Evolution of Evaluating Values

By: Shahab Sabahi, Policy Analyst in Energy Security and Policy Research Group

Empirical  evidence shows how social evolution changes worldviews and motivations in societies [The World Values Survey www.worldvaluessurvey.org ]. According to the results there are cross-national differences which are robust and enduring, and they are closely correlated with a society's level of economic development: people in low-income societies are much likelier to emphasize traditions than are people in rich countries. These values surveys demonstrate that the worldviews of people living in rich societies differ systematically from those of people living in low-income societies across a wide range of political and social norms. The differences run along two basic dimensions: traditional versus rational values and survival versus self-expression values.

Traditional societies emphasize religion, respect for and obedience to authority, and national pride. These characteristics change as societies become more rational.

 The shift from survival to self-expression values is linked to the rise of postindustrial societies. It reflects a cultural shift that occurs when younger generations emerge that have grown up taking survival for granted. Survival values give top priority to economic and physical security and conformist social norms. Self-expression values give high priority to freedom of expression, participation in decision-making, political activism, environmental protection, gender equality, and tolerance of ethnic minorities, foreigners, and gays and lesbians. These values create a culture of trust and tolerance in which people cherish individual freedom and self-expression. These attributes explain how economic growth, which takes societies from agrarian to industrial and then from industrial to postindustrial, leads to democratization. The unprecedented economic growth of the past 50 years has meant that an increasing share of the world's population has grown up taking survival for granted. Mass priorities have shifted from an overwhelming emphasis on economic and physical security to an emphasis on subjective well-being, self-expression, participation in decision-making, and a relatively trusting and tolerant outlook.

 

Pollution, Made in China. Should customers be blamed too?

By: Shahab Sabahi, Policy Analyst in Energy Security and Policy Research Group

A question ran through my mind when I came across an article on Climate Change. It may find interest of you too.

However the discussion on Climate Change runs out of steam and is overshadowed by some overwhelming and pressing today-challenges. The challenges range from preserving regional security and defusing conflicts to mending flaws in the economic structure. But it is worth, just a touch, revisiting the responsibility of air pollution from a realistic economic perspective.  

China is now the world's leading contributor to greenhouse gas emissions, and its largest cities are choked with some of the worst smog on the planet. However a large share of China's pollutants is generated during the manufacture of goods for export and destined to other countries [the journal Proceedings of the National Academy of Sciences (PNAS)].

In the study, researchers found that, in 2006 alone, about a fifth to a third of China's air pollutants—which include sulfur dioxide, nitrogen oxides, and carbon monoxide—were associated with the production of goods for export, and that about a fifth of those amounts were linked to the production of goods for the United States.

The PNAS study places responsibility for China's pollution. But the goods are produced to satisfy demand of consumers who live somewhere else. The question one may raise “whom should be blamed for air pollution emissions?”. Do both producing and consuming nations have share responsibility for emissions generated during the production of export goods?

In a broader view, I think we should put responsibility on those also who are consumers as well as those who produce emissions. Electricity generations and goods productions do not occurred – in the first place there are demand and places where those go. That is the demand side and we should take into account the demand aspect. Perhaps a consumer-based way of looking at pollution is better than just looking at who's producing it.

THE EVOLUTION OF THE STRATEGIC THINKING

By: Shahab Sabahi, Policy Analyst in Energy Security and Policy Research Group

This short theme is an attempt to introduce the evolution of the strategy paradigm to provide input for encouraging further discussion to better understanding the concept of strategic thinking and strategy.

 Phase -1

The first phase in the evolution of the strategy paradigm involved “basic financial planning” in the 1950s where the typical planning focus for the firm was the preparation of the financial budget with a time horizon barely beyond 12 months. These organisations tended to exhibit strong strategies however these strategies were rarely documented. The success of the organisation was dependent on the quality of the CEO and the top management team and their knowledge of products, markets and rivals (Gluck et al, 1980). In the literature Drucker (1954, p. 77) drew attention to this issue arguing that it is the role of top management to address the key questions with respect to strategy: “What is our business and what should it be?”

Phase - 2

The second phase of “forecast-based planning” in the 1960s resulted in organisations embracing a longer time horizon, environmental analysis, multi-year forecasts and a static resource allocation as the firm responded to the demands of growth (Gluck et al, 1980). Important contributions to the evolution of the strategy literature were offered in this period by Chandler (1962), Andrews (1965) and Ansoff (1965). In particular Andrews (1965) and Ansoff (1965) were the first writers to address explicitly strategy content and process. Chandler’s (1962) contribution from an historian’s perspective explained the development of large corporations and the way their administrative structures changed to accommodate the demands thrust upon management as a result of business growth. Chandler (1962, p. 13) offered a broad definition of strategy which did not distinguish between strategy formulation and content noting: “Strategy can be defined as the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.”

 

Phase - 3

In the 1970s there was a move to the third phase of “externally oriented planning” in response to markets and competition as strategic planning enjoyed the peak of its popularity. Planning in this form included a thorough situation analysis and review of competition, an evaluation of alternative strategies and dynamic resource allocation (Gluck et al, 1980). Prescriptive techniques for strategy were at their peak at this time with the planning school dominant (Mintzberg, Ahlstrand and Lampel, 1998) and numerous simplified frameworks for strategic analysis were put forward mainly by industry consultants. These frameworks included the Experience Curve, the Boston Consulting Group’s (BCG) portfolio matrix and the Profit Impact of Marketing Strategies (PIMS) empirical project.

 

Phase - 4

In the 1980s firm’s embraced what became known as the strategic management phase - the fourth phase - being the combination of the firm’s resources to achieve competitive advantage. This phase included:

1.      A planning framework that cuts across organizational boundaries and facilitates strategic decision making about customer groups and resources.

2.      A planning process that stimulates entrepreneurial thinking.

3.      A corporate values system that reinforces managers’ commitment to the company strategy (Gluck et al, 1980, p. 158).

The strategy process came to be increasingly performed by line managers with occasional assistance from internal strategy experts operating in fewer numbers compared with the past. Initiatives in the field were driven by unprecedented levels of change and complexity confronting organisations (Prahalad and Hamel, 1994) as firms endeavoured to keep pace with environmental developments. At this time there was also a shift from quantitative forecasting to greater use of qualitative analysis (Stacey, 1993). The focus became establishing the firm’s mission and vision for the future, analysis of customers, markets, and the firm’s capabilities (Wilson, 1994).

 Phase - 5

By the mid-1980s it was evident that the changes in the evolution of strategic planning into strategic management were not leading to significant improvements in strategy implementation. In addition, at this time there was apparent a greater sense of the importance of organisational culture and internal politics in the strategic management process (Wilson, 1994; Bonn and Christodolou, 1996). The ineffectiveness of the strategic management process led many experts in the field to emphasise the need for strategic thinking - the fifth phase in the evolution of the paradigm. In this context Stacey (1993, p. 18) observes: “…that although the procedures and analytical techniques of modern strategic management may not be of much direct practical use, they do create a framework for strategic thinking and, it is assumed, managers who think strategically are bound to act more effectively in dealing with the future." That the strategic management process provides a framework for strategic thinking is an important foundation in attempting to conceptualise strategic thinking.”

The evolution of the paradigm from strategic planning to strategic management into strategic thinking reflects the economic, technological and social changes that have taken place since its inception in the mid 1950s, especially since 1984 (Aggarwal, 1987; Prahalad and Hamel, 1994) with higher levels of environmental uncertainty evident placing greater demands on the strategy process in organisations. Indeed, the day-to-day challenges of management bring forth issues that test established frameworks, policies and procedures within organisations designed to deal with them. The major task of managers is to determine when to apply these established frameworks, policies and procedures and when to ignore them and develop new solutions. Strategic thinking facilitates this process (Stacey, 1993).

Subjective knowledge: the Swing of Rationale - Emotion

By: Shahab Sabahi, Policy Analyst in Energy Security and Policy Research Group

What is the nature of knowledge? How does the mind acquire knowledge?

In the sphere of policy design and the clash of objectivity-subjectivity, it has been always a crucial question to answer “What do we really know?”   

Formerly academia thought of what we call “natural science” an offshoot of Descartes division of the universe in matter and spirit, while it dealt only with the former. Therefore, the study of the mind and its affairs should either fall in the spirit category or; for the sake of remaining objective-oriented; should assume that they behave like classical objects, and possible quantum effects should be negligible.

The quantum theory, though, provides a ground to understand the development of knowledge; it is based on a series of complex mathematical formula which one may find it hard to follow and apply.

An alternative explanation, which is formulated upon the evolutionary theory, gives a preliminary picture to who may have a quest to crack the nut of the knowledge mystery.     

If we assume that a similar law of evolution is responsible for all living phenomena, from the creation of species to the immune system, and we admit that mind is one of them, and then a possible scenario emerges, which is compatible with the latest neurophysiological findings.

Thoughts are continuously and randomly generated, just like the immune system generates antibodies all the time without really knowing which ones will be useful. Thoughts survive for a while, giving rise to minds that compete for control of the brain. At each time, one mind prevails because it can better cope with the situation. Which mind prevails has an influence on which thoughts will be generated in the future. In practice, a mind is the mental equivalent of a phylogenetic thread (of a branch of the tree of life). We are conscious, by definition, only of the mind that is prevailing.

In ancient times the minds generated chaotically were simply yelled to the "rational" apparatus of the brain, which would act as the mediator with the environment: it would translate "illusions/visions" into actions. The result of actions into emotions, and emotions would either reinforce or weaken the mind in control. Emotions would select the mind.

This is more evident in children, who explore many unrelated thoughts in a few minutes: whatever the various minds produce. Later, the adult is better adjusted to select "minds" and does not need to try them all out. The adult has been "biased" by natural selection to recognize the "best" minds.

EU Energy Security and its implication for Ukraine

By: Shahab Sabahi, Policy Analyst in Energy Security and Policy Research Group

One could think of various reasons for the recent Ukraine tension, but certainly wining political control over the Eurasia faultline isn't the only driving force for Russia's offensive stance, as the coincidence of last year’s energy agreements, between Kiev and the giant energy companies, with the commencement of the conflict is unlikely to be considered a random accident.

According to the U.S. Energy Information Administration Ukraine has Europe’s third-largest shale gas reserve at 42 trillion cubic feet. While for years the giant energy companies have been pressing for shale gas development in Britain, Poland, France and Bulgaria there has been considerably less opposition in Ukraine, a country that has been entangled in gas disputes with Russian in recent years. Gazprom annually supplies more than half of Ukraine’s gas demand, and about 30 percent of Europe’s. Russia has often used this as political and economic leverage over Kiev and Brussels. This leverage, however, came under challenge in 2013 as Ukraine took steps towards breaking its dependence on Russian gas.

According to the New York Times, Chevron signed a 50-year agreement with the Ukrainian government to develop oil and gas in western Ukraine on Nov. 5, 2013, just a few weeks before beginning Kiev’s unrest. The quantities of gas production can probably go beyond Ukraine’s gas needs and the left over can export by 2020. As Reuters stated that the deal for Ukraine and Europe would be a step towards more energy independence from Russia.

It’s in the Donetsk Region, in eastern Ukraine, that Shell signed, in January 2013, a 50-year profit sharing deal with the government of Ukraine to explore and drill for natural gas in shale rock formations.

In another occasion, in autumn 2013 Ukraine’s officials were in negotiations with an ExxonMobil-led consortium to explore for hydrocarbons off Ukraine’s western Black Sea coast. On Nov. 27, the Ukrainian government signed another production-sharing agreement with a consortium of investors led by Italian energy company Eni to develop unconventional hydrocarbons in the Black Sea. In Crimea, giant energy companies including Chevron, Shell, ExxonMobil, Repsol and even Petrochina have shown interest in developing its offshore energy assets. In 2013 these companies have greatly expanded their exploration of the Black Sea off the Crimean peninsula. Perhaps one of Russia’s motivations for annexing Crimea was to ensure that Gazprom will remain in control of Crimean offshore energy assets in addition to ensuring the continued use of Crimea as host to Russia’s Black Sea Fleet.

With much invested of these giant energy companies including those of Russian and the west they are deeply entangled in the Ukrainian crisis. Most likely they will firmly stand to make a profit from these contracts signed by the previous Ukraine’s government and that will influence the geopolitics of Eurasia and Ukraine’s future more than other factors in place.

From Dualism to Triplism: The conflict of Tradition-Patriotism-Globalism

By: Shahab Sabahi, Policy Analyst in Energy Security and Policy Research Group

One of the characteristics of the ancient civilizations is their belief in the duality that underlies the essence of societies’ worldview. Societies, in general, have the fundamental belief in the conflict of good and evil, light and dark, or two eternal discordant forces. Indeed some civilizations had been constantly showing a permanent tendency for embracing dualism and sowed the seeds of dualism while there were such civilizations of Greece, Babel and Egypt revered polytheism and later middle eastern who practiced monotheism and broke away from dualism.

Monotheism had been founded on and the belief in the unique essence of God and spread throughout the world. The triumph of monotheism over dualism significantly shifted the traditional societies’ worldview. The people who had converted to the new belief had nonetheless preserved hidden or open sympathies and respect for their old faith. This enabled them to transmit the remainders of their old beliefs to the collective memory of future generations. Years after this shift, a culture came into being that was no longer tradition, but based on a synthetic patriotic-global-tradition value system. Although this culture discarded the philosophical duality that was the unifying origin of the traditional thought system, it replaced it with triplism. A new complex worldview equipped a primitive people with the means of overpowering an old kingdom, along with its massive social and political infrastructure.
The dualism required a source which could govern and distinguish between good and bad. It needed a purified mandate who could be appropriate authorities for being that source. They were assumed being wise in order to guide their subjects’ life-affairs and setting justice through societies. The simple logic of “suppression of the weak by the strong” had no longer valid.

With the emergence of the Modern Constitutional system and following the globalization, internal and external strife between “patriotism” and “globalization” and “traditions” was finally compelled to face the two diverging paths: on the one hand, it could not easily detach itself from a tradition firmly rooted in the long history of tension within the cultures. On the other hand, it could see the pleasing outlook of the modernity and international markets. The inescapable introduction of globalization with its values to the societies, and its unquestioned ascendancy over the contemporary world, added a complexity to the cultural mixture that threatened the society traditional identity. Subsequently, the pull toward the modernity and all aspects of modern life, in both thought and practice, has become so powerful that the confrontation between tradition and modernity shapes the discourse in developed and developing societies.

The conflict between modernity and tradition has been; and still; is tense at particular historical junctures.  Yet two conflicting political and social tendencies are at work. One is the endeavors in using a rational method suited to the political realities, and the other is the attempt to maintain the traditions for the sake of keep the nation united. It is evident that both of these tendencies display an extreme factional bias dissociated from collective rationality and the interests of people.

Once again, in the downturn of heydays of the late twenty century, this heritage of duplicity undoubtedly underlies the ease with which societies submit to two entirely divergent styles in life, administration, and interaction with one another.  One thoughtful idea will be needed to introduce new lifestyle without or at least less social status competitions; no matter it roots in traditions or modernity.  

Is Wealth worth Money? The problem with theory of Wealth, Value and Money

By: Shahab Sabahi, Policy Analyst in Energy Security and Policy Research Group

 

Before getting through my argument, let me set a line of enquiry for this essay, a question that I was asked a couple of days ago:

“One quests a new or an alternative wealth theory which could explain the value of intangible wealth; such as skill and happiness; since the one reads flaws and shortcomings in the existing theory of wealth which formulated in economics.” 

What is wealth in economic jargon? How can one value the wealth? Is wealth an absolute term or relative? Is wealth identified with its value (I mean if one cannot measure values of wealth by scientific ways, the wealth is not worth!!)?

Introduction

The early theory of wealth emerged in order to answer this question: “What is the source of incomes? How are capital surplus of goods formed? It was not a question about “value”. It was an enquiry to find an absolute and continuous source of income not measuring it. For the sake of saving your precious time, please let me explain this part in brief and in the form of bullets as follows

• In France, Francoise Quesney argued that the source of income and surplus is the sun. He developed the first analytical model about wealth (Tableau Economique). He saw farmers as the transformers of wealth and producers of surplus 
• Adam Smith who went to France to study out there, disagreed with his teachers. He came from industrialized England where labor and capital generated incomes even far above the farmers. Smith proposed that surplus arose from the division of labors, which large-scale manufacturers (capital) allowed. In nutshell, Smith talked about productivity and the role of capital in generating it and how this process led to wealth accumulation
• Marx refined Smith focus on labor to say that labor alone was the source of surplus. However Marx’s initial – not his final – argument was that surplus came from labor and there was a gap between the cost of labor and its productivity. This led to what became known as the "transformation problem”, which locked a century of Marxists into an attempt to reconcile Marx’s arguments with linear algebra. 
• The dominant neoclassical theory argued that was impossible to favor one input over the other: both labor and capital contributed to output, and could be smoothly substituted for each other in what they called a "production function”. The problem for neoclassical model (developed by Robert Solow)was that changes in the amount of labor and capital in Solow’s model accounted for less than 50 per cent of recorded growth: the gap, which became known as "Solow’s Residual”, was attributed to technological change – for which neoclassical economics had no theory.

The above historical event explanation reveals how the main issue, searching for source of wealth, disappeared in modern neoclassical economics as the word 'value' was reduced simply to a question of relative prices. But the new problem arises “how relative prices are set” or “How values measure for different types of wealth which differ in their natures”.

Economists define the term of value as functionality of wealth, and scarcity and durability of wealth; by these two definitions they brush away the question on diversity of wealth and reduce the value of wealth to a measureable scale, price / money. Further, they put market mechanism as the medium for determining relative prices where demand and supply face each other.  

From an economic point of view, the value of intangible wealth; skills, knowledge, happiness; can be measured by; the balance between demand-supply of skills, functionality and applicability of knowledge in the markets, and the price of insurance policies for managing risks and consequently remain happy!!

In this sense, wealth maximization is achievable when goods and resources (they assume unlimited resources!!!) are in the hands of those who value them the most; it means someone values a good more, ONLY if he is both WILLING and ABLE to pay more MONEY (or in the equivalent of money) to have it [Dworkin, R. M.; Is Wealth a Value?].

If you disgust with this viewpoint, you are right. One expects theories answer questions not changing questions to fit answers.

 What Heart-Brain may say

To be blunt, my human nature has not been convinced with the existing economic theory for scaling wealth. The theory is far weak to become an ideal model to describe wealth and consequently lead to a robust value assessment method.

Years back, I tried to build a theory upon the theory had proposed earlier by Robert Ayres. The core of my idea was to put energy as an independent factor of production in the neoclassical production function (in addition to capital, labor and technology) in order to enter the limitations which imposed by the second law of thermodynamics in the production model. My intention was to measure a real value for all the production factors (labor, capital, technology).

Although my idea was not welcomed and received with cold shoulders in the course of reviewing my working paper, I learnt that the real value of wealth could not simply be measured by relative prices. There were a few limitations imposed by the law of nature and social behavior of humans.

My point is that the functionality of wealth may vary in its definition in different societies and over the course of time, though the absolute value of wealth can be measured only based on the limitations that the nature puts forward.

The notion of relative price in economics fails to see the whole picture and misleading. 

Conclusions

Our understanding about “social interactions” has locked into perspectives which proposed by the economic theories. Without a multidisciplinary and holistic approach, we cannot expect to find a better theory to explain some truths about the role of wealth in socio-economic-environmental interactions.

Unfortunately, the main stream economists are reluctant to accept non-economic factors entered in to their models. Perhaps they are afraid of complexity or they love status of quo in markets for the sake of easy short anticipations.