On Incentives as a Preferred Instrument
of Corporate and Public Policy
by Win Wenger
Chapter 1 - Introduction
Chapter 2 - Interlude
Chapter 3 - Incentive Analysis as a Problem-Solving, Creative Solution-Finding Method
Chapter 4 - Where These and Other Problem-Solving Methods Come From
Chapter 5 - Incentive/Equilibrium Analysis
Chapter 6 - Adjusting Incentives as a Main Way to Get Desired Things Done, Preferred Over Conventional Administrative and Governmental Methods
Chapter 7 - Toward An Overall Cost-Benefit Analysis to Coordinate Actions, and to Reduce the Costs of Managing While Increasing the Benefits
Chapter 8 - Some Specific Ways to Use or Adjust Incentives
Appendix - Funding of Science Research
Discuss post your comments on our Forum.
Example from a list of hundreds of possible incentives for improving conditions without constraining or damaging individual freedom and/or initiative:
Create a 1% tax on all capital newly borrowed in pursuit of hostile takeovers.
- Because of the close competition of other, more productive opportunity costs - i.e., uses of capital - this would meaningfully shift more resources into productive investment and use, and away from non-productive and even destructive "internecine warfare" among wolving management groups.
- This proposed simple 1% tax would slow speculation, without preventing necessary transfer of productive resources from less efficient to more efficient uses.
- This would be a gentle and yet most comprehensive reform of the savings and loan, banking, insurance and other financial institutions, rendered necessary by their trillion dollar error of loading up on junk bonds, as an alternative to the massive governmental controls and takeovers and rejiggering of power and financial arrangements and resources which have taken most of these institutions out of their traditional local-community-support, locally managed roles.
- This simple, inexpensive measure would curb the most damaging phenomenon ever let loose in the American economy and society.
- This simple tax, with no cost to the Treasury and indeed an immediate if marginal increment of improvement on the Federal deficit, would restore some needed stability to highly productive sectors of the economy, and allow continuity and corporate productive pride to become restored.
- At no cost to either productive suppliers OR consumers, this simple step would free up an immense amount of American capital for productive investment, both here and in fledgling democracies whose window of opportunity may be closing for lack of capital support, capital which now is consumed in hostile takeovers or in defending against possible and actual hostile takeovers.
By far the hugest (ahem) transfer of resources and assets in American and/or world history has been accomplished in two stages.
- Recessionary and then realty-depressing policies which collapsed market values at the most crucial time, converting a possible billion-dollar shortfall in savings-&-loan institutions into a trillion-dollar short-fall and buyout. (Much of that value, Gentle-but-I-hope-not-too-gentle Reader, went somewhere!) Obviously, the appropriate policy to follow while sorting through and buying out the mess of the collapsing S&Ls should have been an expansionary economic policy, to support values and minimize the costs to the Treasury and to the public, until the episode was complete. The opposite policies instead were pursued, expanding the losses to Treasury and public from a billion or so dollars three orders of magnitude upward toward a trillion dollars! This strange coincidence of the relevant policies is, indeed, remarkable.
- The subsequent rules and power shifts which enabled the enforced transfer of wealth assets on an even larger scale, which is why your friendly neighborhood bank or S&L is now the outlet of some distant colossus.
Where are Woodward and Bernstein or other courageous investigators when we most truly need them? It might be a fascinating exercise to determine how many of the close associates of those now holding most of those transferred assets, were also the close associates of those who determined and carried out that remarkable confluence of coincidental economic policies.... —Or how deep and how far back some of these matters indeed run...
One has the distinct impression that the related and remaining financial industries had, indeed, a la golden goose, been taken past the brink by these policies and were nearing the point of a yet far more comprehensive general collapse, before "time was bought" for the American economy in the form of NAPA and GATT, which may give us even some temporary prosperity for a decade or so before the next remarkable transfer of wealth assets is gotten underway. (Editorial note: this was written a decade before 2001.)
Appetites tend toward infinity—and certainly at a greater pace than do resources—and if not appropriately limited or curbed can strip the land of all its further productive possibilities.
One objection to this initial argument is the often-raised objection that it is nearly impossible to pursue an expansionary economic policy without inflating prices. In response, one may question how expansionary an economic policy had to be to match the inflationary impact of running up the Federal deficit by a trillion dollars through the coincidence of restraint policies, realty decline and the S&L crisis. A better response, though—better because it allows us to move away from unproductively pointing fingers, and toward suggestions which could be very productive of improved value—is that there are indeed ways to expand the economy without inflation, to nurture a whole brood or flock of golden gooses if you will. For starters, read within this brief monograph to see how we can readily encourage a 6%, 8%, even 10% annual economic growth rate while simultaneously enjoying stable or even declining prices!
—And how we can also develop a qualitative economic growth rate....and inexpensively preserve and restore the natural environment, and other aspects of a fully human quality of life.
Hundreds of incentive-directed suggestions—-the one which opened these pages above, the several dozen below, and many others—-each individually appear to be good ideas and can be debated thus. However, each of these is also reflective of a larger set of common principles which at some point must be addressed. These common principles apply within firms, agencies, corporations, communities and even neighborhoods, as well as on state, national and even global levels. These principles suggest a way of managing resources which is less costly and more efficient than are conventional supervisory, managerial and governmental techniques. Further, these common principles point directly to ways to restore major corporate or public goals whose difficulty of achievement by other means had caused their pursuit to fade. These goals range from corporate growth goals to levels of public health, and bear on the dilemma of homelessness, the embarrassingly faltering American space program, standards of environmental quality, and development of oceanic resources, to name but a few such elements.
We Americans have failed as yet to come to any meaningful grips with key matters which severely threaten not only our livelihoods but our very survival. We've postponed even looking at these because the scope is so great, the apparent costs of remedy so high, and because the problem is so much bigger than we or I that necessarily someone wiser and more powerful or responsible will somehow come along to take care of it for us. That latter attitude is as un-American as it's possible to get!—and the cascade of crisis and decline in not only American world position but in absolute living standards, moreover, make it appear that truly no one is responsibly at the wheel, effectively in charge. No undisclosed possible power group behind the scenes is taking care of us and saving us from ourselves, any more than our uninformed democracy is.
—Yet many or most of these greater problem issues are easily and inexpensively solved! Examples you will see within are our nuclear wastes problem and the little-noticed but nearly fatal distortions in our scientific and medical research efforts. Other problem issues are more costly to address, but still are fairly readily solved, such as the fading ozone layer, the immense cleanups needed around some of our older nuclear facilities especially those which were part of the defense program, the approaching sudden-death of the lungs of Earth, our oceans.
True, each of these problems, if addressed the usual way, could consume more resources than the present Federal budget in toto, and literally mean an end to remaining individual freedoms though even that could be preferable to the results of leaving such problems alone until too late.
Yet addressed by the means suggested in the pages following, the cost of such matters can be readily reduced to far more easily managed proportions and the degree to which the indicated situations can be fully remedied can be uncompro-misingly high.
Beyond these specific concerns:
Once this set of principles and general approach is highlighted, the incentive approach we propose herein becomes apparent as a useful general method by means of which to address a much longer list of corporate and public problems and issues.
Perhaps as significant, this incentive approach generates in prospect not only useful but gentle solutions to these and other problems and issues, including those great issues and problems which have long been thought to be wholly unsolvable. Further,
The very fact that this approach is generating apparently plausible proposals for solution of various specific global problems which "everyone knows" are hopelessly unsolvable, should in itself justify a close look at the principles we present here, and at this general approach proposed to creatively solve a range of such problems.
In the regard that the means determines the ends (in contrast to the ill-fated theses that the end justifies the means)—applications, of this proposed system of principles and specific methods and solutions, may go a long way to restoring certain key American traditions and values once identified with Jefferson and Madison, and which actually trace back to the Benthamite context which underlies all western democracies. ("Democracy," however, we define as "people having a meaningful say in the decisions which affect them," which may or may not have much to do with the institutions of voting. A truly free marketplace, if one existed, would in this sense be far more democratic than are today's politics for national political office in America whose effectiveness as a "democracy" has, indeed, come substantially into question.)
To the extent that you can work with people pretty much as they are and still get done the things you need or want done, you can allow people their freedom. To the extent that you have to somehow change them or override aspects of their nature in order to get needed or desired things done, you have to reduce their freedom.
That was what destroyed that beautiful dream of international brotherhood called "communism." There was no way that system could get much of anything done without a great deal of either self-compromise or of overriding the human nature of those people unfortunate enough to come under its sway. The degree of its overriding of human nature and ignoring of matters of incentive and dysincentive, dictated formation of one of the worst totalitarianisms ever unleashed upon this planet. Mostly the people directly under its sway, still nurse the secret hope that communism itself can somehow still be revived and made to work "with a human face," that what went wrong before was a few people "betraying the revolution." If any of these countries does, indeed, succeed in reinstituting communism, it will necessarily again be "betrayed." The betrayal, though, is not in a few individuals who sought and grasped power, either for its own sake or to try to get some of those needed or desired things done. The betrayal is built into the dysincentive structure of the communist system itself, and no long-term positive outcome under that system is possible. The betrayal was real enough and terrible enough—but is necessarily inherent in the nature of the beast called communism.
Why America, for some considerable period of time, came to be substantially the world model for democracy and freedom, is due not especially to unique virtues on the part of our forefathers who were as human as we are (if somewhat better informed). We were a huge wilderness without effective authoritarian controls. If you didn't like the way things were being done someplace, you picked up and left and went somewhere more to your liking. The only way multi-person or social or collective desires could be accomplished was through working with people being comfortably pretty much as they were. If you tried to override or change them, they went somewhere else. —So we evolved ways of working with one another, ways of working through and with others, that were effective even though we left people otherwise pretty much as they were and didn't try to override them. That was the only way to get done the desired community or collective aims.
—Of course the successes resulting from use of those freedom-involved and democratic methods, brought growth which put an end to the conditions which made that freedom and democracy required. Of course we coasted awhile on the momentum of those traditions, and grew further, to the point where some would now argue that in our crowded and complicated world freedom and genuine small-level democracy are not only no longer required, but increasingly impossible.
We propose instead to show, in these pages, that any meaningful forward surge into modern world conditions, especially one that can be sustained forward, can not only be accomplished with meaningful freedom and democracy fully reinstituted but that, in the long run, such freedom and democracy are required to survive and prosper in the complex modern world.
—And that the only way this can be accomplished is to examine and adjust the incentives at work among us, and to turn from traditional coercive means TO incentive adjustment as the preferred means for getting done the various collective and social and general things which we want done.
That this is feasible, and very necessary, and urgent to do, is the thesis of this paper.
Incentives work best at the margins of people's attention, rather than directly in the center. —When, almost unconsciously, it's easier and more rewarding to go one way rather than another.
When people, for their own reasons, find it in their own personal interests to do that which benefits the whole, they tend to do so for their own reasons.
—So Adam Smith taught us in Wealth of Nations. Smith also taught us a range of conditions under which private interests differ from those of the larger whole. That is where our freedoms disappear down a black hole. That is where, attempting to constrain private responses to conform to the benefits of the larger whole, we have made nearly all our terrible mistakes and are still doing so.
Where conditions cause conflict between private interests and the benefit of the whole, both lose.
Correspondingly: where the whole can truly bring into line with what benefits it, what freely benefits the interests of the private individual, both gain.
When you constrain by law or by administrative practices, all are required to conform and freedom disappears. Adjust incentives and no one is forced to conform, no one's freedom is lost—but the benefit of the whole gets realized.
The larger the community, numbers and variety of people are, among whom incentives are thus adjusted: the better are the chances that enough will respond to carry out the aim or benefit of the whole accordingly. —For their own reasons, on their own initiatives, economically and flexibly and adaptively and quickly.
The costs are all around us, today—the costs of the traditional methods of constraint. The costs of forcing private response to serve, or at least to not injure, the benefits of the larger whole.
Who is more the prisoner—the inmate, or he who has to guard that inmate? And: que custodiat custodias?
I wonder if any of this has anything to do with America being the only major or modern nation with more than a million of its own citizens behind bars—with another two million awaiting their turn? (Editorial note: as of 2001: two million Americans now behind bars with another three million needing to go there.) —At a time when it costs several times as much to keep someone behind bars as it does to send him to Harvard. —And certainly the costs of that less than 1% of 1% of 1% of the cost of opportunities foregone through our present arrangements.
Concentrate enough power to exert the traditional methods of authority, administration and constraint/ restraint by law, and you've created an extremely serious additional dysincentive regarding the benefit of the larger whole. More and more people start playing more and more ruthlessly to the stakes of that concentrated power and wealth....
...Diffuse that power by means of adjusting private incentives to serve even the same policies and corporate or public aims, and you reduce such stakes. —And with those stakes, you reduce much or most power-play behavior. Policies become more rational as the policy-setting conditions become more rational.
Incentive Analysis as a Problem-Solving, Creative Solution-Finding Method
Most or all major problems which involve or affect many people, and which persist despite effects at their solution, may be usefully analyzed in terms of the incentives which bear upon those who relate in some way to that particular problem.
A. Solution to many such major world, national, regional, agency, corporate or community problems, will be found in terms of modifying various of those incentives.
B. The same principles apply infrastructurally, within administrative apparatus as well as to employees generally and to the population at large.
C. For example, in terms of frequent contemporary experience, we elect a commissioner of roads because of his promises to take heroic steps to solve the city's awful traffic jams. His incentive - for job security and more pay and moral support - turns out, however, to be to be seen in heroic battle with the traffic problem. Incentives dictate that the last thing in the world he would really want to do would be to actually solve that traffic problem. If we were wise enough to change the incentives bearing upon his position, we would change thereby the traffic situation.
D. In years past we have proposed elsewhere that one way to bring an end to the war in Northern Ireland would be to give a 5% tax break to firms and enterprises which are jointly owned by Irish Catholics and Protestants. Immediately upon enactment (especially if the incentive itself were enacted reasonably quietly and not made too much of an issue), powerful interests on each side would begin feeling out their counterparts to find ways of taking advantage of that tax break. A la Darwin, other firms would engineer the same to stay alive in competition with the enterprises which enjoy that tax break. Rapidly would build up on each side a substantial arrangement of people whose own prosperity rested upon the well-being of the other side. For "Ireland" also read the Punjab, Sri Lanka, the West Bank, most of the countries in Africa, hundreds of other such troubled areas.
—While that much was apparent at first look, in the Irish instance a closer look with Incentive Equilibrium Analysis (whose instructions step by step are provided a few pages further on), produced a major and shocking discovery. Despite professed and probably actual beliefs on behalf of both Protestant and Catholic Irish churches, and despite those churches being central to the several peace movements and initiatives launched there—those churches nonetheless draw their main importance and community support from the conflict. The churches have a considerable vested stake in the conflict continuing. We all wish the best for the current peace initiatives, which have to date gone much further than previous efforts. But (despite the complete non-response of the Irish Desk in the U.S. State Department to this point, among others so advised) if this stake is overlooked, this brightest-and-best peace effort is deeply imperilled.
There might well not be a single individual on either side deliberately prolonging the conflict for (conscious) church-related reasons. —But no solution may get by unless is added to it some measure as sweetener which sustains or extends the importance of the roles of each church in its respective community! Making the churches major channels for foreign aid for reconstruction and peace-time development, is the surest guarantor for any of many possible peace arrangements there.
Incentive/Equilibrium Analysis enables you to discover the potential or actual winners and losers relative to any situation, problem, proposal, policy or position. This method is also known as the "Win/Win-Finder" because, in this non-zero-sum game world where many or all can win together or lose together: such use of sweeteners to prevent anyone having to lose, such compilations of solutions which are "win/win" for all concerned, generally make solution-finding and policies in major social matters far easier and less costly than is the effort to override entrenched resistance. —Even when, as we will discuss, that resistance is unconscious and higher, conscious motives are genuine (and, believe it or not, they usually are!).
E. Most major social goals, we postulate, can be more readily and inexpensively advanced through appropriate incentives than by more direct and traditional administrative, governmental and compulsory means. For example, President John F. Kennedy inaugurated a long sustained period of record economic growth by adjusting tax incentives relating to investment. West Germany wrought its economic miracle in the 1950s largely by providing incentives to its businessmen to develop foreign trade. Here in America again, we continue to have great difficulty with pollution (something like the above problem with the commissioner of roads, perhaps?), but this brief hopes to make a persuasive case, a few pages hence, for the proposition that by setting appropriate incentives, we can actually clean up our own and surrounding environments quite rapidly for a fraction of the cost of what we're already spending now so ineffectually. (This may move from crucial to desperately urgent if either of Earth's main sources of breathable oxygen, the oceans or the tropical rain forests, continue to die and approach cascade point. —Those who are so impatient of government as to not want to consider incentives which might imply a continued and legitimizing role for government to play, please consider the world in which oxygen became scarce and the whole Earth, at best, became a "water kingdom" with our very breath, not just water, subject to centralized control of supply!)
To deepen this latter example of an incentive approach to problems, let this writer quote excerpts of a letter he wrote in 1988 to a good friend in Brazil, concerning the rainforests there:
"....Right now, any moves to try to address either Brazil's long-term interests there or the world common interest, appear dead in the water. At the same time, the public treasury there and pretty much the state of the economy however high that economy's potential, also seem to be dead in the water. I'm wondering if we might not put the two sets of problem together in a different way and let each problem help solve the other problem—
"Obviously, the Federal Government there (and/or the involved state governments), needs a positive incentive to begin protecting the rainforests, even though these are so essential to Brazil's own long-term interests entirely aside from the matter of these being a major part of the lungs of Planet Earth. The following double-action incentive could be the beginnings of the process—
"The Federal Government to set up a regulatory agency to supervise the development of the Amazon region. The agency would be funded by user fees, at a rate high enough to also meet some of the other needs of the Federal treasury as well.
"Since half the rainforest land is privately owned: any such land which is cleared or burned without that regulatory agency's supervision, the title of that land (and ownership of any of its resources and/or earnings) automatically reverts to the State!
"Hardship to private owners whose land was accidentally burned by someone else's actions, could be addressed by tort action against the burner, backed by a state insurance fee which was part of the user fee structure. Losing land title and resources to the State would automatically and correspondingly be part of the losses to be recovered by tort action and/or insurance. Thus,
"The State would have double-incentive—the direct input to its general public treasury (and building of some bureaucratic empire), and the receipt of some parcels of land in the developing area—to legislate and execute the necessary arrangements. This would not halt the slaughter of rainforests, but the very existence of a regulatory agency cum user fees would in itself slow that process. Also, such an agency would by its very nature be likely to begin at least partly rationalizing the development process and curtail the less rewarding, more damaging aspects of that process.
"Once Brazil was in a position of drawing some of its needed funds from putting brakes on that process, a very different psychological and political climate would exist ..... as Brazil's regulatory agency developed a civil staff with a stake in formulating a seemingly rational policy ..... would make feasible further additional measures not least of which, eventually, would be a tax credit or other positive incentive to developers to RE-forest some of the cleared areas which were less suitable for development. Some of the damage might actually get repaired before the climate, driven by the explosively positive feedback of tropical prevailing wind cells, collapses to Brazil's immediate detriment.....
"....have to look to incentives to sustain or execute desired or desirable public policies. The old methods don't work any more, if they ever really did. Species protection in Kenya, where the government there really does want to conserve [but poachers have destroyed most of the elephants and rhinos regardless], is a case in point. I predict that a large part of your President's present (1988) posture of outrage at outside interference is because he doesn't see any ready way to accommodate the world's common interest at this point, and thus is putting the best face possible on the situation by attacking the outside interference. Now that such a position is staked out, even if your government finally saw a way to accomplish a halt on the clearance, it would be a long time before it could rationalize its way around to doing so. —Whereas, the double-incentive measure proposed above is clearly in large part a means to relieve the beleaguered public treasury, and not at all a how-tow to those outside interferers...."
However, with the emergence of I/E Analysis it didn't take long to reveal the gaping flaw in this plan—the entrenched private interests, especially cattlemen and the political powers to which they are constituent. These have a stake, regardless, in the current reckless slash/burn practices - as do various industrial and power-plant factors. —But is there a "sweetener" to be added here, especially one that could be brought about from out here in the world outside Brazil? The answer is, yes—
Simple, Non-Governmental, Way to Save the Rainforests:
Reportedly, iguanas are more efficient at converting feed into high quality meat than are cattle. Even if they were only comparable in this regard, their meat is chicken-like and can - with recipe and cookbook prizes and a little media help from those here who have a genuine concern with the environment, as distinct from the drive for money, membership and power—be turned into a worldwide fad and major market export for Brazil.
Why should we wish to create such a market for Brazil? —Because iguanas require a forest habitat. The main slaughterers of Brazil's rainforest, the cattlemen, get several years grazing for their cattle out of freshly cleared land before the ground gets too hard and turns to desert. A boom in iguana meat would encourage ranchers to turn from cattle to iguanas as more profitable. Not only would this drastically slow the destruction of rainforests even apart from the above tax plan. Through sheer market force cattlemen might well find themselves leading the forefront of RE-forestation efforts!
This part of things we can easily accomplish from here in the United States—if the environmental groups are truly staked in better environment instead of in power seeking for its own sake in the name of a popular cause—or if some other source of support can be found, even an individual philanthropist, to underwrite such a campaign for popularizing consumption of iguana.
A concerted I/E Analysis might then go on to examine how a dramatic breakthrough in this regard could be made to advance the power interests of the environmental groups more than those interests would be damaged, a la commissioner of roads, by the alleviating of a major public concern.
As you can see from this example, I/E Analysis solutions tend to be untidy, slopping over in several directions—but look far more likely to get the job done and to get it done inexpensively. —In contrast the traditional-style attempts at solution which face the cost of having to override entrenched reflexive (and often unconscious) resistance. If I/E Analysis doesn't guarantee a win/win for absolutely everyone, at least it tends far more strongly in that direction than does any other method at the present time—and seems much more likely to see proposed solutions become actual solutions once this approach becomes more widely known.
This tendency toward the less-expensive, more workable if untidy win/win is a crucial difference for any executive, or constituency, or board of directors, or legislators. In the present example, we've been looking at proposals for saving the rainforests whose costs run well in excess of 100 billion dollars—cheap in comparison to the cost of their loss, but compare even that 100 billion to the cost of a million or so dollars in prizes for a lousy cookbook or so!!!
Potentially, this incentive approach represents enormous saving above and beyond present solution-finding approaches, above and beyond the further savings of actually getting solved some of the issues and difficulties which have dragged on for so very long.
Even in this initial summary overview, we've given some detailed attention to the issue of Brazilian rainforests not because that is a more deserving and urgent issue (maybe it is), but because this sequence of considerations illustrates the kinds of concern which I/E Analysis addresses better than any other technique presently does. Stockholders and taxpayers please take note!
Following a brief look at the origins of the method, next chapter, in subsequent chapters we will examine some further examples; spell out in detailed step-by-step form the method itself, and examine some of the guidelines and conditions for use of incentives generally. Beyond these details, though, and beyond I/E Analysis serving as an apparently uniquely useful approach and problem solving method for some of the most pressing problems of our times, let us keep sight of the fact that such use of incentives may also substitute for, and reduce the costs of involvement of, conventional government in the public sector and unproductive areas of management in the private sector. Let us remember:
The "first law" of cybernetics is, that a control instrument should consume a minimum of the resources of the system it is governing.
Perhaps we can also begin to devise, not so much a rule as an aesthetic value, that a proposed solution to problems, or other type of intervention, should consume a minimum of cost relative to the value of the intended value of that solution or intervention.
May we also realize or remember:
Not only are solutions possible to virtually every problem in the real world, however unsolvable they may at first appear to be—but usually many alternative solutions to each are feasible.
This last may be an improbable-seeming notion to the reader presently mired in seemingly irreconcilable disputes and stuck in the wider consequences of various seemingly unsolvable major problems. But let's check again on that once you've worked with a little of the resources of this present brief book. —And yet again, if you should happen also to acquire and work through this writer's main initial text on Socratic/Einsteinian combination technique for problem-solving, A Method For Personal Growth and Development.
Where These and Other Problem-Solving Methods Come From
This writer first came into the field of creative problem solving in 1967, while he was still teaching college full-time. The creative literature at that time was almost entirely around two programs, the Osborn-Parnes system originating out of Buffalo, New York, and the Synectics system which arose in Cambridge.
The one contribution this writer can claim any credit for, took place at this time (1967), though most of the effects of that contribution began to be realized much later when yours truly went full-time into research. That contribution is utterly simple:
The Principle of Re-investment of Methods Into Creating Better Methods: one good use for any good method of solving problems is.....on the problem of how to create better methods of solving problems! One of the best uses for those better methods is on the problem of how to create even better such methods....
Continue this practice for awhile, of re-investing your best solution-finding methods into the problem of creating even better such methods, and after awhile one begins to find some interesting things. Each new method which has taught itself to us thereby, has brought in with it entire new contexts and ranges of understanding, so the process itself continues to accelerate.
—So that is one of the roots or sources of Incentive-Equilibrium Analysis, a/k/a the Win/Win-Finder. Here is another—
—Around 1962-3 when this writer, still an undergraduate student at University of Virginia after several changes of major, was taking his B.A. in Economics there: he became very interested in political economy and in particular, in the ways in which various features of government taxing policy modify the behavior of the public. It occurred to him then—and he barely finished his B.A. in Economics as a consequence—that if government traditionally was such an awkward and expensive method for carrying out various policies, and if slight differences in tax law induce the public into very substantial changes in behavior as it looks for ways to minimize the incidence of the taxes one pays: why not "eliminate the middleman?" Why not carefully arrange "loopholes" in the tax code such that the public at large will generally carry out the goals of government policy, without having to go through spending and authority of government bureaucracies which are so much clumsier and more costly?
From that time to the time, in 1983, he discovered Incentive/Equilibrium Analysis and introduced its group practice form in 1987, every time some major public issue came along—including the Irish Civil War and the Brazilian tropical rainforest of Chapter Three above—he would ask himself: (1) What changes need to take place in public behavior in order for this problem to resolve itself without government spending or law-inflicting? (2) What changes in taxes or other incentive adjustments would bring about those changes in public behavior— (3) —and at least cost in terms of other effects, or of undesired effects? Thus, this writer accumulated a great many draft solutions to a great many issues even before the emergence of I/E Analysis greatly sophisticated that tool and allowed it also to be adopted to private corporate situations, not only government, tax and public matters.
An even earlier, and to this writer even more significant, taproot of I/E Analysis goes back to 1949. It was then, thanks to an excellent public library in his hometown where schooling was less than ideal, that this writer became profoundly interested in the theory and dynamics of civilization. All of this writer's work since that time has been motivated, at least in part, by desire to find ways to improve the odds that our own global civilization won't destroy itself the way so many others before it have.
Part of that general issue is that at least 24 of the 29 identified civilizations which preceded ours in agreed historical record, destroyed themselves catastrophically. Only one of the 29 (the Mycenian civilization, by the eruption of Thera in the Aegean Sea), was clearly done in by outside forces without it having not set in motion those forces itself. The processes identified as bearing causally upon those remarkably consistent instances of self-destruction bear dismaying close resemblance to much of what appears to go on around us today.
Many diverse theories are current, and some have credibility, as to why civilizations tend to commit suicide and as to the precise form in which our own global Euro-derived civilization may inflict upon itself our own extinction. Nearly all those theories appear to agree on our own civilization being in the throes of the penultimate crisis on this point, however. Some theories have been dented, while others including this writer's sociotectonics model have been supported, by the sudden shocking collapse of Soviet Communism. Whatever the theory, however, there is one simple, indeed naive-seeming, description which appears to fit all cases:
—That in each of those self-destroyed societies, people at all levels let problems pile up faster than they solved them, until the whole became overburdened and came crashing down.
—At a similarly simple level, then, it follows—
—That if more people become better equipped to cope with and solve their own problems and the problems around them, and/or if problem-solving methods improve, this also improves the prospects for survival of our entire global civilization including survival of the stakes we all have in that civilization.
In this regard, whether some particular ideal solution to a global problem or issue is implemented, is less important than that more and more people become capable of acting effectively upon that problem or issue (and upon other problems or issues), improving the chances of some such solution(s) coming to be.
That defines the goals and "mission" of this writer and of his organizations, Project Renaissance and the Institute Of Visual Thinking. The above also describe some of the main roots by route of which have emerged, among a good many other advanced solution-finding systems, the system of Incentive/Equilibrium Analysis a/k/a the "Win/Win-Finder." Let us also note that that system, as seen next chapter in which we detail the steps of that method, is far more than only a way to solve problems or even to identify hidden support and opposition.
—And let us also note that though much of the above-cited context from which the Win/Win-Finder emerged revolves around problem-solving and efforts to mitigate or reduce threats to the survival of our civilization, what much of our work with these and other problem-solving methods has shown us is a positive creative side. —That the prospects for forward advance of our culture and civilization are many times more diverse and extensive and breathtaking than have the threats even when they were at their most pressingly urgent. That our present sluggish development of the economy and technology, our sagging position in the global economy, the quagmire of both our domestic and foreign policy bog-downs, and our accumulation of social ills, represent as much as anything a failure of our public and private imaginations and one which, in virtually an instant, could be swept aside in favor of by far the heartiest, healthiest, materially and spiritually wealthiest, most dynamically human era yet seen upon and around this spinning little blue marble.
Indeed, the degree of our present public failure provides us a unique opportunity because, in contrast, almost anything will work better and to put together solutions and new creative tracks which work well, which well we certainly can, will provide a positive "swing factor" of truly historic proportions.
But for now let's get down to the concrete, step-by-step ways how we can work such "miracles-by-contrast." First, let's realize the following:
Just as in biological complexly homeostatic organisms including human beings, 99.99999+% of the responses by which self-balancing societies and societal systems and arrangements maintain or equilibrate themselves, are reflexive and unconscious. These unconscious, reflexive responses of the social role are carried out by human beings occupying those social roles whose conscious motives are often very different from the unconscious in this regard.
Unless we are very alert ourselves, to such matters and perhaps even then, you and I reflexively embody and carry out responses from within the context of the conscious and unconscious role we are playing in whatever social units and arrangements. These responses almost always have the function to return the system to status quo ante even when our own interest and intent is very much otherwise. Guarantee: that on some instances you have done exactly thus, acting in some instances to your conscious intent for improvement or other change in the situation. A la Pogo: "We have met the enemy and he is us!"
—It's not just those bad people over there who are running the situation that we're trying to correct....
Next chapter, we lay out, step by step, the bases of Incentive/Equilibrium Method. Leading into that chapter we will lay out "Dynamic Format," an effective strategy and method for conducting groups through meetings, whose usefulness extends far beyond the group use of I/E Analysis. We also lead off with this group management technique, "Dynamic Format," because it is profoundly crucial to the best form of Incentive/Equilibrium Analysis. Another part of this next chapter will describe other uses of I/E Analysis. Subsequent chapters will describe other examples of use of incentives in addressing various issues; some general guidelines for determining and setting incentives to get the results you want from those incentives; and some of the general theory for the use of incentives as a preferred instrument in private corporate and public matters.
First, we will examine a group management technique which is essential to effective use of Incentive/Equilibrium Analysis and valuable far beyond that as well. "Dynamic Format" is so crucial a tool for success both of this analysis system and of much else, that it stands in this chapter ahead of everything else.
Incentive/Equilibrium Analysis can be performed working alone and still be useful. This writer used it for a decade, in fact, before developing it into a group procedure. However, the group form of the procedure is so very profoundly more effective for use—and also entertaining—that we urge the Reader to learn it in this form first and to use it with your staff or other group as often as you can. —So we hereby devote several brief pages to the easiest, most focussed, most productive, most effective way of directing groups that you have ever seen! —Starting just several paragraphs below, under the heading, "Dynamic Format."
Second, we will examine Incentive/Equilibrium Analysis itself, the newest major creative solution-finding system to come into world use.
Third, we will squeeze in a partial example, a not-very-detailed look at the issue of a new, relatively clean, possibly economic power source through the eyes of I/E Analysis.
Fourth, the Incentive/Equilibrium Analysis system turns out to be far more than "merely" a uniquely effective solution-finding method for solving problems. We will examine here several of its various main uses.
1. Prologue: How to Run Better Meetings, Groups, Clubs and Classes
Have you ever had the experience of having something important to say but no opportunity to say it? How easy or hard is it for you to really hear and respond to what someone else is saying while you're sitting there seething with your own thwarted urgent contribution? —Same for your participants. Every time you've done your job as chair or moderator so well that your people have gotten interested and involved, you inflict that perception-inhibiting frustration on your brighter members and in direct proportion to the degree that each has something important to contribute!
—Same for your students! Every time you've done your job so well that your lecture starts to get interesting, you inflict that perception-inhibiting frustration on your brighter students and on your class generally!
In a corporation where time is money, how much time is wasted in board and staff meetings, either in lengthy discourse by the chair or CEO while expensive specialists and executives sit mute, or in pre-orchestrated speech presentations whose "discussion" outcome was determined long since, or in a chaos ended only when the chair or CEO goes out and either does things himself or by dictate, dismissing 99% of all that was said at the meeting? Or where everyone is saying only what the chair or CEO wanted to hear, providing no meaningful feedback or direction?
Here then, follow in summary a very few, very simple provisions through which you can build interest, sustain tight topical focus, while fostering dynamic expressive interaction which wonderfully integrates and develops your group's various perceptions and perceivers. You will find that you can maintain a stronger, better topical focus WITH these interactive group-managing techniques than you can sustain now in solo lecture! This is not loose soft-minded stuff about letting students or employees or members express themselves; this is highly efficient group, boardroom or classroom MANAGEMENT. Here, then, is a very easy, very real way to discover and focus your people's (your people's!) very real genius:
Dynamic Format fits comfortably with and can benefit most other group methods and procedures. It can turn miraculously productive all kinds of group meeting, from classroom (and even faculty meetings!!!!!) to board room to sales meeting to Town Hall and civic clubs.
Dynamic Format will enable you to easily get the members of your group actively, richly exploring, debating, investigating and relating to any topic or issue, yet staying far better focussed than can the most forceful lecture or most rigorous use of Robert's Rules. Dynamic Format helps your participants to participate without getting in each other's way or in your way. Dynamic Format is a set of very simple managing techniques to conduct the transaction of information and/or decision with maximum sensitivity and breadth of consideration and perception, quickly, crisply, in depth but efficiently. (Doesn't sound like meetings you've been in before, does it? We've all heard the old joke about an hippopotamus being an animal designed by committee, meaning that group outcomes normally are a joke or come out close to being the lowest common denominator. Getting genius from such a group?!? Unthinkable! —But within a page or so you'll be seeing how to do so....
The simple "house rules" of Dynamic Format enable your people to be interactive, thoughtful, perceptive, expressive, comprehensive, and yet to maintain a tight, clear, progressing focus on your topic. Dynamic Format allows a group to move deftly, crisply and quickly, without heavy-handed directing and without having to wander through mishmash.
Here is how to bring about these and other desirable effects from a group meeting
Have any group of more than 5-6 participants to subdivide at the start of your session, so each is already in place with his or her partner(s) on a stand-by basis so you can move swiftly and smoothly and deftly in and out of the interactive mode when you come to the point in your session where you want to use it. Have your people stay oriented with their partner(s) even while functioning in your larger (plenary) group. This way, when you want to switch modes, no logistics are required and you are free to move crisply between levels of interaction as well as from step to step, or into interaction and crisply back to formal lecture or other formal process.
Your teams can be pairs, or threes, or you can have "buzz groups" consisting of as many as 5-6 participants, depending upon what you want to do with them. Each participant in a pair has more "air time" in which to examine and describe what s/he is perceiving in the context of the defined topic or question. The larger the group, the more chance that someone in it will catch on to what you want and model how it is done. The more difficult your question or task, therefore, the larger you want your groups up to a maximum of six to ensure that someone there in each group will be able to comprehend and get things moving as you want. Most of the time, to get the maximum of Socratic benefit you will want to work your participants within pairs. You can even have your participants, as this writer has often done with his participants in his workshops and teachings, orient in pairs within larger sub-groups of 4 to 6 members.
From the very start of such a session, set up at least some of the following "Core Agreements" or "house rules for this session," to make it easy for you to swiftly and gently guide and focus or refocus your people into, through, and out of highly involved, highly interactive "buzz-sessions:"
Waterglass Rules—the waterglass, ashtray or chime which can be heard easily when everyone is talking at the same time—so your voice won't have to compete with all the other voices—
THREE 'bings' = Instant Pause In Talking. Rule: the moment you hear 3 'bings,' pause in talking not only in mid-sentence but in mid-word so that you and others can hear the next topical question or step of instruction.
One 'bing' = half-minute's notice, before the 3-binger. Rule: keep on doing what you are presently doing but be ready a half minute after this one 'bing' to pause in talking to hear the next instruction.
Hand-Up = Instant Talk-Pause + Hand Up, this simple device often used by the Scouts. This is best for very large groups, of one hundred or more members. Rule: the instant you notice either the leader's hand go up or other people's hands going up, pause instantly in your talking and get your own hand up!) (On-off flicks of the room lighting can serve the same purpose.)
RELEVANCY CHALLENGEmake a triangle of your thumbs and forefingers, sight at the speaker through that triangle. Rule: on that instant, whoever is speaking must (1) demonstrate how his/her remarks relate to the topic; or (2) return to the topic; or (3) yield the floor. Instantly. (How many times have you been reluctant to shut off someone's story but had to stand there bleeding internally while s/he got further and further off the subject and broke the context?!?)
You can see how, with just a little simple pre-arrangement, major group dynamics can be set in motion or stopped, directed, focused, how you can orchestrate them to maximum effect in terms of learning or of meeting-goal. Simple arrangement of easily used hand signals as standing rules or agreements allows you to orchestrate a wide range of group behaviors virtually without effort or delay. On the same principle, from time to time you may want to set up these special-occasion rules for particular situations—
Support-First Rule, used to obtain creative production, fresh ideas and perceptions, innovations, and answers to questions or issues whose outcome is not narrowly predetermined. To get more and better ideas contributed, the first response to the contributing of an idea should be a positive reinforcement. However off-the-wall an idea or input may seem at first, the first response to it must be some form of meaningful, content-related support! After that meaningful first support, then it's o.k. to carve that weird notion into corned beef hash, so long as the support came first. Every major system of creative problem solving has some form of this rule; to use it effectively, simply put it in this form:
Any time you observe an idea not getting supported first, whether yours or someone else's, clasp your hands together over your head for a second or so while looking wistfully upward, then go on.
Note: the best ideas usually are those which were greeted first with a burst of laughter. You may wish to give those laugh-burst ideas special attention. In any case, make sure that the first response to whatever input positively reinforces that act of creating and contributing ideas and fresh perceptions. Win your way past the usual reflexive self-censorings which stifle creative thought and perceptiveness.
Don't use this support-first rule where you don't want richly expansive creativity, multiple considerations, and enthusi-astic participant expression.
3-sentence limit (or 4, or 2, or simply a 1-minute limit per input, depending upon the size of group and the nature of the process you are working. Once this rule is invoked, any time you notice someone going beyond the set limit, simply lean forward with hands clasped in front of you.
Make Record of the Run-Pasts! This corrects the main frustration about any group discussion or process which gets interesting enough to provoke a lot of desire to participate. Rule: Anything you notice that seems worthy of mention, but which the group process (or lecturer!) has stampeded past: make a written note or record of it, immediately! So reinforce YOUR OWN perceiving of overlooked aspects, not merely just that particular point! (—And clear the traffic jam in your perceptions between what you have to say and giving more attention to what others are saying now!—and if others also follow this Record Run-Pasts Rule, your inputs when you do get to make them will receive attention. Sometimes there is a chance before the end to pick some of these points back up and consider them—but the main purpose of this rule is to reinforce your own perceptiveness and integrity of view. Any time you notice someone else seething with an overrun point, point to his or her notepad and waggle pen or pencil at it.
An Aside: A Lecture to Teachers—
The lecture method was invented for the situation, back in the Dark Ages before printing, when only one copy of some book would be at the university, and the most qualified person would both read from it to the class and lecture based upon it, for the benefit of all the students who otherwise had no access to that book and its contents. A few of the relevant circumstances have changed since then! Some churches and most schools have continued the practice, though—all most classrooms need to become a religious service is a hymn or so!
Even if you are wedded to the lecture method and have never "buzzed a group" in your life, you can experiment just a little. Identify the key point you've just been trying to make in your lecture, and instruct your students to "turn to your partner(s) (or "the person next to you" if you've not pre-set the class) and, between you, let's see which pair of you can come up with the best statement of this issue." (Or turn your main point into a question and ask that question.)
- Get them started. (By look or persuasion, make sure all are participating.)
- Allow 3-4 minutes.
- 'Bing' and state the half-minute's notice.
- Sound your waterglass, cup or ashtray three gentle 'bings' to end the "buzz."
- Sound out (and give positive reinforcement to) each of a few pairs' wording of the issue (or answer), reinforce from there the point you were making, and move on.
Now, that wasn't too hard, was it? —And easier to do next time. Courage, there: for lo, you soon can be effortlessly moving your students in and out of interactive process, and through different levels of process, with amazingly well-focused discussions, like a master conductor directs his well-trained orchestra! Yes, you!
If you are shy about it, test out these rules one step at a time until you feel them working for you and you see and are pleased with the results - especially pleased with what you see happening with your students, as you manage your classroom into ever more excellent topical focus and intensity.
Consider: of what value even the most eloquent lecture, if little is learned from it? What matters in the classroom is what is learned, not what is taught. Dynamic Format lets you have it both ways.
Beyond the classroom: The Board Room, the Clubhouse, City Hall:
—Note that Robert's Rules of Order were designed to shut down communications within a group so that business can be transacted. The too-typical result leads to the joke about the hippopotamus being an animal designed by a committee. Dynamic Format, instead, elicits focused communications in a way which causes the business transacted to reflect the highest considerations and actual genius of the group!
—Yes, your group! Once you learn how to tap, focus and direct its very real resources, you have some extraordinarily pleasant surprises coming to you.
Board meetings, annual business meetings of societies, faculty or staff meetings, planning groups, task forces, town meetings, etc., are just as appropriate for this set of focusing strategies. This form of participant involvement, fostering expression from each participant's own perceptions while sustaining a tight topical focus, yields results far superior to those of the methods historically or currently in general use. Any corporation, society, committee, task force or staff can immediately, easily and sharply improve its performance and product.
Beyond Clearing the Mental Traffic Jam:
Focused "buzz-grouping" a la Dynamic Format, enabling everyone to get in his say and go on, as previously noted clears a mental traffic jam so that deliberations can move forward and each participant be fully and productively engaged. Instead of sitting there seething with things to say and mentally rehearsing what he's going to say until he can grab the floor, each participant fully expresses himself and is freed to listen, as well as to move forward in his thoughts and perceptions. Beyond that effect—
Socrates was among the first to discover that to describe a perception develops that perception further. The original schools, in classical Greece, were set up not for the benefit of students, but to provide quality audiences for the leading thinkers and perceivers to describe their perceptions to. Socratic method is a set of techniques for getting participants to examine their inner and/or outer perceptions and to describe in detail what they discover there.
The resulting peak learning experiences and "Socratic miracle leaps" phenomena which frequently occur with this kind of process, no less than the insights come up with on the couch of a good psychologist, are now easily understood in terms of modern psychology's most widely accepted or "first law: You get more of what you reinforce." Each time you describe one of your own perceptions, you—
Reinforce that particular perception, discovering more and more about it, sometimes until it seems that you're perceiving the whole universe at once.
You reinforce the behavior of being perceptive!
This is why groups conducted extensively through Dynamic Format, where each participant not only "gets his say" without slowing one-another down, but describes enough from his own perceptions to expand those perceptions, deepen his insight, and also is freed to listen further, not only perform so much better but increasingly better than do groups conducted through conventional meeting methods.
The Japanese had to teach us the American-discovered technique of product quality control. Can we teach ourselves this form of meeting quality control, which may well prove to be of far greater significance to us all? You have the above simple instructions in hand, and enough information about them to devise your own "Dynamic Format" rules should you need different ones. The rest is up to you.
2. The Procedure: Incentive/Equilibrium Analysis
a/k/a "The Win/Win-Finder"
How Also to Discover Your Sources of Support and Opposition
I/E Analysis is the most recent major creative problem-solving system to find its way into world use. It was first introduced into public use in 1987 by this writer, at the annual Creative Problem-Solving Institute in Buffalo, New York, where some form of it has been practiced each year since. I/E Analysis has turned out to be far more than only a very good system for solving problems, and we will explore some of its other uses after the instructions below. First, we present it as a group creative solution-finding procedure.
As a group procedure, I/E Analysis works by far the best when conducted under the provisions of "Dynamic Format," as in the preceding pages above.
The first 7 steps of I/E Analysis require, the first time tried, between 1 and 3 hours, and subsequently can be performed in about half to three quarters of an hour. The duration of Step # 8 is a function of other variables, these mostly being the prior experience of participants, and can run between a few minutes and several hours.
The Basis of Incentive/Equilibrium Analysis:
Problems which last awhile, despite varied good efforts to solve them - especially problems in the firm or in society involving large numbers of people - are usually situations in equilibrium. By definition, this means that these are in self-defending homeostasis or sociostasis. Self-balancing, they reflexively maintain themselves, often in complex or sophisticated ways.
Identify and intercept the reflexive negative feedbacks by means of which a homeostatic situation or system maintains its equilibrium, and you can change that system almost without effort, with low cost in energy or money. To override that reflexive feedback is what drives up costs and makes solving that problem situation expensive, difficult or impossible.
Problems which are major, especially problems which involve many people, subsist from the behaviors—usually reflexive, usually undertaken for wholly different conscious motives than are the unconscious motives which are controlling—the behaviors of many people in that self-equilibriating situation.
Defining those equilibria, or goals of self-sustaining balance—and also very useful to analyze—are the incentives acting upon the margins of decision of anyone who relates to that problem, either in that problem or "in the wings."
Needing special recognition: the tendency of most complexly sociostatic situations to retain and restore equilibrium by unconscious reflex, regardless of the conscious motives of those involved. —Just as the homeostatic physical human body maintains its million-and-one complex balances by unconscious reflex, leaving the person's conscious mind free to address other issues than those of maintaining proper fluid levels, pumping just the right amount of noradrenaline, etc. This is a structural, mathematical identity of behaviors, between organisms and social arrangements. This is not the organic "fallacy of composition" of which Oswald Spenglar was accused. It is the behavior of certain types of structure, whether found in organisms or in society, with which we are concerned here.
Others looking on, or those adversely affected by the continuance or chronic return of the problem situation, assume that the controlling motives which direct people in those system-reflexive behaviors are conscious. They make severely negative judgements about the (presumedly) conscious motives of those who keep the problem going. These judgments are almost always highly insulting as well as inaccurate, and engender the hostilities so frequently featured in major problem equilibria.
We too often fail to note or remember the very great difference between the roles people are playing—which relate to those social structural problem equilibria—and the human beings who happen to be playing these roles. We stereotype these roles and throw them back in each other's faces, instead of seeking out our common ground as human beings, making it almost impossible to step aside from those roles even if it should occur to us to do so.
I/E Analysis lets us look directly at these role reflexive behaviors, without the need to impugn anyone's conscious motives, to judge these systematic/mechanical factors as distinct from, and potentially very different from, the human dimensions of the same problem domain.
Without assuming like Marx did as to the conscious motives of various interests and groups in a given situation (and without a reductio as absurdum around some rigid economic theory!), it is useful to address those unconscious reflexive responses which are held in relation to identified factional interests, within the particular problem context. In doing so, Incentive/Equilibrium Analysis also leads us toward finding bases of solution which do not sacrifice anyone's interests, conscious or unconscious.
Another Acerbation Factor: Idealists PLEASE TAKE NOTE!!!
Wouldn't the world be so much better if good people everywhere stepped back from these system-reflex roles and "did the right thing?" Even if they could become aware enough to do so, or were good-hearted and generous enough that you could persuade them to sacrifice their own interests in doing what you want them to even for high-minded idealistic reasons....here is the difficulty.
Where large numbers of people are involved, and especially in hierarchical and complex situations, there tends to develop a very great difference between what benefits the common good and what will benefit one's own narrowly selfish interests.
Where such a difference exists, necessarily: persons motivated by self-interest will advance—and at the expense of people who are motivated by what would benefit the whole.
To the extent such a difference is allowed to exist (or where you are very persuasive), such situations necessarily punish humanitarian and "higher" motivations. You can reduce to some extent that difference and that punishment, but you cannot entirely eliminate it—if what benefitted selfish interest entirely benefitted also the common good, the "selfish" would resemble the humanitarian and could not thereby be sorted out in favor of the humanitarian; in all other cases the situation sorts out the humanitarian in favor of the selfish. If you are very persuasive to the point where people on the other side of an issue from you go against their own interests, you soon run out of friends and potential friends.
To reduce such punishment—and to reduce the attrition of the higher-minded—reduce the difference between what benefits the individual and what benefits the whole. One way to achieve this is to address problem equilibria with the "Win/Win-Finder" aspect of I/E Analysis as below. Reduce the sacrifice of those who are motivated by or responsive to higher concerns. This frees them - and more people generally - to act on their higher and conscious motivations, and reduce the power and role of system-reflex, unconscious, inadmissible motivations. People become better people and more of the better people survive. Widespread use of the "Win/Win-Finder" thus tends us toward a less bruising and more rational, sensible world.
Detailed Step-By-Step Instructions for Performing
- A group of 2 or more people besides yourself. Hundreds can "play," subdivided into groups of from 4 to 6 persons each.
- Plenty of "Post-It" pads, and pens or markers and notepads enough to go around.
- A large sheet of paper (11x17 or larger) on a table, or an equivalent space on a chalkboard or markerboard, per sub-group "playing."
- (Optional:) A Polaroid camera and film, or a video camera, with which to easily record particular configurations en route to your most optimal solution.
If this is mostly people new to the procedure, so that the process is likely to require several hours, you might want refreshments also on hand in service of a break.
Setting Up the Problem: select or state the problem. In a small boxed-in space on the center of the allotted large piece of paper or board space, write the statement of the problem. Up to the middle of either side of that boxed-in problem space, draw a horizontal line through the allotted space or large sheet. Evenly spaced, draw 2 more lines across which mark off three horizontal spaces above the middle of that box, and 2 more such lines across the allotted space or large sheet which mark off three horizontal spaces below the level of that problem box. (Map is modeled below.)
- Step One Viewed from DISequilibrium: To bring equilibriating forces into view, imagine the problem to have been extremely disequilibriated by having been "solved." Imagine and describe in detail to your paired partner within your larger group or sub-group, what it would be like if the problem were not only solved but solved to an exaggerated degree, and notice everything that comes to vision or to mind in that context. Brainstorm as many as possible of all the things you can think of which would be different if the problem were solved in such an exaggerated or extreme way. Use "Support First" rule from Dynamic Format; don't stop to argue or judge, just include whatever entries come up. Find 40-50-100 possible differences resulting from the problem having been solved so utterly.
This exaggeration makes apparent some elements of the problem situation which would not have been so noticeable in static views of it even when participants are well informed. Exaggerate the solution—the client is not only promoted in his firm but jumped 3 levels higher; not only is involuntary world hunger ended but everyone is so totally nourished as to be even getting dangerously fat. Imagine sales to increase not only by the target percentage but shoot right up off the chart. Imagine what if all the illicit drugs in this country are seized successfully in one fell swoop. Whatever the problem, expanding thus the view of it being solved expands our perceptual map of the situation, and gives us room to peer between its elements.
(Note: aside from problem-solving, use this procedure also toward discovering the sources of support for you, your policy, or your proposed solution to the problem—or anyone's pet solution to the problem, which often has to be run through before other perspectives can be opened. Likewise envisage the wild success or over-achievement of that person, policy or proposed solution. Likewise, when using this procedure as an accelerated learning technique, in combination with "case studies" method in management training or in socio-behavioral courses: exaggerate the extent to which various proposed resolutions of "the case" could affect the persons or factors under study.)
- Step Two Identification of Problem Elements: In groups of 3 to 6, brainstorm WHO are all the players in that problem situation and who are all the players in the wings. Anyone who relates to, is affected by, affects or could effect, or could be affected by that problem situation! Give specific names wherever possible, but identify also all groups and "interests" as well. Instead of slowing down for arguments, use the "Support-First Rule" from Dynamic Format. When in doubt as to whether a named entity is part of the situation, record it anyway instead of debating.
All named persons, parties, interests each go on a slip of Post-It.
- Step Three Setting Values, within your groups of 3-6. In those groups, as rapidly as possible determine with each Post-It entry what the impact of solving the problem would be on the (perceived short-term) interests of each. Do this by means of "Quick-Vote." As each entry is read aloud, within 3 seconds everyone in your group "votes" his/her estimate by holding up or down 0, 1,2 or 3 fingers. A positive impact on the entry's perceived short-term interests is signified by the fingers held upward; an adverse or negative effect by the fingers held downward. In either case, the greater the perceived short-term impact on the entry's interests, the more the number of fingers held out accordingly.
Position the Post-It of the entry at horizontal 0-line or 1, 2, or 3 spaces above or below, on your sheet or board, according to the rough average of your group's "vote."
On the left edge of the allotted large sheet or boardspace, provide a column space for "squiggles." On the right edge, a column for asterisks (*). Accordingly,
If there are wide disparities in your group's voting on some entry—say a plus two and a minus three—place that Post-It entry in the "squiggle" column. These squiggle cases are of special interest because examination of them often reveals whole sectors of the problem situation which might not otherwise have come to view.
Also: for any entry where there is a strong sharp impression of long term real interest differing greatly from short-term perceived interest: post that entry in the asterisk column. In whichever column, post each entry whether squiggle or asterisk to correspond in terms of level with the average of your group's perception of that entry's perceived short-term interests.
Continue until all Post-It entries are posted somewhere on the sheet or board at some valence level.
- Step Four Examine your sheet or board, with this concept in mind: Entries above the 0-line (those with positive valences) are your potential sources of support for a solution. Below that neutral 0-line, entries with negative valences are likely to be somehow involved in the defeat of attempted solutions (and policies and courses of action).
Of special interest: swiftly review and analyze your "squiggle" and asterisk entries. In some special cases you may want to recap the above 3 steps in miniature, to identify elements within that special entry—these can be especially illuminating!
You may also discover key aspects of the problem situation from examining some of the possible relationships between entries, on and off the board or sheet. Especially focus on how a change in one might affect another.
- Step Five Win/Win-Finding: determine what changes or "sweeteners" would need to be added to the plan or solution or policy or course of action, to bring more entries topside your 0-line (making their perceived short-term interest impact positive). To what extent will the cost of those sweeteners subtract from some of your support? Start tinkering with the solution(s) or policy in such a way as to see if you can turn all valences positive and still have a distinctive thrust of solution.
It's crucial to begin making such changes or adding such sweeteners, if you are to emerge with a solution which will generate broad enough support to be a solution. One experimental group, in fact, which up to this point had performed brilliantly, froze on its initial solutions without even beginning to explore such changes to those perfect jewels of resolution—and was the only such group not to develop at least the beginnings of an emergent genuine solution. (Even the several groups which ran out of time were clearly en route to an effective solution.)
If, as you check out these sweeteners, your solution is beginning to look a bit thin your policy expensive or shaky, you may want to take a picture of this configuration of your sheet or board, then try a different proposed solution or policy. Go quickly as possible on each entry interest, to get group averaged estimate as to possible change from old to proposed new solution impacting on that entry's perceived short-term interests.
This is also your opportunity to get someone's "pet solution" run and out of the way. The more important a problem is, the likelier you will have people who have pet solutions to it. To free their full attention for the ultimate solution-finding, as soon as possible after running such a pet solution through the valences and down the tubes, start running another proposed solution through the valences.
Design Objective: find a solution which constitutes a win/win for all concerned, if possible even in the short run - and definitely a win/win for all in the long run. To the extent that the eventual solution falls short of that objective, is the measure of the cost in power, force or extraordinary persuasion which would be required to implement that solution or policy.
If that solution is not universally win/win, it must be at least close enough that sufficient support will be generated to supply special or compensatory incentive to those factors which otherwise would not be sharing in the win. If your solution cannot generate that much support, it probably is not a good enough solution. Seek another which is.
Example: one suggested idea for finding a cure for AIDS faster (or any seemingly incurable fatal disease which still leaves mental faculties relatively in good order), would be: to STAFF an entire major research center (and dedicated funding commitment) with medically qualified researchers who are themselves AIDS victims—and turn them loose on the problem. However—
—Other identified elements in the AIDS problem appear to be adversely affected by that possible answer and/or by any possible major and/or inexpensive cure. These elements would, consciously or unconsciously, probably block action—for all sorts of high-minded reasons, explanations, protection of the public, safeguarding of human rights, rules of accountability for public resources, whatever.
To be adopted, this solution option would have to be accompanied by other measures, possibly by direct incentives to those other identified elements—and delicately enough not to offend sensibilities with an air of "buying off" someone or of impugning motives.
More generally, this example suggests, in broad outline at least, a strategy which might be used to rapidly find cures for most remaining incurable diseases, some of which have been around with billions in research and treatment spent on them, for a long time and with a tremendous extent of human suffering.
Step Six (if needed): If all your major solutions and policies have shown up bankrupt, then brainstorm in your group all possible solutions to the problem without regard to acceptability or suitability, to flush new options into view. The "Support-First" rule is back in effect. Try for 40, 50, 100 solution suggestions.
Quickly pick out the most interesting ideas from the list, and/or bunch them. Give special attention to that idea which was first greeted with a burst of laughter, since that often turns out to be the best idea. If no one idea emerges "head and shoulders" above the rest, use whatever quick sort-down method can get you to the 2-3 most interesting solution possibilities within 3 minutes or so. Configure each on your sheet or board as above, then look for the least expensive sweeteners which will bring virtually everyone above the 0-line. Also, on each of these,
Compare your own gut-level responses to each solution. See if you can identify and state in particulars the cause(s) of that gut-level response. See what that factor does when introduced into your board or sheet. Remember that any problem solving formula or method "is a tool, not a rule;" its purpose is to expand perception over facets which otherwise might not get noticed and which just might possibly contain your winning answer. Sometimes, pointing in one direction is what brings another direction into view. In the long run, not the method but you make the decisions.
Step Seven—Select the preferred solution. Improve further on it. Design a step-by-step sequence of operations which will cause it to be implemented, a series of specific steps culminating in completion of the solving of that problem. Your steps need to be concrete enough, specific enough, that you will readily know when each is completed or that it is not. Pinpoint each step in sequence or time. Make sure you've accounted for First Step. ("What's First Step? If there's anything which has to be done before that step then it's not First Step so what is First Step?")
—In other words, generalities may point the direction, but solutions happen only through concrete specific steps.
Experience thus far:
Thus far, participants have been laymen at best, with regard to the problems addressed. —Yet their levels of discourse, analysis and solution-finding under this set of procedures consistently has been profoundly superior to the recorded and media-broadcast deliberations on the same topics by assembled experts and leading professionals.
In every instance, participants and observers have been astounded by the degree and quality of information and insight developed where all participating were initially thought to be uninformed. Every time, key facets and possibilities have emerged which do not appear to have been considered anywhere else.
It will be interesting indeed to see what can be accomplished once teams of informed experts and professionals are assembled to these procedures.
3. An Example—Brief Brief on a Speculative Case Study:
Can We Make Part of the Problem
Into Part of the Solution?
(—Also Known As: "Adventure With a Squiggle")
Can the most nightmarish part of our environmental and global pollution problem actually provide a major part of the solution?
I. General Case for a Proposed Solution—-
Let's look at power sources—-
- There's only so much hydroelectric potential to go around.
- Conventional, fossil-fuel-burning power stations—
- —use up fossil fuels(!);
- —pollute air and water;
- —worsen our accumulating world greenhouse CO2 effect; and
- —if oil-fired, worsen our trade deficits and national dependency.
- Solar power, after many decades, we've never yet managed to master the art or science of making economical on a large scale. Hopes for space-based solar power have slipped another generation further back with the retreat of plans for the U.S. Space Station.
- Geothermal power pollutes air and water.
- Ocean waves and tidal inlets, after many decades we've never managed to make into an economical power source.
- Temperature differences within different layers of part of the ocean, after more than a decade we've not yet managed to make economically feasible as a power source. Perhaps the same principle could become feasible with the sharper temperature differences found in groundwater in desert regions.
- Controlled fusion power seems more out of reach now than when we first invented nuclear reactors, and "cold fusion" has gone into the books as an example of myth and hysteria in science.
- Conservation of power, as relatively a power source, has begun to bump into its limits. Thermal insulation of buildings has run into radon. We don't seem to be able to push Detroit into much higher fuel efficiencies. Social resistance to further measures is climbing unless we radically adjust incentives. Only the computer revolution has significantly reduced power demand, and how much further can that aspect go?
- Nuclear reactors are not only directly dangerous a la 3-Mile Island and Chernobyl, but their greatest problem is the continued accumulation of radioactive wastes, already far more than we've figured out how to handle and potentially the most lethal threat to all life on Earth. To build any more conventional nuclear reactors would be one of the most irresponsible decisions in the annals of history!
—So what IS left? —Those very same radioactive wastes already produced!
II. The Proposed Solution—-Convert radioactive "wastes" into a power source in secondary thermal reactors.
The end product of radioactivity is heat. —Enough heat, when brought together, to melt and pump sodium as a thermal conductor, or steam if run cooler than that, to drive turbines or other power-generating devices.
Can there be much doubt that, as a working power source, a given set of radioactive "waste" would receive much more careful handling than it does now as "waste?" Still dangerous, but the assembly of radioactive wastes into "secondary," thermal reactors has to be counted as a major safety improvement over today's situation.
Every unit of power generated from radioactive "waste" is that much less greenhouse effect, that much less air and water pollution, that much less fossil fuel used up, that much less foreign trade deficit and dependency resulting from more conventional power generating.
Unlike conventional nuclear reactors, such "secondary" reactors from radioactive "waste" will not generate more such waste. In two senses it will make less such waste, in that—
It moves stuff from essentially uncontrolled "dumps" into much more carefully handled power plants; and
It's power can begin to replace conventional nuclear power, thus reducing the rate at which further such wastes are being created!
Design and building of these "secondary reactors" will also be a useful conversion of some of the technical resources of our dwindling defense industry, and a good spur to our stagnant economy. (Editorial note: written about 1990, but still a recourse apparently appropriate for both that industry and the economy as of the 2001 edition.)
In the 1940s and '50s we made the basic national decision, echoed elsewhere, to build regular nuclear power plants and to treat their non-power output as waste, rather than as part of a thermal, secondary power retrieval system. Whatever the economics were then as regards such secondary retrieval, those economics have certainly changed since, and the whole issue certainly bears rethinking.
When we originally made that basic national decision, we were in the throes of a technological fantasy about limitless clean nuclear power. Fusion power was just around the corner, we had not yet come to appreciate how hard it is to keep up safety standards in large-scale enterprises and over long periods of time, and we'd certainly not anticipated or come to appreciate the extent of the problem that we are now posed vis-a-vis horrendously accumulating, dangerous, nowhere safely disposable radioactive wastes. Each of these factors by itself fully justifies our rethinking that decision of not converting radioactive wastes into secondary thermal retrieval power reactors. Taken together, it's quite remarkable that no one is exploring the issue.
—And quite remarkable that our officials and technicians are so casually discussing the disposition of an extremely dangerous poison and possible deadly permanent weapon whose half-life usually exceeds that of the longest life span of any human civilization to date, by various reckonings some twenty to thirty such civilizations having come and gone upon this planet. Imagine the consequences of such "waste deposits" falling into the hands of contentious barbarian bands characteristic of the dark ages following the fall of civilization! We have GOT to stop making more of this stuff....
III. A first look at incentives regarding this solution—
—And whatever the economics were then, back in the late 40s and 50s; and whatever the economics may be now: there is a very simple, direct and easy way to change those economics for the better. Exempt from all taxes for a decade, income from commercial exploitation of a long list of substances hitherto known as dangerous and toxic wastes! (—Including radioactive wastes.) Tax such income at half rates for the decade following and at normal rates thereafter. To take advantage of the tax break, all sorts of uses will come out of the woodwork to use up such "wastes." Any foregone tax revenues during that interval would be many, MANY times made up for by what we would otherwise have to spend in protecting and restoring our livingspace from those dangerous wastes, and our absolute societal and global costs saved would be many times more even than that!
Until World War II, a major part of the history of the industrial revolution was a matter of each generation finding commercial uses for the waste by-products and overlooked resources of the previous generation. Since then we appear to have let matters in this regard get away from us. The proposed tax incentive would bring us back in line with this historical precedent, and further would be very much in line with current social efforts to reclaim and recycle specific wastes such as plastic and aluminum.
Conclusion: we should immediately proceed to study the feasibility and simple design of secondary thermal recovery power plants using some of our radioactive wastes. The wastes we are so anxious (and unable) to control now should be made available to commerce under appropriately controlled and well-understood conditions. We should also begin immediately to determine how best to define and apply the proposed tax incentive to encourage the commercial using-up of all sorts of toxic and dangerous substances with which we've let our world become overrun.
IV. Short-term losers who would need "sweeteners" in order not to become major opposition to the proposal—
We won't go into an exhaustive listing here, in order to take time and space to look at a most fascinating squiggle/asterisk factor which developed in this instance. But the most obvious major losers are, of course, all the competing industrial sources of power, especially oil and coal, and suppliers of equipment and services to those industries. The sweeteners, also, required to offset to these big "losers" the effects of a major new source of clean power, thus far appear to be more controversial than the original proposal though if a concerted program of this sort eliminated much of the need for conservation of power, cutting back on some areas of power conservation effort might serve as part of such a "sweetener," attracting support from builders who could be among the major "winners" if their insulating costs were reduced—rendering insulation manufacturers a source of opposition, and so on. Obviously, this is an unfinished case since the people in our thinktanks thus far have contributed their time for free and are "scarce" in relation to the need for their services both on this and on other matters. —And no one has yet hired any of our thinktanks (or anyone else!) to dig deeper into this issue, or provided any study grants for this purpose.
A lot of the opposition to the tax incentive measure or other application of the proposal, that nuclear "wastes" be converted into a thermal power source in secondary reactors, is marginal and could easily be headed off with just a bit of sweetener. A few of the more rigid power companies, and suppliers of some of their equipment some of whom, if identified, could be contracted with for the very same program and thus brought around. —Unfortunately most of the conservation groups, seeing this as one issue less to get the public excited about and in their camp of support. Unless they can be gotten to see the advantages in membership money and power terms of becoming advocates of the proposed program and getting public credit for it.
Among "winners," besides the general public whose diffuse interests almost never get served directly, would be much of the health and safety insurance industry; the State of Nevada where the Federal Government has been planning to dump most of the nuclear wastes; neighbors (and realty interests) proximate to the many current temporary nuclear waste dump sites around the country (assuming that they even know that such a site is so close by them! Most don't know.) —and, most of all, key segments of the defense industry who would be building the plants and equipment for the proposed secondary reactors.
All that much is obvious, even without running a formal I/E Analysis to discover sources of support and opposition.
Each time we ran such an analysis on this issue or started to, we ran into a most remarkable consideration.
Obviously, the Federal Nuclear Regulatory Agency, and to some extent the various transportation agencies and other related agencies, would be a major player or factor in the game. But when we began to look at whether this proposal would be a positive or negative valence for them, we got squiggles and asterisks. When we gave these closer attention, they broke out mainly in this manner:
Lower branches of the agency or related agencies would be highly specialized, and bureaucratically would see this proposal as meaning a lot more work to hassle with but not enough positive to bother. Hence, lower branches receiving the proposal would be negative toward it and find reason to reject it, regardless of its merits for the country as a whole.
Higher, more generalized levels of the bureaucracy or bureaucracies concerned, would instead see possibilities of expanding or of building new empires, even in the short run and especially in the long run. The higher ranking the officials contacted on the proposal, the more likely they would be to support the proposal.
The strategy this configuration dictates is, not to submit the proposal through channels at all, routed as these are to the lower, more specialized rank and file. The only way for the proposal to get enough of a hearing, consideration and argument is via a systematized campaign of letters and E-mail and personal contacts with the top people in the agencies concerned, even after being referred down. The campaign has to be sustained, kept in the attention of the top people because the first few times bureaucrats at lower levels will keep finding ways to defeat it. That will turn around, and the lower echelons will finally swing to support the thing and do what they're supposed to do, once it becomes clear to them that it'd take far more work and time and attention and effort to keep fighting the proposal than to let it go through.
—All this without regard to the actual merits of the matter! But that is what is built into the structure of the situation, as revealed through I/E Analysis, and whatever protagonist(s) of this proposal can ignore that only at peril.
Upon due reflection, we realized that this structure is true also for most innovative proposals, independent of their merits. The days when ordinary citizens could suggest an idea and get it considered on its own merits, are long gone. So long as government agencies are structured with specialized lower echelons and generalized upper (and it is difficult to see how they might be otherwise arranged), the system has a built-in drive toward political power arrangements, and away from considering actions and policies and proposals by their actual merits.
Note also that this structural predisposition, rooted in government agencies and tending response systems away from considerations of merit and toward political power—and is that really all that much a surprise, given what we see around us?—is true for all forms of government, ranging between formal democracies and formal totalitarian tyrannies. So long as wealth and power are concentrated to get things done through government, the policies and deliberations of government will be driven away from what is best for the country and tend toward being less and less rational over time.
—Often or usually either until the situation collapses ruinously, eventually to restart in another such cycle; or until a way is found—such as use of incentives to the private sector instead of more direct methods to "get things done"—to diffuse those concentrated stakes of power and wealth.
—All of this from a squiggle!
Step One: please discuss this proposal—in any or all of these regards—
to convert nuclear wastes into a secondary power source;
to use tax incentives to induce the private sector to convert wastes into commercial products and services;
the general case with "the squiggle," that because government agencies are constructed with specialists near the bottom and generalized leaders at the top, this "squiggle effect" tends ideas and proposals away from consideration by merit and toward political power arrangement increasingly antithetical to the interests of the whole—
with at least one other person whom you respect.
4. Other Uses for the Win/Win-Finder Method
I. The Win/Win-Finder, or I/E Analysis,
as an Accelerated/Enhanced Learning Technique:
In the socio-behavioral curriculum—history, psychology, sociology etc. — this same procedure can be used to refocus the "Case Studies" method used there and in management training. For each case problem: lay out all elements and "players of the game" and "players in the wings," just as with the main method, leading to a dynamic and profoundly enriched analysis and understanding of the "case" or problem situation so addressed.
Even more directly, use this procedure in sessions of the "Problems of Democracy" program.
In history courses: whether highlighting crucial factors and epochs in a conventionally chronologically taught course, or featured in the "post-hole" or episodic approach to history-teaching.
Use this method also to brilliantly highlight moments and situations portrayed in psychodrama and sociodrama.
In each instance here, just as in our thinktanks with corporate or societal problems: I/E Analysis instantly sophisticates participants' understanding of the problem area and its dynamics, and also is highly involving of interest. Initially naive and uninformed groups quickly move ahead of the experts in their grasp of the problem situation and its potential resolutions. That impressive leap in understanding can not only serve problem-solving purposes but educational ones, as suggested here.
Just as Walt Disney's "Storyboarding" technique has the potential of enriching the study of literature and drama, above and beyond its present uses in creative theater and therapy, I/E Analysis or Win/Win-Finder, by highlighting the problem situations of characters in stories and dramas, has high potential for enriching educationally the study of literature and drama, and for heightening the poignancy of "might-have-beens" in tragedy.
II. Off the Horns of a Dilemma:
It's usually the people who care about some problem or issue, and who have put some thought and concern into that matter already, who have developed some pet or stock solution or response to it. Because everyone else tends to dismiss their ideas—and concerns—pretty much out of hand regardless of merit, it's easy for some of these concerned, thoughtful, at least partially informed, people to become shrill, repetitive or otherwise abrasive about it, deepening further the likelihood of rejection.
It's wonderful for a concerned, caring—and usually-dismissed person to have the Win/Win-Finder run on his idea or proposal. He's actually getting a hearing on the thing, it's actually being considered! He might not much like the outcome of that analysis—but he was part of it, he saw how it went, he no longer is driven toward—
- Obstructing everyone else's proceedings in that topic;
- Dismissing and ignoring everyone else's ideas in that topic the way his own were treated;
- Not hearing further information and insights, as he busily continues mentally rehearsing his own arguments and looking for an excuse to re-insert them.
Instead of being a noise and an obstacle, this caring and informed person usually becomes a genuine asset to the group's deliberations on the topic, and considerably enriches the final outcome even though it is usually very different from the answer he was for so long utterly convinced of.
Turning such bright, concerned, abrasive obstacles back into productive human assets makes use of Win/Win worthwhile even for that reason alone, even if it didn't solve problems and do all these other things
III. Discovering the Support and Opposition to Your Position, Your Plan or Policy:
Whatever your position or title, it automatically tends to attract support from some players and opposition from others. Some players are cast, by definition, in a more complementary role; others in an actual or potentially competing or adversarial role. Identify all players in relation to your position, title or job description. Now imagine your position become supersuccessful and powerful, exaggeratedly so. Assign valences as before. Cross-check: imagine yourself suddenly removed from that role and from the situation—who would gain? Who would lose? Who would be discomfited? Assign valences as before, remembering this time that you are working in the inverse, or negative.
Especially important to remember and consider are two things—
This map is showing us the potential for unconscious motivation and not the actual, conscious motivation which can be and usually is very different.
Also, with respect to role: there's the role and there's the human being playing that role. The human being can be the major factor and the role minor, or the other way around—and the human being is usually motivated at differently than is the role he is playing, which is part of his unconscious motivation.
Roles are a key means for us to learn and to grow, but they are not us. I have a role but I am not the role that I am playing. In fact, I am considerably more than the sum total of the various roles I am playing or have played. Most Americans have not been educated on this distinction between roles and the people playing those roles, and so are muddled, confused or otherwise easily misled on these matters. Opponents on some point or issue are too easily regarded as - and treated as - enemies when, with a little care in handling, they could become your great allies and friends in most other contexts. Play hard but play clean and be quick to extend a helping hand back up as you move toward some other context. Anticipatory cultivating of personal relationships can also prevent opposition where your map would otherwise predict it, even where you don't formally design in "sweeteners" of one sort or another.
Similarly with a policy or policy decision. Again, imagining the exaggerated super-success of that policy outcome to outrageous levels, rather than a merely normal success. That exaggeration gives you "more room" to perceive the relevant valences among your various affected players.
IV. Win/Win-Finder or I/E Analysis in Personal Goals Therapy:
Did you once have goals which are fading because you've somehow just not been able to achieve them? Are you settling for less than what you originally set out for?
Even one human individual is a complex being, not only biologically but psychologically and socially. Each role that individual has played or is playing—father, son, daughter, stern parent, nurturing parent, dependent child, wayward child, wunderkind, friend, boss, employee, lover, packmate, etc. etc. —and each stake s/he is playing to or has played to, defines a facet.
Each of these items in your personal history and situation defines a facet which, with regard to the long-standing non-attainment of some particular goal or standard, can be regarded a la I/E Analysis as a "player in the game" or in the wings.
If you have "stabilized" short of your long-desired goal or standard, despite some good efforts along the way: this suggests equilibrium, indeed a complexly homeostatic equilibrium identical in character, at least, to those addressed in continuing or chronic long-term societal problems.
In relation to that long-held but unfulfilled goal or that chronically failed standard:
- Identify and give short tag names as above to all the roles you've played, other stakes you've played to, and whatever other identifiable facets of your being.
- Imagine that goal or standard exaggeratedly overfulfilled and achieved. Relative to that exaggerated success,
- Race through those identified tag-named aspects of yourself assigning them valences just as you did with your teammates around that corporate or societal problem statement-in-the-box. With a little imagination, conduct "bargaining and negotiation" in some way on behalf of or between these various facets of yourself, to discover your main sources of internal support for reaching your goal, and to discover some arrangement wherein all facets of yourself are brought above the 0-line so that you no longer are preventing yourself from achieving your aim.
These were but a few of the possible extensions of a very young method of creative solution-finding. What the future holds for it, your handling of it will help determine. What you have not experienced, until you actually go through a session with some form of this system, is the amazing quality of public or group shared insight and sophistication on matters which you could have sworn that no one present knew a thing about. Experiencing this effect will, in and of itself, tell you some surprisingly positive things about yourself—and about others around you.
—And reveal some surprising new opportunities on great groaning chronic problems hope of solution of which had long since faded away. Mad or no, we don't have to take it any more!
Your own entertaining and/or productive test and use of this method, in one or more of its various forms, will go a longer way than you yet realize toward the day when many, many people discover themselves to be more than a match for the difficulties which had been so besetting them and besetting us all. —And the positive opportunities opening up are of a scale, scope and nature such that it's well worth staying alive through these times to share in that coming experience.
Adjusting Incentives as a Main Way
to Get Desired Things Done,
Preferred Over Conventional Administrative
and Governmental Methods
The General Proposition—
All human societies are incentive societies. Tautology: people are moved by what moves them. What is an effective mover or incentive differs from instance to instance. If this book were written in a predominantly Abo-bushman society—or a predominantly Buddhist or a predominantly Muslim society—or from a politicized socialist society—it'd be a very different book from the present one written in the American context with material market traditions. Yet its basic principles and premises would remain the same.
Indeed, the one certainty is the change which will take place in what is an effective incentive, as you move from one cultural context to another. Also, a materialist society like ours will experience major changes in what's effective among its incentives, once a well-thought-out incentive policy has rescued it and successfully improved our response to our various material needs. People's motivations will tend to drift "up Abraham Maslow's Ladder," so to speak, concerning less and less about dollar rewards and more about how they regard themselves and are regarded by others. —So a crassly material incentivized society will necessarily soon obsolete itself and need to re-think and redesign its system of incentives, though we believe that pretty much the main considerations and guidelines addressed below will still hold true. Though we have a number of specific incentive proposals with which to address various issues and problems, this strategy of systematically using incentives instead of coercive methods has to go far beyond simply a set of specific proposals for our current issues and problems.
Our society, as mentioned at the beginning of this book, has from time to time even undertaken deliberate use of incentives on one issue or another, because that seemed to be a good idea in that specific regard. What we've failed to do, though, is to address the strategy itself in any comprehensive way so that that intelligence can in turn inform our other choices.
All human societies are incentive societies. The matter may be more critical for free-market oriented and democratic-oriented societies (note we did not say societies which ARE free-market or democratic, lacking present-day examples). But no society can afford to let its prevailing incentives drift too far out of line with its main policies and goals, or it will disintegrate.
We can in fact go on to observe that our type of society, predisposed by its traditions, at least, toward democracy, freedom and a free economy, has by definition values very congruent with the idea of using incentives in place of more coercive, direct control methods. We have already distanced ourselves from the more direct, brutal or harsher methods of governing and of imposing collective will—enough so to usually get upset when instances of those harsher methods surface nonetheless. One might well say that "incentivism" is a logical, appropriate extension of the American ideal and of the ideal of all such societies oriented toward democracy since the time of Jeremy Bentham and the Utilitarians.
Further: it appears that not many societies—including our own—can afford to let incentives drift at random or at happenstance, uninformed by any systematic thought, theory or sustained comprehensive effort to relate its incentives to its goals and policies. Hence, in this chapter and the next, we attempt a thumbnail sketch of the beginnings of a comprehensive theory and set of guidelines on incentives, and on the use of incentives as an instrument of corporate and public policy. This discussion stands on its own, independent of our foregoing Incentive/Equilibrium Analysis but nonetheless obviously closely related to it.
Negative incentive—punishment—obviously has its place in any such theory but a minimal place. People do often tend to adjust their behavior to avoid punishment. But we know from historic and societal example that the stick is far less effective than the carrot. Especially we know this from psychology and biology. Any reinforcement of a behavior or trait is a reinforcement, reinforcing the likelihood that the behavior or trait will be repeated. Even punishment tends to reinforce the likelihood that the behavior punished will get repeated. Hence, our discussions of incentive will revolve mainly around carrots, not sticks. If our society could in various ways reorganize its affairs with this consideration in mind, life here would become a lot more rewarding and less punishing!
Both within most firms and agencies, and in society generally, most major problems appear to be answerable by means of variously adjusting the incentives—motivators or motivating factors, literally—which bear upon the margins of decision of the people in those situations. —And on the margins of decision of the people in the wings of those situations.
At any given time, we and everyone are working in and embedded in a context in which are to be found literally hundreds of diverse incentives, nearly all of them in place by happenstance or through the workings of dynamic systems such as the marketplace about which Adam Smith so well taught us in 1776. Use of incentives is as old as the hills, even deliberate use of incentives in specific instances throughout history. Our concern here is with adjustment of this mix of incentives, and with thinking about incentives as such in a comprehensive, systematic way so that our subsequent handling of such matters can be more intelligent, more congruent with whatever effects we are seeking.
We herein propose that many or most issues and group or societal goals should in fact be addressed by adjusting incentive, instead of by more direct or coercive or overt means of social, managerial or direct governmental control.
To substitute adjusting of incentives for more direct controls, we see as—
- A way to get things done better at less cost.
- A way to reduce the stakes of centralized power—and to reduce the degree of misbehaviors which accompany such stakes.
- A way to bring attainable many goals and achievements which elude us now, corporately or as a nation or civilization.
- A way to strengthen individual freedoms.
- A way to strengthen the roles played by creative individual initiative.
- A way to solve or mitigate hundreds of specific "unsolvable" difficulties which plague us now and which in some instances threaten our very survival.
We cannot emphasize enough the issue of the difference in terms of human freedom. Under conventional managerial or governmental technique, specific persons - and sooner or later, all of us - are constrained to act other than we wish. —By force or threat of force; by pressure of personal authority and/or persuasion; by social pressure; by the prospect of more hassle than we care to stomach should we pursue our own path; by fear of loss of job, of standing, of position, of respect, of access to the action, of insurance.
To get things done by a simple adjustment of incentive, on the other hand, means that we rely on individual freedom and initiative to get things done and, in fact, reinforce these. No one is compelled against his will to act other than he wishes. No one. But various of us, enough of us, from amidst our multiconfluences of desires, stakes, goals, strategies, tactics and whatever situations, freely take the matter on for our own individual reasons and the job gets done. The desired thing gets done. I may not have done it, or Joe, or Harry, but Sam got it done. This time. —Because it cost him less relative to what he wanted from it, on this particular occasion. He gains, no one else is forced to lose or sacrifice.
—Which has not been the case with most of society's - and government's public - goals and needs and aims for at least some decades if ever. As we pointed out at the beginnings of this book, the one thing that we have reached "limits to growth" in is government. We now find a bloated, virtually helpless giant surrounded by jobs not getting done, goals not getting accomplished, unable to order its own affairs, beset with increasing frequency by an embittered, impatient public voting for major cuts, ANY cuts that can bring at least the illusion of relief. —And genuine, even dire, needs continue to accumulate and go unfulfilled, "people at every level continue to pile up problems much faster than they are solving them..."
Caught in our own inept shamble, as we Americans continue to lose our world leadership standing, in regard after regard, we seem to have become convinced that not only are there tasks and goals which are beyond us, but virtually no goal, no aim at all can any longer be accomplished, if ever. We look at situation after situation, in our own country and in the world, and blink piteously.
Let us dispel the illusion that most tasks or needs or challenges or difficulties are beyond our reach to accomplish—
To try to build New York City as a monument, would consume more effort and resources and attention than all the governments on Earth put together could possibly muster. Yet there stands that proud city—the accumulated incidental by-product of millions of ordinary human beings living their so-various lives, under incentives which focused that by-product into the form of that city. —And so for any major city. —Or our technology. —Or any of Euro-western civilization's other major accomplishments of historic proportion too numerous to cite here.
If we set out by conventionally coercive governmental and administrative means to accomplish any one of the things for which Euro-western civilization is unique, we could achieve none of it. Yet we have achieved all of it.
Just north of Australia lies awash an entire submerged continent: the Great Barrier Reef. That reef is the accumulated incidental by-product of the living of countless tiny marine organisms, under incentive conditions of current, temperature, mineral availability et al which focused that great continent of reef into being.
By often-slight adjustments of incentive, our society can literally focus into being great continents of effect wherever it pleases—as the incidental by-product of millions of ordinary human beings freely living their own lives. This continent of effect can be a 10% or even 15% annual economic growth rate. It can be the development of the oceans. It can be space—to which we have to bend our efforts sooner or later. It can be universal good health. Useful longevity. Clean-again environment. Beauty. The arts. Energy independence. Invention and innovation. Universal high education. Elimination of involuntary poverty, in our country or even throughout the world. World peace. Whatever.
Whichever of these goals can be determined as truly desired and desirable, is within easy reach of appropriate incentive-adjustment programs which will cause such a goal to be cumulatively thrown up as the incidental by-product of the ongoing free-initiative activities of our citizens and our enterprises. Once we've determined what needs to be done, ask:
- Who needs to do what in order for the thing to be accomplished?
- Among freely acting firms and individuals: what changes in incentive would produce that effect?
- How do the costs compare, to central treasury AND to society as a whole, between getting the thing accomplished through incentive and getting it done the conventional way? (That these two types of cost are very different will become apparent when we get to our discussion, a few paragraphs below, on indivisibilities and economic externality effects.)
As to whichever goal is best to go after: there certainly is no guarantee that the boss, the board, the city council, the government or whatever authoritative structure will choose wisely and well, any more in an absolute sense than is happening now in our world theater of the absurd. As noted earlier in this book, however, much of or most of the absurdity is a by-product of people playing to the huge stakes of wealth and power which have been concentrated during our pursuit by conventional authoritative means of the various collective goals and policies. Dispel much of that concentration, through turning to incentives as a main or the main means of getting such aims accomplished, and collective choices and policies are bound to become more rational.
—And let us not forget the absolute reality of the needs themselves, ranging from the immediate personal plights of the homeless, the inner cities, the masses trapped in the moral and intellectual wastelands we call schools, to the dying Earth itself which is undergoing catastrophe to a degree and at a rate not seen since the previous great comet wiped out the dinosaurs and, indeed, 90+% of the species then living on this planet. These are not abstractions or debating-games, however we may be treating them. They are absolute. They are real. They are catching up with the rest of us. The vessel which bears us is breaking. Forget that at your imminent peril, those of us who are so impatient to end the excesses of government that to consider such needs however imperative is inconvenient, too much a reminder of the problems for which we called government into being in the first place in order to address.
—And those of us who are so stirred by such problems and issues that it is inconvenient to dwell upon the failure of government and authoritative conventional methods in addressing such matters: forget at your imminent peril that such failure is inherent in that method and structure, not just a matter of who's in power to "run things right."
Historically, societies have from time to time undertaken heroic goals—and almost always suffered terribly for it. The heroic effort, finally successful, to end the evil of chattel human slavery, en route led through America's terrible civil war. Huge, stupendous efforts were made to end or reduce extreme inequities and inequalities in Russia and China: nearly a hundred million human beings died terribly. The wrong was not in the goal but in the means. Appropriately designed incentives can enable a nation or a people or a firm to set high goals and to achieve them, without inflicting such costs. —Indeed while developing a far richer level of individual freedoms than now exists.
Too many of us have forgotten the very basics—perhaps because of the shortcomings of our schools, perhaps for other reasons—including especially the very basics of economics. Not least of all our economists themselves, as demonstrated by the tragically wrong advice they have been heaping upon post-communist eastern Europe and Russia.. Our very earliest and greatest economists long since taught us that the effectiveness and efficiency of any economy is a matter of enabling, or allowing, alignment between private interest and the interest of the larger whole.
Toward A Theory of Rational Management and Policy
(With Special Reference to Environment and Natural Resources
An Exploration in Political Economy.
Without a comprehensive theory to coordinate
policies and actions, many of these
will be mutually counter-productive.
The factors causing alignment, and misalignment, between private and general or public interests, should be crucial to any theory of administration.
The more closely aligned are such private and public interests, the less administrative intervention, or administering over the private interests, will be needed. The more these respective sets of interests are misaligned, the more such intervention or administering is required to defend the general well-being from private interests. This points a direction for us in reduction of costs relative to benefits.
Some misalignment-causing factors are not only no secret, but have been integral to economic analysis since the days of the first great philosopher of market economics, Adam Smith. Smith's The Wealth of Nations (1776) laid the foundations of the whole of modern economic theory, and much of the basis of modern social and political theory.
Smith's was a cybernetic, marketplace equilibrium analysis: what people find benefitting them, they will tend to support or buy in due proportion. What they find (when well-informed, that is!) not benefitting them they accordingly will tend not to buy or support. Buying or not buying drives up or down the price which producers and suppliers can obtain for their goods and services. Producers and suppliers are controlled not only by those prices but by the costs of supplying their goods and services to their buyers. Producers and suppliers are thus led, as if by "an invisible guiding hand," to provide the most beneficial—or at least most desired—goods and services at the most optimal levels of production and price. Departures away from this optimal point "punish" the supplier by reducing his or her profits until either he has to yield up his productive resources and role in the economy to someone "more efficient," or make the adjustments necessary to restore profits and more effectively serve the interests of the whole.
Such a thesis may well seem archaic and simple-minded when weighed against more modern economic analyses and propositions. —Yet it underlies not only the whole of economics, but most of America's once-powerful advantage over authoritarian, socialist and communist or other command-type political and administrative systems. Command systems get bogged down in details and in making too many decisions. Command systems in the short run cut through a few obstacles to get one or a few things done; in the longer run they operate with long-notorious inefficiency, and become their own worst enemy as regards achievement of their purpose. Such advances as they may somehow still make are accomplished either through brute force and human suffering, or by efforts on a heroic scale. A free-enterprise, market-oriented system, by contrast, makes most of its decisions automatically, smoothly, quickly, inexpensively, and reflexively represents at least some alignment of private with public interests.
Thus the economically analyzable factors which help to cause an alignment of public and private interests are, indeed, quite powerful. Our society would be in even far more extreme difficulties without them. It well behooves any theory of administration, management or government to take these into account. To the extent that such factors can be utilized to serve the public or whole corporate interest and general well-being, and/or to pursue significant societal goals, these apparently can be served with significantly less cost in terms of administrative intervention and regulation and policing.
(We presume reduction or conservation of costs, relative to sought-after benefits, to be a desired outcome in any economically rational theory of management, and in the pursuit of most policies. Such policies as do not pursue some form of economizing relative to their ends, soon consume all resources available to them and cannot remain in the picture for very long to be accounted for in ongoing theories of management, administration or government!)
Non-economic factors—humanitarian, psychological, oriented on some ideal or ethic—also play a role in aligning private with public interests. While these are not as immediately susceptible to economically defined rational analysis, they are often resorted to by management—and by government—in efforts to hold down administrative and economic costs in pursuit of some collective aim. Frequent attempts in recent decades to "jawbone prices down," during episodes of high or accelerating inflation, illustrate both the short-term success possibilities of this type of strategy and the long-term futility of it.
The real issue—
Classical economic analysis also highlights many of the factors which misalign private and public interests. To the degree that such misalignment occurs, private departures from corporate or public norms, goals and policies appear to require government intervention in and regulation of the marketplace, above and beyond the minimum role of enforcing contracts. These misaligning factors fall into seven general categories as follow:
External economies, where the benefits of an action go mainly to other people while the doer bears the costs. An example: basic research, in which the particular research firm is so situated that it can exploit and benefit from only a tiny aspect of its findings directly. —Yet the general public benefit of its findings can be such that various other firms and individuals can make their respective fortunes from the same information. Thus, the incentive to perform such basic research is poor, compared to applied research immediately within the contexts where the researcher can readily exploit the results to his own advantage. Less basic research, therefore, is provided than overall cost-benefit analysis would warrant. Without outside or governmental intervention of some sort, external economies result in underallocation of the commodity in question, relative to what would be allocated on the basis of costs and benefits as a whole.
Many or most people in prospect of benefits from those economic activities which result in external economies, have no say in the decisions of the doer, who is guided principally by the direct costs and benefits he experiences in his own treasury.
External diseconomies, where the costs of a private activity such as a polluting manufactory rain down on many who are not party to either the decision or the benefits of the activity. Only the doer is reaping the benefits, guided principally by the direct costs and benefits he experiences in his own treasury. —Not because he is short-sighted or even evil, but because he has a fiduciary responsibility. He owes it to his stockholders to make profits.
Where other people experience the costs and the doer the benefits, this results in over-allocation of those goods and services relative to their overall costs and benefits. This condition appears to require government intervention and regulation and policing, to protect the general well-being from attrition and injury. So long as the costs of polluting the environment are not part of the immediate bookkeeping, they are rarely part of the private decision as to that activity.
—Not an abstraction. Our own lives are now threatened—both incrementally now as cancers and other toxin-stimulated diseases increase among us, and soon to be catastrophically as entire segments of the Earth and possibly the whole planet move in fits and starts toward uninhabitability.
While, in theory, common law and the law of torts should provide a redress of injury and attrition and thus prevent such misallocations: in practice the difficulty of specifically proving the cause of particular injuries, diseases and discomforts and even economic injuries, have resulted in very high legal thresholds. Redress has been provided only rarely and usually then only in the most extreme and egregious instances. 99% of the instances go untouched by tort action. This seems to require more active and preventative governmental intervention, some of which we have begun to see even though seemingly "too little and too late."
Tort recourse simply may not be an option, realistically. Even where damage is direct and the case is obvious: the powerful tobacco companies have yet, as of this writing, after all this time to pay medical costs or damages for anyone. (Editorial note: Indeed, they went, after this writing, all the way until 1999, and in 2001 appear poised to escape most of the burden of their liability.) Add the further degree of statistical uncertainty where external diseconomies are the injury, and it's hard to imagine any meaningful degree of correction happening through tort proceedings.
Economic and societal indivisibilities are a third area where distortions cause private or market behavior to injure the public. Most often cited example of this has been national defense. How do you slice it up so as to account for St. Louis' share of benefits from our early warning radar system or from that 4th or 5th aircraft carrier stationed in the eastern Pacific? Closer to home, preventative public health against what used to be catastrophically dangerous plague epidemics. Also closer to home, the mixed case of public right-of-way across otherwise privately owned lands to serve general commerce and traffic.
Advertising produces another type of distortion from the pure win/win of Adam Smith's ideal free marketplace. Purveyors of goods and services now possess the means on a grand scale to create entirely artificial public desires having little if anything to do with actual benefits. Thus, where advertising is a major influence, enormous capital, informational and human resources are sidetracked into the production and distribution of goods and services which don't benefit and may often actually injure the public well being. Herein appears to exist a large justification for government intervention in the realm of commercial advertising. —But a considerable problem for such intervention is posed by national and societal commitment to free speech, a commitment effectively justified on other grounds. Further problem is posed by the extreme involvement of such advertising, in its most distorted and destructive forms, as an overwhelmingly major part of our political process itself. You are not going to be too harsh with the very people and system which have been getting you elected to make such policies!
Generally, as regards advertising, we see only some rules governing slightly "false advertising," perhaps used more against the providers of nutritional supplements than against shysters! —And some regulations under the Securities and Exchange Commission governing the release of information affecting the value of money instruments. The nature, terms and optimal strategies for more effective government intervention in the realm of advertising appear to be as yet largely undefined. These matters have been left not to rational analysis of public well being, but to political factors.
Monopoly and oligopoly not only allow but require the controllers of an unduly large portion of a given market to allocate production at levels considerably less than, and prices and costs considerably higher than, what would be best for everyone as a whole. (Converse distortions hold for oligopsony and monopsony.)
Traditional government intervention in this problem area has been partly in the form of "regulation of public utilities;" partly in the legislated attempts, especially the Sherman Anti-Trust Act, to prevent formation of monopolies and oligopolies and to break up undue concentrations of economic power in particular markets.
When, as now, a large proportion of capital resources in the national economy as a whole are tied up even after the S&L junk bonds debacle, in attempts at takeovers, in defending against takeovers, or hedging against takeover possibilities, it would appear that political failures in this area of intervention continue to result in an extensive misallocation of resources relative to at least short-term public well-being, most probably also to long-term public well-being. Surely all that capital has more productive use somewhere else!
Both mis- and dys-information and lack of information, which result in less than well-informed decisions being taken, correspondingly misdirect allocation of the resources of production and distribution away from what would be general optimal well-being. In some critical sectors, especially in the instance of attempting to administer commonly- or publicly held natural resources, including the overall natural environment, vis-a-vis private interests and industry, this is an especially serious and difficult matter. No overall evaluative basis now exists for judging costs and benefits to the public or to the larger whole, for particular policies, decisions and actions concerning natural resources. We know we are being hurt and that the hurting has become very dangerous; we just don't know how to count. We don't know how much a given action will help or hurt us. Here as in advertising, no system exists and such actions as are taken are purely at the mercy of the vagaries of politics and special organized interests.
Without an overall evaluative basis, no economically rational decisions or actions can be taken. Thus the various states' programs and the U.S. Department of the Interior become largely the prisoners of those who can shout the loudest, or who have the best power connections. This is certainly a situation hardly conducive to optimal service of the common good or public interest!
Without an evaluative system to measure effects vis-a-vis natural resources and the environment; without a comprehensive theory; some of the actions and decisions we undertake necessarily will contradict other such actions and decisions. Benefits of managing resources under these conditions will continue to be minimal at best and the costs staggeringly huge. Create a comprehensive theory and yardstick with which to coordinate policies, decisions and actions, and you will increase immediate and long-term benefits of such managing, and reduce immediate and long-term costs.
A further misalignment problem exists, cutting across all other dimensions: differences between short-term and long-term interests. Few people generally agree on what is the best period of time across which to optimize strategies for attaining high levels of well-being. By definition, most private interests may be expected to orient to a different time frame than can any public consensus on the same issue. In many instances short-term strategies can damage long-term well being prospects; long-term strategies may well damage and sacrifice short-term interests. Our trading partners/competitors in Asia, especially, appear able to pursue much longer-term strategies than we can, waiting the 20 or 30 years they may need to leave the United States hopelessly behind in the dust. Some Asian countries, on the other hand, have been so predisposed toward longer-term strategies that in the more totalitarian instances they have forced their peoples into huge sacrifices which usually turned out to be futile. In any instance, we are on chancy ground until and unless we can devise a comprehensive theory with yardsticks by means of which to measure the effects of short- and long-term alternatives.
Clearly, either we add more value to the world than we take out of it at some given point, or we impoverish our children. Also clearly, enjoyment of well-being is in large part a here-and-now matter at any given instant and not only governments but private individuals have been known to needlessly sacrifice well-being in pursuit of distant and often unattained objectives.
Some Guidelines For Using Incentives:
Above, we have touched on some general considerations with which to work toward a general theory in use of incentives as a preferred alternative to more coercive means of administering, managing and/or governing. Part of these considerations has gone to establish the areas of misalignment between private and general interests, the understanding being that the degree of such misalignment has historically served as the degree to which superior force—of management or of the government—has been called upon to restrain private activities and to constrain them toward the common good.
Our problem has been that the traditional costs of such managing or governing have been far too high, yet the needs which these are called upon to redress, especially in the public sector, have grown increasingly acute. We have reached not only limits to growth in government, but virtual paralysis. Conservatives don't like to consider or talk about indivisibilities, external economies or diseconomies or other distorting factors even though Adam Smith himself addressed them, because these appear to open the way for justifying government intervention. Liberals don't bother to address these seeming technicalities because the human needs they wish to correct are so compelling in and of themselves that anything else seems to be a distraction. Meanwhile, the "gridlock" deepens, occasionally ripped by public spasms of governmental cutbacks applied almost at random across the disintegrating fabric of our society.
Our case is that to offset these distortions of the free market by adjusting private incentives, would allow these public needs to actually be addressed with some or better success, at lower costs because of the economies normally realized in the marketplace. We emphasize also the greater freedom which results when one turns to incentive as the means to get things done, since no one firm or individual is constrained—whoever takes care of that particular issue or need does so for his own reasons, not because of his position in the hierarchical organization chart or because laws and regulations force him into it against his will.
Part of our case also is that to address such needs through incentive adjustment, requires far less concentration of wealth and power than do more traditionally coercive and direct methods. Historically and in our time, it is the very concentrations of wealth and power, creating huge stakes which various people play to at all costs, which most result in the making of very bad decisions. Turning to incentives as the main means of getting things done, diffuses this concentration of wealth and power to the extent that the people who manage or govern or politicize will make more rational decisions than they do at present.
Decisions as to what needs to address, but as to the incentive or other means used with which to address them. To render this latter part of the decision-making process easier, and as a help to anyone seeking to use effective adjustments in incentive instead of more direct coercive means as an inexpensive, efficient, liberty-preserving way of getting things done, we suggest the following guidelines in design, use or adjustment of incentives. These guidelines can also be ranked down a page or so as a checklist of criteria in evaluating your own or other people's suggestions (including ours!) as to what incentive to use in particular situations—
Apply your incentives to the interests of the people whom you want to take the desired action, or who are in the position to make the decision you want made. —Also not only to the interests of people whose behavior you wish to change. In lesser degree you may also apply incentives to the interest of people whose behavior you wish to sustain against possible undesired change.
"Incentivize" only those actions which are acceptable to the people involved—for what, within the culture value context, should be honorable doings. For example, offering a bribe to a judge is not usually an acceptable incentive, and can arouse expensive resistance. This moral guideline is crucial—cross it only at high risk!
Incentives should be incentives—that is, they provide what the people concerned actually want.
Incentives should be for the actual behavior you really want. A good negative example of "incentive pay" systems which fail this important principle is most "merit pay" systems. Know what your objectives really are, and be sure that your selected incentives actually serve those objectives.
Incentives are most effective when working at the margins of people's decisions over time—rather than in some out-and-out confrontation in which people's resistances are up and courses of action already strongly determined. Incentives work better at the margins of issues than when they become issues themselves!
Incentives should cost less than the value of the result which you are seeking. —Like the above guidelines, this is an obvious point but nonetheless one which is easy to overlook. Beyond this minimal consideration: seek a maximum or optimum of response relative to a minimum of resources expended for providing the incentives.
Establish and maintain the credibility of your incentives—that is, keep your promises. Make these something your target can believe in—another obvious point but one easily and sadly overlooked in some quarters.
The people you are trying to reach should, in some way, be (or be made) aware of your incentives if you expect them to respond to them. At the same time, because incentives are best when working at the margins of people's decisions and attention, don't arouse the attention of your people to these incentives in a way which generates expensive resistance.
The more people your incentives can be at work among, the better are your chances of eliciting the desired response. Conversely, the fewer people toward whom you direct your incentive, the more chance that other, special considerations will override the incentive you offer and prevent that desired response in each individual case. Hence, nations can use incentives more efficiently than can village neighborhoods, large firms than small enterprises.
In an ongoing situation in which incentives are repeatedly used, expect an evolution of what constitutes an incentive. As per psychologist Abraham Maslow's model "hierarchy of needs:" as individuals satisfy their more basic needs—thirst, hunger, sex—toward belongingness, love, self-esteem and self-actualization as higher rungs on the "motive ladder:" they tend to become less responsive to purely material, purely extrinsic incentives. With this evolution, at some point people become more effectively motivated from within than without. This can be profoundly significant whether within an corporation, an agency or a nation.
At any given time, from among substantial numbers of people there are always at least a few such self-motivated individuals, several of whom may even feel offended if offered material incentives too crassly.
To the extent that the initially material, extrinsic forms of practice of "incentivism" significantly improves the satisfaction of basic human needs, this will also increase the proportion of individuals who ascend Maslow's "motive ladder" to self-actualization (and who therefore react more in terms of a relatively objective and profoundly held view of right and wrong, among other things). Such individuals are more difficult to control—by incentive or by other means—but conversely, they are conscious enough of issues of right and wrong, even of some form of the "common good," to usually (though not always!) need less to be controlled. In any event:
It is important to note that the initial forms of "incentivism" will render themselves obsolete to the extent that they succeed, however remote a prospect this now seems amidst the welter of today's all-too-material problems.
(Parenthetical conclusion to this Chapter:)
These ten criteria, or aspects-to-remember, or generalizations about using incentive adjustments wisely, are obvious, common-sense, intuitively and immediately understandable. Incentive theory and practice is a VERY young science—indeed, it is hardly yet even an art! These ten general guidelines for using incentives are very preliminary descriptions indeed.
The reader, once his attention is on the matter, is just as capable of observing and formulating such general guidelines, some of which are bound to be better than the above. Let this writer herewith warmly invite the reader to indeed formulate his own descriptive principles—and any other improvements on incentive theory and practice—and communicate them to this writer, to be credited in the next edition of this book (with your permission, that is—we will also respect confidences and protect identities when need be).
The above general guidelines have also been a bit informal. Even at this early stage in the development of incentive theory and practice, however, it is possible to manage to come up with a few descriptive observations of a more formal, quantifiable, analyzable nature. That is the topic of our next, very brief, chapter....
(Chapter 7, next, is technical—and brief. Its points are essential to building any kind of comprehensive theory or system of analysis. Anyone who finds expression of mathematical relationships uncomfortable can still get the gist of the following discussion. If even that is too uncomfortable, he can still obtain a pretty good idea of the overall issue of use of incentives from not only the previous chapters, but by skipping over this Chapter 7 to the following and final Chapter 8. We apologize for any inconvenience: for this book to accomplish its aims it needs to be read by a wide range of people from a wide range of backgrounds.
We are all in this community together. So with abject apologies for any inconvenient technicalities, here is a very brief Chapter 7...)
Toward An Overall Cost-Benefit Analysis
to Coordinate Actions, and to Reduce the
Costs of Managing While Increasing the Benefits
We face problems of misallocation to the extent that decisions and actions taken are on a less than well-informed basis. We face need of government intervention to the extent that such misallocation occurs, but government is an inept and expensive way to handle the matter. We find a better way through adjustment of incentives, but find no substantial body of theory and measurement to guide that process.
With so many playing to the concentrated stakes of power and wealth, there is no guarantee that rational choices will be made even if a substantial body of theory and yardsticks should become available to inform the process. However, even this early in the development of this topic, if we should be able to provide some sort of reference point, we improve the chances that at least some of the choices to be made will become more rational.
Within corporations, and within smaller units of government, we have as yet no suitable set of yardsticks and so are reduced to looking at each situation on a case-by-case basis, sometimes even then only flying on the seat of our pants. As units become larger, however, within the sphere of cybernetic or managerial concern, more of the effects bunch into useful categories and more of the effects can be analyzed within the frame of reference. While this line of inquiry has not yet been pursued very far, we do have several yardsticks developed relating to optimizing incentive levels through the tax structure. Indeed, these yardsticks can finer-tune an adjustment than economists are likely to be able to measure, for some time to come.
In the extreme ideal model, likely unattainable, nearly all government policies would be implemented through private initiative under a system of incentives which offset the ten bases of distortion set forth in the previous chapter, especially for external economies and diseconomies. In such an ideal case, to remain fine tuned, tax benefits for each activity or goal area would have to be continuously readjusted in ongoing recomputation of some x over x+y, where x over y is the ratio of net public benefit to net private benefit of each activity or goal area. Mainly, this is the measure of the degree of external economy or diseconomy in that activity to be offset through incentives. More precisely:
Total Public Benefits = E + E(eE-eD) and
Total Private Benefits = D + (D(eD-eG) (see definitions below).
Each commodity's optimum allocation may be said to exist where, by this Underallocation Formula,
This value may be computed under these terms:
+U = the rate of Underallocation;
-U = the rate of Overallocation;
D = the direct Divisible or private benefit of the commodity to be realized by the private supplier of that good or service;
C = Compensatory incentive required to offset externality values;
e = standard external benefits of income multiplier effect in that sector of the market and investment productivity multiplier effect therein, over some specified time interval;
g = the standard external benefit of the highest sacrificed alternative, and where the value (eC-g) is maximized.
Please note the distinction between standard e of the most purely private commodities and E which applies to correspondingly less perfectly private commodities. The measure of this distinction evaluates the undesirable incentives which, when not compensated for, foul up the free market's "guiding hand's" accuracy in directing private interests toward the common good.
The ultimate measure of standard e tends to fall somewhere between the multipliers of the spending habits of those immediately involved, and those of the community or national average.
As a general yardstick: a commodity's misallocation, stemming from the divergence of privately and general publicly experienced benefits, and/or from the divergence of privately and generally publicly experienced costs, is corrected by repaying/taxing private spenders according to the value determined by the ratio x over x+y where x/y is the ratio of public to private economies or diseconomies.
At points short of this ideal, we can expect inappropriate pressures and resultant distortions of decision away from optimal public interest. We can expect this incidence and degree of inappropriateness to be reduced to the extent that a society turns "incentivistic" as its primary means of implementing social policy goals. We can expect, however, some political and special interest group lobbying pressures on even the computations of the Underallocation Formula itself until that quantity's value and derivation are wholly objective and routinized.
Putting aside the issue of incentives as a means of management and of public policy, and turning more directly to the issue of finding a rational basis for collective choices, we could hardly do better than to turn to the centuries-old example set by Jeremy Bentham's Utilitarians. Let us do so in the context of one of the key topics of the previous chapter, that of the management of natural resources and the lack of any accounting system by which to measure the effects of choices and policies.
"Utiles and Ecotiles"—a possible accounting system?
The political and economic foundations, not only of our own America but of all the present-day Western democracies, were laid with Jeremy Bentham's inventing of the concept of "utile" or unit of pleasure value. That value was arbitrary and imaginary at the time. There was then no way to measure the actual or intrinsic value of a "utile." But given the concept, the Utilitarians were able to talk and think about and assess the effects of their actions on a cost/benefit basis. They were able to define goals in terms of "maximizing net positive utiles" the way an entrepreneur seeks to maximize his dollar benefits over costs, on short-term and long-run bases, to examine issues of what constitutes "the greatest good for the greatest number." (It was this, in turn, which enabled Benthamite Utilitarians to lay the argumentative bases which became the thought foundation of all western-style democracies. Greater net good would come of decisions where each individual could inform
the decisions being made that would affect his interests, aggregating toward the greatest good for the greatest number.)
Their work also set a definition for "rationality," and became the underpinnings for the sciences of economics, political science, political economy, and game theory or the science of strategies, among other fields. —And all this before there were ever developed ways of actually measuring the intrinsic value of a "utile.
(Oddly enough: the only structurally quantifiable definition of "rationality," the Utilitarian one of "seeking to maximize net positive utiles" short-term and long-term, has never been explicitly or rigorously applied in psychology itself, but that could prove to be a very interesting way of diagnosing and treating patients, sanity in part thereby becoming a very non-esoteric issue in defining good or poor strategies and tactics.)
For many decades we've stampeded expensively back and forth, doing and undoing our various heroic public efforts, on many issues concerning the environment and the management of natural resources—without any consistent reference point or standard. Hence, our environmental policies have been conducted similarly to the catastrophic economic policies which preceded the emergence of Utilitarianism.
Similarly, we might for the first time begin to discover the basis for a rational environmental policy by defining the imaginary unit of environmental value, "Ecotile," in a manner such as follows: (—and similarly for other presently undefined areas of public or major corporate policy:)
Set `E' as "Ecotile" as unit of Environmental value, equal to some arbitrary dollar value, E = X$.
Assign initially arbitrary values to given environmental qualities and situations. Assess possible changes in those qualities and situations by some consistent standard, such as cost-benefit, short-term/long-term analysis:
X$ = B(Es + f[E1]) - C(Es + f[E1]).
Work through a number of interrelated environmental or natural resource situations, in a series of narrowing approximations until the initially arbitrary values become mutually consistent. Compute the point at which overall X$ is maximized. Then determine what is the minimum incentive or other minimum-cost governmental or administrative act which will bring general behavior to correspond with that maximum-value situation. So long as the dollar cost of the act is less than the computed X$, the act of adding incentive is positively indicated. So also for any other planned or intended intervention or policy with environmental consequences—such as converting part of a wilderness area into a popular public park, or turning a marsh into farmland or into a shopping center, or leasing wilderness for mineral rights.
Arriving at X$ for E may require extensive run-through of many environmental issues and hypothetical trade-offs. —With a good number of participants in the study who are representative of a wide range of social views and interests. One way to pursue the study is to interlink participants by computer around an accounting program not unlike a Dow-Jones listing of stocks and modellings of stock behavior. Participants would be assigned various weightings similar to the varying wealth which participants bring to the stock market.
Initially arbitrary X$ in this modelling game would rise or fall toward an equilibrium more truly reflective of intrinsically held values, and no longer be arbitrary. This outcome also constitutes a useful prediction, for policy managers and/or for political parties, about which configuration of policies will eventually "win." Though this equilibrium will be dynamic rather than fixed or static, this also will make that outcome more accurately reflective of the true situation to which we are attempting to assign value, so as to account for the impact of our actions and policies.
If, on the other hand, this gaming approach did not discover an equilibrium trade-off range but instead the political "rock-scissors-paper" problem, a Kenneth Arrow-style revolving majority where A beats B beats C beats A, so that there was found to be no internally consistent value basis for our actions vis-a-vis the environment, at least this procedure would have clarified and defined the point of attack for some more successful subsequent analytic strategy.
In these two theoretical chapters, we've attempted to examine the foundation causes of government intervention in the free economy. We've attempted to discern less costly means than the directly coercive traditional means of government for pursuing public policies, and/or the policies of analogous units such as very large corporations. Our cost-benefit analysis suggests that indeed some sort of administrative or governmental intervention is justified—but that an undistorted market system would automatically move toward optimal allocations. To compensate for distortions through adjustment of incentives, therefore, will bring private interests back toward an identity with the common good, reducing or eliminating most need for more overt forms of intervention.
We have also suggested taking a page from the original strategy of Jeremy Bentham's Utilitarianism, which became the basic philosophic underpinnings of the United States and other Western democracies. We suggest a formulation of "Ecotiles" for cost-benefit analysis in managing the environment, for example, and similar units in other concern areas, similar to the original formulation of "utiles" as the basis of rational behavior. In the environmental instance we have suggested one of many possible ways in which an accountable unit of environmental value may be determined in relation to actual value, so as to assess more accurately the effects of governmental and private actions impacting upon our common environs and upon our heritage of natural resources. Much the same approaches may be used in other areas of common concern. We urge that such an accounting system be developed, and developed as soon as possible, to inform our ongoing choices and policies and to minimize further costly disasters and mismanagements.
Apart from these technical or theoretical considerations, much may still be appreciated pro and con about the use of incentives case by case, now that a system of relevant concept has been assembled in these pages. Let us look at a few examples…
Some Specific Ways to Use or Adjust Incentives
Many private firms are way ahead of this book. Being results-oriented, some have long since developed incentives and "perks" as a preferred, inexpensive way to "get things done." To take up corporate situations with the above theory and guidelines in mind, we would rather proceed on a case by case basis than try to pronounce rules, though some of the above procedures may prove useful in any instance, including Incentive/Equilibrium Analysis. Meanwhile, though, other firms have not even thought about any systematic use of incentives, much less developed any basis of experience or expertise with them.
Public issues and policies, however, (1) reflect the community we all have to live in; (2) are familiar in some regard or another to most readers of this book and so are easier to think about; (3) are trailing far behind not only many commercial organizations but behind even this modest book, in terms of any systematic address of incentives. Here, let us provide a few specific examples of incentive application which we hope might prove to be useful.
Why Our Schools Are Wall-to-Wall Disaster:
When Junior learns better, no schools-related personnel get more money or power. If Junior learns WORSE, though, more money and power are poured into the system to compensate!
This is a condition which has endured for some decades, coinciding with the remarkable persisting decline in our schools. It is a fantastic incentive for poor teaching, and dysincentive for good or effective teaching.
Schools receiving aid, which make the mistake of actually making real improvements, are immediately and automatically disqualified from and cut off from their funding.
The better the reform or the better the teaching method, the more resistance will prevent its taking hold or spreading, so long as this perverse incentive is still in place. Conversely, huge improvements on all sides will emerge and spread if we can correct that unintended incentive!
This is the one point where a concerted effort can make all the difference—whereas, whatever very special method, theory, practice or other reform seems to be or is significant, NOTHING worthwhile that you advocate to improve schools can take hold or spread very far!
Change this one weird incentive, and virtually all meaningful gains become possible for our schools and for our children, our people, who are at stake within them.
The 3 Specific Changes Which Will Best Convert
Federal Aid from a Destroyer to a Builder
of Quality American Education:
The aid grant to a particular school or school system must last 3 to 5 years, regardless of how much progress the school makes. Improvements, however huge, must not disqualify the school or system from further assistance.
Specifically provide for further aid and follow-up aid programs to that third of schools and school systems which improve most during the term of the earlier grant.
Automatically disqualify from any further Federal assistance such schools and systems as fail to make meaningful gains during the term of the earlier grant—and keep them disqualified until or unless thoroughly reorganized and their administrative personnel replaced!
Why have we seen so many mere Windowdressing "Reforms" in American Schools this Past Half Century of Stupefying Decline?
Everyone has seen, and nearly everyone has suffered through, some of the decline—which in turn bears on the condition and even the survival prospects of the rest of our country. Most of us still have special people whom we care about still going through the poisoned system. This has many, MANY times generated the kinds of pressure for change that we are seeing again now. On the other hand, with that quality dysincentive in place, no real positive change was or is possible!
Therefore, over and over again, officials would relieve that pressure for change by going for windowdressing "reform" which only microtinkers, and does not meaningfully improve, our schools. The public falls for and buys this gimmick, over and over and over again. Any substantive improvement gets blocked or sidetracked. The microtinker windowdressing "reforms" get ballyhooed as our salvation. Our reformists are fooled into exhausting themselves on behalf of the trivial, hoping that this will somehow lead on to some further, more major improvement later which of course it never does.
The only way for any substantial improvement to reach through our schools, other than letting them collapse the rest of the way into ruin, is to correct the incentive. The overall system always drifts with the incentive. Conversely, correct that most remarkable disincentive and both our schools and our country should recover.
Sociohistorians familiar with the patterns of rise, fall and behavior of other empires and civilizations throughout history, are unsurprised by America's steep decline. What does startle most of them, however, is how soon America was brought to her economic, industrial and cultural knees. We have all seen, however, the central role in that decline which our schools, once the great civilizing force in America, have been playing. The cause of our schools' unhappy decivilizing role, in turn, clearly is the remarkable quality-dysincentive so basic to the structure of Federal and consequent state aid to education during this half-century.
(Editorial note: we missed as regards at least the economic knees. The writer had failed to take into account the effects of the Internet, which fueled the Clinton-era economic boom and which appears likely, as of early 2001, to drive further economic expansion for some years after current regrouping.)
It thus seems reasonable to suggest that it was this one provision, that unintended but awful disincentive, which brought America to her (educational and cultural) knees maybe 40 years early. Change that incentive, trigger a recovery in this hugely important area, and this might help break up the patterns of decline now underway in so many other areas of our societal makeup. (As has already, to some extent, the emergence of the Internet.Ed.) America might even become able to resume advancing for many decades to come, and might never have to go through the more catastrophic forms of extreme collapse and self-extinction as have almost always happened elsewhere in history. Hey—maybe most of our great future is still ahead of us!
Here are a few brief examples of possible incentive use:
Greentops—to restore breathability and freshness to the air of our great cities, and enlarge available recreational space: for the owners of flat-roofed buildings, give a slight credit against property value taxes for the amount of rooftop square footage given over to natural greenery—rooftop lawns, gardens, shrubbery.
Price deflation without pain—prices need to move freely in order for the market to keep signalling people and resources to their best and better uses under changing conditions. What we need to change is the overall direction, not price instance by instance at the expense of freedom and/or flexibility. Place a 1% tax on revenues from increased prices; a 1% credit against taxes for revenues foregone through price cuts. (To finetune this: peg this to prices above and below established trendline instead of absolutely flat prices.) A feather's light touch, but probably enough to establish a 2-3% annual decline in prices instead of the current low inflation, even under conditions of an expanding economy.
Price deflation without pain—II: a credit against taxes for what corporations spend to develop the cost-saving ideas of their employees. Accompany that, of course, with some incentive to corporations to provide incentives in turn to their workforce to come up with cost-saving ideas. Note with this latter point the leveraging of effect, achieving a lot of incentive with very little cost in tax revenues. —An incentive to firms to provide incentive to their employees....
Another leveraged incentive: tax breaks to health insurance firms which provide pricing incentives to their clients for preventive health care.
Another leveraged incentive through insurance companies—this time, automobile insurance. Tax breaks to those firms which provide pricing incentive to their clients to engage in stress-reduction training programs and practices. (Ed. Note this was written before "Road Rage" became popular and made such a provision even more desirable.) —And pricing incentive to their more elderly clients to train and maintain practice in programs and activities which fine-tune sensori-motor responses, even if it's a simple game like table tennis, or more involved programs relating to developmental optometry.
Not only is the proverbial "ounce of prevention worth pounds of cure," but through such leveraging, a few cents of foregone Federal revenue can result in thousands of dollars' worth of material savings, to say nothing of human costs saved! This indeed seems to be a reasonably worthwhile investment!
What can a state government do? One thing is to take a competent listing of what are the 10-30 best prospective growth industries and new fields of employment? Pick the most desirable half of these, in terms of working conditions, job generation, quality impact upon the surrounding community and the environment. For these, provide incentives and temporary tax breaks for firms in these growth categories to set up within the state. Soon the state itself is identified with, and enjoying the benefits of, growth industries while others continue to try to nurse along industries which should have closed long since.
What can a town neighborhood do? Remember from our list of guidelines that the fewer people to whom an incentive applies, the harder it is to get enough of the desired response. Even so: to improve the quality of life, conditions and values within that neighborhood, provide a modest credit against taxes for what is privately spent for upkeep and improvement.
Instead of shutting down the stock market or cutting out programmed trading whenever the stock market goes through another "Black Hole Monday" or other wild swing of values: after a 3% swing in either direction in one day, for the remainder of that day and half of the next, tax 1% of the subsequent transactions. If speculative pressure is so great as to continue the swing, the Treasury is actually enriched by what would otherwise be evaporating values. More often, with only some enrichment of the Treasury, traders would expect each other to pull back from speculative excess and so would themselves do so, and the most pressing business of the market could go ahead.
The Appalachian region, and the Dakotas, provide incentives like those talked about a few years ago for "enterprise zones" in our inner cities.
Preserving wilderness and good farmland next to growing cities: without having to purchase tracts of land to preserve them, develop a regional "metazoning plan" wherein owners and developers who stay within the "metazoned" provisions for their tract get taxed at a lower rate. The "metazones" do not have the force of law as with formal zoning, which is always going to those infinitely corruptible exemption request hearings. If someone has strong enough reasons to step outside of his metazone provisions he can do so without anyone's permission; he just pays a higher tax rate to do so. We can thus encourage preservation of natural tracts very close to where most people live and work. We can encourage patterns of development which are best and most easily served by the least costly transportation routes. We can settle cities on destroyed stripmined land and preserve the healthy lands next to them. We can preserve our waterways in better health for farming, industry, recreation, fishing, drinking. We can respect prevailing wind patterns in our areas of living and industry.
Are you tired of long commutes? Of 3-hour "rush" hours that are one long choking parking lot? You would probably scream at the idea of a tax on the distances that people live from their place of work, but—what if the tax were slight, pending, and gradual—and accompanied by a one-time-only tax credit for moving closer to your place of work? OR:
What of tax and other incentives for encouraging "electronic commuting," going to work on your household PC plus modem?
What of credits against taxes for purchase of tickets on mass transit, especially underutilized mass transit?
Mothballed large helicopters by the thousands sit on hundreds of acres of the Mojave Desert, "temporarily" retired from military service during one or another of our spasms of cutback and never brought back because of our military's continuing quest for bells and whistles and further futuristic technology. What about major tax breaks to firms which purchase and refit some of these helicopters and press them into a new class of commuter service in and out of our more congested cities?
Combination of carrot and stick for pollution control:
Place an eventual pending, then slight, then gradually increasing tax on all classes of economic activity, in due proportion that these activities pollute or otherwise are damaging the environment. Exempt, in due proportion or wholly, from this tax those firms which themselves prove not to be polluting or damaging—but with the burden of proof ON the firm! (There is an enormous difference in administrative costs between policing a regulation, and having your clients come to you to prove their hands to be clean!)
At the same time, provide a substantial credit against taxes on what is spent by firms to control or eliminate such pollution or environmental damage. A credit with a sunset. The credit is largest—say 50%—if earned during the first year after enactment, 40% if earned instead the following year, 30% thereafter.
This combination of incentives makes the long-run prospect of polluting a discouraging one for the polluter. It makes attractive the process of changing from polluter to non-polluter. It makes even more attractive the process of changing into one of the good guys as soon as possible, rather than later, so as to get the larger credit. This seems ideal for bringing an early correction to the problems of our environment, with far less cost to our public treasuries than what is being spent now for mostly ineffectual results.
Tired of looking at other people's walls? A "build-down tax," basing part or most of property value tax on buildings constructed after a pending date, on above-ground cubage instead of infinitely corruptible guestimates of market value. More and more of at least our utility stuff goes underground. More and more gets built underground to duck the cubage tax, leaving trees and grass and sunlight in place of future paved-over canyons.... Huge saving in energy costs. Huge saving in lives and health when Earth's magnetic field lets go and starts to flip, letting radiation through. (That flip-over, according to geologists, is well overdue and could happen at any moment now or as late as a hundred years from now; geophysicists suggest the patterns of change in Earth's current magnetic behavior indicate that the flip has at least begun.)
Incentives of various sorts favoring true innovation of new products and services — and a tax on those products and activities which are identified as "enforced obsolescence." (An improvement in our patent procedures could also go a long way. Now the only ones beating a path to the door of the inventor of a better mousetrap, are invention "development" firms whose income is not from actual development of inventions but from fees for services charged to inventors.
NOTE: the best way to sterilize any field of research is to fund it from above. Historically, the major breakthroughs have virtually always come from the wildest ideas and the wildest off-the-wall people. When you are responsible for public money especially, those are the people and ideas you have to screen out, or face getting at least a "golden fleece award" or worse. In any research field substantially funded from above, the people and resources are drawn to "where the money is." This effectively sterilizes that field of research and slows it down to what we see all around us now. Since World War II, in this manner has our government sterilized nearly every major field of research! If, instead, we could switch to tax credits and other incentives for private spending on research, especially basic research, and most especially research which took a few chances on the wilder people and ideas along the way, we would see a rapid emergence of new understandings, new products and services, new economic growth.
What about economic growth? Combine the use of taxes and tax credits to encourage lower prices, as of several pages above, with:
The above suggested switch from funding research from above, to incentives to the private sector to support basic research from the ground up;
Tax breaks and other special incentives to those who develop new products, even to the extent of generating an entire new growth industry just from this development service.
Incentives in support of: the most productive kinds of investment—in new products and services; in people capital (effective training and education of workforce); in know-how capital generated by research especially basic research; and in broadly identified growth industries. —And in aggressive support of retraining services offered to workforce in dead or dying industries, and an incentive to retrieve and redevelop dead capital equipment into something usefully productive. Little or no tax breaks for forms of investment which do not create future gains in production of value. That 1% tax on capital borrowed in pursuit of hostile corporate takeovers, suggested earlier in this book, which in itself would then release enormous amounts of capital into productive use which have been held as hedges against takeovers or in war-chests toward future intended takeovers. Incentive (and international legal) support for the private but "mannerly" development of the huge resources of Earth's oceans—and of the far huger, truly unlimited resources of space wherein nearly all of the human future must be experienced.
Today in this country, a annual growth rate of nearly three percent during recovery from deep recession, is viewed as dangerously inflationary and triggers an almost panicked series of interest rate hikes by the Federal Reserve. The time for further improvement of human living standards in our country is moving further and further away into a clouded future and we Americans appear to have swallowed and accepted a remarkable decline in our living standards this past decade and more, totally at variance with our entire history up to that time.
There is no intrinsic reason why, with measures like those suggested above, we cannot encourage and sustain a steady growth rate not only of 3%, or of 4 to 5% in the Kennedy-Johnson days, but 8%, 10% matching all of huge China's current growth rate, 12%, even 20%—and still have, not inflation but deflation, declining prices! And be taking far better, more conserving care of our resources than we have been doing.
If the "continent of effect" we wanted to throw up, from the accumulated incidental by-products of the living of millions of ongoing human lives as focused by the relevant incentives, were to be to rapidly abolish involuntary poverty, not only in America but all over the Earth, we could rapidly do that through measures like these, with plenty left over from such a high economic baseline to provide for all the individuation and differentiation of incomes we Americans seem to crave.
Member of the firm, or citizen: is there some desirable goal you would like to see accomplished? Ask yourself:
What people need to do what in order for that goal to be accomplished?
What incentives can be adjusted that will induce enough appropriate people to do the things which will accomplish that goal?
Is the goal valuable enough to you to be worth more than what you are investing to provide those incentive adjustments?
Run an Incentive/Equilibrium Analysis on the situation to identify as possible whom you need to incentivize, where some potentially valuable sources of support for what you want may be found, and how much incentive is needed. And/or,
Remember those ten guideline criteria, to make sure that those incentive adjustments accomplish what you want them to accomplish.
Fair taxes? There aren't any such. Any tax which is fair by one criterion will be unfair by other criteria. How can the same tax be fair both to someone who has huge discretionary income and to someone who has none? How "progressive" or "regressive" should a tax be, to be "fair" to both? The only way to reduce unfairness is to reduce taxes. —But we can't simply cut back at random and leave gaping there not only the running sores of our current public needs but needs aggravated by those cuts. —But we can greatly reduce our taxes and their unfairness—and correct those needs at the same time—if we begin to intelligently readjust the incentives which will enable the private sector instead to address more and more of those needs. If we offset through incentive adjustment, or by whatever reasonable means, the factors which now distort market dynamics and divert private interests away from the good of the greater whole, market forces can then freely be accomplishing in those areas with the same efficiencies that they do in more purely private areas of economic activity.
If you want less government, don't be afraid to grasp the nettle of those needs, just switch toward intelligent readjusting of the relevant incentives. If you want this or that public need met, don't count on past-its-limits government to do the job. Look to how the private sector can be encouraged, for its own reasons, to pick up and actually accomplish that job. We can move rapidly toward a world of plenty and away from scarcity in the literal sense. Human wants may be infinitely expandable in a world of definitely un-infinite, limited resources. There may always be comparative, relative poverty—some people always will have less than do others. But all of us can swim in a world rich in positive opportunities, and where not only our children but even ourselves can readily develop by far the richest resources of all, the wonderful human beings that we are and can be.
There is nothing new about incentives. We all have always swum in a sea of multiplexed various incentives. Nor is it new to suggest that some of these incentives be adjusted, or set, in support of some specific broad purpose or high goal. What is new is what has been thus far modestly attempted in this book, a comprehensive, systematic way of thinking about incentives generally and of looking at many situations instead of just one or a very few as potentially improvable through adjustment of incentives. The creative solution-finding system Incentive/Equilibrium Analysis, a/k/a the "Win/Win-Finder," which turns out to do so much more than just solve problems, is also new. The sheer scale and scope of what now becomes immediately possible to us, through such methods, also appears to be new.
Anyone so inclined, who is among the earliest to become substantially involved in this inquiry area, is due to become a major leader in society to the extent that this inquiry area reaches levels of attention where it becomes part of public argument and debate. Certainly this appears to be a focus through which much good—and much gain—can both be accomplished and some major win/win generated.
This book is a very modest beginning in a field of inquiry which is very young. One of the better things you, the reader, can do is to help find things in this book which can be improved. One of the better things you, Gentle Reader, can do also is to discuss some of the premises of this book with at least one other person whom you respect.
This book is another effort by Project Renaissance, although in a very different context from most of our other work, to make it obvious to you that you are, indeed, more than a match for the difficulties you now face and the broader difficulties you find around you. The more that you, and others like you, discover this truth and reality for yourselves, the less daunted you will be and the more likely to do something useful about what you find out to be going on.
Remember also—no matter how angry you might sometimes get at some of the actors in the situations you look at, as you discover more and more about what has been going on, remember that even negative reinforcement (punishment) is still reinforcement, tending to make more likely those behaviors or traits which are being punished. That the positive incentive, the carrot, is far more effective than the stick in bringing about desired changes. —And there is so much so positive in the opportunities before us all! More than a match for our difficulties, become also a match for those opportunities as you begin to discover them. You yourself, and others whom you care about, begin to discover some of these positive opportunities so that all of us can begin moving forward into them, world without end, and into a truly human future well worth living in.
To Both Conservatives and Liberals,
Concerning the Funding of Science Research
Elements of prior correspondence between liberals favoring further government sponsorship of scientific research and conservatives favoring getting government out of scientific research. As this particular discussion broke out, we will hear mostly the conservative view, though that does not make the writer’s riposte liberal. It seems that a sensible, incentives-considering view is bound to offend both liberals and conservatives. In any event this next discussion, edited down from a much longer discussion, led to the author’s reply, further below:
The money spent in science and technology.....WHICH science and technology should be supported and, more important, HOW should those decisions be made?
Could you estimate in 2003 dollars the worth of some of the inventions of Edison, Tesla, Bell, Marconi, Maxwell?....I seem to recall that none of them were supported by the state in doing their research.
For the reasons explained in the recent exchange between Win and ———— about testing new discoveries, there is a very significant inertia to measuring the worth of science for society. One reason is that people holding political power have comparatively very little knowledge of science, and it would be quite unrestful for them to realize how important science is. Because science is difficult.
(The word) "science" is....too general to be useful in a discussion about allocation of resources. You seem to be using the word to designate the particular projects that you wish to see done. There are an infinity of possible research projects and a finite amount of resources available to pursue them. You are presupposing that political fiat should be used to allocate the resources, and your argument is simply that the politicians should allocate to the projects that you consider worthwhile. I say that the marketplace should allocate resources as the owners of the resources see fit. We really differ (as to basing such decisions on) political values rather than scientific tastes, so we're not likely to resolve anything by discussing the relative merits of particular research projects.
Have you ever seen pictures of the crude equipment that Rutherford worked with? BYes. Crude??? State of the art back then. He was first because he had the best equipment in the world.
My point was that he built his own equipment. I refuse to believe that important physics research NOW necessarily requires astronomical expenditures. I think it's a failure of imagination on the part of the institutional specialists.
Or coming up to the present.. have you read about the small-budget projects that are being funded by NASA these days, as compared to the huge projects of the past?
Sorry, this is politically-based media hype. The cold war isn't there to fund for the program, you need new ways to sell it. Instead of spending pantagruelesque amounts of money, they're down to just spending immense amounts.
(Snip) I really think NASA should be sold. The evidence is building that private companies can do what the U.S. government does, at a tiny fraction of the cost.......Projects that appear to be getting much more "bang for the buck?"
Reply from this writer:
Gentlemen: two things—
A textbook economic justification for government support of scientific research, at least basic scientific research as distinct from the applied kind; and
the shortcomings of government as a conduit of support for scientific research.
Both of you are going to come away unhappy from this one. —Sorry.
For this one I cite no less an authority than Adam Smith himself in his The Wealth of Nations, father of laissez-faire freemarket economics. For some types of economic activity, the pricing mechanism leads people conversely from the general good instead of toward it. Where the "invisible guiding hand" goes wrong, among other things, is activities which involve a high degree of "externality," effects felt externally rather than by he who created those effects.
Examples of negative externality: being the one in your block who fails to shovel the snow off your walk. Elizabeth, New Jersey—the effects are created by the refineries, but felt by everyone living somewhere downwind. The costs and benefits felt by the company don't reflect the costs and benefits felt by everyone involved. The bookkeepers and stockholders look at a picture that says, "Keep pouring it on!" The people downwind....die.
—And now, the side of it of interest here: positive externality. The people who turn up the really basic science are rarely themselves in a position to exploit it. By spending ten million on a project, Company A may get back one million in benefits A is looking at a bad investment, so it is unlikely to do it even if the investment returns value to society as a whole in the trillions of dollars. That's a benefit externality, and that's why basic research, compared with applied research, is chronically underfunded and needs support of some kind from beyond the marketplace.
But now the problem—When you are responsible for public funds, you have to be very careful, certain of what you are doing, you don't want to get hit with a golden fleece award. You in fact have to screen out all the wild people and wild notions which, historically, HAVE been the main source of scientific breakthroughs! Meanwhile, you pour Federal money into an area of basic science and you attract all the other resources in that field to where the money is, and away from more productive alternatives. You may temporarily expand the advance of a field but you are thereby also sterilizing it in terms of any future progress. Federal money has by now effectively sterilized nearly all areas of basic research.
This situation reminds me of the cartoon of the dejected lab technician looking at another and saying, "What's the opposite of Eureka?" For this issue, "What's the opposite of having your cake and eating it too?" There is, of course, a proper solution to this dilemma:
Give hefty tax breaks for expenditures in support of truly basic science. This will re-balance the books to have private choices being made in conditions more reflective of the general good, so that freedom and the market can operate efficiently over a broader range of conditions than before. Conservatives don't like this because government and taxes is still involved; liberals don't like it because public needs are so obvious government should be in there DOING something instead of simply adjusting the playing-field. —But I think scientists especially SHOULD like it because it frees them from depending upon the so-well-demonstrated great wisdom of Congress for making scientific decisions. And to be brutally frank, I don't think we can get to see public needs reasonably met until we turn from direct government to incentives and tax breaks as the preferred means for getting things done—and we're not going to see substantially reduced government and costs of government until public needs are finally reasonably well met which now they are not. Show me any other way these desired objectives can reasonably be accomplished and I'll listen. (—which is more than either conservatives or liberals generally appear to be doing!)
Incidentally, this case also extends strongly, I believe, to giving really substantial tax breaks for expenditures/investments in developing space, even though that involves some applied research. The pending benefits for us all are just too huge to ignore, and possibly too urgent as well. We need to break open this field onto a broader playing base, as electronics and computers broke open some years ago—an event which every one of you who are reading this is a direct beneficiary of or you wouldn't be here reading this! (This exchange took place by e-mail in 1999Ed. Note)
Meanwhile, you might want to check my arguments and evidence in closer detail in Incentives As A Preferred Instrument of Corporate and Public Policy (the foregoing book).
 In private correspondence, at lectures, even to the Hon. P.M. John Major back when he was Interior Secretary, but the idea appeared to be somewhat too advanced for its audiences.
 Win Wenger, A Method For Personal Growth & Development, 2nd Edition. Gaithersburg, MD: Project Renaissance, 1991.
 This got underway when he stumbled into the Somerville abridgements of Arnold J. Toynbee's A Study of History, was soon fed by the later volumes of that Study including Vol. XII, Reconsiderations and by other writers such as the thoroughly misinterpreted Spenglar and the long-term president of the American Sociological Association, Pitirim Sorokin. Twelve years later this writer drafted his own well-received theory model, which a dozen years later evolved into Sociotectonics.
 Win Wenger, Toward A General Theory of Systems: One Man's Window on Our Universe. Gaithersburg, MD: Library of the Republic of the Sciences, 1986. Now mainly distributed by Project Renaissance as the second volume of a two-volume set, the first volume of which is the writer's Civilizations and Other Living Systems, (1971).
 Socratic method basically is a way to get people to examine their inner and/or outer perceptions and to describe in some detail what they discover there. Once such description is started, so much insight or understanding often are revealed that "Socratic miracles" of growth occur. For 2200 or so years Socratic practitioners have been convinced by such effects that nearly all knowledge and understanding are already within each of us and need merely be "drawn forth," meaning "educated:" education itself is named after this concept, and is very different from the didactic teaching and schooling nearly all of us today are overly used to.
 For further discussion of this mathematical or structural comparison between organic and social arrangements, see Win Wenger, Civilizations and Other Living Systems, vol. 1, 1972 and Toward A General Theory of Systems: One Man's Window On Our Universe, vol. 2, 1985. Gaithersburg, MD: Republic of the Sciences/Project Renaissance.
 Observation made by Gordon Tullock, in The Politics of Bureaucracy. Washington, D.C.: Public Affairs Press, 1965.
 Participants who are able to use Einsteinian or post-Einsteinian discovery imagery should do so at this point, describing with eyes closed to see more freely, and with better chance of letting their own imagery surprise them with what it shows them.
 In the series of trials which developed I/E Analysis, we found that Steps #'s 1 & 2 could be done in either order with about the same results, so long as both have been performed before Step # 3 next.
 A basic understanding of simple evolutionary biology makes obvious the reasons for this persistence of punished behaviors. In harsher times, only those of our ancestors—and of the ancestors of all living animal species today—who persisted in running hard even after it got to hurt, in running after breakfast or in running away from becoming breakfast—survived long enough to become our ancestors. Species—and within species individuals—who pursue their goals with passion and persistence even in the very teeth of punishing difficulties—were and are the ones who survive to pass along their traits. Punishment may sometimes defer a behavior in the short run: in the long run carrots are far more effective than the stick, and we see this for all animal species, not merely humans. That we need to re-think the arrangements of carrots and sticks in our society is indicated by, among other things, our having more than a million Americans behind bars and at least three million more "needing" to be behind bars. —By one of our greatest governmental expenses now being the building of more prisons to relieve overcrowding. "Build thee ever greater jailhouses, oh my soul!!!"
 To further discourage already-abysmal public interest in and general knowledge of economics, nearly every economics school text opens with the line referring to economics being "the dismal science," with reference to Malthus and a perhaps premature reference to the structured concepts of relative scarcity around which the logic of the subject develops. By the time most students who stay in the course or with the text eventually get around to the beauties of that structure, they can't see it because they were turned off on Day One.
 For example, persuading Russia to release controls not only before competition was in place in every industry, but before competition was in place in any industry! The inevitable, obvious result: a classical textbook case of monopoly pricing behavior driving hyperinflation! Our leading economists appear to be so caught up in their ideologies and technical details that they forget the fundamentals.
 Excerpted from papers long since submitted elsewhere.
 For example, the recent governor of a state best left unnamed, and who himself is as of this writing (1993 edition) in a high cabinet position in the U.S. Federal Government, once got his state to allocate an incentive fund to its schools in due proportion that they improved their average test board scores. What developed, since the loophole was that "discipline" cases among students who happened to be in process on the day of the tests did not get figured out, was that on the day of the testing, throughout the state, the bottom third of all students suddenly became "discipline cases" and this was how the schools in that state improved their average test scores! As of this writing we do not know if any corrections have been made in this procedure!
 Now, of course, at least two basic approaches and a host of specific techniques, relating to those approaches, are available with which to determine such measures. One is a comparison standard, defined and determined by ranking among alternate choices. Biomonitoring the pleasure-related responses of organisms and then recording these quantifiably in various situations is another approach. A third approach, seen with both its strengths and flaws in artistic competitions and in Olympic athletic arts such as figured ice skating, is the expert panel, with as much comparison reference built up as possible.
 Reprinted from pages 1-2 of Capital Ideasmiths, Autumn, 1992.
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