Consumers, ultimately the sole source of revenue to a corporation, should have a role to play in the decisions of a corporation. Why? Their money is what will sustain the business, pay the salaries of the workers and the executives, and provide the profits of the corporation, which in turn enable the corporation to make other decisions. As users of the products, they are affected by their quality, safety and functionalities. As sustainers of the production process, they are partially responsible for the social impacts whether they are directly affected or not. If all the customers withdraw their transactions with the corporation, the corporation cannot survive. Good management understands that the customers come first. If customers as a group exercise their influence, management has little choice but to listen.
Workers, the source of human capital to a corporation, should have a role to play in the decisions of the corporation. Why? They are essential to a corporation. If all the workers go on a strike, the corporation will be impaired if not disabled.
However, their power is weakened when outside labor sources are available, and management out-sources the labor. If the costs of the government’s unemployment program are internalized in the corporation’s decision, uneconomical out-sourcing decisions will not be made.
Greater diversity in the values of consumers and workers will moderate the sharply focused short-term profit interest of the corporation and make corporate decisions more in line with the long term interest of the corporation and with public good.
As a result, corporations will be more stable and less prone to boom and bust and Public good will also be improved.
Sunday, February 05, 2006
Technology Needed to Provide Accounting of Public Benefits
If public good becomes quantifiable, accounting is needed before it is tradable. With today’s technology and low costs of computing and data communication, this technical requirement is not an impediment. Public Benefits Funds (PBF) could be set up at the global, national, state, local, and corporate levels to keep track of various public goods and the account balances owned or owed by all entities, citizens or corporate entities.
Participation in PBF is automatic by virtue of residency (or citizenship) and work status, etc. Actions taken by an individual or a corporation which have a public good impact will be credited or debited in the appropriate Public Benefits Funds.
Public good has categories (accounts) such as air quality, water quality, land quality, waste, wild life and vegetation quality, well-being of the poor and unprivileged, peace, education, and voluntary social services, etc.
Quantified measures will be used for each account, and a dollar value per measured quantity will be set periodically by some scientific, market or democratic process.
Consumer products will carry two prices, Tier 1 and Tier 2. Some will evolve into a single price. In addition to the monetary price currently adopted in Capitalism (Tier 1), there will be a Tier 2 price or credit equal to the consumption or creation of public good in producing or consuming the product. For example, an orange needed x gallons of water for its growth, removed y pounds of CO2, occupied z sq. ft. of land, and provided w sq. ft. of vegetation. When the orange is eaten, it will generate m oz. of waste. Altogether, the Tier 2 price can be computed by an approved formula using the current values of these public goods. A trial period will be used so that people can appreciate these Tier 2 prices and understand the true cost to society of all consumer products.
When a consumer product’s Tier 2 price is found to be reasonable and stable, it may be phased into a real price. The revenue from Tier 2 prices will be received by the corresponding Public Benefits Funds. Some funds will receive a credit and some a debit. For example, if water quality is worsened by a product, the water quality PBF will receive Tier 2 money from the sale of that product. If land quality is improved by a product, the land quality PBF will pay or credit the producer of that product for the improvement.
PBFs that accrue a positive fund balance will be able to take on projects to improve that public good. Members of that PBF may be allocated financial benefits, if democratically approved, to be taken one time or at a payout schedule, such as for retirement. For example, if people are willing to accept the existing level of air quality, the money collected from air polluters may be paid out to the people instead of using that money to make the air more clean than necessary.
PBFs that accrue a negative balance, e.g., from making payments to enterprises which have improved water quality, may charge a usage fee on other uses of that public good in order to make the PBF financially viable. For example, cleaner campgrounds may have to charge recreational users a higher fee. Moreover, there would be data to support a market value for such recreational fee.
National goals may be set up for automobile gas mileage or for air emissions per mile traveled. The owner of a car certified to perform better than the national goal will receive an air quality credit in his or her PBF account computed each year by the miles traveled on that car and its emission rates. Likewise, the owner of a car certified to have under-par gas mileage will receive an air quality debit in his or her PBF account. Depending on implementation, these debits and credits may be charged via the income tax process, or simply reconciled in the person’s total PBF account balance.
Volunteers for social work will receive PBF credits for performing accredited social work, such as voluntary work at the hospitals, prisons, and shelters or tutoring students, serving as voluntary business consultants for under-developed countries, etc.
Each person will receive a regular statement of his PBF accounts (or accessed through the Internet). A procedure for converting these credits into cash would be set up and could be used for retirement benefits. Because the PBF account is a tangible financial account, it is a powerful financial incentive for individuals to increase its value through social-conscious actions.
Participation in PBF is automatic by virtue of residency (or citizenship) and work status, etc. Actions taken by an individual or a corporation which have a public good impact will be credited or debited in the appropriate Public Benefits Funds.
Public good has categories (accounts) such as air quality, water quality, land quality, waste, wild life and vegetation quality, well-being of the poor and unprivileged, peace, education, and voluntary social services, etc.
Quantified measures will be used for each account, and a dollar value per measured quantity will be set periodically by some scientific, market or democratic process.
Consumer products will carry two prices, Tier 1 and Tier 2. Some will evolve into a single price. In addition to the monetary price currently adopted in Capitalism (Tier 1), there will be a Tier 2 price or credit equal to the consumption or creation of public good in producing or consuming the product. For example, an orange needed x gallons of water for its growth, removed y pounds of CO2, occupied z sq. ft. of land, and provided w sq. ft. of vegetation. When the orange is eaten, it will generate m oz. of waste. Altogether, the Tier 2 price can be computed by an approved formula using the current values of these public goods. A trial period will be used so that people can appreciate these Tier 2 prices and understand the true cost to society of all consumer products.
When a consumer product’s Tier 2 price is found to be reasonable and stable, it may be phased into a real price. The revenue from Tier 2 prices will be received by the corresponding Public Benefits Funds. Some funds will receive a credit and some a debit. For example, if water quality is worsened by a product, the water quality PBF will receive Tier 2 money from the sale of that product. If land quality is improved by a product, the land quality PBF will pay or credit the producer of that product for the improvement.
PBFs that accrue a positive fund balance will be able to take on projects to improve that public good. Members of that PBF may be allocated financial benefits, if democratically approved, to be taken one time or at a payout schedule, such as for retirement. For example, if people are willing to accept the existing level of air quality, the money collected from air polluters may be paid out to the people instead of using that money to make the air more clean than necessary.
PBFs that accrue a negative balance, e.g., from making payments to enterprises which have improved water quality, may charge a usage fee on other uses of that public good in order to make the PBF financially viable. For example, cleaner campgrounds may have to charge recreational users a higher fee. Moreover, there would be data to support a market value for such recreational fee.
National goals may be set up for automobile gas mileage or for air emissions per mile traveled. The owner of a car certified to perform better than the national goal will receive an air quality credit in his or her PBF account computed each year by the miles traveled on that car and its emission rates. Likewise, the owner of a car certified to have under-par gas mileage will receive an air quality debit in his or her PBF account. Depending on implementation, these debits and credits may be charged via the income tax process, or simply reconciled in the person’s total PBF account balance.
Volunteers for social work will receive PBF credits for performing accredited social work, such as voluntary work at the hospitals, prisons, and shelters or tutoring students, serving as voluntary business consultants for under-developed countries, etc.
Each person will receive a regular statement of his PBF accounts (or accessed through the Internet). A procedure for converting these credits into cash would be set up and could be used for retirement benefits. Because the PBF account is a tangible financial account, it is a powerful financial incentive for individuals to increase its value through social-conscious actions.
How Selfish Interest Can Promote Public Good?
If improving public good can increase a person’s tangible benefits, would that person not do it out of self-interest? The answer to this question is not a definitive yes. Making that tangible benefit a tradable monetary value will help induce the behavior. Once it is made tradable, even if that action results in a reduction in a personal benefit in another way, as long as the net effect is an increase of monetary value, the desired behavior may be induced. For example, if a person is given cash for each pound of garbage brought to a collection center, homeless people may find it to their self interest to make money from collecting garbage from the streets. On the other hand, an employed person earning a good wage would not be induced to do such work because it would take time away from the other paying job, unless of course, if garbage collection pays more.
In a corporate environment, if a corporate decision results in greater profits but reduces public good and there is a monetary penalty to the corporation due to that reduction of public good, the executive would likewise be induced to change the decision to maximize profit less the penalty. That decision would be to maximize the corporate self interest. In doing so, the corporation would also increase public good, if there is money to be made.
In a corporate environment, if a corporate decision results in greater profits but reduces public good and there is a monetary penalty to the corporation due to that reduction of public good, the executive would likewise be induced to change the decision to maximize profit less the penalty. That decision would be to maximize the corporate self interest. In doing so, the corporation would also increase public good, if there is money to be made.
Deficiencies of Capitalism and Central Planning
One of the deficiencies of a pure market system is the tendency towards a boom and bust cycle. Examples of that include the U.S. real-estate bubble in the 1980s which led to the collapse of the U.S. savings and loan associations, costing the American taxpayer more than $100 billion [2]. Another example is the telecommunication bubble which went from boom to bust in just nine years, from 1992 to 2001. Even the power market in California had experienced a cyclic phenomenon where the power shortage in the summer of 2000 led to a burst of power plant construction which subsequently slowed because of the ensuing drop in electricity prices [3]. Joseph Stiglitz, a Nobel economist, believes that his research on the consequences of imperfect and asymmetric information (where different individuals know different things) has shown that one of the reasons that the “invisible hand” economists associate with Adam Smith may be invisible is that it is simply not there.
In the book “20:21 Vision”, Bill Emmott, the Editor in Chief of The Economist, noted the failures of capitalistic markets to address environmental problems and their undesirable effects of increasing the income disparity between the rich and the poor within a country and between the rich nations and the poor nations [4].
In human history, two economic systems have been put to practice. Central planning (as implemented in Communism) and capitalistic market system engaged in a global competition during the twentieth century. Central planning proved to be stable but not conducive to innovation and economic efficiency. In comparison, the capitalistic market system has flourished. However, recent history has shown that there are deficiencies in the capitalistic market system. In the opinion of this author, some of these deficiencies are as follows:
· Self interest of corporate executives, unchecked sufficiently by investors and customers or their representative government leads to unbalanced management decisions.
· Financial incentives for corporate executives are mostly short term and measured by numbers some of which can be manipulated through creative accounting.
· There are insufficient management incentives to provide public good at the expense of corporate profits.
· Global corporations may have greater power than nation states.
· Globalization may override local interests of weak nation states.
· Consumers, even though they provide 100% of the revenue to corporations at the base of the business chains, have little power over the conduct of corporations.
· Workers, even though they provide the majority of the productive labor to corporations, have little power over corporate decisions, except where unions exist. (Corporations are not democracies.)
· There is a lack of global democratic institutions to balance the power of global corporations.
In the Central Planning economies, there were different problems and deficiencies, such as:
· Equal pay for different capabilities discourages high performance and provides little incentive for innovation.
· Central planning cannot adequately handle a complex economy.
· Power is concentrated on a ruling class with lack of diversity in ideas or views.
· It trails Capitalism in productivity and improvement of living standard.
· Reliance on information suppression to maintain political control leads to further economic inefficiencies.
· Comparison with Capitalism’s prosperity leads to political instability.
In reviewing these two lists of deficiencies, it can be observed that they are all about the creative power of diversity, the providing and balancing of incentives, and the balance of power among those actors with different incentives. If power is not balanced, people with differing incentives will behave in ways that produce results undesirable to others. If incentives are distorted or incomplete, even properly balanced power structure could result in undesirable consequences. It is postulated that when public goals are blended with self goals through UDI-ism, the hybrid system will provide the damping on the boom and bust tendency of the capitalistic market, as illustrated conceptually below.
In the book “20:21 Vision”, Bill Emmott, the Editor in Chief of The Economist, noted the failures of capitalistic markets to address environmental problems and their undesirable effects of increasing the income disparity between the rich and the poor within a country and between the rich nations and the poor nations [4].
In human history, two economic systems have been put to practice. Central planning (as implemented in Communism) and capitalistic market system engaged in a global competition during the twentieth century. Central planning proved to be stable but not conducive to innovation and economic efficiency. In comparison, the capitalistic market system has flourished. However, recent history has shown that there are deficiencies in the capitalistic market system. In the opinion of this author, some of these deficiencies are as follows:
· Self interest of corporate executives, unchecked sufficiently by investors and customers or their representative government leads to unbalanced management decisions.
· Financial incentives for corporate executives are mostly short term and measured by numbers some of which can be manipulated through creative accounting.
· There are insufficient management incentives to provide public good at the expense of corporate profits.
· Global corporations may have greater power than nation states.
· Globalization may override local interests of weak nation states.
· Consumers, even though they provide 100% of the revenue to corporations at the base of the business chains, have little power over the conduct of corporations.
· Workers, even though they provide the majority of the productive labor to corporations, have little power over corporate decisions, except where unions exist. (Corporations are not democracies.)
· There is a lack of global democratic institutions to balance the power of global corporations.
In the Central Planning economies, there were different problems and deficiencies, such as:
· Equal pay for different capabilities discourages high performance and provides little incentive for innovation.
· Central planning cannot adequately handle a complex economy.
· Power is concentrated on a ruling class with lack of diversity in ideas or views.
· It trails Capitalism in productivity and improvement of living standard.
· Reliance on information suppression to maintain political control leads to further economic inefficiencies.
· Comparison with Capitalism’s prosperity leads to political instability.
In reviewing these two lists of deficiencies, it can be observed that they are all about the creative power of diversity, the providing and balancing of incentives, and the balance of power among those actors with different incentives. If power is not balanced, people with differing incentives will behave in ways that produce results undesirable to others. If incentives are distorted or incomplete, even properly balanced power structure could result in undesirable consequences. It is postulated that when public goals are blended with self goals through UDI-ism, the hybrid system will provide the damping on the boom and bust tendency of the capitalistic market, as illustrated conceptually below.
How Incentives Affect Human Behavior?
As it is hard to philosophize without examples, we shall suggest some of these common and desirable conditions for the purpose of mental exercise or discussion:
· Having a clean environment
· Having good health
· Eliminating hunger and poverty
Most people would agree that these are desirable conditions for themselves to have. Most people would also agree that these are desirable conditions for others to have. Where people may disagree is the degree of help they would give to others in order for the others to enjoy these conditions, or the degree of sacrifice they are willing to make in order for others to enjoy these conditions.
Note that one can define a set of goals that all human beings desire, to various degrees of relative weighting factors, such that this set also includes all Public Good goals, although some people may give a near-zero weight to some of these Public Good goals. In other words, every human being has a set of goals that potentially affect his behavior. If these goals are quantifiable or at the minimum be comparable, a person’s behavior may be formulated as the multi-attribute objective function Z.
(1)
where Gi is a goal and wi is the weighting factor associated with the goal.
At the base of these human feelings about these goals is the self-preservation animal instinct. Why should I help others when they are my competitors for survival? Human beings became masters of the Earth by rising above the purely selfish behavior. Through thousands of years of evolution, human beings have come to realize that there is a net benefit to the group to share if individuals come together to work as a group. By hunting or farming together, more food is obtained or produced, and the risk of an individual starving is also reduced.
Note that this is a realization that the individual’s objective function Z is a summation over self-preserving goals as well as over public goals whereby the achieving of a public goal would provide tangible or perceived values to the individual. But each individual may have different weighting factors for the self-preserving goals and for the public goals, and therefore they would behave differently.
A modified formulation of the multi-attribute incentive model is as follows:
(2)
where Si is a Self goal, si is the weighting factor, Pj is a Public goal,pj is the weighting factor.
In this framework, one way to define the difference between Public goal and Self goal could be based on the number of individuals who would benefit from such a goal. For example, if only one person would benefit, it is clearly a Self goal to that individual only and clearly not considered a Public goal. If all individuals within a community’s boundary would benefit, it is clearly a Public goal. However, even in this situation, the space and time of the scope of the benefit may not cover all individuals at all time. It is therefore evident that it is not possible in some cases to draw a bright line between a Public goal and a Self goal by looking at the beneficiaries.
Another approach may be to define it based on the ownership of the matter (in the sense of atoms) which will be impacted by the achievement of the goal in question. For example, the air or the atmosphere is affected by the goal to achieve clean air. Who owns the atmosphere, the Public or an individual entity (person or a business entity)? Another example – take a goal of increasing oil production. Is it a Public goal or a Self goal? The affected matters include the land and vegetation above the oil wells, the atmosphere, the stability of the ground and the quality of the water adjacent to the oil wells. Who owns these impacted matters? The oil company may own or have the rights to certain portions of these matters, but not all of them. Unless the oil company takes on the full responsibility for neutralizing all impacts on those portions of matters it does not own, it would seem that oil production has both Self impact and Public impact.
This raises the question of how a goal should be defined. Increasing oil production is an activity, not a basic goal. Rather, it is a means to a more basic goal. Perhaps the more basic goal is to make profit for the oil company. That profit or the money is the matter that will be affected by the goal of profit making. Who owns that money? The company, i.e., the corporate entity. By drawing the line between the public and the business entity / individual, this makes the goal of profit making by that oil company a Self goal.
The debate will continue as to how one could define Public goal versus Self goal. However, it is not critical for moving forward on the concept. Ultimately, the weighting factors in Equations (1) or (2) to each decision maker are what matter to that decision. These weighting factors are mostly subjective, until it is possible to convert all attributes into a single denomination, which would be, for all practical purposes, the monetary value.
Coming back to the subject of human incentives, despite technological progress and the global economic boom through human history, the scarcity mentality persists. There may be tribal unity, but then one tribe would fight with another tribe over food or resources. Even today, this mentality persists between nations, between corporations, between ethnic and religious groups, and to a degree between individuals in the same community.
The multi-attribute incentive model of Equation (1) is not very effective in modifying the ingrained behavior of human beings. The reason is that self-directed and tangible benefits are real while public good does not translate into exclusive, self-directed and tangible benefits. You may have to enjoy it with others and it may not have immediate or direct effects because the effect can only be observed in the long term. Furthermore, creating that public good may require your sacrificing and reducing your direct benefits in other areas.
In keeping with the modified multi-attribute incentive model of Equation (2), visionary leaders try to develop social mechanisms to create more public good. Two paths were taken. The first is by law and order. The second is by religions.
Organizations (including governments) are set up by people or their leaders to unite people and to compete with other organizations. Rules and laws are set up to maintain order and to resolve conflicts. This system is a system of “sticks”, a system generally of punishment.
Religions are set up by visionaries to motivate people to do good things, either by appealing to people’s idealism or by setting up rules or commandments. It is a system of sticks and carrots. For example, if you commit a sin, you will go to Hell; if you do good acts, you will go to Heaven. But the carrots are usually not material gains in this world. By making promises for spiritual gains, from an economics perspective, religions are writing checks that can only be cashed or found to be void after death. But are these incentives effective in producing more Public Good, or greater Unity in Diversity? With the world’s continual violent conflicts and world poverty, etc., after several thousand years of recorded human history, it is hard to argue that such incentives are effective, or at least sufficient.
· Having a clean environment
· Having good health
· Eliminating hunger and poverty
Most people would agree that these are desirable conditions for themselves to have. Most people would also agree that these are desirable conditions for others to have. Where people may disagree is the degree of help they would give to others in order for the others to enjoy these conditions, or the degree of sacrifice they are willing to make in order for others to enjoy these conditions.
Note that one can define a set of goals that all human beings desire, to various degrees of relative weighting factors, such that this set also includes all Public Good goals, although some people may give a near-zero weight to some of these Public Good goals. In other words, every human being has a set of goals that potentially affect his behavior. If these goals are quantifiable or at the minimum be comparable, a person’s behavior may be formulated as the multi-attribute objective function Z.
(1)
where Gi is a goal and wi is the weighting factor associated with the goal.
At the base of these human feelings about these goals is the self-preservation animal instinct. Why should I help others when they are my competitors for survival? Human beings became masters of the Earth by rising above the purely selfish behavior. Through thousands of years of evolution, human beings have come to realize that there is a net benefit to the group to share if individuals come together to work as a group. By hunting or farming together, more food is obtained or produced, and the risk of an individual starving is also reduced.
Note that this is a realization that the individual’s objective function Z is a summation over self-preserving goals as well as over public goals whereby the achieving of a public goal would provide tangible or perceived values to the individual. But each individual may have different weighting factors for the self-preserving goals and for the public goals, and therefore they would behave differently.
A modified formulation of the multi-attribute incentive model is as follows:
(2)
where Si is a Self goal, si is the weighting factor, Pj is a Public goal,pj is the weighting factor.
In this framework, one way to define the difference between Public goal and Self goal could be based on the number of individuals who would benefit from such a goal. For example, if only one person would benefit, it is clearly a Self goal to that individual only and clearly not considered a Public goal. If all individuals within a community’s boundary would benefit, it is clearly a Public goal. However, even in this situation, the space and time of the scope of the benefit may not cover all individuals at all time. It is therefore evident that it is not possible in some cases to draw a bright line between a Public goal and a Self goal by looking at the beneficiaries.
Another approach may be to define it based on the ownership of the matter (in the sense of atoms) which will be impacted by the achievement of the goal in question. For example, the air or the atmosphere is affected by the goal to achieve clean air. Who owns the atmosphere, the Public or an individual entity (person or a business entity)? Another example – take a goal of increasing oil production. Is it a Public goal or a Self goal? The affected matters include the land and vegetation above the oil wells, the atmosphere, the stability of the ground and the quality of the water adjacent to the oil wells. Who owns these impacted matters? The oil company may own or have the rights to certain portions of these matters, but not all of them. Unless the oil company takes on the full responsibility for neutralizing all impacts on those portions of matters it does not own, it would seem that oil production has both Self impact and Public impact.
This raises the question of how a goal should be defined. Increasing oil production is an activity, not a basic goal. Rather, it is a means to a more basic goal. Perhaps the more basic goal is to make profit for the oil company. That profit or the money is the matter that will be affected by the goal of profit making. Who owns that money? The company, i.e., the corporate entity. By drawing the line between the public and the business entity / individual, this makes the goal of profit making by that oil company a Self goal.
The debate will continue as to how one could define Public goal versus Self goal. However, it is not critical for moving forward on the concept. Ultimately, the weighting factors in Equations (1) or (2) to each decision maker are what matter to that decision. These weighting factors are mostly subjective, until it is possible to convert all attributes into a single denomination, which would be, for all practical purposes, the monetary value.
Coming back to the subject of human incentives, despite technological progress and the global economic boom through human history, the scarcity mentality persists. There may be tribal unity, but then one tribe would fight with another tribe over food or resources. Even today, this mentality persists between nations, between corporations, between ethnic and religious groups, and to a degree between individuals in the same community.
The multi-attribute incentive model of Equation (1) is not very effective in modifying the ingrained behavior of human beings. The reason is that self-directed and tangible benefits are real while public good does not translate into exclusive, self-directed and tangible benefits. You may have to enjoy it with others and it may not have immediate or direct effects because the effect can only be observed in the long term. Furthermore, creating that public good may require your sacrificing and reducing your direct benefits in other areas.
In keeping with the modified multi-attribute incentive model of Equation (2), visionary leaders try to develop social mechanisms to create more public good. Two paths were taken. The first is by law and order. The second is by religions.
Organizations (including governments) are set up by people or their leaders to unite people and to compete with other organizations. Rules and laws are set up to maintain order and to resolve conflicts. This system is a system of “sticks”, a system generally of punishment.
Religions are set up by visionaries to motivate people to do good things, either by appealing to people’s idealism or by setting up rules or commandments. It is a system of sticks and carrots. For example, if you commit a sin, you will go to Hell; if you do good acts, you will go to Heaven. But the carrots are usually not material gains in this world. By making promises for spiritual gains, from an economics perspective, religions are writing checks that can only be cashed or found to be void after death. But are these incentives effective in producing more Public Good, or greater Unity in Diversity? With the world’s continual violent conflicts and world poverty, etc., after several thousand years of recorded human history, it is hard to argue that such incentives are effective, or at least sufficient.
CONCEPT OF UNITY IN DIVERSITY (UDI-ISM)
What is diversity? One fundamental world view of this concept is that each and every human being has a free will, and that all human beings allow others to exercise their free wills unless conflicts occur. When conflicts between individuals’ free wills occur, many problems arise. Diversity means the preservation of individual’s right of free-will choices. Unity in diversity is, by the choice of words, not the same as unity by conformity. Unity in Diversity means seeking unity while preserving diversity. Thus, unity is to be achieved not by force. More importantly, unity is not a static or absolute goal that is universally imposed on or accepted by everyone. It represents a common set of goals and their relative values freely emerging in consensus from the diverse goals and their relative values to the individuals. As individuals continue to change their relative values among their diverse goals, any consensus of unity, i.e., the subset of majority-subscribed common goals, will also change.
Religion and morality are not necessary elements for discussions about unity. If the majority chooses a single religion or a single set of black and white morality standards, they may try to make that the goal for unity. Whether they succeed or not depends on the amount of power or control they have over the community in which they live -- more specifically, over others in the community who do not subscribe to their view. The form of government becomes the key factor. In a properly balanced society, “tyranny by one, a few, or the majority” must be prevented to protect the minority. Given such a democratic society with protection for the minority, because of the free wills of the individuals, that unity will only be achieved when the minority’s free wills are persuaded to follow the majority’s goal.
In this world view then, critical thinking, reason and logic are also essential elements which enable the system to function. People are not forced to follow. People must be persuaded to change their minds. For minds to be changed with certain degree of permanence there must be a rational basis for the persuasion.
What is unity then? Unity is the striving for a common set of goals or desirable conditions that the entire population wants to have. We may call it the pursuit of Public Good.
Religion and morality are not necessary elements for discussions about unity. If the majority chooses a single religion or a single set of black and white morality standards, they may try to make that the goal for unity. Whether they succeed or not depends on the amount of power or control they have over the community in which they live -- more specifically, over others in the community who do not subscribe to their view. The form of government becomes the key factor. In a properly balanced society, “tyranny by one, a few, or the majority” must be prevented to protect the minority. Given such a democratic society with protection for the minority, because of the free wills of the individuals, that unity will only be achieved when the minority’s free wills are persuaded to follow the majority’s goal.
In this world view then, critical thinking, reason and logic are also essential elements which enable the system to function. People are not forced to follow. People must be persuaded to change their minds. For minds to be changed with certain degree of permanence there must be a rational basis for the persuasion.
What is unity then? Unity is the striving for a common set of goals or desirable conditions that the entire population wants to have. We may call it the pursuit of Public Good.
Did the Roman Catholic Church Pioneer UDI-ism?
However, in fact, one could argue that a market was available to use real money to obtain some of these other-worldly checks when medieval churches granted Indulgences to individuals in return for alms giving. The practice of Indulgences may be interpreted as an ingenious market mechanism to turn a spiritual asset into money. Under the Roman Catholic doctrine, sinners, after receiving forgiveness, are required to do temporal penance, such as saying a number of prayers over a number of days, or doing some public acts of penitence. This doctrine created a demand. The Church also claimed to have a treasury of spiritual good, through the doctrine of the Communion of Saints. This provided a supply. Indulgences may be granted by the Church to offset temporal penalties because of its abundant treasury of good work. This created an instrument for delivering the product from the supplier to the consumers. It is interesting to note that the Indulgences were denominated in a quantifiable number of days, equivalent to the days of temporal penances. Quantification enabled rational trading. Furthermore, this market achieved a useful economic function. The Church was the primary provider of social work and alms-giving was a mechanism for sustaining the public good. People can receive Indulgences by giving donation to the Church for various purposes. Thus, the trading of financial support for the good work done by the Church followed sound economic principles. Religion had in essence introduced an other-worldly system of incentives which at one time was tradable in the secular market. That practice was criticized by the Protestant movement and subsequently minimized. It is interesting to note that Indulgences are now denominated only as Plenary (full) or Partial with the latter value only known to God.
However, this “experiment” deserves consideration as we continue our exploration about UDI-ism because it was an attempt to connect between public good and self interests through a monetization of some previously unquantifiable attribute, and it applied the market concept.
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"An indulgence is a remission before God of the temporal punishment due to sins whose guilt has already been forgiven, which the faithful Christian who is duly disposed gains under certain defined conditions through the Church’s help when, as a minister of redemption, she dispenses and applies with authority the treasury of the satisfactions won by Christ and the saints" (Paul VI, Indulgentarium Doctrina 1).
However, this “experiment” deserves consideration as we continue our exploration about UDI-ism because it was an attempt to connect between public good and self interests through a monetization of some previously unquantifiable attribute, and it applied the market concept.
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"An indulgence is a remission before God of the temporal punishment due to sins whose guilt has already been forgiven, which the faithful Christian who is duly disposed gains under certain defined conditions through the Church’s help when, as a minister of redemption, she dispenses and applies with authority the treasury of the satisfactions won by Christ and the saints" (Paul VI, Indulgentarium Doctrina 1).
CAN TECHNOLOGY BRING ABOUT A BETTER ECONOMIC SYSTEM WHICH COMBINES MARKET PRINCIPLES WITH SOCIALISM?
The electric power industry went through a long and stable period of being a regulated industry, planned and operated by vertically-integrated utilities, before liberalization and restructuring became the global trend since the 1990s. In essence, it went from central planning towards a free market with mainly the generation supply side. After some major power market failures, debates about the solution are polarized around either reverting to the previous structure or more market liberalization on the rest of the supply-demand chain. The work presented here suggests a third way. It is based on an ideal which may be called “Unity in Diversity” or UDI-ism in short. The hypothesis is that if an individual’s selfish incentive can be made to align more with the socially optimal objective, then the creative energy of individuals’ diversity would become more unified in achieving the social objective. The key is to make that incentive market-based and monetary in nature. In order for the market-based monetization to take place, efficient market mechanisms with low transaction costs need to be developed. With technology and research, that may become possible. This paper will propose a third way of regulatory and financial structures and incentives which may fix this problem, seeking a balance between the traditional, regulated and vertical utility structure and the idealized power market designs which have viewed the transmission grid as a monopoly requiring regulation. This paper will first outline the concept of UDI-ism and discuss how it will benefit the economy in general. Second, it will then apply this concept to the problem of global warming and show how it will enable market principles to manage the effect of CO2 emitted by the electricity sector. Third, it will show how UDI-ism may provide public benefit solutions for the transmission investment problem, for example, for the inter-national transmission projects crossing multiple borders. Finally, the role of technology and research necessary to turn this ideal into reality will be discussed. It is hoped that this paper will stimulate discussions among researchers to further explore these ideas so that a more robust and more optimal economic system will become reality.
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