Friendships – My Christmas Gift

By Shahab Sabahi, Energy and Environment for Development – Research Group

You may remember that once asked me; how to communicate with people and make friendship? My partner says. My partner continues “People buy ready-made things in the shops. But since there are no shops where you can buy friends, men no longer have any friends. If you want a friend, tame yourself!” What should I do? I asked.

“You must be very patient. First you will down at a little distance from one who wish to make friendship. One shall watch you out of the corner of one’s eye and you will say nothing. Words are a source of misunderstandings. But every day you can sit a little closer to one. You should come back at same time every day. One shall start feeling happy at an hour before the meeting time. As the time passes, one shall feel happier and happier. At the meeting time one shall become agitated and start worrying. One shall discover the price of happiness. But if you come just at any time, one shall never know when should prepare one’s heart to greet you. One must observe certain rites.”

“Now my partner; do you see the ocean? I do nothing to do with it. The ocean does not remind me of anything. And I find it rather boring. But you have heart the size of the ocean. So it will be marvelous when you tame your mind with the influence of your heart. The ocean, then, will remind me of you and I shall love the sound of the wave in the ocean”

Inspire by my partner and courtesy of Antoine De Saint-Exupery’s book “The little Prince”

Nationalism, nation’s economic life

By Shahab Sabahi – Energy and Environment for Development – Research Group

The twenty centuries was marked by the progressive process of the fusion of the nation’s fate with the fate of its globalized economic life; but the tendency of this century amid climate change and resource security is the growing contradiction between the nation and globalized economic life. In developed countries this contradiction has become intolerably acute.

The social tensions in national and regional level, like all the upheavals of history, stirred up various historical questions and in passing give the impulse to national-wide radical changes in the more economically stagnated nations. But these are only the belated echoes of an epoch that had already passed away. With emotional methods societies attempt to solve a problem of progressive historic development, the problem of organizing economic life over the entire arena which had been prepared by the uneven distribution of wealth and power.
Needless to say, the social unrest and regional conflict have not and will not find any solution to this uneven distribution problem. On the contrary, it atomizes the world regions even more. It deepens the interdependence of the developing regions to the developed ones at the same time that it deepens the antagonism between them. It gave the impetus to the independent development of the developing regions and simultaneously sharpened the dependence of the developed regions upon the developing regions’ markets. As the consequence of the ongoing upheavals, all the contradictions of the past are again aggravated.  Developing countries have improved their economies from top to bottom. They might effectively organize productive forces but inevitably it implies the reinvigorating of all those evils that had led to the social unrests in developing countries in the past.

The present crisis, which is synthesized all the capitalist crises of the past, signifies above all the crisis of national economic life in the global sphere. International organizations attempt to ease this contradiction by translating from the language of militarism into the language of diplomatic pacts the task which the war left unsolved in the twenty century. But the perpetual series of political, economic, financial, tariff, and monetary deregulations only unfolded the panorama of the bankruptcy of the prevailing global governance structure for deal with this contradictory.

How may the economic unity of the world be guaranteed, while preserving complete freedom of individual and cultural development to the peoples living there, in the context of scares resources? If an answer to this question may exist, it certainly is not by military and diplomatic methods. Toiling and thinking humanity proves incapable of grasping in time of pride of itself, when emotion blinds its eyes to recognize how to organize productive forces correctly on a community scale.

Negative forces of ultra-competition and victorious bankers

By Shahab Sabahi – Energy and Environment for Development – Research Group

The sociology of development literature identifies four phases in the development of the capitalist world system; the mercantile phase in the 16s and 19s, it was the transfer of an economic surplus through looting and plunder, disguised as trade. The characteristic commodities of this period were gold, sugar, spices and slaves. The characteristic institutions were slave plantations and the plunder of central and South American societies. Between 1800 to1950, the colonial period, that witnessed the transfer of an economic surplus from peripheral regions to the center through ‘unequal terms of trade’, by virtue of a colonially-imposed international division of labor. In this harsh perspective, the developed center provided the under-developed periphery with simple manufactures, which were exchanged for food and raw materials, but the colonies had to provide increasing volumes of primary exports to by the same quantity of manufactured imports. The characteristic institutions were east European wheat fields, Brazilian coffee plantations, Argentine beef ranches and Lancashire cottons. The neo-colonial period took place between 1950 to1970 when the transfer of an economic surplus from the periphery to the center through ‘technological rents’. It means that when former colonies were given political independence, they were ‘encouraged’ to retain economic links with their former occupying power, and in some respects these economic linkages were strengthened through aid and assistance packages. The latter occur when first world companies establish plant in third world countries, to utilize their advanced technologies and cheap, unskilled labor, thereby making high profits. The characteristic institutions were ‘tied aid’ and ‘foreign direct investment’ (FDI). The main ideological terrain ranges over modernization theory and dependency theory. The modernized trend is so-called: post-imperialism has set out since 1970 onwards It witnesses the transfer of an economic surplus from the periphery to the center by debt repayments. The characteristic institutions were syndicated sovereign lending and are debt rescheduling packages, with ‘IMF loans’. The main ideological terrain concerns the differing interpretations of globalization.

What about now, the age of free trade and globalization? How does the international socio-economic work? Who are dominant powers? How do dominant powers control the socio-economic system?

The debate has been hot for and against the Marx’s perspective on political economy. Marx believed that ultra-competitive nature of capitalism would tend to depress the levels of profit in the capitalist system. Industrial companies would tend to become dominated by the banks and other financial institutions, which in turn would pour money into the development of new markets and new sources of production overseas, where materials were more abundant, labor cheaper, and demand for basic products potentially infinite. As dependency theory concerns, there are those who have followed Marx to argue that the capitalist powers did more damage in the structure of economy through their dominance of politics and institutions, leaving the structure and ideas that had much more to do with the needs of the powerful banks than with other elements of the . Perhaps one can expect, after the age of classic imperialism (annexation of colonies) and direct rule which turned to be costly, the emergence of powerful banks and financial institutes (in the shape of free trade and capital flow), which is cheaper, and involved domination by unequal exchange.

In short, it sounds, nowadays, that the powerful institutes (e.g. banks) use their control of trade and finance to gain excess from free trade even by manipulating political systems. It may be thought, as some suggests, much more of a political than an economic phenomenon; essentially a political response to disturbances. But I am not convinced by this sort of arguments and sill I believe that this stems from the nature of competition.  

The root of short-termism: implication for institutions

By Shahab Sabahi – Energy and Environment for Development – Research Group

If public policy experts are asked to describe the global challenges, they will provide a rich account of most important problems, potential solutions, and typically the institutional constraints to the solutions. What is institution? How do the experts assume the role of institutions in their analysis? In a broad sense, institutions are rules of the social game in which individuals interact with each other and the society as a whole. This definition links institutions closely with the way individuals think. Rules reflect cause-and-effect relationship. But causality is also fundamental organizing principle of individual thinking (Bower and Morrow 1991). The experts tend to recount their professional opinions with narratives that have a causal structure. The causal mental model is thus an individual’s interpretation of the institutional rules that constrain their decisions.

Having the above premise, we can say that the main institutional argument of public policy is that the actions of decision makers are largely determined by a feedback between institutions and the mental models of these decision makers. Nowadays, among the experts, the global consensus favors the efficiency of market economy; therefore this consensus leads to adopting the institutions of the capitalist system. As these institutions have proven their legitimacy for an efficient economic system, in return, their feedback influences the decision makers’ mindset. Accordingly the predominant of institutional order in societies prioritizes short term economics achievement over long term sustainability and system stability. It persuades decision makers to adopt cognitively inharmonious mental models in which economic efficiency achievement values higher than socio-economic harmony for the society.  While thinking that long term concerns should guide the public policy decisions, the mental models of decision makers focus only on economic concerns that, they believe, could destabilize the social system in shorter term. In the end, the short term economic concerns will determine which policies will be implemented. There is no way to get out of the link between mental models and institutions and they together constitute the decision making process.

Cognitive scientists assert that the more the formal institutions dominate the actions of decision makers, the stronger the cognitive dissonance they experience; but the stronger their cognitive dissonance, the more decision makers try to reduce it by adhering to the existing institutional order. They also explain that the individually conceived mental models form the building blocks for determining expert’s socially constructed reality of the issues.

The mental models than can be observed in experts’ narratives are complex causal networks containing both normative and factual statements which are reflected in the institutions and then influence the public policy decisions.  

Can demographic force determine demand side or supply side economic policy?

By Shahab Sabahi – Energy and Environment for Development – Research Group

Developed countries once praised themselves for creating robust economic growth. They pronounced that their success had stemmed from innovative monetary and fiscal policies. They encouraged other nations to adopt their ideas through IMF (international monetary fund). In reality, it turned out that socio-economic system did not really work out the ways policy had desired (e.g. Asia crisis in the 90s). Socio-economic system is a complex dynamic system. Its emergent property always manifests that planning can do little for taking the system in a desirable trajectory.  For example, in developed countries, the Great Recession was primarily caused by the collapse in economic demand as 80 million “baby-boomers” born between 1946 and 1964 moved out of their peak spending years in their mid-30s to mid-50s and into retirement in their late 50s and early 60s. In the US, the government tried to resuscitate this demographically shrinking demand with spending $7.6 trillion on Keynesian demand-side stimulus over the last five years. With only 23 million born between 1995 and 2012, this population is just too small for demand-side stimulus to revive the economy. Now the government faces high unemployed people with a budget deficit, and further needs to fund the baby-boomer’s retirement. Under this circumstance, will really demand-side stimulus work?

Our world today is different from the time of the Great Depression. To tackle the great depression, politicians borrowed the idea of Keynesian “demand-side” economics from Great Britain. Demand-side economics argues that in the “short-run” productive activity is influenced by aggregate demand (total spending in the economy) and that aggregate demand may not always equal aggregate supply (the total productive capacity of the economy). Therefore, governments set a demand goal through targeted spending, that has led to short-term growth since 1948.  

Studies demonstrate that 50% of all durable (cars and houses) and non-durable (food and clothing) expenditures are directly related to household demographics. Spending tends to peak as families grow and people reach their mid-30s to mid-50s. Then spending declines rapidly after the mid-50s.

In the 80s when the US switched to supply-side economic policy, the first baby-boomers born in 1946 were just turning 35 years old. By the time those first baby-boomers hit 55 in 2001, the NASDAQ over-the-counter index of growth stocks had risen 2600%, from 190 to over 5000. As the boomers hit 55 and begin to retire through 2019, only 30% as many generation members will replace them in the work force.

Leftist politicians advocate demand-side economics, as they get to look busy spending lots of money creating “demand” for the crony capitalism system. But as we have been observing, governments have been at the edge of bankruptcy cliff long before politicians can “create” enough demand to replace the shrinking consumption spending as the baby-boomers continue to rapidly retire. On the other hand, rightists try to promote a supply-side economics, since these sorts of policies believed once to encourage long-term economic growth.

Now developed countries are either relatively in national debt and recently suffered a credit downgrade (like the US) or suffer low growth. Also, in the theoretical sphere, there is no policy option but supply-side, therefore governments tend to return to supply-side economics to encourage growth. Perhaps governments can encourage population growth policies. 

Break away from obsolete monetary policy instruments (Orthodox school of thought)

By Shahab Sabahi – Energy and Environment for Development – Research Group

 Since July 2007 and particularly June 2011 onwards, the stock market in the US is undervalued. Stock’s prices are lower than the estimate of their fair value. It raises the questions “why the investors’ expectations are so low while real yields are negative” and “why the decrease in interest rates have not produce the increase in investments expected by the central bank”.

It can be argued around investments decisions behaviors. They are based on cost of capital of which interest rates are just one part. The other part, the cost of equity is so high that it takes promising exceptional high rate of return on capital to invest. In a world with uncertainty and complexity as the dominants factors, these investments are difficult to find. It is quite different from a probabilistic environment. In a probabilistic environment businesses can simulate business models with the increasing supply of data. However in the presence of complex systems where, interdependence, connectedness, diversity, and adaptation/learning rule, additional data does not help. In such an environment, businesses find hard, even with data analysis, to distinguish the market signal from the noise. We now face a complex world rather than a complicated one. A complex system stands between order and chaos. A complex system produces non-periodic patterns and emergent structures and functionalities. We should not expect a reduction in the cost of capital under the existing regulatory systems. Even if the real interest rates continue to decrease, businesses should overcome the uncertainty and the complexity of new investments. It is the real cost of capital in the present competitive environment.

Demand for higher cost of equity will promote the notion of rent seeking and short termism.  The world will encounter poor quality and high risky investments. Unfortunately our regulatory systems are still practicing traditional monetary policy. The regulatory systems have not come up with new innovative instruments and not prepared for addressing our today’s real challenges.

 

On the origin of short term attitude: Is it really against sustainable development?

By Shahab Sabahi – Energy and Environment for Development – Research Group

In the realm of socio-economic development, the short-term attitude is regarded as the enemy of sustainable development. So often, investors are blamed for their short-term attitudes. Do investors not really take into account long-term sustainable development? Do they look after immediate profits? If the answer is positive, why do they do so? Do short-term strategies really overlook sustainable development?

To answer these questions, first we should define the short-term attitude and then try to find out what trigger it. It is defined as humans’ attitude for acquiring profits or capital gains over a relatively brief time. Therefore this attitude fails to appreciate the scarcity of resources and the rights of next generations. Indeed, human nature and socio-economic system structures contribute the most into the emergence of the short-term attitude. Researches show that human’s brain functions in a way to choose short cuts in order to achieve certain objectives. Thus short-term attitude seems to be a common approach among all humans, not solely investors, which is a behavioral aspect of humans. Another aspect is to be the system structure through which a society organizes its internal and external interactions. Complex and less regulated systems often encourage the short-term attitude for survival reasons and attracting more resources. It is eloquently described itself through the lack of ethical and moral culture. Today’s financial systems, for example, promote higher gains through more risky operations that ultimately increase the chance of gains. It urges a comprehensive push is needed for regulating financial markets.

Societies and all stakeholders (including shareholders) should be more aware of ultimate purposes of businesses’ investment decisions. It does not at all mean that short term gains are immoral and ruin sustainable long term sustainable development. However regulation is needed to balance the positive-negative effects of the short term attitude. We should not forget that short term strategies are to react effectively to internal and external changes while long term strategies are to build sustainable future for a society.

The notion of slow economic growth - Vacuum of genuine ideas

By Shahab Sabahi – Energy and Environment for Development – Research Group

Robert Gordon in his recent paper, titled “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds”, challenges the notion of “indefinite economic growth”. He argues that regardless of cyclical trends, long term economic growth may grind to a halt. Over two and half century growth of rising per capita could become a history account. The nutshell of his argument is that growth has been driven by the genuine innovations which led to general purpose and resource augmented technologies. Indeed this growth trend has deeply and broadly transformed human’s lifestyle.

The paper is deliberately provocative and suggests that fast economic growth was a one-time thing centered on 1750-2050, and it happened because there was no growth before 1750. He looks after 2050 or 2100 when there might conceivably be no growth.

Opponents to Gordon’s view (see M. Wolf, Financial Times) point out catch-up by developing nations could still drive global growth at a high rate for long term and the speed with which innovation is adopted is determined by finance.

Also the advocates of efficiency improvement argue that growth can still occur as there is massive potential for productivity improvement. The process of innovation may be battering its head against the wall of diminishing returns. Indeed, this is already evident in much of the innovation sector.

It holds true that the global growth can still be achievable as long as the developing countries markets can accommodate more consumption, and developing countries allow the exploitation of their resources. But it should not be necessarily translated to sustainable and long-term growth.

The opponents miss two points.

First, inevitably finance and risk-taking have driven innovation and growth. However, over the two decades, this risk-taking approach has burdened external costs on societies. The miserable pain of external costs has gradually been felt by societies. It could change the risk-taking behavior. Thus so-called innovative finance instruments also cannot be the utmost source of growth.  
Second, the share of productivity in boosting growth decreases and accounts average for 15% while the rest, 75% comes from more resource exploitation (Hulten 2001; Jorgenson and Griliches 1967; Young 1995).

Up to now, economies of scale, market expansion, trade and finance, productivity improvement and financial innovation have modestly contributed to growth. But this show cannot go on any more. Externality, limited resources and the sheer size of growth that are needed to sustain the globe expansion, will defuse the traditional influence of trade-finance in growth.

Yes, Gordon’s message is right; a genuine economic growth needs genuine innovations.

Global governance challenge: Efficiency and Effectivness

By Shahab Sabahi – Energy and Environment for Development – Research Group

Along with the advent of globalization, climate change, sustainable development, and etc., public policy scholars have recognized the problems associated with horizontal policy integration (cross-cutting). Horizontal policy integration is understood as balancing variety of public-wide objectives (e.g. economic growth, social development, distribution of wealth, environment protection). Indeed horizontal public policy integration aims to balance between interests and trade-offs of public-wide objectives. In theory, the balancing occurs when the integrated public policy maximizes (minimizes) synergies (negative impacts) of the all objectives.

Traditionally, the policy formulation was largely defined within the framework of BUREAUCRACY. Bureaucracy is the hierarchy-based model of institutional function that described by Max Weber in the 20s. It has been widely accepted as an optimal way to organize an institution in order to achieve maximum EFFICIENCY. Horizontal policy integration is (in particular under the context of sustainable development policy, global governance) a policy formulating process that is dominated by cross-administrative practices rather than high-profile political decisions (Steurer & Martinuzzi, 2007; Steurer, 2008). Therefore the efficiency of the whole system is not the sole objective of horizontal public policy. Sustainability and effectiveness of the whole system are as important as efficiency. 

The challenge of horizontal policy integration is still pressing. Against this background, new paradigms have emerged to define how cross-administration policy should be deigned. The two most popular ones are namely New Public Management (the market-oriented model that emerged in the 1980s) and New Governance (the network-centred response to the market-hype in public administration). The guiding principle of New Governance is not efficiency but effectiveness (Jackson, 2001; Salamon, 2002; Jervis & Richards, 1997).
 
Evidently none of these paradigms effectively addresses the challenge of horizontal policy integration. Due to complexity of large integrated systems, “New Governance” faces difficult challenges. Driving forces are hard to understand and measured. Driving forces differ strongly from country to country and influenced by culture elements and value systems.  

The Polymath Paradigm

By Shahab Sabahi – Energy and Environment for Development – Research Group

Ken Jonson principle chief at Florida Tribe Cherokee Indian discussed in his recent post in social scientists portal that in history, American [even other nations] has multiple instances where polymaths helped shape and set societies apart as a contender in the world's economic and political matrix. He brought a couple of examples of the great American polymaths, such as Ben Franklin (his contributions in understanding of optometry, diplomacy, free press, invention protection, invention development, marine sciences), Thomas Jefferson (land survey standard, the college system, positive racial relations and culturally sensitive assimilation), Henry Ford who introduced mass production and marketing.  One may add more name to this list such as Nikola Tesla or more examples from other nations.

In our world today, it would appear that the polymaths are fading away. Conventional schools set to steer students away from being polymaths. Educational systems require focusing on particular discipline of sciences. Academics further polarize the issue by not allowing works from fully credentialed academics to be given credit as possible valid points of thought for consideration. Even though many academics later disprove the work of academics after massive harm has been caused (e.g., Professor DiIulio's book called " Body Count: Moral Poverty and How to Win America’s War Against Crime and Drugs).

Ken sees that the traditional system of polymath has brought more profits to humanity and society development.

Perhaps one cause could be the idea of division of labour in order to achieve maximum productivity. It curbs the development of polymaths. Nowadays being professional in one narrow field is credited the most. It may stem from the growth of complexity in sciences. Without having polymaths, the creation of ideas for growth would be halted.  The ideas those are necessary for stability of systems and are required for developing holistic definition for performance and value for systems (e.g. Society). The ideas are equally important for improving the interactions between systems.

Nowadays there is no debate on ideas as it was (capitalism vs. communism). What is hot now, debate on policies

Damping the development of polymaths could also be seen beyond the division of labour. It could stem from the fragmentation of interest groups. It keeps broad development of interest in many different fields limited, if only artificially. Those who have the larger field of view into humanity and develop that wider focus on the world do not stand out as much either with the democratization of knowledge through the prevalence of higher education being spread far and wide. There is drift between fields but to be a master of one field happens on a much higher technical level than in previous epochs. This may cause self-limiting behavior and leads to less of the polymath phenomena taking center stage.

Driving forces for socioeconomic change

Shahab Sabahi
Energy and Environment for Development – Policy Analysis Research Group

Since Herbert Spencer who submitted that society should evolve from barbarian forms to civilized forms, the debate on the causes of progress or changes in society has been heated up. From Spencer’s view as society evolves, the most capable individuals rise to the top and the least capable die out. He termed this idea on social order "survival of the fittest”.  Karl Marx took a holistic approach and synthesized sociology and economics to analyze the causes of changes in society. Marx theorized that the driving force behind social order was class conflict. Class conflict theory states that the capitalists (those who possessed resources fit to create wealth) were constantly in conflict with the proletariat (workers who do not own the means of production).

In the search for the cause of changes in society, one of the widely discussed concept was introduced by Max Weber. In his treatise "Protestant Ethics and the Spirit of Capitalism" Weber combines psychological & sociological variables with economic development. Because of its determination of the value systems of societies, he put primary importance on religion. According to Weber, the Protestant religion was a precondition for capitalistic development for two reasons: Protestant ethics led to an ascetic life style which, instead of advocating affluence, reinvested the proceeds. As well, it is the basis of rationalism and goal achievement behaviour. While a value system which motivates economic development can hardly be limited to Protestantism Weber's stress on values and the resulting motivation influenced later thought.

In more recent times, Parsons and Smelser explained economic development as a result of tension and unrest in societies. If a traditional undifferentiated society experiences economic growth and economic differentiation as a result of external inputs, this leads to unrest. Frustration of groups of the population not & participating and gaining generates further differentiation and growth, and these small steps happen within relatively short times. McClelland sees the cause of underdevelopment in the absence of achievement motivation. The desire to do well to attain an inner feeling of personal accomplishment is the pre-requisite for innovative activity. Following McClelland's concept that a level of development is correlated with achievement motivation, Hagen tried to explain why this achievement motivation varies between societies and their classes and strata. He argues that in traditional societies the status of individuals is fixed. Children learn to act according to established norms, and deviations (initiative) are punished. If by external influences a new group gains power, the status of the old elite is challenged and weakened.

Perhaps one can say that the insecurity and frustration leads to changed behaviour in society which has consequences on the family structure the basic block of society. The young generations in families tend to become dissatisfied with society’s institutions and their contradictories with readily. The young generations develop new value system or accept existing alternative value systems. In time, they become innovative personalities, if these persons become dominant groups in the society, this causes economic development. Similar phenomena may happen as far as the changing situation of marginal groups or minorities is concerned.

Quality of admirable company

Shahab Sabahi
Energy and Environment for Development – Policy Analysis Research Group

What company is the most admirable company?

Steadily creating value accounts the most important characteristic of an admirable company. By definition value is attributed to that which preserves more quality life. Now a question rises: “What features account for steadily creating values?” 

Directors and analysts count the common attributes for the most admirable companies as the quality of management / products / services, innovativeness, long term investment value, financial soundness, ability to develop people, responsibility to the community and the environment, wise use of corporate assets. (D. Anginer, University of Michigan 2008)

I believe that we can categorize these attributes in a simple way to describe better an admirable company.

Governance quality shows the most important attribute of an admired company. It is a continually evolving process. It enables a company to adapt itself when the business forces change. It brings a company quality of leadership and reputation which are the important assets that company possesses 

Formulating stable strategy comes the second. It shows the ability for the long run value creations in a company. By stable strategy, I mean a strategy that wisely elaborated based on resources capacity constraints and interests of companies with envisaging the development opportunities.

Stable strategy may require long term investments in human, knowledge and capital. Stable strategy entails effective use of company’s resources. Stable strategy leads companies to create more value options.

Integrity is an important corporate ideal. By integrity, I mean honesty, honour, and reliability. It is the firm foundation of a corporation. It is important to all stakeholders including employees, suppliers, customers, shareholders and the community. Integrity is a reflection of the professionalism and the responsible attitude of its management and employees. By corporate-wide committing to do the right values, every element of the corporation team has the freedom and of course responsibility in return to deal with each other. Integrity creates trust among stakeholders that provides a code of ethics by which the organization’s performance is consistently checked and improved over time. Integrity leads to sound collaboration, joint effort, and solidarity

Besides the fact that admired company should be a profit-making company, it also should speak to the concerns of communities. Thus in my opinion governance quality, stable strategy, integrity and profit making are the most characteristics of an admired company.

Energy Security – reconsidering endogenous energy resources development

Shahab Sabahi
Energy and Environment for Development – Policy Analysis Research Group

General notion agrees that economic growth, energy security and climate change are fundamental and interlinked challenges for the world. Having their impacts on human well-being, the clear understanding of their complex interplay has concerned both academics and public policymakers. Society’s and economics’ interest varies across countries and it implies that individual country may take on differently in addressing these interconnected issues. The common belief is that the tension of energy supply and environmental deterioration are the consequence of the economic growth. Modernized economies have long been powered by fossil energy sources. As productions and outputs have been boosted, the use of fossil energy sources has exponentially grown; it has consequently pumped more emissions to atmosphere and intensified Greenhouse Gas (GHG) emissions. Continuous fossil energy use negatively impacts the collective performance of an eco-socio-economic system which is triggered by climate change and the exhaustion of scarce fossil resources. Climate change and foreseeable rising fossil energy prices under increasing demands and increasing production and exploration costs make policymakers think over the serious use of alternative energy sources. If the scarcity of fossil energy and environment degradation are the serious threats to sustainable economic growth, it would be politically a persuasive case to see the development of renewable energy sources as an opportunity. It is a double-edge opportunity; it can cut pollutions in one hand and on the other hand can substitute for additional fossil energy demand thus economic growth remains intact. High fossil energy prices and renewable energy technology advancements will accelerate the substitution process as renewable energy becomes highly competitive and economically feasible.  

Free pollutions from fossil energy use and conventional energy technology lock-in are regarded as the market failures which need policy interventions. Developing endogenous renewable energy sources and other sort of clean energy seems to be a proper solution for tackling simultaneously the interconnected issues. This approach, however, requires heavy investments and changes in energy-economic systems, consumption patterns, and institutions.

 

Harmonizing interests and values: an application for international affairs

Shahab Sabahi
Energy and Environment for Development – Policy Analysis Research Group

On May 1st 2012, Janos Martonyi Hungary’s foreign minister gave a quasi-exclusive lecture in the centre for European Study, Chulalongkorn University – Thailand. How Hungary would respond to the forces from the world order shift was the main topic of his lectured. He initially outlined the current world’s powers structure and analyzed the possible shapes of the world structure through evolutionary process. Although he tried to not speculate the future, he ended the lecture with contemplating the possible positions of Hungary in the new world order and supported his hypothesises with the effect of Hungary’s recent foreign policies in regional and national level.

“Value-Based Foreign Policy” was the core of Hungary’s doctrine, Dr. Martonyi’s pointed out. By the “Value-Based Foreign Policy”, he meant that Hungary’s goals would not be selected on an ad hoc basis, but would be a function of the important value sources such as the UN Charter, the North Atlantic Treaty, the Treaty on the European Union and of course Hungary’s constitution.

Commitments are the prime source of values. As the definition suggests, a value-based approach requires policies are formulated within the framework of commitments made at the first place. As the number of commitments rises, policy choices become narrow.

It raises a question and I got it for Mr. Martonyi. How does Hungary harmonize her national interests and values if there would be a conflict between them? Today it is the case of the European Union, from Greece, Italy to Spain. As a competent politician, he answered my question that the value based approach, in the realm of foreign policy,  should not inherently limit Hungary’s relations with countries that do not fully respect the values her country adhere to. He continued that the competition between values and interests would be a perpetual challenge for societies. In effect it means that policy choice again remains a contextual, and values except core values such as human rights, can be altered.     

Concerning international relations, it would be an easy task to rhetorically speak on an international objective, but adopting a collective policy to reach that objective would be hard. Individual nation’s interests and contexts influence nation’s response to policies. Certainly the social structures and relations are manmade and the values (again except the core values such as human rights) are open to reasoned critique about what is the most reasonable to do. Should a commitment to manmade values be treated in completely contextual terms? Or should interests and values be harmonized before thinking about commitments?     

To harmonize interests and values, general practice is to run a pros and cons analysis which is conforming to rationality and reality of the relevant circumstances. If there would not be institutional humps, this approach creates value based interests which would be an optimistic outcome.  Priorities and institutions may cause deeper interests and values divergence which jeopardize the success of the harmonization process.  In fact, commitments beyond the core values, unlike options, bound the ability of adaptation and decrease the resilience level.

So a value-based policy is only a catchphrase, if one misses to recognize the origin of values. It reminds me this quote “G. Kennan believed that language helped make policy and that vague, expansive language would lead to vague, expansive policy” (Ideas Man by Nicholas Thompson)  

Loser and Winner in the game of change

Shahab Sabahi
Energy and Environment for Development – Policy Analysis Research Group

One of the recent discussions in the Strategic Planning Society brought forward the old dilemma of the change process and tries to address it however, in my view, in idealistic ways.

The discussion recognizes creation of loser and winner as the trouble of change. And it builds its premises based on this belief. I critique the discussion’s certainty and its proposition and argue that the marginal groups are driving forces of change and crucial to change’s success. The trouble appears when marginal groups become larger and more divided which is so-called polarization.         

Company boards, directors, legislators are presumed to be sane. It requires them to hurt no one when carrying out their responsibility which is to assure their systems steadily progress. Under the strain of change, they should respond, restructure, reallocate the scarce resources, and impose new regulations, to create fresh system resilience. By nature these processes rearrange resources and shatter the previous merit system. These processes create marginal forces (let’s call them winner and loser). The marginal forces are critical in the process of change. Both marginal forces, upper and lower average would be supporting the change, if they remain marginal. The problem appears when a system was polarized at the first place.

After the demise of communist and followed strong conductivity in the world, a polar-free world would be expected. Contrary, all systems are now thoroughly polarized and the question is WHY? (Foreign Affair Jan Feb 2012)

Polarization creates the sense of winner and loser in systems, and it should be addressed   

 In the context when change is inevitable, scarce resources, priority setting comes first. (the dilemma of judgment). What guides one’s decision making process is the principle of economic efficiency and cost-benefit analysis. Efficiency does not speak about distribution. However welfare economic theory posits grounds for working out distribution issue. In the case of change, in the race between efficiency and redistribution efficiency must triumph. In fact winners do not outnumber losers but they organized efficiently and share strong and clear interests along with compromise wherever it is needed (Mancur Oslon)       

Institutions and society's growth

Shahab Sabahi
Energy and Environment for Development – Policy Analysis Research Group

How and why do societies grow? What are the consequences of growth? Does growth follow deterministic patterns? Can growth path be imitated in another location with similar results? If so why then some countries are able to achieve economic growth and better standards of living for their populations while others are not. Most of my time has been spent in last two years to do research on this topic with particular focus on role of natural resources, capitals, environment, social institutions, individuals and states and the rule of law. 

These issues concern social scientists Old and  the current economics frameworks has been well identifying sources of economic growth in terms of educational achievements, technology, market organization but hasn’t really dug deeper into why markets are organized differently. Why is it that in some places there is investment into education, or adoption and embracing of new technologies, and in other places there is not? That is the point that economics alone fails to help for searching answers. It requires bringing political economy and institutions in the picture. The major theme that has been keeping me busy right now is to understand the roles of institutions, how institutions emerge, and why dysfunctional institutions arise in different places.

In terms of statistical institution structure and its sources of creation and survival are rather complicated. Social scientists acknowledge elements such as geographic limitations, ecology, weather, natural resources, security problems, etc. which contribute to economic development and growth in much of the world. These scholars are essentially talking about elements that are outside of human control. But history tells us events that humans intentionally changed the course of growth or even initiated it even in the ground of environmental limitation.

So it sounds that to achieve a clear understanding we should examine the roles of institutions and how these social structures can provide leverage and influence in a way that mitigate the impact of various inherent environmental limitations. .

Moral economy does not matter

Shahab Sabahi
Energy and Environment for Development – Policy Analysis Research Group

Maha Hosain Aziz in her article in CNN (April 19th 2012), analyzes the causes of Occupy Wall Street movements around the globe. She claims that at various points in the past six months, movements have been fighting for the same cause as the peasant communities of rural Vietnam during the 1930s - the moral economy. She explains that theorists have typically used moral economy rhetoric to explain rural movements where protesters felt their basic right to subsistence was being threatened. In the case of Vietnam, the onset of colonial capitalism in the Great Depression contributed to a food crisis for peasant farmers, prompting significant protests. In effect, an informal contract had been broken between the governing power and the governed involving the individual’s basic right to feed himself. She believes today, a similar “contract” has been broken between governing powers and the governed, thus the main causes of Wall Street Movements were beyond corporate greed and income inequality.

Her analysis and perspective is valid in the context of the Great Depression and the 1930s. Since then, the world has thoroughly got changed. People’s knowledge has advanced and it affected their worldview, perception of world affairs and their rights. The street movements are not just about demanding people’s basic right, such as work, affordable basic goods, and homes. They challenge the government dysfunctional bodies, lousy regulations and ineffective policies. They simply do not trust governments’ corporate –oriented policies.   

Unlike the Great Depression era, there is no a clash of ideologies in the Great Recession time. Now policy making process faces big challenges and should be restructured. Capitalism embraces the culture of change which drives societies toward growth. Some people accept both the joys and comforts of capitalism achievements and challenges posed by those achievements. Capitalism contains the element of creative destruction which creates winners and losers. The gap between winners and losers widen when governments fail to regulate based on facts and reality and instead intervene by giving ill visions and targets which are not inline with society well-being.        

Contrary to Maha, I see the street movements, in different locations, fight their own causes. But what they have in common is “they are fed up with fake government visions”.  

To conceptualize the main causes of the street movements, two macro-questions should be asked “What difference cultural variation would make to capitalism? and Which forms of embedding would be most successful in supporting the street movements' strategies for success in the context of capitalism? (if we admit the importance of economic growth!!)”

Conflict between what societies need and what societies want in our time may be the key barrier. Perhaps moral economy in the context of globalization, integrated markets falls short to provide adequate principles for designing effective global governance and global policies.

Myths, Fallacies, Artifacts in Strategy Development

Shahab Sabahi
Energy and Environment for Development – Policy Analysis Research Group

This piece is a part of my discussion on "Creating  body of knowledge for strategy" in Society of Strategic Planning. It just reflects a pure view through the lens of Philosophy of Science. It should not be regarded as an educational expert view. (part of critical thinking development discourse)

To avoid ambiguity, I first make concept clearance and set the context in my discussion and then proceed to make my points which agree with Dr. Pierre's original thought (Myth, fallacies and irrelevant fact of strategies as a pure science).

From an international development perspective (not firm strategy) and the basic platform of philosophy of science, I initially state problems and explain in brief where the contradictories stem from.

1. It fails to draw a fine line between short and long term (cause objectivity). No solid guiding principle for defining short and long range. It causes a conflicting between the short term view (performance) and long term (value creation). If the concept of short/long borrowed from economics there would be a conceptual contrary. (i think that it must be valid even for corporation strategy as it is for state),

2. There is no evidence that strategic planning actually improves performance (only case studies) so it leads to inductive reasoning (probability).More than fifty casualty analysis articles have been published which proposed different methodologies to gauge the contribution of strategic plan in success of a company. Yet consensus has to be reached (Strategic Management Journal)....I agree this is not a fallacy and is progressive debates ....But as i mentioned in my earlier comment the result of debate whatever would be, just acceptable as inductive reasoning (nature of strategy),

3. Strategic planning attempts to control (deterministic) the future by employing forecasting techniques. Strategic planning requires quantitative data which limited in scope, aggregated, and uncertain to be useful in effective strategy formulation (limitation to develop theoretical bases). It stems from philosophical debate between dynamists and progressive advocates. I do not think it could be discussed without settling a common ground for what school of thoughts we would like to subscribe to. (just punching air),

4. Strategic planning frequently focuses exclusively on strategy formulation, the success for implementation rests upon people who had nothing to do with creating those plans (Subjectivity conflicts Objectivity). Strategy, strategic thinking, strategic planning and performance plan etc help to prioritize our actions (a wonderful approach to solve the long dilemma of value judgment) and support efficient resource allocations (through process which are known)However it contradicts Agent-base theory which is used in development of strategy (EU social science journal, if i my mind goes right),

5. To have a robust analysis, analysis should not be synthesis. However strategic planning analysis in its interaction with strategy is often synthesized (if we do not accept dialectic!!!),  

6. Strategic planning is rather a tool of formal analysis while strategy requires creative synthesis. It is another source of fallacies (a reality),

5 and 6 i have personally no problem with dialectic process as way to develop knowledge....But if one subscribes to intuitivist school of thought (philosophy of science) it would have a hard time to convince its research results

Society with the harmony of interests: free-man's desire

Shahab Sabahi
Energy and Environment for Development – Policy Analysis Research Group

My ideology, world perception and reality mismatched. My mindset, it had shaped since my childhood, misled my perception to reality. Ambiguity was high in my every action. Why do I receive vice in return to my earlier wise to people? Should not I be nice? Do societies treat me unjust?

It was a struggle rather a challenge. It took me decades to find fallacy deep in myself. I do not think it is late. The discovery of realities always is sweet and brings happiness.

With a proper understanding of one's interest, it can be seen that there is a harmony of interests between rational people. We benefit extremely from positive interactions with others. This benefit comes in the form of the abundance of wealth made possible by the notion of real capitalism and in the form of knowledge advancement for mankind. It comes in the form of friendships, romantic love, and reciprocal support of kinships. The harmonies of interests bring men together in peaceful cooperation to benefit their lives. This is the bedrock of society. This would be a society to live in.

Although the desires of men may be opposed, their interests are not. It leads to a peaceful society where brings vast benefit to its habitants. Any possible advantage gain from living outside of a peaceful society is insignificant compared to the loss. Living in a wilderness may bring one more peace and quiet, but it is at the expense of friendships and the enormous material wealth possible in a society.

The harmony of interests only exists between rational men. Irrational men tend to use force against the interests of others. Men's interests are only in harmony with peaceful, voluntary interactions. Only when men live by the mutual reciprocal value-based altruism principle, their interests meet and steadily grow. Only when men accept value-based trade like principle, their society thrives in peace and just.

Don't let your value down

Strategy: science or art?

Shahab Sabahi
Energy and Environment for Development – Policy Analysis Research Group


This piece is a part of my discussion on "Creating  body of knowledge for strategy" in Society of Strategic Planning. It just reflects a pure view through the lens of Philosophy of Science. It should not be regarded as an educational expert view. (part of critical thinking development discourse)

To me (perhaps like you Peter) strategy falls in the realm of axiomatic concept albeit as a case specific truth. Strategy as an axiomatic proposition is one (an epistemology perspective) that being known to be true only by understanding its meaning without proof.  No proof or possible proof in distance future makes strategy difficult to perfectly fit in the scientific sphere. We have to also keep in our minds that certain forms of argument from axiom are considered fallacious or abusive in scientific debate and different contexts.

However analytic propositions have been well established in strategic planning and strategic management and such (strategy with suffix), ultimately contains of strategy itself are only verbal truths and valid in specific context. Furthermore strategy may be regarded as the secret of success for a firm who does not have any intention to share it with others.

The value of strategists’ contribution is as important as scientists and artisans. Although strategists may not be scientists, strategists are talented in bringing ideas from conception to reality. They expect perfection from themselves as well as other intellectuals so long as they are competent to see the whole picture. Strategists may prefer to stay in the background while leading strategies, knowledge and adaptation (for better observations).

My position:

1-     There is room to articulate and elaborate “a body of knowledge” for strategic management, strategic planning, strategic international relations, strategic sustainable development (all with suffix), though strategy by itself is an art which is crafted by decisive, open-minded, self-confident, attentive, theoretical and pragmatic persons (strategists)  

2-     If one wish to outline a “body of knowledge” for strategy (without any suffix), s/he must initially formulate strategy as abstract concept of evident truths through which reveals connections between the meanings of ideas. (Enormous case specific data in place and it makes it a hard task)

The Prime mover of Human progress – leave human alone

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

We always come down by surprise and ask ourselves why did this happen? Why did that technology fail? Should it not be utilized? Why did that nuclear plant (Fukushima for instance) break down? They were supposed to generate CLEAN electricity and have done so far? Surely the technology had not been developed for any other purpose. In panic, we label that technology devil and keep saying something else happened than what was intended and campaigning for shutting down them.  However the joy and benefit from the technology is still fresh in memory of us.

All technologies have developed in almost same pattern. Human experience and knowledge has long been the engine of change. The fruit of human ingenuity curiosity and experience over the course of history is our today relatively better standard of life. However developments make some part of our life insecure, as climate change, resource depletion and human security can be considered as our key challenges

I do not intend to talk about the impact of development on or the importance of technologies in human life transformation. Rather I aim to point out the chief driver of human experience. I would to briefly discuss whether this driver depends really on conformity to one central vision, or it comes from trial and error attempts taken place in an open-ended society where creativity operating under predictable rules, generate progress in unpredictable ways

In “the future and its enemies” Virginia Postrel’s book, she draws a line between people, mislabelled “progressive” who desire social stasis, and those paradoxically named conservatives, who open the perpetual change of society by dynamism.

Dynamists focus on complex evolutionary processes as scientific inquiry, market competition, artistic development, and technological invention. This world view, as well as a penetrating analysis of how our beliefs about personal knowledge, nature, virtue, and even the relation between work and play shape the way we run our businesses, make public policy, and search for truth.

In contrast, so-called wrongly progressive, think of a central planner tries to anticipate moves in future. He tries to set up a plan for achieving a better outcome, as he thinks. Imagine his static vision and plan cannot fit in the reality of future. The central planner insists on prescribing outcomes in advance, circumventing the process of competition and experiment in favour of its own preconceptions and prejudices. It just wastes resources without hitting the desire outcome and even achieving any experience.

We should welcome patterns created by millions of uncoordinated and independent decisions within determined rules. It may look like a chaotic situation but we remember that chaos is not really disorder but rather is an order that is unpredictable and necessary for our survival. (I. Prigogine)

Human security - from the economic notion of scarcity viewpoint

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

The economic notion of resource scarcity differs from what scientists consider for physical abundance of resources. For economists, the net value of resources over the course of time is a measure for making judgment for resource scarcity. From an economic point of view, if marginal costs increase as remaining reserves decline, but market price does not increase as fast as the costs, then the net value is declining and it indicates NON growing scarcity. The fact that remaining reserves are declining would indicate geologic scarcity, but unless market price increases fast enough than marginal cost, the resource is not becoming economically scarce.

Indeed from an economic perspective market forces; technology costs, future demands, substitute commodities prices and their availability will determine the level of scarcity for resources rather than geologic and physical availability of resources.

What about environmental quality; fresh water and clean air? What about species face the danger of extinction? Could we apply this commodity-based and private goods notion of economic scarcity to public and environmental goods? Can this notion guarantee the irreversible exploitation of the life-support resources?

Scarcity is an economic fact of life and can be manageable for commodities that flow through organized institutions such as markets. However where the case is about the scarcity of life support resources and human security may another institution should be in play. In the latter case, interchangeability, market price and demand fluctuation are not applicable.

Having the reality of limited capital and human resources and necessity of their optimal allocations, we need a framework to help us to effectively prioritize our environmental objectives. The more non-market the environmental service, the harder it will be to adapt this economic notion of scarcity. It is suited to private commodities that exchanged in markets.

The existing value system cannot appropriately calculate the real value of environmental goods. Furthermore the prevailing and dominated development model for societies cannot accommodate all aspects of human security.

These all may require the development of new economic value system within new global governance, with focus on effective regional cooperation and conservation efforts, to fulfill the human security needs.        

From Globalization to Chaos – (application of entropy measure)

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

With applying the philosophical reasoning approach (see my previous post), I examine the link between globalization and expecting more confrontations. In science, there is an analytical measure, it is called entropy, that being employed to evaluate phenomena which directly dominate human’s life. It can be used to explain aging, society decay, stability life, information, language, codifications, norms and cultures. According to this measure, the trends for the all phenomena tend to converge toward a universal trend for equalization, like the concept of globalization. Globalization has its adherent dynamics which force the whole system to equalization and developing a universal norm. In scientific term it means that an increase in global entropy. It is going to create an equivalent thermal death. There is another philosophical explanation that brings some hope that an open system, as our life system is, may not follow the entropy increasing direction. Chaos theory (I. Prigogine) explains chaotic moves keep a system away from reaching that equalization condition.    

With this perspective, S. Huntington’s “clash of civilizations and new world order” is rather philosophically described a natural phenomenon than posits just a hypothesis.