SSPM final game: evolution in the car industry

In this post, I will try to introduce a game that we can play during the final session. The four pitches during class last week showed that it is harder than we imagined to clearly explain a game.

Learning goal:   this game tries to show evolution in a product: will different firms grow into selling the same sort of cars, or will they occupy different niches

Players:

-          Car firms           5 teams of about 3 people present the car firms

-          Consumers        rest of the group is individual consumer

-          Public opinion   the ‘game masters’ draw cards that influence the public opinion

Starting point:

-          Car firms start with the table below – but one of the categories get an extra point

	Status	Performance	Maintenance	Fuel saving	New technologies
Round 1	3	3	3	3	3
Round 2	...	...	...	...	...
Round 3	...	...	...	...	...
...

-         In each his round, consumers choose a car from the table that is displayed in the classroom:

Round 1	Status	Performance	Maintenance	Fuel saving	New technologies
Firm 1	4	3	3	3	3
Firm 2	3	4	3	3	3
Firm 3	3	3	4	3	3
Firm 4	3	3	3	4	3
Firm 5	3	3	3	3	4

Next round:

-          Car firms get extra points they can invest, following this scheme:

o   +2          Most cars sold

o   +1

o   0

o   -1

o   -2           Least cars sold

-          Consumers are shown the table for round 2 and make another choice.

Public opinion:

Because I fear that most Industrial Ecologists will probably go for the more sustainable, fuel saving cars, I add an extra dimension which I call public opinion. In every second round the ‘game masters’ draw a public opinion car, that slightly changes the game (like in monopoly). Texts on these cards are:

• The leading firm gets a fine for unfair competition and has to hand in 4 point
•  A crisis occurs, so consumers are likely to go for cars that score on maintenance
• There is a technology break-through, the two firms with the most points invested in ‘new technologies’ get 3 extra points to allocate
• Etc.

After x rounds:

The cars either become more similar or more diverse. This will mimic the process of industrial evolution. Or to be more precise, adaptation to the environment, which is the consumer market in this case. In this game, extinction is defined as not selling any cars for two rounds. Thus, the game shows competition as well.

My only fear is that this game might not be too interesting for the consumer. But, in real life you cannot really 'win' in consuming either.

Comment, 30-12-2014
While rereading this post, I want to make two contributions:

- I did not clearly state what I meant by the 'points' that the car firms could collect in each round. I introduced them to create some sort of financial competition between the firms. Of course, these points are only based on popularity of a car. Also, they do not include the fact that normally cars would be priced differently - in this game every consumer can by any car. The points can be used to invest in some 'traits' or categories, so that the  firms are likely to diverge over time.

- After discussing the 'self-organized' session in class, I think that my game falls short on two points. First of all, the game is very abstract. Consumers are expected to make decisions based on a table with points. A nice addition would be to add a picture of a car to each car type, so that consumers might choose less rational. Secondly, the preference of the consumers in the first round is quite determining for the outcome of the game. To overcome this problem, the random punishments and rewards from the 'public opinion cards' could be more severe.

Solving the tragedy of the commons

Tragedy of the Commons & Industrial Ecology

Last SSPM session, we were confronted with our more evil side. Where we as industrial ecologists tend to see ourselves as moral human beings, conscious of our environment and the people around us, we were proved to be the bad guys ourselves.

In the fishery game, many teams (including mine I’m afraid) played ‘defect’, by fishing more fish than the sustainable amount of four. Within five rounds we had completely emptied the sea. But we did not even defect in a rational way - we went for five fish. The only rational strategy would have been to play 50 in the first round, since we would play a maximum of 8 rounds (so if all teams played ‘cooperate’, we would have caught 4*8 = 32 fishes). Of course, this strategy would only work if the other teams were to go for a more modest start and not empty the sea before us.

In an infinite game, this defect tactic would be completely useless. Nevertheless, human beings do not seem to be very well-equipped to reason on the long run, especially when we consider infinity. A growing population density, combined with the development of international trade, reduced direct feedback loops between human beings and nature. Through the mechanism of competition, human beings are actively encouraged to produce more and therefore to use more resources.

Governance

Vast population growth combined with the increasing depletion of natural resources have lead to degraded ecosystems, for example caused by fishing or deforestation. These problems are often referred to as a tragedy of the commons (Hardin, 1968). The only way to overcome the tragedy of the commons, Hardin describes, is by accepting that complete freedom is a illusion.

Handing over freedom so that we can share common goods in an honest way is fundamental to the way today’s society is organized. We pay taxes (hand over freedom) and in return, the government ensures health care, education, drinking water and clean air. So, to prevent an empty sea, we should implement some form of governance in the fishery game we played in class.

Culture
We started that same lecture by creating an in-group and an out-group. Signalling is one of the main mechanisms that is used in nature to make a distinction between friend and foe, for example with odour or in behaviour (Krebs & Davies, 1997). During the first half an hour of class, students who came in too late were forced to either stand or sit on the table. Clear public ‘punishment’ for their defecting behaviour. By differentiating between ‘accepted behaviour’ (in-group) and ‘alien behaviour’ (out-group), we in fact started to develop a culture. Schein (1968) defines culture as a pattern of shared assumptions, that are in some way formed within a group, if they deal with collective problems. Culture needs to be reinforced, so that it becomes a pattern.

Overcoming the Tragedy of the Commons

So, in order to overcome the tragedy of the commons, we need to establish governance, that is enforced by a culture, or at least the feeling to be part of some sort of in-group, and defecting behaviour should be signalled and actively discouraged.

Therefore, I propose the following measures:

1.       Before the fishing season starts, all ‘team captains’ will come together and seek for common ground

2.       Based on these common values, a cooperation will be established

3.       From each team, 1 member will take place in a cooperation board, which will set up rules

4.       From each team, 1 member will take place in an audit board, they will be paid from general contribution to the cooperation, to ensure their independence

5.       As a fishing boat returns from the sea, it’s catch will be checked, if it’s more than four fish, there will be 2 consequences:

a.       The boat is no longer allowed to use the logo on their boat (signalling defecting behaviour)

b.      The boat is excluded from fishing the next year

The only way in which these measures will work is if ‘defecting’ is not just discouraged by rules, but also by all members of the cooperation. In a cooperation, ‘cooperate’ should be a cultural norm, so that defecting leads to serious social consequences as well.

Relating my solution to Colby’s paradigms, my solution is an example of resource management, in which economic growth should be balanced with natural resources. Even though humans are central in this paradigm, eco-efficiency based regulations prevent ecosystem depletion.

As there is no direct influence from a central government in my solution, the governance type can be characterized as private interest governance (Boons, 2008). In the end, all fishermen are better off with a healthy fish population, so there is a clear common interest. Also, since we are discussing a small community, research has showed that in many regional cases top-down legislation from a central government can have a negative impact (Andersson & Ostrom, 2008), whereas bottom-up governance can be based on extensive local knowledge.

In short, I think all teams combined should start building a culture, in which ‘defecting’ is simply not an option. By creating a cooperation, common ground can become institutionalized and part of the deep underlying assumptions of the fishermen’s culture. A cooperation board can continuously improve rules and regulations and an audit board can actively discourage any ‘defecting’ fishermen. A tight social network can be an answer to the tragedy of the commons.

References

- Andersson, K. and Ostrom, E. (2008). Analyzing decentralized resource regimes from a polycentric perspective, Policy Sciences 41: 71-93.

- Boons, F.A. (2008) Self-Organization and Sustainability: The Emergence of a Regional Industrial Ecology, Emergence: Complexity and Organization 10(2).

- Hardin, G. (1968) The Tragedy of the Commons, Science 162(3859 , Dec. 13, 1968), pp. 1243-1248.

- Krebs, J.R. & Davies, N.B. (1998) Behavioural evology: An evolutionary approach, Blackwell Publishing, Oxford

- Schein, E. (1996) Three Cultures of Management: The Key to Organizational Learning, Sloan Management Review; 38(1): 9-20.

Comment, 30-12-2014
The tragedy of the commons is in fact a collective action problem, where the outcome of individual behaviour is positive for the individual, but negative for the collective if all individuals produce this behaviour. In rereading this blogpost, I feel that I miss some of the complexity of such an issue, as my solution builds on the assumption that, once all fishermen start talking, they will agree on a collective policy.

It may be more realistic to add another governance structure: that of a local or national government. The main governance structure could still be the cooperation board, but the progress of the community should be audited by this local or national government. This will make sure that the fish population remains high on the agenda and it will offer an extra tool to control defecting behaviour within the cooperation.

I feel these two governance structures combined can establish a community in which the fish population will stabilize at a sustainable size.

Legitimacy - the Nokia case

In italic are the comments that I added on December 30.

The 2006 documentary 'Een nette zaak' on the attempts of Nokia to change standard working conditions throughout its supply chain shows many of the difficulties the multinational faced and most likely is still facing today. In this blogpost I'll discuss how both Nokia and its supplier strive for legitimacy, whether Nokia's attempts are effective and in what other way they could act.

Nokia

The documentary is quite honest: incorporating the three P's (People - Planet - Profit) in your strategy is inevitable for a western multinational. Various stakeholders - shareholders as well as consumers - tend to ask more and more questions on the way Nokia produces its products. Whereas the multinational used to focus on its own processes, Nokia is now looking at the entire supply chain. In this documentary the emphasis is laid on the working conditions in the supply factories. 

Prakash ('01) investigates why companies would go beyond governmental environmental policies, even if this does not necessarily lead to profits that can easily be assessed. He states that people within these companies simply may feel the urge to do good and/or that they focus on long term benefits. In order to implement more ambitious policies, management can make decisions either based on power (use some sort of force) or on leadership (induce consensus). I will come back to this later.

Throughout the documentary, I got the feeling that the Nokia team that is followed to China is sincere about changing the supply chain. I feel that these individuals may be the forerunners within the organisation that, as Prakash explains, wish to do good. However, their attempts do not really seem to work. As a viewer, I got the feeling that the supplier was defensive rather the constructive and I did not get the feeling they would change their ways. Below, I will discuss how I think Nokia can make a larger impact.

Supplier

The Chinese supplier, with (at least) two Europeans in its higher management is visited by a team from Nokia that assesses the treatment of personnel in the supply factory. The supplier does not even oblige local legislation. We see that employees are forced to work overtime, in order to make the Chinese minimum wage. Another example: as a Nokia employee expresses her concerns about strong chemicals that are stored next to drinking water facilities, the supplier orders an employee to put the chemicals away for the moment. It is obvious that this is only done to please the guests.

Even though it may not directly seem the case, you can see the supplier striving for legitimacy as well, but the playing field is less balanced in a way. Where they state that the working conditions in their factory surpass the working conditions of their competition, they are not even meeting local legal standards yet. Their legitimacy dilemma is this: to remain a relevant party for their customers, they seek ways to keep their costs as low as possible, but at the same time this leads to more and more friction with their employees. 

I would like to add that the legitimacy is also strongly based on culture. China is still developing, so the working conditions may seem harsh to the Nokia team, but can still be attractive - or at least legitimate - to the Chinese employees. I view the documentary through this Western framework as well, so I do see the supplier as the bad guys. However, the situation is more complex than that.

Nokia vs Supplier

Where for me, as a westerner, it was easy to identify with the Nokia side of the story, I still found it striking how little effort Nokia put in trying to understand the underlying issue, which is a fundamental difference in view of 'good' working conditions. Prakash would describe the way in which Nokia is trying to influence its supply chain as power-based. The underlying disagreement is not assessed, but Nokia has the power to look for another supplier and is thereby forcing its supplier to meet Nokia's standards. DiMaggio and Powell ('83) describe the fact that industries tend to become more similar as they evolve. This can be caused by coercive, mimetic or normative mechanisms. Here, Nokia is actively pressuring its supplier, which I would consider to be a coercive mechanism.

Nokia and Supplier

If Nokia would seek to fundamentally change the supply chain, it would be useful to try to switch form a power-based influence to a more leadership-based influence on its suppliers. Nokia could even further increase its legitimacy, if they would try to assess the underlying differences between its vision and the playing field of the supplier. By actively trying to convince its partners, Nokia may achieve a snowball-effect, in which the 'better' working conditions spread through supplier companies through mimetic mechanisms of institutional isomorphism.

This may seem like an unrealistic or maybe moralistic approach, but I feel that it is the way to go for Nokia. Where the assessment team was a good first step (I had the feeling the Nokia management team honestly thought that at least local legislation would be enforced by their suppliers), I feel that the next steps should be based more on cooperation than on telling the supplier what to do. Changing this behaviour is not just a question of paying more, but also investing in a more equal relationship between suppliers and Nokia. 

I would suggest a 5-year plan. Nokia commits to the same supplier for 5 years, if the supplier actively improves its working conditions. This should be done in small, feasible steps that are part of the contract between the two companies. I feel that Nokia would show leadership and long term vision if they would intensify their cooperation with such a 5-year plan.

Social Ecological System: the honey bee

In italic are the comments I added on December 30.

General framework

Ostrom (’09) proposed a general framework that could help analyzing complex social-ecological systems (SES). In here framework a resource unit (the unit humans actually consume) is always embedded in a larger resource system, as well as we (the user/consumer) are always guided by some sort of governance system. And of course, all possible interaction take place between these four parts of the framework. The system is also affected by social, economic and political settings and related ecosystems. This can be seen in figure 1.

Figure 1: source

Honey bee

In this short SES-analysis, I will focus on the decline of the honey bee, that is not just of importance for us as a source of honey, but as a pollinator of 1/3 of the world food crop production as well (Rabobank review, 2011). In recent years, the number of honey bee colonies has declined rapidly, with starvation rates of 35% of the colonies per year. The same Rabobank review estimated the anual economic value of honey bees on around 40 billion euro per year.

Because of their huge importance to food production, honey bees can be seen as public goods (non-excludable, non-rivalrous). 

To assess the complexity of the problem of honey bee starvation, I will reuse figure 1, but now include the honey bee in it. 

The resource unit in figure 2 is the honey bee, embedded in a larger ecosystem (in this case a flower field). The bee is used by humans. The keeping of bees is regulated by several layers of governance, ranging from bee keepers to national governments. The beekeepers can be seen as a layer of governance that is highly self-organizing.

The causes of the bee starvation are unclear. It is thought that neonicotinoids, used as insecticides, may be the cause. However, the ban of these chemicals in France has not altered starvation rates. Another cause may be the varroa destructor, a mite that causes a disease called apis mellifera. In any case, there is no clear description of solving this issue. 

It might help to see this SES in the light of the panarchy model, proposed by Holling ('01), which explaines the concept of adaptive cycles. In nature, change often occurs rigidly and rapidly, and after an initial face of reorganization, exploitation and conservation of a feature will take place. If we apply this model to our honey bee situation, you might say that the pressure to innovate (evolve) is high for the species, and therefore the starvation may end abrupt as well.

Increase profits 

Friedman propagated the idea that the sole purpose of a business should be to increase its profits. I introduced the consumer as the user in the SES framework. However, the Friedman principle applies to the unit of the firm. In this case, I would like to argue that farmers are the relevant unit, as they are most dependent on the honey bee for their financial success.

However, even though the honey bee is a species that is of vital importance to global food production, the bees are not necessarily owned by farmers. This means that they do not feel the direct responsibility to invest in research that is needed to identify the cause of bee starvation. Therefore, I don't see a way to use this principle constructively in the sustainable management in this SES. 

However, according to Andersson and Ostrom ('08), it is often beneficial to analyze a resource management system on different levels. They found that decentralized or local governance structures work best if they are offered clear institutional incentives from central levels of governance. 

If I combine this insight with the Friedman thesis, I'd propose a system in which the central government financially supports research that can be done by bee keepers, who have accurate knowledge. Hopefully, this will lead to a achievable strategy to decrease the starvation of honeybees in future.

Feedback

Feedback on Jody Milder
Hi Jody!

I really enjoyed your blog - especially your 'shine a light'-joke! The first part on lightning efficiency was interesting to me, because I had never really thought about the issue. 
I have some remarks, hope they are useful!

- One of your explanations is that the general income has increased, so that consumers don't really worry about energy costs. In addition to that, I believe electricity has become cheaper. Maybe you can implement that factor as well?
- I miss some sort of short assessment of your different explanations. Which one do you think is most important?
- As for the second part, I have a remark on the structure. It would be easier for your reader if you could divide this section into paragraphs (as you did in the first part).
- Also, you might add some sort of positive remark (if you feel there is one). As a reader I got quite depressed, so it might be nice to conclude with a hopeful sign.


Hope this helps!
Maja

Feedback on Laurens B.
I really enjoyed your blog! I liked the personal touch to it and the comparison you made between medicine and food. Below, I'll try to give you some points of feedback.


- I like the fact that you try to make your blog as personal as possible, however, to me your start feels a little as if you really don't want to write this blog and that can put a reader of.
- The personal note in the end, where you link this assignment to your own bachelor thesis, really added value to your argument. I would suggest you use stuff like that in your introduction in stead of in the end.
- All your arguments are based on fear (fear for changing the natural world, fear for large corporations and fear for environmental/health risks. Therefore I'd suggest that you rename your third argument, fear into something else.


Hope this is helpful!
Maja


Feedback on Marco Meloni

Hi Marco,

Interesting topic! Didn’t know about this at all! I have a couple of comments on it though:

For me as a reader, the difference between rational choice and bounded rationality is not completely clear. In your paragraph on rationality you state that the 2 degree goal satisfied the need (a clear goal for politicians) and may have been optimal under the available information. But than you start your bounded rationality explanation by stating that it wasn’t the best choice, given the available information.

From what I understood of bounded rationality, this process takes place within an organization. In your blog, I miss dimension, you still treat the UNFCCC as a black box.

On your final remark, I agree of course with the fact that policy makers get complete/clear information, but you have just stated that in this climate issue there is not such a thing. Wouldn’t it be better if the UNFCCC would be open about the gaps in their knowledge (“Given the information we have today, the best possible target to achieve through policy measures should be …”).

Hope this will help you!
Maja

Friedman revisited
I like this part! Very Friedman of you!

However, I think that the point of these businesses is not that they intend to go bankrupt (aka that they don’t want to make any profit at all). The point is that money is not their sole motive, they want to contribute to the community as well. And even though this may seem vague and sounds a little like marketing, they do make fundamental changes in the way they run their businesses.

(Maybe this is not really a suggestion for you, but merely my opinion in this matter, sorry!)

Best,

Feedback on Jeroen Huisman
Hi Jeroen,

Saw your detailed reviews and was really impressed, so I´ll try to do you the same favour below. Overall, I found your example clear, but I feel that you can elaborate a little more on the bounded rationality theory. I think that you state it too simple here (basically it’s the rational model, with the addition of emotion).

Hope it´s useful!

[Introduction] – clear introduction, it might help to mention the leave of Weekers and the fact that Wiebes was presented as the new solution to all tax problems to stress the importance of the issue.

[RAM] – brief explanation that really helps your reader. Maybe add that this model is not supported by any evidence, either from controlled lab studies or empirical studies?

[Bounded rationality] – what I miss in your explanation here, is a second important feature of this model: the inclusion of interaction between decision makers. Also, there within bounded rationality there is a focus on the imbedded conservative behaviour of large organizations. Standard procedures and parallel processing of information may inhibit radically new decisions.

[Tax system & RAM] – detail: ration should be rational; maybe explain again who ‘they’ are.

[Tax system & Bounded rationality] – I like your explanation here. I think you can actually take it one step back: even the fact that there is such a rush to change the tax system is strongly dependent on the public opinion, that was undoubtedly fed by the same lobbyists that advised the government. Politics is essentially emotional and I think the Samson example illustrates that clearly. I think you can deepen your analysis if you briefly introduce the different actors (government, political parties, public opinion, lobbyists) and the fact that they interact.

Feedback on Theodoro Spathas
Hi Teodoro!

You can find my comments below 

Intro: I like the fact that you come up with a case in which you have played an active role. I do have some minor comments: financially unsustainable – shouldn’t that be unfeasible; unused cost – should be unused coast.

Ostrom’s framework: In general, I would advise you to explain a little about the framework, even if it is just a picture. For me it is unclear in the rest of your post why you are discussing these points and why you are using this order. Also, I’m missing the direct link between the framework and your analysis – what is the resource unit here, what is the resource system etc.

Provide information: Who failed to involve all parties? The national government right? I think you should make that clear in the first sentence! Also, I’m very sorry, but I have absolutely no clue what you mean with the final sentence of this paragraph.

Deal with conflict: You only describe conflict between the private company and the government here. But what about conflicts with other parties (like civilians, NGOs, etc.)?

Induce compliance with rules: I think this sort of states the same thing as the paragraph above – in your view the only controlling mechanism is the paper contract between the government and the private party. However, I can imagine that there are more mechanisms that shape the actions of the private firm; they probably don’t want to much bad publicity, which compromises their legitimacy. Maybe you can look into that a little.

Infrastructure: This is an interesting point! You would want to have such a huge project integrated in the surrounding.

Conclusion: Short and sweet! Maybe one suggestion: I would speak of a social ecosystem, not just a ecosystem.

Best,

Maja

Feedback on Chloë Dejeune

Hi Chloë!

I liked your blog, as it answered all question clearly and you had I for detail. I especially liked your remark on the fact that the audience of this documentary actually sees more than the Nokia team that visits the supplier.

My main point of feedback is on your last paragraph, where you seek other options for Nokia. I feel that you think Nokia should be stricter, so not asking the supplier to change, but to openly seek other suppliers/build their own factory, so that working conditions will change. I think that if you truly want to change the supply system, you have to change the way these suppliers see their employees. I feel the approach as they take right now is already too top-down and it doesn't bridge the huge cultural gap. Of course, should the supplier not be willing to change, than Nokia should seek other suppliers, but I don't feel immediately abandoning this supplier will lead to a more honest supply chain.

Hope this helps!

Best,

Maja

Feedback on Laura Lucas Trujillo

Hi Laura,

In this post, you were able to explain to me as a reader what the ethical issues regarding this documentary where, so that is a huge plus.

However, I have some comments regarding the way you describe how the supplier is striving for legitimacy. I feel that in this part, you couple their legitimacy only to Nokia, the company they supply to. However, they also strive for legitimacy among their employees. As a manager said in the documentary, the employees are getting better informed and start asking questions or even start to demand better working conditions.

An interesting point that you raise is that it is hard for Nokia to assess whether policies are actually executed, if the local government is not even monitoring its regulations. I'm looking forward to the update of your blog, as I think you will address this question in your 3rd part?

Best,

Maja

Feedback on Zinzi Wits and Sway Leung
No blogpost on last session´s subject

Feedback on Imme Groet
Hi Imme,

See below for some comments on your analysis of the ‘Waternet’ SES.

[Ostrom’s framework]: you refer to ‘framework’ in two ways in this paragraph: (1) as the overall theory introduced by Ostrom, and (2) the framework that is actually the outer shell in this framework (consisting of social and political influences).

You also write about the aim of the framework. I see your point, but I would like to add that the framework is used to identify the system boundaries, that are usually larger than one expects.

[Ostrom + Waternet]: I was wondering whether the rules are only based on VROM, European and WHO regulations or whether the municipality of Amsterdam has any part in this. 

Also, I think the resource unit should actually be the potable water. The river water and ground water may be part of the resource system, but are not deliberately used for consumption.

Moreover, I have no idea what you mean with your last sentence. What outcomes are produces here exactly? I’d say that there is a certain interaction between the way the SES is organized and the social, political and economic circumstances.

[Friedman + Waternet]: you stated before that Waternet is a private company and that there are various regulatory actors (WHO, Europe, national government) that set the standards for potable water. Within this playfield, Waternet, as a private company, tries to make a profit. That is basically the whole idea behind privatisation. I would say that this is actually in line with Friedman’s idea. That is, private companies have no further responsibility towards society than to comply with the laws and regulations.

Details:

-          [To give an example...] This sentence is not completely right

-          [Water from rivers are...] è water from rivers is

-          [The norms of portable water is...] è The norms for potable water are...

I hope this is helpful!

Best,
Maja

Feedback on Ella Baz
No blogpost on last session’s subject

Feedback on Carl Kühl

Hi Carl,

Really liked your post! You write in a short, but clear manner.

I can follow your line of reasoning for group 1 easily, however, your Extra Note is somewhat puzzling to me. You make a suggestion to vary the fish quota, but I do not think this would actually work in practice. You never want to exceed the sustainable yield, so varying would in fact mean lowering the fish catch. That means that you have to persuade the fishermen to catch less fish than possible, leading to lower profits. I do not think that’s feasible.

For the second group, I wonder what you mean by monopoly. Do you want one team of fishermen to catch the entire catch for a year and then rotate that? Or do you want to combine all teams into one large group that is regulated by a central government? I understand you wish for a monopoly, however, I think that you put huge pressure on the ‘leadership council’ in your idea. They have to resist the pressure that one large company and a government (both looking for high returns). If they do, you would have solved this tragedy though!

Hope this is in any way helpful,

Maja