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.  

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)