penalties for poaching, for example, in a country like Liberia where game meat constitutes a major source of protein in the rural villagers’ diet (ITTO 1988: 48), are extraordinarily difficult to enforce. 16. Tan and Mingat (1992: 7) document the prevalence of this bias in Asia, especially in the poorer nations. Kelley (1996: 90) argues that this applies to developing countries in other world regions as well. In Egypt, the Institute of National Planning (2000: 97) judged that “With the constraint of financial resources, the bias toward higher education and against basic education, has contributed to quality deterioration in basic education, leading to a skewed result.” A World Bank assessment (Entwhis-

Notes to Pages 16–42  261

tle et al. 2005: 128) found the same result in Senegal; another World Bank assessment found the same in Guatemala (World Bank 1995: 29). 17. For an exposition of these connections, based on the work of Harold D. Lasswell, see Ascher and Hirschfelder-Ascher (2004). 18. For the broadest expositions of Lasswell’s framework, see Lasswell and Kaplan (1950), Lasswell (1971b), and Lasswell and McDougal (1992). 19. The importance of the difficulties that nonsimultaneous exchanges raise, and the centrality of nonsimultaneity for contracts, is emphasized entertainingly in Kron­ man (1985).

chapter two 1. The huge literature on impatience is nicely summarized in Loewenstein (1992), Becker and Mulligan (1997), and Frederick, Loewenstein, and O’Donoghue (2003). 2. Kahn and McDonald (1995) summarize several of the dynamics that can lead to short-term deforestation practices. 3. Schmutzler (2001) assesses the problem that corporations’ managers, who have shorter time horizons than owners, neglect the long-term prospects for such complementarities and therefore resist opportunities to invest in product and production innovations that would be both more profitable and environmentally friendly. 4. A massive UNESCO study of education and population linkages concludes that “a critical failing in current development policy is a shortsighted underinvestment in education” (United Nations Educational, Social and Cultural Organization 1999: 48). 5. Cline (2004) argues that experts who oppose reducing greenhouse gas emissions on the grounds that it is not worth it in terms of discounted benefits and costs use temporal discount rates that are higher even than the rates appropriate for investment decisions. Yields on short-term U.S. Treasury bonds, which are essentially risk and inflation free, imply an annual discount rate of only 1 percent, in contrast to the 3 percent rate that these experts’ studies employ. Cline concludes that the use of this rate reflects “pure impatience” rather than optimizing net societal welfare. 6. The Page 1993 volume includes numerous accounts of shortsighted monetary policies by developing-country governments that reduce the business sector’s investment time horizons. Jacobs (1991) documents similar problems in the United States. 7. Lasswell and Kaplan (1950: 11–12) operationalize “identification” as how individuals symbolize themselves, both to themselves and to others. 8. One indication of the limitations of social safety nets in developing countries is the estimate by Chetty and Looney (2005) that developing countries devote an average of 6.8 percent of GDP to social insurance, compared to an average of 18.5 percent for developed countries. 9. Singh and Fagernäs (2006: 4) calculate lower volatility for East Asia for 1982– 2004 compared to the previous two subperiods, but only by excluding the East Asian economic crisis years of 1998 and 1999.

262  Notes to Pages 42–53

10. The situation in parliamentary systems is more complicated, in that ministers do not have fixed terms. Of course, this holds for both developing and developed nations.

chapter three 1. Loewenstein and Prelec’s model (1992) can represent a straightforward decliningrate discounting pattern, a constant-rate discounting model, and even preference for later outcomes, depending on the values assigned or empirically calculated for its parameters. Therefore although it is very useful for mathematically representing discounting behavior, it does not assert a particular pattern of discounting. 2. Chapman (2003) describes these inverted time preferences and provides healthrelated examples. 3. For example, when people are not angry, they tend to underestimate how aggressive they will be when they are angry. Similarly, Loewenstein, Nagin, and Paternoster (1997) report that when young males are not sexually aroused, they predict lower levels of sexual aggressiveness in dating situations than they predict when they are sexually aroused. 4. This subfield is often labeled “the psychology of socialization.” 5. See Bryan, Redfield, and Mader (1971). Eisenberg (1983: 6) summarizes a host of research findings demonstrating the positive effects of reinforcing “prosocial” behavior. 6. To cite just a few of the compendia on this topic: Kahneman, Slovic, and Tversky (1982); Kahneman and Tversky (2000); Gilovich, Griffin, and Kahneman (2002). 7. See, for instance, Camerer (2003).

chapter four 1. The very broad idea of optimism toward the future, captured by views on progress, the perfectibility of humankind, etc., is also very important for the willingness to share with others today and to support initiatives that will benefit future generations. “Democratic character” rests on a sufficient degree of this broad optimism and confidence (Lasswell 1951). 2. This program is assessed in Mekong Economics Ltd. (2001: 17–19). 3. This was the experience of the U.S. savings and loan associations in the 1980s, costing the U.S. taxpayers roughly $125 billion. 4. See Camerer et al. (2003). 5. Other natural resources with long gestation periods include fish stocks and livestock herds following a population collapse. 6. The importance of market-rate credit lies first in the advantage of making the source of credit sustainable, rather than bleeding it through below-market loans that erode the credit source’s capacity to make further loans. It also deters opportunists

Notes to Pages 54–94  263

from trying to take advantage of the subsidies even if they are unwilling or unable to operate productively. Subsidized interest rates insofar as they appear to be giveaways, can also reduce the willingness of borrowers to pay back the loans, as was the plight of the rural credit program under the Ferdinand Marcos administration (Smith 1988:5). 7. See Hazell, Pomareda, and Valdez (1986) for a thorough if now dated discussion. 8. See Welford and Gouldson (1993). 9. See Ostrom (1990), Bromley (1992), and Ascher (1994) for analyses of these entities in natural resource management. 10. Determining nonsubsidized insurance rates (the “underwriting process”) requires gauging the appropriate premiums in light of the probability of adverse outcomes and the magnitude of the potential damage. 11. These are also termed “Build, Own, Transfer” arrangements, with the same acronym and apparently the same structure. 12. According to the Lions Clubs International (2007) Web site. 13. In his much later recollections of the origins of Rotary, Harris (1947) wrote, “My plan for our Club provided that only one member of each business or profession would be eligible for membership. We would thus be able to enjoy the fellowship and also to help each other in our respective vocations.”

chapter five 1. In the policy sciences framework, these four are labeled “deference” values, as distinct from the “welfare” values of wealth, well-being, skills, and enlightenment, which are essentially less relational. See Lasswell and Kaplan (1950: 28). 2. Lasswell and Kaplan (1950) note that the values in both sets can be used as resources (“base” values) to gain other desired consequences (“scope values”). 3. For example, the U.S. president’s July 13, 2006, Parent’s Day Proclamation begins, “As a child’s first teachers, mentors, and role models, parents shape the character of those who will help to build the future of our Nation. On Parents’ Day, we pay tribute to the hard work and sacrifice of the millions of devoted parents who provide guidance, support, and unconditional love to their children.” 4. Mitchell, Mertig, and Dunlap (1992: 12) noted that “the Sierra Club and the National Audubon Society . . . both rank among the top three environmental organizations in size and influence.” The standing of these organizations has not changed significantly since this assessment. The National Wildlife Federation has a “clientele” (members, participants in programs, and purchasers of NWF materials) of over 4 million. The National Wildlife Federation actually claims a membership of over 4 million; however, it includes as members “other supporters.” Bosso (2003) notes that the “aggregate figure [of 4 million] includes school children who take part in various NWF educational programs, members of affiliate state organizations, and purchasers

264  Notes to Pages 95–109

of NWF books, calendars, etc. The actual annual dues-paying membership is probably closer to 600,000.” 5. See Shaiko (1999) for analyses of the history, financing, and communications strategies of these and other U.S. environmental organizations. 6. A modest effort can be found in Ascher (1989). 7. The mission of the Center for Regional Development/Transparency International Armenia (2007) “is to promote good governance and economic cooperation across the region through the creation of professional networks of specialists qualified in diverse development areas such as public sector reform, small and medium enterprise development, trade facilitation, etc. CRD/TI is committed to the furthering of enabling environment of current political and economic reforms by means of building NGO coalitions, sharing professional expertise, exchanging innovative ideas and administering joint projects. One of its particular fields of interest is to ensure more democratic, accountable and transparent government in Armenia and the region.” 8. The difficulty of changing fundamental principles that guide human action is that the broad norms and values that people hold regarding commitment to community and future generations are rooted to a large degree in personality and temperament. A recent study of three thousand Americans’ levels of “generativity” shows that the combination of the personality trait cluster of “communion” (empathy, warmth, caring, etc.) and the cluster of “agency” (forcefulness, assertiveness, etc.) underlie the willingness and ability to take actions on behalf of others (Rossi 2001b). In turn, these personality traits emerge from both genetic inheritance and childrearing and are rather stable from childhood into adulthood. Therefore the prospects of transforming adults from “nongenerative” to “generative” are not encouraging.

chapter six 1. For example, Agentina’s Chaco Province has a “Secretaría de Planificación y Evaluación de Resultados.” 2. See Palumbo (1987) and Russ-Eft and Preskill (2001) for overviews. 3. As indicated by both their ex post rates of return and less quantitative assessments. At the World Bank, most projects require a 10 percent rate of return to qualify for funding. See Ascher (1993). 4. See Isham and Kaufman (2000). There are also technical difficulties in anticipating project difficulties and role conflicts if analysts try to incorporate their doubts about whether government officials or their own organizations are truly committed or competent to implement the projects effectively and in a timely fashion. See also Ascher (1993). 5. See also the World Bank Website on “The Quality Assurance Group” (World Bank 2007a).

Notes to Pages 119–144  265

chapter seven 1. Because this situation is analogous to a nonsimultaneous exchange agreement without an external enforcer, the framework offered by Anthony Kronman (1985) regarding strategies to create “self-enforcing” contracts is very useful. 2. This problem is quite common in Vietnam, where local officials are prone to skewing the reporting of school populations and enrollments, numbers of elderly people, and so on, to try to get resource allocations across health, education, physical infrastructure, and so on, that correspond more closely with the local stakeholders’ preferences in the face of rigid formulae. See Ascher and Rondinelli 1999. 3. See, e.g., Kronman 1985. 4. The difference between these terms is that “delegation” is a conditional transfer of authority that formally recognizes the right of the higher governmental level to reassert its authority. 5. Daniel Tarschys (2003: 82–83) points out that “both in budgetary politics and in public administration, items and targets in the current fiscal year and in the budget under examination tend to capture almost all the attention, with longer-term consequences disappearing into a haze of incertitude. This may lead to a variety of distortions, such as over-consumption, under-investment, or spending frenzy towards the end of the year. When the budget balance of each fiscal year is played up as the main criterion of failure or success, programmes will be assessed on the basis of their immediate budgetary effects and easily quantifiable results, while more intangible constraints and objectives tend to be disregarded.” 6. This argument was espoused most prominently by Chicago philanthropist Julius Rosenwald (Rosenwald 1929). 7. A survey of the issues involved in decentralizing natural-resource control in developing countries can be found in Ascher (2007). 8. Examples from many countries, not all in Southeast Africa, can be found in Secretariat for Eastern African Coastal Area Management (2001). 9. The Alliance for Progress foreign assistance program for Latin America under the Kennedy administration required multiyear indicative plans, which in many cases had minimal impact on actual budgetary decisions. 10. It is worth quoting Lasswell at length: “One cautionary proposition is that short-range success is often the parent of long-range failure. . . . The mechanism of generalization operates by suffusing the entire picture of reality with the sunlight of success or the darkness of defeat. In the case of a successful outcome the positive experience generalizes backward and confers a positive aura on the strategies employed at the preoutcome phases of decision. The cues that were part of the perspectives used to identify a situation to which the strategies were appropriately applied are similarly affected. Cumulative success tends to narrow the context that is allowed to emerge at the focus of attention” (Lasswe11 1971a: 84; emphasis in the original).

266  Notes to Pages 145–154

11. Detailed information on the history, structure, financing, and governance of the Port Authority of New York and New Jersey can be found at www.panynj.gov. 12. The four federal transportation trust funds have been under both direct and indirect attack for decades. The spending levels of the Harbor Maintenance Trust Fund, the Airport and Airway Trust Fund, and the Inland Waterways Trust Fund have “been artificially held down to mask the size of the operating deficit. In effect, these deficit proof, pay-as-you-go programs have been cut back to finance other programs, funded out of general revenues, that have been the true cause of deficits. While we believed this to be unacceptable even during the era of budget deficits, it is even more difficult to justify in this new era of budget surpluses” (U.S. House of Representatives, Committee on Transportation and Infrastructure 2001). The U.S. Interstate Highway Trust Fund, vigorously defended by road construction interests, has largely escaped this form of raiding, but a significant portion of its resources have been directed to other modes of transportation, especially mass transit.

pa r t t h r e e 1. To illustrate with the simplest example of two options with the same initial outlay of $1,000,000, evaluated by an individual who is neither risk averse nor risk loving. Option 1 is deemed to have a 60 percent chance of resulting in a future gain of $1,000,000, but has a 40 percent chance of resulting in a loss at that same date of $500,000. Option 2 is deemed to have a 50 percent chance of resulting in a future gain of $500,000, but a 50 percent chance of resulting in a loss of $100,000. The expected utility of Option 1 is (.6 × $1,000,000) − (.4 × $500,000) = $400,000. The expected utility of Option 2 is (.5 × $500,000) − (.5 × $100,000) = $200,000. Therefore the individual will choose Option 1. 2. This is a classic disagreement about the basis of knowing and attributing probabilities, dating back at least to the 1920s. For a useful summary of the debate, see Ellsberg (1961).

chapter eight 1. For the term “environmental scanning,” which is the most commonly used term in the business sector, “environmental” refers to the environment beyond the firm, rather than to “environment” in the sense of the ecosystem. Of course, some “environmental scanning” can focus on ecosystems, biodiversity, conservation, and so on. 2. See, e.g., the many articles in the International Journal of Forecasting and in Technological Forecasting and Social Change. See also Ascher (1978), Ascher and Overholt (1983), and Armstrong (1985). 3. Geoff Mulgan, the head of policy analysis in the United Kingdom’s Prime Minister’s Office and director of the Cabinet Office’s Strategy Unit, has argued, “Partly to counter the influence of conventional opinion it is important in horizon scanning to

Notes to Pages 154–175  267

keep an eye on the margins: everyday phenomena such as complementary medicine, the internet, gun culture, text messaging or Big Brother were not well understood by mainstream institutions. Changes of this kind are not usually detected by the radar of establishment institutions, which is why some governments and companies try hard to go beyond their normal sources, to look at open source methods, at leading indicators rather than just backward-looking statistics and gossip” (Mulgan 2003: 9). 4. Das (1987: 208), after finding that a sample of executives had a “future orientation” of just under three years, argues that “in the event that an organization has a 5-year planning horizon, and a relatively low preferred planning horizon would indicate that the executives are being ‘dictated’ by the planning system to operate in an important management decision situation against their considered judgment. As a general point this would seem to be ill-advised, in that the best judgment of top executives is being overridden to force temporal preferences of strategic decision-makers into a procrustean planning cycle determined by extraneous factors or, perhaps more realistically, by nobody in particular.” 5. Freeman’s study (2003) is the definitive technical exposition on valuation, focusing on its applications to conservation and environmental issues. See especially chapter 1 for a discussion on values. So also Bateman and Willis (1999) for applications in both developed and developing countries. For a more critical view, see Sagoff (2004). 6. See Berger and Compston (2002), for an assessment of concertation in Western Europe. 7. The same lesson was found in comparing two early post-WWII studies of U.S. natural-resource trends. The 1947 Twentieth-Century Fund study America’s Needs and Resources provided detailed investment targets to offset resource declines; the 1952 Resources for Freedom study of the so-called Paley Commission provided general assessments of resource challenges, which could be invoked to justify greater investments in assuring resource supplied. The two studies were issued with comparable levels of publicity, but America’s Needs and Resources had little impact, despite an updated study in 1955. The Resources for Freedom study was cited for many decades and was instrumental in providing the basis for the establishment of the prominent Resources for the Future think tank as well as the federal petroleum reserve program. See Ascher (1978: 32–37).

chapter nine 1. Bardach (2000: 7) regards this as “smuggl[ing] an implicit solution into the problem definition.” Be that as it may, embedding some degree of embedded an implicit solution within a problem definition is quite widespread. 2. See Brunner (1983) for an overview of the rationales and methodology of casewise analysis, as well as an application to the issue of energy pricing. 3. Brewer and Kakalik (1979) completely changed the problem definition regarding services for children with disabilities in the United States by starting with interviews

268  Notes to Pages 176–193

of parents. They discovered that the conventional prevailing definition of how well the several federal agencies providing services for specific disabilities was neglecting the difficulties that parents were having in finding out how to get services and was also neglecting the rise of multiple disabilities that require more coordination among the agencies. 4. See Repetto and Gillis (1988) and Sharma (1992) for a host of case studies on the mandates and behaviors of forestry agencies. 5. John Walton (1990: 136) reported that in Malaysia “James Wong, Minister for the Environment, claims that shifting cultivation causes more destruction to the environment than logging, and results in irreversible damage to the ecosystem. He claims logging, however, does not cause serious environmental problems and that logged over areas will return to normal after five years.” Walton then presents straightforward calculations to demonstrate that the magnitude of forest clearing by shifting cultivators is an order of magnitude less than that of the commercial logging operations. 6. The pattern of clearing and burning trees to enrich the soil, albeit only temporarily; planting crops; and then moving to another location when the soil loses its fertility. 7. In fact, the threat to the customary user rights of local people can provoke more rapid deforestation. Godoy, Kirby and Wilkie (2001) cite the forest clearing of Bolivian Amerindians as an effort to secure property rights. Utting (1993: 152, 157) reports that in retaliation for appropriating forest lands, dispossessed Hondurans made arson a major cause of forest destruction. 8. Addressing the sheep- and goat-herding nomads of Iran, Emadi (2005) argues that “the relatively limited achievements in nomadic development and natural resource management stem from the fact that policies are based on a reductionist viewpoint and analysis, which . . . neglects the diversity, complexity and recursiveness of the different dimensions of nomadic life. These policies are also developed on the basis of government perceptions of the nature of the issues confronting nomads rather than on the basis of shared concerns with the nomads themselves.”

chapter ten 1. Lasswell (1952: 21) hypothesizes that “in general, crisis concentrates, noncrisis disperses attention.” 2. Lasswell (1965b: 65–67) wrote about the “parochializing of attention” and “intense self-reference” as reactions to threats and anxieties. 3. Two massive volumes, Loewenstein and Elster (1992) and Loewenstein, Read, and Baumeister (2003), summarize much of this research. Most of the tendencies recounted here are summarized in Chapman (2003). 4. The simple example is the preference for elegant meals once a month over the course of a year, rather than all within the first twelve days of the year.

Notes to Pages 194–216  269

5. The findings on extreme campaigns to deter people from smoking—for example, by displaying photographs of diseased lungs—show that some smokers block out such extreme communications, especially if they have low expectations that they would be able to quit (Witte 1992). 6. If the prior decision in retrospect proved to be unwise, and yet the strategy is still pursued, this is a case of the so-called sunk cost fallacy (Parayre 1995). Regret theory (Loomes and Sugden 1982) is premised on the idea that having to recognize that one has made a bad choice causes a psychological loss in addition to the material loss; therefore people tend to choose options that they expect will maximize the combined utility of the material and psychological outcomes. 7. At that time, the shrinking reserves reflected the underfinancing of the state oil company, PEMEX, more than the exhaustion of Mexico’s total oil potential. 8. Chapman (2003: 412) notes, “Given that time preferences vary so much from situation to situation, it is not surprising that discount rates measured with hypothetical choice scenarios do not predict real-world health behaviors that represent intertemporal tradeoffs.”

c h a p t e r t w e lv e 1. The huge literature on this topic is well represented in the collections of Kahneman, Slovic, and Tversky (1982), Kahneman and Tversky (2000), and Gilovich, Griffin, and Kahneman (2002). 2. We are referring to the “intuitive” application of heuristics, that people apply with little awareness or deliberate examination, as opposed to the “reflective,” selfconscious strategies to make decisions quickly and “frugally” with limited analytical resources and effort (e.g., scoring options on a limited number of dimensions, and choosing the option with the highest aggregate score) (Kahneman and Frederick 2002: 51). 3. For those previously familiar with the standard terminology of the heuristics literature, especially the classic Kahneman, Slovic, and Tversky (1982) volume, the use of the term “similarity” rather than “representativeness” may seem strange. However, more recent efforts of leaders of the “heuristics and biases” school of thought have tried to clarify and extend the “general purpose” heuristics, resulting in some relabeling and extending the original three core heuristics (availability, representativeness, and anchoring and adjustment) to six: affect, availability, causality, fluency, similarity, and surprise. See Gilovich and Griffin (2002) and Kahneman and Frederick (2002). 4. A significantly different definition of the affect heuristic is the positive or negative reaction triggered respectively by being in a positive or negative mood. This is not the definition employed by the core “heuristics and biases” researchers. 5. That is, because people’s expectations tend to be “subadditive”—they do not count up all of the probabilities of separate paths to the outcomes under examination, emphasizing all of these paths would promote a more self-conscious effort to add the

270  Notes to Pages 222–243

probabilities correctly.Greater awareness that a desired long-term outcome can come about through multiple pathways will help to offset the tendency to underestimate the probability increase the expectation of success. Writing about underestimated probabilities of positive outcomes, Fox and Tversky (2000: 129) assert that “unpacking the description of an event is . . . expected to increase the attractiveness of a prospect whose outcome depends on this event.” See also Ascher (1993) on how underadding the probabilities of multiple risks leads to underestimates of negative consequences. 6. Soroos (1991) succinctly summarizes the Montreal Protocol’s particulars: “The 1985 Vienna Convention on the ozone depletion problem has been supplemented by the 1987 Montreal Protocol on Substances that Deplete the Ozone Layer, which obliges ratifying states to achieve a 20% reduction, from 1986 levels, in the consumption and production of certain CFCs by 1993, and a further 30% cutback by 1998. Amendments to the Montreal Protocol that were adopted in London in June 1990 require a complete phasing out of most ozone depleting substances by the year 2000, except by less developed states, which are allowed a further 10-year grace period” (Soroos 1991: 118).

chapter thirteen 1. The ACLU mission statement reads: The mission of the ACLU is to preserve all of these protections and guarantees: Your First Amendment rights—freedom of speech, association and assembly. Freedom of the press, and freedom of religion supported by the strict separation of church and state. Your right to equal protection under the law—equal treatment regardless of race, sex, religion or national origin. Your right to due process—fair treatment by the government whenever the loss of your liberty or property is at stake. Your right to privacy—freedom from unwarranted government intrusion into your personal and private affairs. (American Civil Liberties Union 2007) 2. The debate is best known and expressed through Edmund Burke’s insistence on “trustee” representation rather than “delegate” representation, dating back to the eighteenth-century debates in England over the role of members of Parliament. See Burke (1774). 3. Members of the California State Assembly are limited to three consecutive two year terms.

chapter fourteen 1. See Elgie (2001) for analyses of Denmark, Ecuador, Finland, France, Germany, Ireland, Mexico, Poland, and the United States.

Notes to Pages 246–256  271

2. The most prevalent example is the so-called prisoner’s dilemma scenario, in which the immediate gains of betraying one’s “partner” are less likely when the players know that the game will have an indefinite number of rounds (Axelrod 1984). 3. Recall that delegation is the provisional transfer of authority, with the grantor retaining the prerogative to retract the transfer. Devolution is defined as an irreversible transfer, although in practice some devolutions have been reversed. See Rondinelli (1981, 1989, 1993).

chapter fifteen 1. See Parsons (1960) and Riggs (1964) for early analyses of these differences. 2. As mentioned in the introductory chapter, the policy sciences term for these value categories as resources is “base values”; as valued benefits, the term is “scope values.” The most widely used set of value categories consists of power, wealth, wellbeing, skill, enlightenment, affect, respect, and rectitude. This is not a theoretical proposition that these categories are somehow primary but rather a useful framework for (a) exploring, with a high degree of comprehensiveness, the values that people tend to desire and the breadth of resources that can be utilized and (b) identifying arenas in which the demands for each category of valued benefits is typically pursued (e.g., wealth through the market; power through elections and governmental decision making; and rectitude through religious and charitable institutions).

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index

Abidin, Mahani, 17 Abt Associates, 97 abundance effect, 39, 194 academic institutions, 48, 97, 132, 146, 169, 182–84, 211. See also education; and specific institutions accommodationist option, 21 accountability, 35, 38, 63, 90, 202, 232, 238–39, 245 Acs, Zoltan, 7 Adams, Ansel, 95 advocacy groups, 12–13, 23–25, 36, 94–95, 99–100 affection, 16, 51, 91–92, 95, 99, 102–3, 188, 206, 210, 253 afforestation. See forests and forestry Africa, 4–5, 17, 42, 151, 273n5. See also North Africa, nomadism in; South Africa; Sub-Saharan Africa Agarwala, Ramgopal, 168 age, as a correlate of farsightedness, 233–36 ageing, 162, 233–34 Agence France-Presse, 260n16 agency problem. See principal-agent problem

aggressiveness: of NGOs, 13; provoked by impulse appeals, 205–7; provoked by “we-they” distinctions, 195; selfpredictions of, 262n3 (chap. 3); as strategy, 156 agricultural extension agents, 109, 152, 220 agriculture. See farming AIDS, 5, 147 air pollution, 108, 164, 198. See also pollution air traffic control systems, 173 albedo effect, 180 alcohol: consumption, 4, 9, 20, 27; diseases from, 20, 79, 97, 200; of U.S. university students, 97 Alexander, Jan, 147 Algeria, technology incubation efforts, 81 Alm, James, 22 Alpizar, Edwin, 75 Altbeker, Antony, 143 American Association for the Advancement of Science, 138 American Civil Liberties Union, 237, 270n1

300  Index

American Society of Civil Engineers, 98–99, 256 analytic limitations, 29, 36–39, 41, 53, 55, 60, 106, 151, 210, 218, 250, 254; of organizations, 37–38; particular to developing countries, 43 analytic strengthening, 37–38, 45, 59–60, 106, 149–86, 220–21, 229, 244–45, 249–50, 253–55 Andrews, J. T., 180 Angner, Erik, 49, 207 Annan, Kofi, 163, 222 anthropology, 44, 176 antimiranda, 195, 207 Arab states, 6. See also individual Arab countries Aral Sea, 138 archeology, 44 Argentina: concertation efforts in, 249–50; dollarization policy in, 143–44; Equipo Federal del Trabajo, 249; forecasting future of, 153–54; hyperinflation in, 143–44; political culture in, 154; poor economic performance, 10–11, 112; positive political/economic scenarios, 153–54; public-private commissions in, 249–50; tax compliance in, 100 Armenia: “Armenia 2020” discourse, 159; Center for Regional Development/Transparency International, 100, 264n7 Armstrong, Scott, 266n2 (chap. 8) Aron, Paul, 95 Aryeetey, Ernest, 4 Ascher, David, 249 Ascher, William, 15, 38, 86, 109, 138, 164, 171, 250, 260n13 Ashkanasy, Neal, 65 Asia: bias in favor of higher education, 260n16; drug use in, 5; economic volatility in, 42; reforestation in, 8.

See also under specific regions and countries Asian Development Bank, 166 Asian economic crisis, 144–45, 155, 269n5 assessments: as analytic tools, 59–60, 152–54, 157, 170; environmental, 163–66; long-term, 44; of risks and opportunities, 37. See also risk: assessment assets, 124, 130–31, 191, 194, 273n1; as collateral, 133; depreciation of, 108; of foundations, 131, 146–47; management of, 71; natural resource, 108, 163; taxation of, 85 Attanasio, Orazio, 4, 30, 259nn1–2 attention cycle, 131–32 attention focusing. See focus of attention attention threshold, 207. See also focus of attention austerity measures, 13–14, 33, 188, 219, 226, 260n10; in S. Korea, 260n9, 260n11; in Thailand, 144 authority relationships, in development programs, 182 automatic price adjustments, for Mexican fuels, 198 automatic withholding, 137. See also savings Auty, Richard, 15, 56, 260n3 avian flu, 151 Avolio, Bruce, 232 Axelrod, Robert, 54, 271n2 (chap. 14) Aydede, Sema, 47 Babiker, Mustafa, 180 balance of payments, Costa Rican, 141–42 Balkans, road maintenance in, 259n5 Baltic, 138 Bandura, Albert, 103

Index  301

Bangladesh: family planning in, 93; savings institutions, 70, 92, 252, 255–56. See also Grameen Bank banking, 69–70, 72, 238; in Costa Rica, 141; in East Asia, 144; panic, 144; regulation of, 67; system failure, 13; in Trinidad and Tobago, 202 Barber, D. C., 180 Barbier, Edward, 165 Bardach, Eugene, 173, 175, 179, 184, 267n1 Barg, Stephan, 157 Barnett, Steven, 137 Bass, Stephen, 168 Bassett, Peta, 208 Bateman, Ian, 267n5 Bates, Clive, 197 Bauman, Kathleen, 97 Baumeister, Roy, 268n3 Bayoumi, Tamim, 30 Becker, Gary, 261n1 Beer, Christine, 108 Belfield, Clive, 35 Bem, Daryl, 95–96, 232 benchmarks, 117, 202; plan targets as, 156 benefit-cost analysis, 157–58, 165, 168; societal, 76–77, 163–65 benefit-postponement preference, 48, 192–93 Benin, road maintenance, 9 Benmaamar, Mustafa, 5, 9, 146, 259n5 Berger, Stephan, 267n6 Bergman, Marcelo, 100 Berndsen, Mariette, 39 best practices inventories, 225 Beyer, Peter, 51 Beyth, R., 218 biases (cognitive), 37, 53, 61, 68, 213–27, 235, 255, 269n3 Bill and Melinda Gates Foundation, 147 Bilodeau, G., 180 Binkley, Clark, 74

Binmore, Ken, 54 biodiversity, 97, 165–68, 268n1 (chap. 8) biotechnology, 167 birds, 49. See also Silent Spring (Rachel Carson) birth control, 18, 40, 71; in Thailand, 107. See also family planning Black Sea, 138 Boden, Leslie, 34 Bolivia, property rights in, 268n7 Bonds, 83–84, 261n5 boom-and-bust cycles, 14, 19, 260n10 Boris, Elizabeth, 86 Bosso, Christopher, 263n4 Bostrom, Ann, 224–25 Botswana, insulation of resource revenues, 252 bounded rationality, 37, 50, 213 Brazil: conservation payments in, 75; constitutional earmarking funds for, 129; energy demand in, 151; ethanol production in, 151; resettlement programs in, 15, 30; school enrollments in, 8 Brekke, Nancy, 217 Brennan, Geoffrey, 234 Brewer, Garry, 267n3 bribery, 35, 99, 248. See also corruption Briceño-Garmendia, C., 6 Bromley, Daniel, 260n8, 263n9 Brundtland, Gro Harlem, 166 Brunner, Ronald, 53, 175, 180, 267n2 Bruzelius, Nils, 23, 83–84, 98, 260n14 Bryan, James, 262n5 budgeting, 40, 130–31, 183–84, 265n5, 265n9; adjustments in 130; alloca­ tion formulas, 121; annual, 129–30; in Brazil, 129; carryovers in, 121, 129; family, 141, 175–76, 233; in Germany, 130; as hands tying, 129; multi-year, 121, 129–30, 142–43; “Planning, Programming and Bud­ geting System” (U.S.), 130; repetitive,

302  Index

budgeting (cont.) 129; role of women in household, 233; rolling, 143; in Sweden, 130; in U.K., 142; in U.S., 130; zero-based (U.S.), 130 “Build, Operate, Transfer” (BOT), 82–84. See also public-private partnerships “building ahead of demand,” 9 building codes, 180 bureaucratic inertia, 231 Burke, Edmund, 270n2 Busenberg, George, 172 business associations, 12, 249 business executives: performance evaluation of, 111–13; planning by U.S., 208 Butler, Tina, 97 Cabanilla, Liborio, 31 Caiden, Naomi, 129, 168 Calder, Kent, 67 California State Assembly, term limits, 270n3 Calvo, Guillermo, 14, 260n10 Cambodia, Mekong River Basin cooperation, 166 Camerer, Colin, 262n7, 262n4 (chap. 4) Cam Hoa commune (Vietnam), 68–69 Canada: Great Lakes cooperation with U.S., 138; Sierra Club of, 222 Canadian-U.S. International Joint Commission for the Great Lakes, 138 capacity building, of local institutions, 181–82, 256–57 capital flight, 106; in Thailand, 104 capital-intensive industries, 40 carbon sequestration, 33–34, 76. See also global climate change; global warming Caribbean Development Bank, 202 Caribbean nations: deforestation in, 4; education levels in, 6–7; hurricane

and earthquake insurance in, 79; productivity in, 6; youth sexual activity in, 259n4. See also under specific nations caring, 32, 58–59, 201, 264n8; for children, 52, 233. See also generativity Carnegie-Mellon University, 224 Carson, Rachel, 43, 193, 199 case-wise analysis, 175 cash crops, 3, 31. See also farming Castilleja, Guillermo, 74 Caucus of Development NGO Networks (CODE-NGO) (Philippines), 100 Cavallo, Domingo, 144 Cavieres, Aaron, 74 Centerbar, David, 217 Center for Regional Development/ Transparency International-Armenia, 100, 264n7 Central Asia, drug use in, 5 Certification for Sustainable Tourism Program (Costa Rica), 75 Chamber of Agricultural and Fertilizer Health (Argentina), 250 Chapman, Gretchen, 48–49, 192–93, 200–201, 262n2 (chap. 3), 268n3, 269n8 charitable contributions, 3, 6–7, 23–24, 51, 86–89, 114–15, 146–48, 211, 271n2; tax exempt status of, 86–89, 146, 219 charitable foundations, 87, 102; liquidating, 131–32, 146–48; perpetual, 131–32, 139, 146–48; spending formulas, 131, 146–48; staff of, 146–47; U.S., 131–32, 139, 146–48 Charles, Jeffrey, 87 “Chasm Ahead, The” (Aurelio Pecchi), 199 cheap credit, 13, 67, 154 checks and balances, 121–22, 127, 242–43, 250

Index  303

Chernobyl reactor accident (Ukraine), 233 Chetty, Raj, 261n8 child labor, 162 Chile: Copper Stabilization Fund, 137; export-revenue insulation, 252; Fundación Chile of, 81; insulation of resource revenues, 252; optout provisions, 71; public-private commissions in, 250; research and development institutions, 81; social security system, 69–71; state copper company Codelco, 137 China: dams in, 161–62; economic growth in, 10; education system in, 35; energy demand and production in, 151, 161; environmental problems in, 10, 161–62; forecasting in, 161; forest plantations in, 8; industrialization drive, 104; Mekong River Basin cooperation, 166; plan­ ning in, 161; power stations in, 161–62; State Environmental Protection Agency, 162–63; Tech­ nology and Economic Research Center of, 161; Three Gorges Dam, 161–62 chlorofluorocarbons (CFCs), 106, 221–22, 270n6 Cialdini, Robert, 158 cigarette smoking, 5, 9, 26, 79, 140, 200, 269n5 (chap. 11) cirrhosis, 20, 200. See also alcohol civic organizations. See nongovernmental organizations (NGOs) civil engineers, code of conduct of, 98–99, 256 clerics, 97, 102, 209 climate: scientists, 179–80; variability, 180. See also global climate change; global warming Cline, William, 261n5 Club of Rome, 172, 198–99

coastal management, 198; in Eastern Africa, 139–40, 265n8 cocaine. See drug use Codelco (Chilean Copper Corporation), 137 coercive power, 13, 26–27 Cofinancing: of charitable contributions, 86; of community selfimprovement in Pakistan, 80; of conservation efforts, 73, 75, 87; of conservation in Brazil, 75; in the Philippines, 73, 101 cognitive dissonance, 96 cognitive maps, 50, 161 cognitive psychology, 15, 16, 37, 96, 151 COHDEFOR, 96–97 cold states, 49–50 collaborative environmental analysis, 172 collateral, 124, 132–34 collective action, 7, 12–13, 18–23, 27, 35–36, 70; and charitable giving, 23; by communities, 247; and environment, 7, 19; by firms, 82; nongovernmental, 12–13, 27, 247; in the Philippines, 73, 101; problem, 35–36, 192; and productivity, 21; by unions, 12 Colombia: Pacto de Chicoral, 86; protected areas (resguardos) in, 138; tax reform in, 85–86 Commissions: ad hoc, 60, 132, 156, 159–60, 166–67, 235–36; regulatory, 45, 121–22; standing, 128, 159, 238, 249–50. See also specific commissions commitment fulfillment, 132–35, 148 commodity booms, 194, 215. See also boom-and-bust cycles communications, 37, 58; design prin­ ciples for, 187–204; environmental, 132; framing of, 50, 53, 187–204; impact on drug use, 97; impact on

304  Index

communications (cont.) family planning, 93; industry, 81, 113; limitations of in developing countries, 41; planning, 23; regulation of, 122; of risks and opportunities, 57, 60; strategies, 45, 50, 60, 128, 174, 187–204 Community-Based Family Planning Service (CBFPS) (Thailand), 71, 107 community leadership, 20–21, 80, 111 community mobilization, 12–13, 20, 113, 182 community radio, 256 community self-help upgrading, 3, 7, 12, 20–21, 27, 35, 37, 59, 80–81, 89, 100–102, 111, 115, 141, 182, 215–16, 225, 246–48 community woodlots, 77, 134. See also forests and forestry competitiveness, 84, 205–6, 241 complexity, 36–37, 150–51, 181, 188, 196; of decision processes, 235, 244; of problem definitions, 173, 227 Comprehensive Spending Review (U.K.), 142 Compston, High, 267n6 computer models: credibility of, 199; Swedish use of, 162; U.S. Forest Service use of, 169–70 concertation, 160, 220, 249; in Argentina, 249–50; in Costa Rica, 249; in Western Europe, 267n6 conditional commitments, 136, 265n4 Conference on Indigenous Philanthropy, 259n7 conscience, 53, 187, 198, 205–12 conservation, 7, 11–14, 18–19, 71–78, 93–97, 107–9, 137, 160–66, 168–70, 176–78, 192, 198–99, 210–12, 221–22, 280n5 (chap. 6), 281n5. See also under specific countries conservation, groups and movements, 9, 13, 27, 58, 78. See also under specific organizations

conservation, policies, 25–26, 89, 120 conspicuous consumption, 51 constitutions: Brazilian, 129; budget commits of, 129; devolution of authority in, 121; difficulty of reversing, 121, 127, 148, 245; excluding considerations, 122; Haitian, 246; insulating decision makers, 236; Russian, 159; U.S., 132, 245 Constitutive policy making, 241, 251 construction companies, 84, 98 consultation, 75, 160, 244, 249, 254–55 contingency plans, 144, 155, 171 contraceptives. See birth control co-ownership: of decision process, 247–49; by firms’ employees, 82. See also ownership; participation copper, 137 Copper Stabilization Fund (Chile), 137 Corporación Hondureña de Desarrollo Forestal (Honduras), 96–97 corruption, 22, 80, 99–100, 190, 208, 214, 248 cosmology, 44 Costa Rica: budget allocation formula in, 123; Certification for Sustainable Tourism Program, 75; concertation in, 249; eco-friendly hotels in, 75; economic policy reforms in, 141–42, 238; excessive credits for reforestation, 75; forward timber market in, 72–73; green accounting GDP adjustment for, 107–8 counseling, 60, 152, 176 credibility, 8, 13, 16, 45, 54, 60, 77, 97, 117–20, 124–28, 133–36, 141, 144, 148, 153, 159, 172, 174, 179, 185, 190, 195–99, 203–4, 208–9, 211–12, 225, 227–28, 251, 253, 257 credible signaling, 20, 54, 97, 119–20, 135, 153, 174, 190, 197, 257 credit, 38, 69, 72, 89, 180, 233–34, 259n1, 262n6 (chap. 4); cheap, 13,

Index  305

67, 154; rural, 71, 263n6; in Thailand, 107; in Vietnam, 68–69 Crenson, Matthew, 199 crisis, analytic impact, 37–38, 40, 45, 50, 191, 241, 268n1 Crissey, Brian, 199 Cropper, Maureen, 47 Crowel, Nancy, 97 Cruz, Wilfirdo, 108 cultural practices, 35, 55–57, 99, 150, 234; of local peoples, 177 cumulative effects evaluation, 107 Dabholkar, Uttam, 73 Dalal-Clayton, Barry, 168 dams, 8, 134, 140, 161–64. See also under specific dams or countries Daniel, James, 137 Das, T. K., 156, 267n4 Davis, Ian, 112 Davis, Jeffrey, 137 De Camino, Ronnie, 108 decentralization, 121, 126, 182, 247–50; of natural-resource management, 138, 247–50 decision delay mechanisms, 243–44; in S. Korea, 244; in U.S., 244 decision process, 24, 45, 152–53, 158, 168, 181, 229, 235, 241–51, 254–55 deference, 58, 92, 96, 253; values, 263n1 deforestation, 4, 176, 184, 261n2, 268n7; in Africa, 4; in Chile, 74; in Latin America, 4. See also forests and forestry de Jouvenel, Bertrand, 28 de la Madrid, Miguel (Mexico), 198 delegation, 121–23, 126, 136, 247, 265n4. See also decentralization delinquency, 27 demands, defined, 16–17 Dembe, Allard, 34 democracy: in Armenia, 159, 264n7; delegate, 238; and democratic char-

acter, 262n1 (chap. 4); development of, 11, 159, 264n7; direct, 238–39; and hostaging, 133; participatory, 53, 238; representative, 238–39, 250; strengthening of, 11, 53 demonstration effect, 80, 192 Dench, Geoff, 51–52 Department of the Environment, Food and Rural Affairs (U.K.), 167 Dery, David, 173 Desai, Sameeksha, 7 desertification, 177 Deutsch, Karl, 91 devaluation, in Argentina, 144 developed countries: distinctive characteristics of, 6, 10–11, 13–14, 41–42, 70, 73, 76, 86, 132, 139, 146, 162, 201; and greenhouse gas emissions, 222 developing countries, distinctive characteristics of, 4–14, 41–43 developmental state, 56 development strategies, 27–28, 56, 208. See also specific strategies devolution, 121, 126, 247–48, 271n3 (chap. 14); to infrastructure authorities, 145; to local communities, 250. See also decentralization diffusion of innovations, 40, 80 Director General of Research Councils (U.K.), 167 disabilities, U.S. services for, 267n7 discounting. See time discounting discount rate. See time discounting discourses, 60, 108, 152–53, 158–60; on Iranian nomadism, 177–78; regarding conservation, 166; Russian political, 166; in Trinidad and Tobago, 202; Turkish economic, 208 discrimination, 123, 247 Dismantling, Removal and Restoration Fund (Alaska, U.S.), 140 divided government, 243

306  Index

dominance (as a goal), 207, 241, 246 Donner, Wolf, 30 Douglas, William O., 95–96 Dove, Michael, 176 Downs, Anthony, 132 down-stream diversification/processing, 15, 31 dread, 48–49, 52, 153, 187, 194, 201, 204 drought, 73 drug use, 4–5, 9, 20, 26–27, 97, 121, 140, 172 Dudley, N., 107 “dueling forecasts,” 172 Dunlap, Riley, 263n4 Durham, Eunice, 129 Durst, Patrick, 74 Dutta, Dilip, 41 Dyke, A., 180 early warning systems, 180 earmarking of funds, 88, 129–30, 139–40, 145–46 earthquakes, 11; insurance for, 79 East Asia and the Pacific region, school enrollments in, 7 East Asian financial crisis. See Asian economic crisis Easterly, William, 6 Eastern Africa, 265n8 Eco-friendly businesses, 75–76, 89 economic efficiency, 22, 30, 33, 85, 99, 115, 141, 225–26, 247 economic fluctuations, 41–42. See also boom-and-bust cycles economic safety nets. See social safety nets economic vulnerability, 18, 42, 70, 234–35. See also poverty ecosystems, 7, 19, 34, 73–74, 104, 163–65, 180, 198, 256, 266n1 (chap. 8); benefits of, 73; forest, 94; Malaysian, 268n5. See also conservation

ecotourism, 25, 75 Ecuador, divided government, 270n1 (chap. 14) education, 3, 6–7, 15, 17–18, 22, 30, 40–41, 48, 86, 131, 176, 209, 248, 252, 261n4; administration of in Thailand, 183; agencies, 117, 183; allocation across levels, 182–84, 186; Brazilian commitment to, 129; discourse on, 158; expenditures, 182–84; funds, 137; in Guatemala, 260n16; impact on fertility, 93; policy, 113–15; problem definitions of, 182–84, 186; required for good citizenship, 54; in Senegal, 260n16; subsidies to higher, 182–83; tax credits for contributing to, 86, 89; in Trinidad and Tobago, 201–2; in Vietnam, 265n2 ego appeals, 188, 205–11 Eisenberg, Nancy, 262n4 (chap. 3) elaborateness of explanation, 196 elderly, 36, 234, 265n2 elders, 51, 97 elections, 159, 238–40, 245, 271n2 (chap. 15); district-by-district, 245; at large, 245; Northern Irish, 143; U.S., 124–25 electricity, 164–65, 233; companies, 78, 142 Elgie, Robert, 270n1 (chap. 14) El Sawy, Omar, 156, 208 Elster,  Jon, 48, 127, 194, 268n3 Emadi, Mohammad, 177, 268n8 emotions: arousal of, 49–50, 187–90, 205, 207; impact of framing on, 187–90; role of, 52, 213, 254 emphysema, 108, 175, 200 empirical probabilities, 149 employees: defections by, 82; training of (see vocational training) Endangered Species Act (U.S.), 140 endowment effect, 194

Index  307

endowments, 121, 129, 131, 139, 146; environmental, 139; maintaining the real value of, 146–47; perpetual, 131. See also charitable founda­ tions energy, 15, 30–31, 38, 81, 161; in China, 151, 161–62; and environment, 192, 221; in Guatemala, 129; in India, 164; nuclear, 140, 165, 178–79, 223–24; pricing and subsidies, 50, 89, 267n2; security, 219; in U.S., 178–79, 210–11 Energy Research Institute (India), 164 enforceability of penalties, 14, 31, 54, 72, 77–78, 85, 90, 119–20, 137, 256, 260n15 enlightenment, as a value, 65, 113, 256, 263n1, 271n2 (chap. 15) Enters, Thomas, 74 entrepreneurship, 18, 84, 89 Entwhistle, Janet, 260n16 Environmental Action Programme Task Force, 14 environmental agencies, 132, 138–39. See also specific agencies Environmental Agency (U.K.), 167 environmentalist identification, 52, 59, 95–96, 195 environmental impacts, 19; assessments, 116, 162–64; assessments in South Korea, 244 environmental groups/organizations, 132; in the U.S., 94–96, 140, 172. See also specific groups environmental protection, 7, 10, 12, 18– 19, 24, 71–78, 93–97, 108–11, 131–32, 137–40, 160–67, 176–80, 198–200, 210–11, 221–25 environmental quality standards, 77 environmental research, 132, 139, 161 environment scanning. See horizon scanning Erikson, Erik, 33, 56

Estache, A., 6 ethanol, 151, 219 ethics codes, 98, 256 Ethiopia, road maintenance in, 9 ethnic groups, 43, 58, 122–23, 248; leaders of, 97 European Investment Bank, 259n5 European Union, 208 evaluability of consequences, 150 evaluation. See performance evaluation exchange-rate-based stabilization, 260n10 executive branch (of government), 22, 123, 127, 235–36, 242–43, 245, 250 expectations, defined, 16–17; shaped by heuristics, 53, 212–29; stability of, 185, 246 expected utility model, 149–50 expenditure security, 60 expertise, 36, 152, 166, 171, 240, 264n7 exports, 215, 252; Chilean copper, 137; oil, 14, 198; processing zones, 90; stabilization funds for, 121, 128, 137; timber and wood products, 74 extensional reasoning, 220 externalities, 33; excessive payments for positive, 74–75; and infrastructure, 83; internalizing, 33, 59, 66, 72, 75, 232, 253; and job training, 81–82; in natural resource management, 71–76, 78, 81; negative, 34, 59–60, 66, 70, 72, 74, 76, 90, 190–91, 247–48; positive, 33–35, 89 extinction of species, 140 Exxon Mobil Corporation, 130–31 Fagen, Richard, 207 Fagernäs, Sonja, 42, 261n9 fairness of arrangements, 28, 56, 85, 101, 245 family economic security, 17–19; strategies for promoting, 66–71, 92–93, 107, 136–37, 160, 175–76, 197–98

308  Index

family education investment, 18, 70 family labor, 18, 162 family planning, 18, 152, 176; in Bangladesh, 93; in Thailand, 71, 107 family savings, 4, 8, 14, 17, 30, 68–69, 160, 197, 252, 256, 259nn1–2 family-size decisions. See family planning FAO. See United Nations: Food and Agriculture Organization (FAO) farming, 3, 31; agroforestry, 39; extensification, 31; harvesting rights, 72; inputs for, 180–81; land for, 4, 9, 18, 21; restrictions on, 78; sedentary, 177; tax on, 85–96 farsightedness, 7–8; correlates of, 232–35; obstacles to, 29–43; screening potential leaders for, 235–36; strategies to promote, 65–251 Fasano, Ugo, 137 fatalism, 46, 190 favoritism, 21, 122–23 fear appeals, 194 Fearnside, Philip, 30 Federation of Chemical and Petrochemical Workers (Argentina), 250 Feraru, Anne, 139 Fernandez, Raquel, 26 fertilizer, 8, 76, 78, 180–81; industry in Argentina, 250 Festinger, Leon, 96 Finland, divided government, 270n1 (chap. 14) Financial Times, 9 Fineburg, Richard, 140 Finlay, David, 207 fires, 11, 73, 78, 268n7 fiscal reform, 136, 182; Costa Rican, 141–42; Mexican, 50. See also budgeting Fischhoff, Baruch, 97, 217–18, 224–26 Fisher, Robert, 177–78 fisheries, 11, 18, 138, 199–200 fixed-utility model, 187

Fleischmann, Max, 147–48 floods, 8, 20, 89–90; insurance coverage for, 79 Flyvbjerg, Bent, 23, 83–84, 98, 260n14 focus of attention, 16, 37, 42, 150–51, 157–79, 191, 203, 208, 210, 213, 241, 254, 265n10 Fong, Geoffrey, 216 food: import restrictions, 31; policies in the Philippines, 31, 183; price suppression, 15, 38; security, 31, 183; self-sufficiency, 31, 183; in Tajikistan, 233 Ford Foundation, 225 forced savings, 18, 69–71. See also family savings; savings forecasting, 24, 45, 60, 152–54, 159, 161–64, 167, 266n2 (chap. 8); conditional, 153–54; Swedish, 171 foreign-assistance institutions, 109, 134, 141–43, 181, 223, 238. See also specific institutions foreign debt, of Costa Rica, 141–42 Forest, Chris, 180 forests and forestry, 11, 18–19, 26–27, 33–35, 39, 72–77, 96–97, 108, 198–99, 236, 268n5; agroforestry, 39; in Brazil, 75; in Chile, 74; in China, 8; community, 134, 184; cooperatives in, 77; corruption in, 35; in Costa Rica, 75; definition as a policy problem, 176–77; deforestation of, 4, 8, 48, 74, 184, 261nn2–7; guards, 184; harvesting rights in, 72–73; in Honduras, 96–97, 256; impacted by road projects, 164; in India, 248; in U.S., 140, 169–70; logging companies, 184; maximum sustainable yield doctrine in, 196, 199–200; payments for conservation of, 73–74; reforestation of, 74–76; regeneration, 176–77; shifting cultivation in, 176, 268n5; timber markets for, 72

Index  309

FORPLAN (U.S. Forest Service), 169–70 Forrester, Jay, 198–99 forward markets, 72–73, 81, 89. See also timber: markets foundations, quasi-governmental, in Sweden, 163, 171–72. See also charitable foundations Fox, Craig, 270n5 framing: of appeals, 187–228; ethical concerns about, 202; of problem definitions, 174; “we-they,” 195 France, divided government, 270n1 (chap. 14) Frederick, Shane, 220, 226–27, 261n1, 269n2, 269n3 Freeman, A. Myrick, III, 267n5 free-rider problem, 35, 81–82, 141 Freud, Sigmund, 206 Frey, Bruno, 243 frugality, 28, 51, 269n2 fuels, 30, 78, 151, 211, 223; prices of, 165, 198; taxes on, 145–46 full-cost accounting, 152–53, 157, 163–65 Fundación Chile, 81 future orientation, 65, 196, 267n4 futures scanning. See horizon scanning Gagnonk, J.-M., 180 Galing Pook Foundation (Philippines), 225 gambling, 25–26, 140–44 game theory, 54, 271n2 (chap. 14) Gan, Lin, 161 Gandhi, Mahatma, 195 gasoline prices, 198 Gates, Bill, 147 Gates, Melinda, 147 Gattig, Alexander, 50 Geher, Glenn, 97 gender, 233. See also women, role of

generativity, 33, 56, 92, 209, 232–33, 264n8 Germany: budgeting and planning in, 130; community forests in, 134; divided government in, 270n1 (chap. 14); forest management, 134; GTZ (technical cooperation agency of), 145–46 Gigerenzer, Gerd, 227 Gilbert, Christopher, 260n11 Gilovich, Thomas, 262n6 (chap. 3), 269n1, 269n3 global climate change, 10, 25, 28, 30, 76, 179–80, 221–22 Global Environment Facility, 76, 163 global warming, 179–80, 222. See also global climate change goal setting, 169 goal substitution, 31, 84, 99, 174; cons­tructive, 52; perverse, 52, 109, 115–16 Godoy, Ricardo, 73, 268n7 Goldemberg, José, 129 Goldstein, Daniel, 227 González, León, 75 “good governance” movements, 99–100, 264n7 Gouldson, Andrew, 263n8 government coordination, difficulty of, 181–82 Government of the Republic of Trinidad and Tobago, 201–2 Grainger, Alan, 176 Grameen Bank, 70, 92, 252, 255–56 grandparents, 233 grass-roots organizations, 27, 95, 100 Greater Mekong Subregion Biodiversity Conservation Corridor Initiative, 166 green accounting, 107–9 Greenberger, Martin, 199 greenhouse gases, 10, 33, 76, 179–80, 192, 221–23, 261n5

310  Index

Griffin, Dale, 218, 262n6, 269n1, 269n3 Grupo de Minería CED (Chile), 137 Guatemala: bias toward higher education, 260n16; lack of social capital, 42, 232; Ministry of Energy and Mining, 129 Gupta, Vipin, 65 Guzman, Oscar, 198 habitats, 19, 34, 73–74, 95–97, 225. See also conservation habits, 51–52, 57, 69 Haiti: electoral rules, 246; resource scarcity, 56 Halpern, David, 197 Hanifan, L. Judson, 42 harbors. See ports Harris, Paul, 87–88 hatred, 207 hazardous behavior, 19–20, 70, 79, 89, 97, 140, 200–201, 224–25 Hazell, Peter, 263n7 health, 5, 7–9, 11, 18–20, 47–48, 79, 93, 97–98, 114–15, 140, 147–48, 151, 163–64; appeals regarding, 200– 201; care in Tajikistan, 233; care in Trinidad and Tobago, 200–201; curative care, 15; information, 9, 223–24; insurance, 34, 137; preferences regarding, 51, 193, 262n2 (chap. 3), 269n8; preventive care, 15, 34, 89, 201; promotion, 12–13; rural care, 148; services, 22, 123; in Vietnam, 265n2 Healy, Robert, 15, 260n13 heart disease, 200 Heimer, Carol, 227 Heller, Daniel, 46 Hérault, Bruno, 163 heroes, 207 heuristics, 37, 53, 188, 213–28, 255, 269nn2–4; heuristics and biases re-

search program, 226. See also specific heuristics higher education. See university education high-profile projects, 84, 89 highways. See roads Hirschfelder-Ascher, Barbara, 38, 261n13 historical sites, 104 history, 150 HIV infection, 5, 147 Hockings, M., 107 Holden, Craig, 111–13 Holsti, Ole, 207 Honduras: forest arson in, 268n7; forestry policy in, 96–97, 256; National Forestry School (ESNACIFOR), 256 Hong Kong, financing for Bangkok transport, 83 Hook, Walter, 259n5 Hopkins, Raul, 260n11 Hörhager, Axel, 259n5 horizon scanning, 60, 152–55, 171–72; in Singapore, 154–55; in Sweden, 171–72; in the U.K., 266n3 (chap. 8) hospitals, 20, 70, 85. See also health hostaging, 124, 132–36, 140, 257 hotels, eco-friendly, 75–76, 89 hot states, 49–50 household savings. See savings: family House of Commons (U.K.), 244 House of Lords (U.K.), 244 housing, 18, 20, 101, 247 Hsee, Christopher, 150 Hudson Institute, 172 human-resource (human capital) development, 21–22, 97, 114, 116, 202, 259n1 human rights, 11, 159, 208 hydrocarbon fuels, 78, 151, 298, 223 hydropower, 164–65 hyperinflation, 260n12; Argentine, 143–44

Index  311

IBRD. See World Bank (IBRD) id appeals, 48–49, 188, 205–11 identifications, 16–17, 32, 35, 43, 47, 55, 57–60, 94–95, 99, 101–2, 189–91, 195, 203, 206–7, 234, 247–48, 253–54, 257; as environmentalists, 96–98; fluidity of, 51–52; operationalized as, 261n7; professional, 98 illegal settlements, 21, 101, 246–47 IMF. See International Monetary Fund Immediate Program for Economic Reorganization (Mexico), 198 impetuous decisions, 54, 207, 229, 243–45, 255, 257 import restrictions, 28, 31; in Costa Rica, 142; reforms regarding, 90, 142 import-substitution industrialization, 28, 141–42 impulse control, 233–34 income security, 60. See also family economic security India: indicative planning in, 143, 265n9; performance evaluation of state-enterprise managers in, 114; resettlement programs in, 15 indigenous philanthropy, 7, 259n7 individual self-betterment, 17, 26 Indonesia: boom and bust cycle, 112; customs collection in, 141; green accounting GDP adjustment for, 108; impact of Asian economic crisis in, 155; N250 airplane initiative, 209; resettlement programs in, 15, 30 Industrial and Petrochemical Chamber (Argentina), 250 industrial development, 10, 19, 28, 33, 165, 172, 198–99; Chinese, 104; Japanese, 68, 154; Philippine, 195, 209; S. Korean, 154; Taiwanese, 81 industrial efficiency. See economic efficiency industrialization, 28, 104, 141–42

industrial strategy, 28, 208. See also development strategy Industrial Technology Research Institute (ITRI) (Taiwan), 81 industry groups. See interest groups inflation, 13–14, 17, 24, 40, 42, 68–69, 83, 120, 131,136, 139–41, 143–44, 188, 260n10, 260n12, 261n5; and charita­ ble endowments, 146; family risks from, 160 informal sector, 41 information, 51, 54–55, 65, 112, 135, 139, 143, 149, 155–57, 171–72, 186, 196–97, 256; in developing countries, 41; distorted, 38; exclusion of, 121–23, 140; glut, 36; health, 9; about leaders, 235; limitations, 36–38; for performance evaluation, 115–16; for principals, 59–60; about risks, 224; sharing, 82, 92; in the Soviet Union, 169; technology, 167 impulse, 7, 53, 188, 190–91, 205–12; control, 233–34 infrastructure, 5–7, 9, 15, 22–23, 113, 231, 260n14; in Alaska, 140; and environmental protection, 109–11, 223; in Mekong River Basin, 166, 168; promoting commitment to developing, 82–85, 89, 97–99, 130–31, 134, 145–46, 176, 182; in Vietnam, 265n2; infrastructure maintenance, 130. See also roads: maintenance innovation, 21, 40, 81, 113; agricultural, 40, 80; financial, 40; process, 21, 113, 261n3; product, 113, 167, 261n3. See also research and development; technology input-dependent industries, 78 input evaluation, 106–7 input subsidies, 78, 89, 164–65 Institute of National Planning (Egypt), 260n16

312  Index

institutional arrangements, 7, 11, 34–35, 55, 61, 174, 229, 239, 241–51 institutional culture, 255 institutional economics, 53–54 institutional interests, 128 institutional memory, 37 institution creation, 45, 128 insurance, 34, 89–90, 152, 259n1, 263n10; commodity, 72–73; crop, 72–73; earthquake, 79; flood, 79; health, 34, 137; hurricane, 79; moral hazard and, 34, 79; mutual insurance funds, 73; social, 261n8; timber 73, 89 intangible rewards, 44, 58, 91–105, 194, 253, 255, 265n5 Integrated Rural Development (IRD), 180–82 intellectual property rights, 81 interdisciplinary approach, 9 interest groups, 15, 22, 25, 39, 195; oil industry, 210; resisting global warming, arguments presented by, 180 interest rates: for borrowers, 263n6; for depositors, 40, 47, 66–69, 89 inter-generational responsibility. See generativity international agreements, 125, 222. See also specific agreements; specific protocols; specific treaties International Institute for Sustainable Development (Canada), 164 International Labour Organization, 6 International Monetary Fund, 125, 238, 260nn11–12 International Tropical Timber Organization, 260n15 intuitive judgment, 149, 214, 217, 226 inventory effect, 194 investment: family, 6–9, 17–18, 70; rates, 6. See also savings investment vs. consumption, 11–14, 29, 47, 68, 128, 147–48, 265n5

Iraq, identifications in, 257 Iran, nomadism in, 177–78 Ireland, divided government, 270n1 (chap. 14) irrigation, 9, 77; autonomous enterprises for, 131; in Mexico, 23; in Valencia, Spain, 9; user groups, 9, 77 Isham, Jonathan, 264n4 Issacharoff, Samuel, 262n4 (chap. 4) issue attention cycle, 131–32 ITTO, 260n15 Jacobs, Michael, 261n6 jaguars, 165 Jamaica, tax reform in, 85 Janis, Irving, 194 Japan: communal land management in, 9; farsighted development strategies of, 56; financing Thai transportation system, 83; industrial planning in, 154; postal savings system of, 67–68; savings rate in, 67; zoning in, 78–79 Japanese Postal Savings Fund, 67–68 Jennings, A. E., 180 Jepson, Christopher, 216 job training. See vocational training joint declaration of commitment, 197 judiciary, 122, 127, 235, 243 justice, 122, 205–6, 209 justices. See supreme courts Kaantabay sa Kauswagan Program (Philippines), 101–2 Kahn, Herman, 172 Kahn, James, 261n2 Kahneman, Daniel, 37, 194, 200, 215, 220–21, 226–28, 262n6, 269n1, 269n3 Kakalik, James, 267n3 Kaplan, Abraham, 95, 261n18 (chap. 1), 261n7 (chap. 2), 263nn1–2 Karachi (Pakistan), urban improvement program in, 80

Index  313

Karl, Terri, 260n16 Kasparov, Garry, 159 Kaufman, Daniel, 264n4 Keenan, Mike, 167 Kelley, Allen, 260n16 Kenya, identifications in, 58, 195 Kerwin, M. W., 180 Khan, Akhter Hameed, 80 Kicklighter, David, 180 Kipke, Michele, 97 Kirby, Kris, 73, 268n7 Kiwanis Clubs, 87, 102 Kliemt, Hartmut, 234 Knetsch, Jack, 194 knowledge, 65; acquisition and age, 233–34; advantage of local people, 248–49; limitations of, 37; of policy impacts, 195; and probabilities, 149; of radon risk, 224; regarding family planning, 18; role in reducing uncertainty, 55 Kong, Tat Yan, 260n9 Kosmo, Mark, 15 Krantz, David, 216 Krasner, Stephen, 141 Krier, James, 227–28 Kronman, Anthony, 54, 132–33, 261n19, 265n3 (chap. 5) Kumagai Gumi (Japan), 83 Kuntz-Dureseti, 33 Kuo, Meichun, 97 Kyoto Protocol, 76, 221–23. See also global climate change labor productivity, 6, 12, 113–14, 163–64 lakes, 138 Lam, David, 8 land, agricultural, 4, 39; appropriation of, 21; Brazilian, 151; classification, 176; clearing, 184; Colombian, 85, 138; conservancies, 94; conversions, 19; environmental fragility of, 21;

protection of, 9; reform, 85–86; restoration, 165; Southeast Asian, 165; tax, 85–86; tenure, 74, 101, 247; U.S., 130–31; uses, 19, 23, 78–79, 177; valuation, 83 Lange, Glenn-Marie, 108 Laos, Mekong River Basin cooperation, 166 Lara, Antonio, 74 Lasswell, Harold D., 16, 53, 144, 156, 188, 190–91, 195, 204–7, 220, 241, 256, 261nn17–18 (chap. 1), 261n7 (chap. 2), 262n1 (chap. 4), 263nn1–2, 265n10, 268nn1–2 Latin America: deforestation in, 4; drug use in, 5; economic volatility in, 42; family savings in, 4, 259n2; funds for, 143; road maintenance in 5–6; school enrollments in, 17; social security in, 71. See also specific countries and subregions Leaders and leadership: community, 20–21, 80, 111; developing farsighted, 231–40; patient, 16, 119, 233–40; transactional, 232; transformative, 232 League of Municipalities of the Philippines, 225 Lecky, William, 32 Lee, Eun, 97 Lee, Jae Eun, 97 Lee, Ronald, 8 legislature, 25, 127, 235, 242–45, 250 legitimacy: of evaluations, 90; of framing, 193; through planning, 156; of rewards and punishments, 90; of scientific findings, 179; of short-term solutions, 191; of social movements, 159; of stakeholder negotiations, 249; of strategic plans, 156 Leibenstein, Harvey, 40 Levin, Henry, 35 Levy, Sidney, 82–83

314  Index

liability protection, 84–85 liberalization reforms, 21–22, 53, 90, 100, 188, 219–20, 226 Liberia, 260n16 libraries, 147 life histories, 235 Lindblom, Charles, 243 Lions Clubs, 87, 102, 263n12 literacy, 113–14 littering, 18, 192 lobbying: business, 240; environmental, 94; by U.S. conservation groups, 95. See also advocacy groups; interest groups Loewenstein, George, 46, 48–49, 194, 207, 262n1 (chap. 3), 262n3 (chap. 3), 262n4 (chap. 4), 268n3 logging. See timber Loncar, Dejan, 5 Loomes, Graham, 269n6 Looney, Adam, 261n8 loss limits, 242 love, 205, 207, 263n3 low-level equilibrium trap, 40, 138–39 low-probability-high-impact events, 154–55, 162–64, 171 Lundstrum, Leonard, 111–13 Madamombe, Itai, 256 Mader, Sandra, 262n5 magnitude effect, 193 Magrath, William, 108 Mahaweli dams (Sri Lanka), 209 Malaysia: affected by Asian economic crisis, 155; savings rates in, 17; shifting cultivation in, 268n5 mandate creation, 121, 128–29, 131–32, 155–56, 170–71, 175, 237, 254 mangroves, in Southeast Asia, 165 Manning, Patrick (Trinidad and Tobago), 201–2 Marcos, Ferdinand (Philippines), 195, 209

marital fidelity, 20, 51 market structures, 35 Marquand, Robert, 161 Marteleto, Letícia, 8 Marten, Lisa, 93 Martinez-Vazquez, Jorge, 22 martyrs, 207 Mason, Andrew, 8 Masson, Paul, 30 Mathers, Colin, 5 Max Fleischmann Foundation, 147–48 Maximum Sustainable Yield (for resource management), 97, 196, 199 May, Elizabeth, 222 Mayer, Monika, 180 Mayfield, Melinda, 65 Mazur, James, 46 McDonald, 261n2 McDougal, Myres, 261n18 McKean, Margaret, 9 McNeely, R., 180 McQuillan, Alan, 170 media: attacks on farsighted leaders, 237; constraints on in developing countries, 41; emotion-arousing, 206; environmental coverage by, 132, 222–23; Haitian, 246; reportage of corruption, 190; reportage of reform efforts, 214; reportage of Trinidad and Tobago’s “Vision 2020,” 202 Mehotra, Rati, 75 Mekong Economics Ltd., 262n2 (chap. 4) mental health care, 148 mental models, 224 merger of interests, 60, 126, 128, 247 Mertig, Angela, 263n4 metrics: educational, 114; environmental, 107–9; for charitable organizations, 115; for nongovernmental organizations, 114–15; for perfor­ mance evaluation, 106–15; problems

Index  315

of, 116–17, 123, 243–54; qualitative, 116–17; quantitative, 116–17 Mexico, 259n2, 270n1; divided government in, 270n1 (chap. 14); education policy, 9; energy pricing in, 198, 269n7; infrastructure in, 23; mutual accommodation in, 243; petroleum in, 23, 198, 269n7; planning in, 243; policy reforms in, 50; presidential term limit in, 239; savings rates in, 4, 259n2 microenterprise, in Vietnam, 68–69 Middle East: labor productivity, 6; nomadism in, 177 migration, 177, 208. See also resettlement programs in Brazil, India, Indonesia, and Thailand migratory species, 166 Miles, Ian, 167 milestones, of community accomplishments, 80, 111. See also targets Millennium Ecosystem Assessment, 163 Miller, Timothy, 8 minerals. See mining Mingat, Alain, 260n16 minimum age requirements for office, 234 mining: contamination from, 77; Guatemalan agency for, 129; hasty extraction of, 137; risks, 79 Ministry of Education (Thailand), 183 Ministry of Higher Education (Thailand), 183 miranda, 195, 207 misguided far-sighted strategies, 27–28 mission statements, 155; of the ACLU, 270n1; of the Honduran National Forestry School, 97 MISTRA (Sweden), 139, 163 Mitchell, Robert, 263n4 Mittelfristige Finanzplannung (Germany), 130 mixed-age group deliberations, 234

mobilization of activists, 12–13, 27–28, 95, 100, 158–59, 195, 197, 206 Mondino, Guillermo, 144 money-based stabilization, 260n10 monitoring: of commitment fulfillment, 135; entrenchment of measures of, 157; environmental, 167, 179; and focus of attention, 157; for performance evaluation, 109–10; priorities for, 154; routinization of, 157 Montreal Protocol, 126, 221–22, 270n6 moral hazard, 24, 34, 70, 78–79 moral imperatives, 50, 91, 209 moral suasion, 209. See also superego appeals Morehead, M. D., 180 Morss, Rebecca, 175 mortgage collatera1, 133. See also collateral Mozambique, road maintenance funds in, 9 mudslides, 3–4, 11, 20. See also floods Muir, John, 95–96 Mulgan, Geoff, 266n3 Mulligan, Casey, 261n1 multistage policy making, 244–45; in U.K., 244–45; in U.S., 244–45 multivalue approach, 9, 63, 187–88 multiyear budgeting, 121, 129–30, 142–43, 156, 265n9; South African, 143; U.K., 142–43; Uruguayan, 142 Munck, Gerardo, 240 municipal authorities, 246–47 municipal services, 21, 246–47 Muñoz, Ronny, 75 mutual accommodation/accommodation, 243, 250; in Mexico, 243 mutual-aid societies, 72 Myanmar, Mekong River Basin cooperation, 166 Myhre, Arne, 180 Myhre, Gunnar, 180

316  Index

Naga City (Philippines), 101, 225, 246–47, 252 Nagin, Daniel, 262n3 (chap. 3) nanotechnology, 167 National Academy of Engineering (U.S.), 30, 113 National Audubon Society, 94–95, 263n4 National Judicial College (U.S.), 147 national pride, 56, 104, 209 National Research Council (U.S.), 165, 178–79 National Wildlife Federation, 94–95, 263n4 natural resources: advanced payments for, 19, 72–74, 81, 89; assessments of, 163–64; endowments of, 7, 9–11, 56; excessive/hasty extraction of, 11, 14, 30, 71–73, 76–77, 107–8, 188; forecasting trends in, 161, 198–99, 267n7; insurance for, 72–73, 89–90; integrating depletion of in national accounts, 107–8; management of, 231, 248, 263n9, 265n7, 268n8; managing revenues from, 252; maximum sustainable yield doctrine for extracting, 196, 199–200; positive externalities from, 34; strategies for safeguarding, 9, 137–39. See also specific resources Natural Resources and Environment Ministry (Thailand), 260n15 nature: reserves, 25, 138; respect for, 103–4, 162, 165, 209. See also conservation Nature Conservancy, 9 neighborhood associations, 101–2 neighborhood deterioration, 220 neighborhood improvement, 45, 77, 101–2, 125–26. See also community self-help upgrading Neira, Eduardo, 74 neoliberal policy reform, 99–100

Nevada, 147–48, 178–79; University of, 147–48 new institutional economics, 53–54 New York City, 145, 253, 266n11 NGOs. See nongovernmental organizations Nisbett, Richard, 216 no-confidence vote, 133 Noll, Roger, 227–28 nondismissible positions, 236–37 nongovernmental organizations (NGOs), 3, 4, 7–8, 11, 12–13, 18–20, 25–27, 41, 46, 70, 72–73, 75–76, 79–80, 89, 99–101, 103, 111, 114–15, 128, 158–59, 163, 166, 170, 176, 184, 201, 215, 225, 235, 238, 247, 264n7; environmental, 12, 19–20, 132, 139; leaders of, 163, 254; nonsimultaneous exchange, 261 nontraditional crops, 3. See also farming norms, 20, 264n8; consistent with farsighted actions, 28, 51–52; inculcation of, 57–59, 91–104, 137, 209, 232; plasticity of, 103; professional, 98–99, 256–57; roles in promoting far-sighted actions, 57–59 North, Douglass, 127 North Africa, nomadism in, 177 North America: charitable contributions in, 7; education spending, 6 Northern Europe, charitable contributions in, 7 North Sea Council, 138 not-for-profit organizations, 237. See also nongovernmental organizations (NGOs) N-250 airplane (Indonesia), 209 nuclear energy, 223–24; waste disposal for, 140, 165, 178–79 Nuclear Energy Agency (Organisation for Economic Cooperation and Development), 223–24 nuclear weapons, 233–34

Index  317

Nurkse, Ragnar, 40 nutrition, 11, 31, 180, 183. See also food O’Donoghue, Ted, 262n1, 262n4 (chap. 4) oil. See petroleum oil-exporting countries, 6, 14, 210 “once and for all” solutions, 178–79 “One Baht a Day” Savings Program (Thailand), 70, 92–93, 136, 255 Oportunidades Program (Mexico), 9 opportunity costs, 157 optimism: arrogant/perverse, 39, constructive/realistic, 55–56, 65–66; influence of heuristics on, 214–15 Optimist Clubs, 87 opt-out provisions, 60, 68, 90; in Chilean social security reform, 71 Orangi Pilot Project (Pakistan), 80, 252 Organisation for Economic Cooperation and Development, 142, 223 organizational culture, 172, 255 organizations, analytical weaknesses of, 37 Ossowski, Rolando, 137 Ostrom, Elinor, 9, 260n8, 263n9 “Our Common Future” (World Commission on Environment and Development), 166–67 outcome evaluation, 106–7 output evaluation, 106–7 overeating, 140 Overholt, William, 266n2 (chap. 8) overgeneralization, of behavioral frequency, 97 overgrazing, by Iranian nomads, 177 ownership: community sense of, 20–21; by firms’ employees, 82; rights, 19 ozone layer, 126, 221–22, 270n6 Pacto de Chicoral (Colombia), 86 Page, Sheila, 261n6

Palme, Olof, 171 Palumbo, Dennis, 264n2 Parallel evaluation, 110–11 Parayre, Roch, 269n6 parental approval, 51 parents clubs, 92, 137 Parents Day, 92, 263n3 Park regime (Korea), 260n9 Parliament (U.K.), 244 Parsons, Talcott, 271n1 participation: collective actions and, 12–13; community, 7, 20, 80, 101–2; conservation and environmental in the U.S., 93–95; in discourses, 159–60; inclusiveness of, 45, 241, 246–50, 255; in planning, 152–53, 224; by stakeholders, 121, 127 Partido Revolucionario Institucional (PRI) (Mexico), 243 Partners in Development (Philippines), 246–47 pawnbrokers, 133–34 Pecchi, Aurelio, 199 peer approval, 51. See also affection; deference; intangible rewards; respect PEMEX, 269n7 penalties: in contracts, 125; enforcement of, 76–77; excessive, 14, 250n15; graduated, 77, 90 pension/social security systems: Chilean, 69–71; private, 25; public, 17–18, 24–25, 36, 69–71, 89–90, 219 performance evaluation, 105–18, 229, 235, 237–38, 253–55; avoiding pitfalls of, 115–18; of business executives, 109–13, 117; of government officials, 113–14, 117; of nongovernmental managers, 114–15; processes, 117–18; qualitative, 117; quantitative, 106–17; resistance to, 116; trivialization of, 116. See also metrics

318  Index

perpetual endowment. See foundations, quasi-governmental, in Sweden personality components, 188, 205–12 personal liberty, 20, 270n1 perspectives, components of, 16, 34–35 persuasion, 13, 25–27, 189, 204 Peru, household savings rates in, 4, 259n2 pesticides, 76, 78, 180–81 Peterson, Steven, 51 Petroleos Mexicanos, 269n7 petroleum: in Alaska, 140; consumption in United States, 210; dependence, 223; exporting countries, 14, 210; in Mexico, 23, 198, 269n7; pricing, 14; production, 6, 137; spills, 172; U.S. federal reserves, 267n7 pharmaceutical companies, 85, 90 philanthropy. See charitable contributions Philippines: Caucus of Development NGO Networks, 100; food policy in, 31, 183; grass-roots organizations in, 100; industrial policy in, 195, 209; Kaantabay sa Kauswagan Program, 101–2. See also Naga City (Philippines) Phuket (Thailand), cultural restoration, 208 physical infrastructure. See infrastructure; ports; roads; telecommunications physical security, 11, 20, 51, 65, 97–99, 179, 200–201, 224, 246. See also wellbeing, as a value physicians, 85. See also health Pillsbury, Michael, 142 Pimentel, David, 4 Piñera, José, 70–71 Pinstrup-Andersen, Per, 15 planning, 15, 24, 32, 38–39, 45, 53, 55, 60, 65, 84, 151–54, 155, 156–60, 166, 175, 220–21, 254; agencies, 34, 41,

106; budgeting as, 130; challenges of, 32, 168–71; communications, 23; in developing countries, 168; economic/fiscal, 121, 128, 130, 243; education, 183; Egyptian, 260n16; horizon, 151–52; indicative, 143; infrastructure, 98; mandates from, 170–71; Mexican, 243; multisector, 201; nuclear-energy, 224; ritualized, 32, 168–71; rolling, 170; Soviet, 169; superficial, 168, 170; Swedish, 171–72; technical-unit, 60, 152–53, 155; Thai, 183; U.K., 142; U.S., 168–70, 208 Planning, Programming and Budgeting System (U.S.), 130 plantation forests, in China, 8. See also forests and forestry plywood manufacture, 15 poaching, 14, 269n15 Poland, divided government, 270n1 (chap. 14) police officials, 116 policy dialogue, 178, 184 policy reform, 25–26, 30–31, 38; in Argentina, 143–44; in Costa Rica, 141–42, 238; economic, 7, 10, 21, 99–100, 196, 208, 214; in Mexico, 50 policy sciences approach, 9, 16–17, 63, 187–88, 195, 256, 263n1, 271n2 political culture, 154, 243 political decay, 11 political stability, 11, 42, 55–57, 257 political support, 11, 134 pollution, 76–77, 94, 108, 138, 161, 164, 198, 220, 223, 242; in Mexico, 198 Pomareda, Carlos, 263n7 Population: as a budget allocation criterion, 123; growth, 9, 177, 261n4. See also resettlement programs port authorities, 131, 145, 266n11

Index  319

Port Authority of New York and New Jersey, 145, 266n11 Portnoy, Paul, 47 Port of Spain (Trinidad and Tobago), 202 ports, 23, 82, 131, 145, 266n2 positive externalities. See externalities posters, as communication medium, 206 poverty, 4, 43, 55 poverty alleviation, 12–13, 159, 215, 218; in Chile, 100; through Integrated Rural Development, 181; in Mekong River Basin nations, 166–68; in the Philippines, 100; in Trinidad and Tobago, 202 Powell, Andrew, 260n11 power: electric, 161–62, 164, 178, 223; as a value, 16, 91–92, 102–5, 184, 271n2 (chap. 15). See also hydropower; nuclear energy power stations, in China, 161–62 precedent-based systems, 237 precedents, 50, 86, 145, 222, 237 preference reversals, 200 Prelec, Drazen, 46, 262n1 presentism, 156. See also shortsightedness Preskill, Hallie, 264n2 prestige projects, 209 preventive health care, 15, 34, 89; behavior, 200–201 pride: as an id appeal, 206; national, 104; professional, 99, 248 Prilles, Wilfredo, Jr., 101–2 primary education. See also education principal-agent problem, 35, 43, 82–83, 247 Prinn, Ronald, 180 “Prisoners Dilemma,” 271n2 (chap. 14) probabilistic analysis, 149–50 problem definition, 51, 173–86; of conservation issues, 176–77; of defor-

estation, 176–77; of desertification, 177–78; of family economic security, 175–76; fragmented, 175; of global warming/climate change, 179–80; incorporating implicit solutions in, 174, 179, 181; of nuclear waste disposal, 178–79; of Philippine food policy, 183; of rural development, 181–82; simplistic, 173; strategies to improve, 174–75; of technical skill shortage, 182–85; weaknesses in, 174, 181–82 procrastination, 26, 28, 30, 67–68 productivity, 6–7, 12–14; improvements in, 21–23, 40; strategies for promoting, 81–83, 99–101, 111–14, 141–45, 180–83, 201–2, 225–26 professional associations, 98 professional identifications, 96–98; among Honduran forestry officials, 96–97, 256 professionalization, 98, 257 profit-sharing, 82 progress: importance of emphasizing achievable, 56, 88, 204, 253–54, 262n1 (chap. 4); preference for over early benefits, 48; self-generated, 65–66; sense of, 193 project pipeline, 31, 34, 109–11, 255 prospect theory, 200 prostitution, 20 prototypes, 60–61, 80–81, 90 psychoanalytic theory, 53, 188, 205 psychological rewards, 16, 48, 51, 57–58, 63; strategies based on, 91–105, 194–95, 204, 253, 269n6 psychology, of reinforcement, 91, 93, 98, 101, 135 public goods, 7, 12–13, 19, 23–24; of afforestation, 73–74, 81, 114, 131. See also externalities: positive public policy advocacy, 12–13, 24–25, 36, 94–95, 100, 191

320  Index

public-private commissions, 249–50; in Argentina, 249–50; in Chile, 250 public-private partnerships, 85, 235, 241 punishment. See penalties pure impatience, 29, 31–32, 38, 42–43, 58, 253, 261n5 Putin, Vladimir, 159 Quadrel, Marilyn, 224–25 Quality Assurance Group (QAG). See World Bank (IBRD) quasi-governmental commissions. See public-private commissions Rabin, Matthew, 54, 262n4 (chap. 4) radio, 206; community, 256. See also media radon, 224–25 Rao, M. Govinda, 22 Rawls, John, 28, 54, 245–46 raw materials, 10, 15. See also mining; petroleum; timber R&D. See research and development Read, Daniel, 268n3 reason: instrumental, 53, 149, 196, 205–12; moral, 103 recession: austerity programs for, 260n10; in Thailand, 144–45. See also boom-and-bust cycles rectitude/righteousness: as a value: 51, 91–92, 101–3, 209, 212, 253, 271n2 (chap. 15) Redelmeier, Donald, 46 Redfield, Joel, 262n5 referenda, 25, 238 reforestation. See forests and forestry regional development banks, 141, 238. See also Asian Development Bank; Caribbean Development Bank; European Investment Bank regulation, 26–27, 241, 245; of Chilean social security, 69; communication,

122; conservation and environmental, 11, 14, 19, 31, 77, 90, 220–22; of foundations, 146; minimum wage, 215, 218; of nuclear industry, 178–79, 223–24; of risky behavior, 11, 20, 70, 78–79 Reilly, John, 180 religion: faith in, 56, 102; institutions of, 7, 20, 24, 87, 102, 122; leaders of, 97, 102; practices of, 102, 121n4 rent-seeking, 21 Repetto, Robert, 108, 268n4 (chap. 9) representation, 150; delegate, 238, 270n2; multiple bases of, 238–39; trustee, 238, 270n2 Republic of Korea Ministry of Environment, 244 rescheduling of rewards, logic of strategies involving, 44, 52, 57, 63, 65–66, 78, 88–89, 91, 105 research and development, 7, 21, 30, 81, 84–85, 89, 113–14, 117, 219. See also technology resettlement programs: in Brazil, 15, 30; environmental impact, 30; in India, 15; in Indonesia, 15, 30; problem definition and, 177; in Thailand, 15 resource curse, 56. See also natural resources resource depletion, 10, 14, 30, 71–72, 76, 188, 198, 204; metrics of, 108–9 resource revenues, 119, 137, 252. See also under specific resources “Resources for Freedom” (Paley Commission) (U.S.), 267n7 respect: for nature, 209; as reinforcement for farsightedness, 95–96, 98, 103, 233, 253, 256, 271n2 (chap.15); as a value, 16, 32, 51, 91–92, 99, 187–88, 209 retirement savings. See family savings; forced savings; pension/social security systems

Index  321

retribution, 205–6 Revenga, Carmen, 74 revenue earmarking, 139–40. See also budgeting reversibility of commitments, 101, 121– 26, 136, 143–45, 178, 271n3 (chap. 14) Reynolds, Kim, 158 Richer, Jerrell, 115 Rider, Mark, 22 Riggs, Fred, 271n1 Riots, 159, 198 rising income preference, 48 risk: assessment, 154–55, 213; com­ munication, 223; levels in develop­ ing countries, 10; management, 223 Rivera, Jorge, 75 rivers, 138 roads: authorities, 131, 145; in Balkan countries, 259n5; building, 23, 34, 36, 82; deterioration of, 3, 220; environmental impacts of, 19, 164; in Latin America, 5–6, 145; logging, 176; maintenance, 5–6, 9, 131; main­ tenance funds for, 9, 145–46, 259n5; in Sub-Saharan Africa, 9, 146; in Thai­land, 83; toll, 82; in United States, 145; user charges for, 82, 145 Robberson, Margaret, 200 Robbins, Paul, 248 Robertson, John, 223 Rodrik, Dani, 26, 120, 135, 196–97 Rogers, Everett, 40, 80 Rogers, Ronald, 200 Rohrer, Finlo, 222 Rondinelli, Dennis, 169, 265n2, 271n2 (chap. 14) Rosenstein-Rodan, Paul, 40 Rosenwald, Julius, 265n6 Rossi, Alice, 32, 95, 264n8 Rossini, Fabrizio, 108 Rotary Clubs, 87–88, 102, 263n13

Rothergatter, Werner, 23, 83–84, 98, 260n14 Rothman, Alexander, 193 routinization of planning, 153 Rowland, Benjamin, 260n11 Roy, Amlan, 260n11 rule of law, 257 “rules of the game,” 55, 61. See also institutional arrangements rural migrants, 4, 177. See also resettlement programs Russ-Eft, Darlene, 264n2 Russia, 2008 Movement in, 159, 166 Rwanda, identifications in, 257 Saad, Mohammed, 81 Sabado, Marilou, 102 safety risks. See physical security; wellbeing, as a value Sagoff, Marc, 267n6 Salinas, Carlos (Mexico), 198 Salovey, Peter, 193 Samiei, Hossein, 30 Samuelson, Paul, 192 sanitation, 3, 20, 27, 80, 101, 247 Sapir, Edward, 53 Sarofim, Marcus, 180 Savage, Edward, 149 “Save More Tomorrow” Program (U.S.), 68 Save the Children-United Kingdom, savings program in Vietnam, 68–69 savings: family, 8, 17–19, 66–68, 160, 197; forced, 17–19, 69–71 (see also pension/social security systems); funds, 128, 136–37; groups, 70, 92, 255; interest rates of, 40, 67– 69, 89; Japanese postal savings system for, 67–68; rates, 4, 8, 11, 17, 30, 66–70, 252; Thai programs for, 70, 136; voluntary, 17–19, 66–67, 70 “saving the best for last,” 48, 192

322  Index

savoring, 48–49, 52, 187, 194–95, 197–98, 202, 204 scenario writing, 153, 167 Schick, Alan, 168 Schmutzler, Armin, 261n3 Schneider, Stephen, 33, 180 scholarships: Fleischmann Foundation, 147; Rotary, 102 Schon, Donald, 173 school-based feeding programs, 6 school enrollment, 6–8, 113–14, 137, 265n2. See also education school fees, 3, 6, 17–18, 48. See also education Schwartzman, Donna, 158 Schwartzman, Simon, 129 science laboratories, 147 scientific skepticism, 178–79 scientific/technical communication, 191, 199, 209 sea level, 179. See also under specific seas Sears, David, 191 seas, international organizations for, 138 secondary costs. See externalities: negative secondary education, 15, 182–83, 202. See also education Secretariat for Eastern African Coastal Area Management, 139–40, 265n8 Secretariat for Futures Studies (Sweden), 162 Secrett, Charles, 30 sectarian conflict, 257 SEEA, 108 self-discipline, 38, 51. See also selfrestraint self-hostaging. See hostaging self-identification, 94–95, 209 selfishness, 32; of agents, 35–36; dimensions of, 32–36; as an obstacle to farsightedness, 32–36; specific to developing countries, 41, 43 self-labeling, 209

self-perception theory, 95–96, 232 self-restraint: importance of, 23, 27, 63; instruments and strategies of, 49–50, 119–47, 195, 253 Senegal, bias toward higher education, 260n16 sequencing effect, 193, 197 Serven, L., 6 sexual activity, youth, 4–5, 9, 259n4 sexually-transmitted diseases, 5, 7, 147 Shafer, Robert, 243 Shafik, N., 6 Shaiko, Ronald, 264n5 (chap. 5) shanty towns, 3, 80, 252. See also squatters shareholders, 40, 111–12 Sharma, Narendra, 268n4 (chap. 9) Sherman, Steven, 158 shifting cultivation, 176, 268n5 shortsightedness, 5–11; causes of, 29–43 shrimp farming, in Southeast Asia, 165 Sidel, Mark, 86 Sierra Club, 94–96, 103, 222, 263n4 Silent Spring (Rachel Carson), 49, 193, 199 Silva, Eduardo, 74 Silvert, Kalman, 43 Simon, Herbert, 36, 44, 50, 150, 213 simulation models, 162, 198–99 Singh, Arjit, 42, 261n9 skill, 16, 65, 256, 263n1, 263n3; acquisition, 3, 26, 95, 99, 113, 183–86; technical, 182–89; vocational, 184–86 slash-and-burn agriculture. See shifting cultivation Slovic, Paul, 37, 215, 226, 262n6 (chap. 3), 269n1 slums. See shanty towns Smith, Adam, 36 Smith, David, 53 Smith, Kenneth, 263n6 smoking. See cigarette smoking

Index  323

snail darter, 140 sobriety, 20. See also alcohol social capital, 42, 257 social democracy, 238–30 Social Democratic Party (Sweden), 139 social isolation, 233 socialization, 20, 52, 57–58, 91–92, 97, 100, 248, 262n4 social movements, 35, 99–100, 159, 207 social pressure, 13, 27, 234, 236–37 social rewards, 94. See also affection; deference; psychological rewards; respect social safety nets, 17–18, 42, 70, 89, 234–35, 261n8 social security. See family savings; forced savings; pension/social security systems social service organizations, 87–88, 102 social welfare, 24; theory, 54 soil erosion, 3–4, 8, 19 Sokolov, Andreai, 180 Solórzano, Raúl, 108 Somalia, resource scarcity and conflict, 56 Somit, Albert, 51 Soroos, Marvin, 222, 270n6 South Africa, 143 South Asia, 6, 42, 70, 86 Southeast Asia, 6, 35, 165 South Korea, 35, 154, 260n9; decision delays, 244; environmental review system, 244 Southon, J., 180 “spend it or lose it” problem, 129 spotted owl, 140 spreading effect, 193 squatters, 101, 246–47 Sri Lanka: charitable giving tax exemptions, 86–87; Mahaweli dams in, 209; tax evasion in, 86–87 stabilization funds, 121, 128, 137; for Chilean copper, 137

Staiger, Robert, 120 Stakeholder: compliance, 25, 79, 85, 100–101, 107, 134, 156, 222, 251, 255; decision-making participation, 121, 127, 136, 138, 244; negotiations, 60–61, 152–53, 160, 220–21, 238–39, 248–50. See also concertation standard-setting, 98 state enterprises, 96, 78 state monopolies, 78 State Science and Technology Commission (China), 162–63 steel-making, 15 Steelman, Toddi, 165, 169 stock: collapses, 112; grants, 82; markets, 112; options, 82; stock-purchase requirements, 82 stockholders. See shareholders Stolton, S., 107 Stone, Peter, 180 Stordal, Frode, 180 strategic impatience, 29, 88 strategic planning. See planning Strawson, Peter, 207 street lighting, 80. See also neighborhood improvement subadditive probabilities, 269n5 (chap. 12) subjective probability, 149, 214–15 subjectivity, 16, 52, 149, 257, 269 Sub-Saharan Africa, 4–6, 9, 17; road maintenance funds in, 146; SubSaharan Africa Transport Policy Program, 5 subsidies, 12–13, 15, 21, 26, 56, 67, 74, 78–79, 81, 85, 89, 107, 114, 141, 154, 165, 183, 198, 209, 219, 263n6, 263n10; in Costa Rica, 141–42 substantive rationality, 150 subways, 82. See also transportation Sudan, identifications in, 257 Sugden, Robert, 269n6

324  Index

sunk cost fallacy, 269n6 sunset provisions, 74, 127. See also termination function superego appeals, 188, 205–12 supermajorities, 127 supervision, 80. See also monitoring supreme courts, 232, 236–38, 254; U.S., 232 Suraswadi, Plodprasop, 260n16 Sustainable Northern Ireland, 143 SUVs, 51 Sweden: budgeting in, 130, 139; Council for Planning and Coordination of Research, 171; Customs Office, 172; Environmental Protection Agency, 163; Foundation for Strategic Environmental Research (MISTRA), 139, 163; futures studies in, 162–63, 171–72; Institute for Futures Studies, 162, 171–72; Knowledge Foundation, 139; Social Democratic Party, 139; Workers’ Fund, 139 swidden agriculture. See shifting cultivation Switzerland: origin of firm managing Indonesian customs, 141; remarriage delays, 243 symbols: of identification, 203; institutions as, 128; with positive or negative valances, 203, 220; role in strengthening appeals, 16, 53, 191–92, 195, 203, 253 System of Integrated Envrionmental and Economic Accounts (SEEA), 108 Szekely, Miguel, 4, 30, 259nn1–2 Tabellini, 120 Taiwan: farsighted development in, 56; household savings in, 4, 260n2; industrial planning in, 154; Industrial Technology Research Institute of, 81 Tajikistan, role of women in, 233 Tan, Jeepang, 260n16

Tang, Keli, 8 Tang, Shui Yang, 260n8 tangible rewards, 44, 48, 52, 57–58, 65–90, 105, 134, 232, 242, 253–55 targets, 11, 15, 89, 114–17, 142, 156, 161, 163, 169–70, 196, 222, 265n5, 267n7 Tarschys, Daniel, 130, 265n5 Task Force on Higher Education and Society, 114 taxation: administration, 22; in Argentina, 100–101; avoidance, 22, 85; of charitable contributions, 86–87, 89, 146; in Chile, 100–101; Colombian reform, 85–86; compliance, 22, 100–101; evasion, 22, 24, 85–87, 100–101; exemptions, 12, 21–22, 67, 86–89, 146–47, 219, 249; horizontal equity of burden, 101, 211; land tax, 85–86; rate reduction, 85, 89; reform, 243; of risky behaviors, 20; in U.S., 24, 243; U.S. reform, 243 Taylor, Andrea, 51 technical assistance, 19, 80, 180 technical-unit planning, 152–53. See also planning technology, 25, 40, 113, 165; appropri­ ate, 167; birth control, 18; conservation and environmental, 198–99, 242; forward markets for, 81; incubators, 81; nuclear, 178–79, 223; process, 21, 91, 113, 167, 261n3; product, 113, 167, 261n3; promotion in China, 161; promotion in Sweden, 139; promotion in Taiwan, 81; promotion in Trinidad and Tobago, 202; uncertainty about, 178–79. See also research and development telecommunications, 23, 113, 201 television, 206. See also media Tellico Dam (U.S.), 140 temporal discounting. See time discounting

Index  325

termination function, 78, 111, 125, 127–28, 131–32, 137, 148, 150, 158, 185, 186. See also sunset provisions term limits, 239–40; in Mexico, 239 terracing, in China, 8 tertiary education, 15, 114, 182–84, 209, 260n16. See also education Tetlock, Philip, 220 Tetrault, Steve, 178 Thailand: and Asian financial crisis, 155; boom-and-bust cycles, 112; Community-Based Family Planning Service, 71, 107; cultural restoration, 208; education ministries, 133; family planning, 70–71; household savings in, 4, 259n2; IMF agreement, 144–45; Mekong River Basin cooperation, 166; “One Baht a Day” savings program, 7, 92–93, 136, 255; penalties for poaching, 260n16; Phuket cultural restoration, 208; recession in, 144–45; resettlement programs, 15; shrimp farming in, 165; transport financing, 83 Thaler, Richard, 68, 194 Thirsk, Wayne, 22 Thørgerson, John, 75 Three Mile Island, 233 tillage techniques, 8 timber: bribes to harvest, 35; harvesting, 15, 72–73, 137, 176–77, 184, 196, 199, 268n5; insurance, 73, 89; in Malaysia, 268n5; markets, 19, 72–74; maximum sustainable yield for logging, 97, 196, 199; revenues, 3, 175; in U.S., 140, 169–70. See also forests and forestry time discounting, 30–32, 46–50, 52, 68, 187, 189–90, 252–54, 261n5 (chap. 2), 262n1, 269n8; declining, 46–48; factors influencing, 52, 57, 60, 63, 192–96, 198, 200–204; hyperbolic, 46–48, 68, 192, 262n1; negative, 48;

psychology of, 187, 202; rate of, 30, 31–32, 37, 39; reducing, 192–96; uniform rate of, 30, 192–93 time horizons, 11, 44, 109, 150; for research and development, 81; impact of availability heuristic on, 214; impact of crisis on, 191–92; impact of decision processes on, 241; impact of discounting on, 269; impact of planning on, 156, 208; impact of problem definitions on, 173, 177; impact on uncertainty, 38; of business managers, 81, 156, 261n3, 261n6; of economic plans, 169 time perspective. See time discounting; time horizons Tironi, Ernesto, 137 Tokage Typhoon (Japan), 78–79 Tolbert, Caroline, 53 toll roads, 82–83. See also roads Tollison, Robert, 21 tort suits, 84–85, 90 Tosi, Joseph, 108 tourism, 19, 25, 75–76 Toye, John, 168 traditional crops, 3. See also farming transactional leadership, 232 Trans Alaska Pipeline, 140 transformative leadership, 232 transparency, 59, 235, 264n7 transportation, 3, 5, 23, 34, 38, 76, 82–84, 101, 145–46, 164, 180–81, 201, 247; in Thailand, 83; in Trinidad and Tobago, 201; in U.S., 145–46, 266n12 treaties. See international agreements trees. See forests and forestry Trevor-Roberts, Edwin, 65 Trinidad and Tobago, 201–2 troop commitments, 135 trustee representation, 238–39, 270n2 trustees, foundation, 148; of NGOs, 235; of Swedish environmental agencies, 139

326  Index

trust funds, 121, 129–30, 148; infrastructure, 130, 145–46, 266n12 Tumbaga, Letty, 102 Turkey, European Union candidacy, 208 tutoring, 35 Tversky, Amos, 37, 200, 215, 218, 221, 226, 262n6, 269n1, 269n3, 270n5 2008 Movement (Russia), 159, 166 Udry, Christopher, 4 uncertainty: of policy impacts, 195; and probabilities, 149 UNDP. See United Nations: Development Programme (UNDP) UNESCO, 6–7 UNESCO-Habitat, 225 UNICEF, 233 unions, 7, 12, 40, 120, 142, 246; Argentine, 144, 153–54, 249–50; Chilean, 250; state-sector, in Costa Rica, 142 United Kingdom Cabinet Strategy Unit, 155, 266n3 United Nations, 141, 163, 166–67; Children’s and Education Fund (UNICEF), 233; Development Programme (UNDP), 8, 17, 138; Economic and Social Commission for Asia and the Pacific (ESCAP), 225; Economic and Social Council, 167; Educational, Social and Cultural Organization (UNESCO), 6–7; Environment Programme (UNEP), 79, 138, 167; Food and Agriculture Organization (FAO), 4, 96, 259n3; Framework Convention on Climate Change (1992), 76, 221; General Assembly, 167; Habitat Best Practices Database, 225; Human Settlements Programme, 225; Office on Drugs and Crime, 5; Programme on HIV/AIDS, 5; Regional Seas Programmes, 138; Statistical Commission, 108

United States: Alaska Pipeline, 140; alcohol consumption, 97; budgeting in, 130; charitable contributions in, 86; conservation and environmental protection, 94–96, 140; constitution, 132, 245; decision delay mechanisms, 243–44; disability services, 267n3; divided government in, 270n1 (chap. 14); elections, 124–25; energy, 178–79, 210–11; federal petroleum reserves, 267n7; forests, 140, 169–70; foundations, 131, 139, 146–48; Great Lakes cooperation with Canada, 138; land, 130–31; multistage policy making, 244–45; nuclear waste disposal issue, 140, 178–79, 223–24; petroleum consumption, 210; planning, 168–70, 208; regulatory commissions, 122–23; roads, 145; savings programs, 68; short-sighted corporate behavior, 111–12; Supreme Court, 232; taxation, 24; transportation, 145–46, 266n12; Treasury bonds, 261n5; water regulation, 242 university education, 48, 146, 182–84, 209, 260n16. See also academic institutions University of Nevada, Reno, 147 Urban Control Areas (Japan), 78–70 urbanization, 18, 71, 78–80, 177, 191–92, 225, 246–47 urgency: of appeals, 28, 191; conveyed by communications, 196–97, 206, 241–42; of problems, 173, 220 Uruguay, multi-year budgeting in, 142 U.S. Agency for International Development, 125, 142, 182 U.S. Department of Energy, 179 user fees, 23, 82–83, 139–40 user rights, 39, 77, 138, 165, 248; customary, 177, 268n7 U.S. Federal Highway Trust Fund, 145 U.S. Forest Service, 169–70

Index  327

U.S. House of Representatives, 266n12 Utting, Peter, 268n7 Valdez, Alberto, 263n7 valence of communications, 191, 193–94, 203 Valencia (Spain), irrigation, 9 valuation, 60, 152–53, 157–58, 165, 168, 267n5; of Colombian land, 85; of environmental amenities, 165; pitfalls of, 165; value-added argument, 31 van der Pligt, Mariette, 39 Vásquez, Alexis, 108 Vegh, Carlos, 260n10 veil of ignorance, 28, 54, 245–46 Veravaidya, Mechai, 71, 107 Verscheure, Hernán, 74 veto power, 127 Vietnam: budget allocation formula, 123; distortions in locally provided information, 265n2; Mekong River Basin cooperation, 166; microenterprise in, 68–69; savings program in, 68–69 Villalobos, Carlos, 108 Vincent, Jeffrey, 74 violence, 246; valued as a norm, 51 “Vision 2020”(Trinidad and Tobago), 201–2 visualization of consequences, 47–48, 158–59, 167, 194, 197 vocational training, 21, 36, 119, 184, 186 Vreeland, James, 125, 260n11 vulnerability, 11, 14, 18, 26, 29, 33–34, 39–42, 45, 48, 55, 58, 119, 122, 125, 129, 165, 191, 232–35; agency, 130, 138; approaches to reduce, 60–61, 65–66, 69–70, 72–73, 78, 106, 115–16, 236–38, 242–43, 248–50, 253–57; of earmarked funds, 146; environmental, 162, 176–77; and land reform, 86; of leaders, 229–32; of planning, 171; of resettled people, 180; and taxes, 85–86

Walton, John, 268n5 Wang, Chien, 180 Wang, Jiann Chyuan, 154 water, 138, 164; irrigation, 77; leakage into Yucca Mountain, 178; pollution, 19, 77, 108, 242; pricing, 38; regulation in United States, 242; sharing in Valencia, Spain, 9; in Trinidad and Tobago, 201 Watson, Vincente, 108 Webster, Mort, 180 Wechsler, Henry, 97 welfare values, 65, 88, 91, 232, 263n1 Welford, Richard, 263n8 well-being, as a value, 11, 13, 16, 65, 125, 263n1 Wells, Michael, 108 Wertenbroch, Klaus, 194 West Asia, drug use in, 5 Western Europe: concertation in, 267n6; education in, 6; financing Thai transportation system, 83 “we-they” framing, 195 Wikramanayake, Arittha, 86 Wildavsky, Aaron, 129, 168 Wilensky, Harold, 98 wildlife, 260n15. See also conservation Wilkie, David, 73, 268n7 willingness to accept (valuation concept), 158 willingness to pay (valuation concept), 158 Willis, Kenneth, 267n5 Wilson, Timothy, 217 “winner-take-all” situations, 46 Witte, Kim, 269n5 (chap. 11) women, role of, 162; in family planning, 93, 107; in household budget management, 233; in managing loans, 256 Wong, James, 268n5 Wong, Jennifer, 73 Wood, Geof, 42 wood products manufacturing, 15, 75–76

328  Index

Woodward, Richard, 108 Woog, Robert, 177 worker productivity, 6 worker training. See vocational training “work or pay” agreements, 141 World Bank (IBRD): administration of Global Environment Facility, 76; and Argentina, 144; austerity programs, 260n11; and Costa Rica, 142, 238; Independent Evaluation Group, 6; loans or grants with national governments, 125; and the Millennium Ecosystem Assessment, 163; Operations Evaluation Department, 109; praise for Mexican education program, 9; problematic projects, 109–11, 164; promotion of community self-help, 141; promotion of hurricane and earthquake insurance, 79; promotion of sustainable infrastructure, 5–6;

promotion of timber futures markets, 73; Quality Assurance Group (QAG), 109–11, 164, 255, 264n5 (chap. 6); in Sub-Saharan Africa, 146 World Commission on Environment and Development (“Brundtland Commission”), 166–67 World Health Organization (WHO), 5, 259n4 Xiubin, He, 8 Yucca Mountain nuclear waste site (Nevada, U.S.), 178–79. See also nuclear energy Zaman, Iftekhar, 86 Zero Based Budgeting (ZBB) (U.S.), 130 Zhang, Xinbao, 8 Zietlow, Gunter, 5