Fresh thinking about government

The eminent neo-Confucian scholar Tu Weiming argues for the importance of bracketing our Western-centric ideas about society, progress, and justice when we think about our global futures. (Here is an interesting article by Tu titled "Mutual Learning as an Agenda for Social Development"; link.) So for a moment let us put aside the familiar rhetoric about "democracy" that usually surfaces when we talk about how societies ought to be governed. Much of that language derives from Western political theorists like Hobbes, Locke, Jefferson, and Mill, and arguably shows the signs of times and places very different from current social realities. Can we begin to rethink the task of collective governance in a way that might help frame current discussions more fruitfully?  Is it possible to rethink democracy in a way that is less Western-centric?

In order to think carefully about the idea of government, we need two different sets of assumptions: first, what the social realities or conditions are within the context of which "government" needs to function; and second, a core set of value assumptions that define the standards to which government ought to conform.

What are the fundamentals? There are several basic social realities that are hard to seriously question, and there are a few normative ideas that have credibility but could be debated.

Large social groups require governance.

Let's define a large group as a population of greater than 50,000 people living in proximity to one another, involved in a range of interactions and exchanges with each other and sharing access to a set of resources. This establishes interdependence and mutual effects among persons.

Here are some core governance needs: Maintenance of public order, management of conflicts, provision of some set of public goods, establishment of a system of rules and laws, collection of taxes to support the activities of government.

Persons have interests and commitments that they care about.

People have interests, desires, and commitments, and these interests lead to competition and cooperation, predation and defense. They behave purposively and strategically to further their interests and protect themselves against predation.

There are perhaps other basic facts about individuals that would be important from the perspective of other civilizational values systems -- for example,

Persons are psychologically and socially defined by the social relationships within which they exist.

Here is another salient fact:

Governments take actions that affect different people differently.

And another fact:

The powers of government create opportunities for corruption, preferential treatment, and favoring of the powerful by government officials.

So citizens care deeply about the outcomes of governmental action, and they are especially concerned at the possibility that others may gain great advantages through corrupt influence on officials and agencies.

Now consider a few values that most people would probably accept.

• Government should pursue the public good, not the private good of officials or private individuals.
• Government should not favor some persons over others.
• Government should take the desires and needs of citizens into account when formulating rules, policies, and laws.
• Government policies and laws should reflect the preferences and interests of citizens.
• Government should establish a neutral framework of law and policy that is applied without regard to persons and private interests.
• Citizens should have the ability to express criticism and disagreement with government actions.

Designing government requires that we take account of these basic facts and do our best to embody the values we agree about.  We need a set of institutions that will be durable, that will reinforce the fundamental values around which they are designed, and that will be difficult to distort when self-interested actors occupy roles within them.  Most fundamentally, we need a set of institutions that embody pursuit of the public good; that reflect citizen preferences; and that secure a just system of law for all citizens.

So what kinds of governance institutions are compatible with this list of facts and values?

This is where the mechanisms of constitutional electoral democracy come in. Western political theorists argue that a constitution sets the regulative framework for governance -- the fundamental legal protections defining citizenship and the scope and role of government. And electoral democracy permits citizens to express their preferences and enforce good performance by officials.  So policies are selected that correspond to the preferences of citizens; and they are implemented in good faith under the enforcement mechanism of representative electoral democracy.

But here is the more challenging question: are there other institutional arrangements that might fit these facts and values about as well? In particular, could we imagine a Confucian single-party state with an energetic anti-corruption office, an energetic and independent "investigative journalism" office, and a robust social survey office that serves the functions of gathering citizen preferences and concerns? Could such a system genuinely embody the public good in a hypothetical modern Asian society? In other words, could we imagine an administrative-authority system that effectively embodied the public good and protections of the fundamental interests and preferences of citizens? Could the "checks and balances" represented by an electoral system be established through other means?

It is easy to see objections to this hypothetical possibility; they largely come down to the problem of independence and effectiveness when a regulative office finds it necessary to criticize powerful officials or private persons. But it's worth asking the question of alternative governance design, and it's not inconceivable that solutions to these problems could be created.

(Here is an interesting collection of Tu Weiming's writings; Humanity and Self-Cultivation: Essays in Confucian Thought.)

Intangible services

Neoclassical economics presents a pretty simple theory of the equilibrium price of a manufactured good. This theory also extends to a theory of the wage for skilled and unskilled labor. We postulate production and demand curves, and the equilibrium price is the point where supply equals demand. The supply curve is influenced by factors governing the cost of production and therefore the level of profit created at a given production level and price, and the demand curve is influenced by subjective consumer preferences. An increase in demand for a good pushes up the price, thus triggering more production; and the price falls to a new equilibrium.

Wages are affected by this calculation because labor is a factor of production, and demand for labor at a given wage is influenced by the marginal product of labor. If the marginal product is greater than the wage the employer will hire another worker, increasing demand for labor and marginally increasing the wage. The equilibrium wage is the point at which the marginal product equals the wage.

Labor is not a homogeneous substance; the marginal product is affected by skill, intensity, and experience. So we should expect different wage curves for different segments of the labor force, with the wage rate for unskilled and inexperienced workers at the lowest level.  But because specialized labor is somewhat elastic in supply (through additional training) we would expect some degree of convergence between skilled and unskilled labor rates over moderate time periods.

How does this theory apply to intangible services where the quality of the product is difficult to measure? I'm thinking of a college education; how does a consumer decide between the education offered at a private university like Rice and the lower-cost alternative at UT-Arlington? But let's think of simpler examples -- for example, architectural services, family lawyers, or studio musicians. What are the factors that influence the price a supplier can charge in the marketplace?  Why do each of these sectors embody significantly tiered price structures?

Take architectural services. There is a wide range of fees charged by architectural firms, ranging from one-person firms designing single-family homes to multi-city firms charging much higher fees. There is demand for architectural services regionally and nationally. There is good information about suppliers and rates at the national level. And the supply of services is somewhat elastic -- more students will enter architecture school when the incomes they can expect are high. So why doesn't the simple logic of supply and demand imply convergence of prices for this service that is reasonably consistent and related to the cost of production of the service? Why are some elite firms able to retain a significant and permanent price premium? In other words, why don't we witness the commodification of architectural services along the lines of the auto industry, where firms compete aggressively on price?

I suppose some of the factors that stabilize this sort of multi-tier price system in services are fairly obvious. These might include brand and reputation; quality and prestige of professional service providers within the various firms; and depth and quality of referral networks.

Consider this thought experiment. RUNOFTHEMILL is an architectural firm of 30 professionals in the Rustbelt. TOPOFTHELINE is a firm of 200 professionals in San Francisco. Detailed quality assessment by the XYZ consulting firm estimates that RUNOFTHEMILL completes a wide range of midsize projects at roughly the same level of quality as TOPOFTHELINE. However, TOPOFTHELINE charges roughly twice what RUNOFTHEMILL charges for a project of comparable size. What are the mechanisms that preserve the price differential between the two firms? Why are rational business organizations willing to pay the premium to have their buildings designed by TOPOFTHELINE?

First, it is possible that TOPOFTHELINE has succeeded in positioning itself in the marketplace as a provider of superior quality. By hypothesis, this is untrue; but if potential buyers are persuaded of the quality advantage, they may choose TOPOFTHELINE over RUNOFTHEMILL in spite of the premium. This seems to be an inverted version of the "market for lemons": because the actual quality of the good is difficult to measure, the purchaser is forced to turn to other indicators as possible signals of quality. And this may lead the purchaser to pay more for the service than necessary.

Second, TOPOFTHELINE may have pursued a deliberate and successful strategy of recruitment of architects from the most respected schools in the world, whereas RUNOFTHEMILL may pay lower fees and may recruit equally capable but less prestigious professionals. Prospective clients may take the prestige of the staff as an indicator of the quality of the product, and may therefore be willing to pay the premium.  The observable prestige of the professional staff may serve as a surrogate for the inferred quality of the service.

Third, TOPOFTHELINE may have a brand that conveys significant prestige on its projects.  A company whose corporate offices are designed by TOPOFTHELINE may gain from that prestige, and the gain may justify the premium in spite of the additional cost.

Finally, it may be that the market for architectural services is highly segmented as a result of the networks of referrals that exist involving the two firms. TOPOFTHELINE exists in a network of premiere organizations, both providers and purchasers; and referrals and endorsements for TOPOFTHELINE support premium prices for its services. RUNOFTHEMILL has completed equally high-quality projects, but for a second tier of companies and consumers; so its referrals more or less automatically steer its services towards a tier of companies that are more likely to compete on price. So RUNOFTHEMILL's referrals generate lower average fees.

Several of these factors are inherently irrational grounds for accepting a price premium.  If purchasers had full information about quality and price, they would not pay a premium for the pedigrees of the professional staff, and they would not restrict their purchasing horizon to suppliers recommended by other elite firms.  Instead, they would go with the Walmart strategy: get the best product for the lowest price. So far, however, it seems that the markets for advanced and specialized services are fairly sticky when it comes to price, quality, and prestige.

System changes in healthcare

One of the largest and most interesting processes of change going on in the United States today is the rapid redesign and adjustment of the American healthcare system. A key driver is this spring's passage of the Patient Protection and Affordable Care Act (PPACA), but the more fundamental causes are the twin crises we face for access and rising cost for health coverage. Somehow the country needs to find a way of including the whole population within the insured population, and we need to find ways of reducing the rate of growth of aggregate and per capita healthcare expenditures. PPACA is aimed at addressing both crises, and they are urgent.

Healthcare in the United States is provided through doctors, physician groups, and hospitals, organized into regional health systems. A given region typically has a number of hospital systems, non-profit and profit, and physician groups ranging in size from one to hundreds of physicians. And many experts describe existing health systems and hospitals as homebrew organizations that haven't changed fundamentally in thirty years. The current environment is forcing change for quality, health outcomes, and cost.

So who is forcing the changes? The requirements of the healthcare reform legislation (PPACA) are part of the answer. But other change drivers are large employers who are purchasers of healthcare services for their employees and the insurers who directly pay for services. A particularly important player is the Voluntary Employee Benefits Association trust (VEBA), a type of organization created by Federal law to administer large benefit pools. The United Auto Workers VEBA itself expends $4.6 billion annually in support of healthcare for its retirees, and it is actively managing plans and contracts so as to achieve sustainable spending for the 800,000 retirees in its pool (link). Health systems, hospital administrators, and physician group leaders are actively seeking ways of adjusting to the imminent future in the healthcare space.

The diagnoses of failure in the healthcare system often focus on a cluster of problems.

• Poorly aligned incentives for patients, physicians, and hospitals
• Incentives don't create behavior of all parties leading to greater health and lower cost
• Lack of focus on health rather than illness
• Lack of focus on the health of a population rather than a group of clients
• Lack of standardization of process within healthcare systems
• Lack of Electronic Medical Records
• Failure to involve the patient in responsibility for his/her health

The problem from the health system's point of view often comes down to reimbursement and revenue. Medicare and Medicaid reimbursement levels don't cover the costs of care, and hospital systems have large obligations for indigent (non-reimbursed) care. So hospital administrators and physician leaders face the imperative of squeezing costs out of their system while maintaining and enhancing quality and patient safety.  More and more urban hospitals are approaching a critical financial status as a result.

Payers -- basically, the companies that pay for health insurance for their employees -- see the problem as one of rapidly rising costs and assuring quality. So their effort is to place pressure on providers and insurers to contain costs, to shift part of the cost to the employee, and to create effective wellness plans that incentivize employees to adopt healthier lifestyles. Payers and insurers are attempting to make highly focused use of data about providers, cost, and health outcomes to permit evaluation of health systems and doctors and their practices. That data is available in voluminous quantities, and it will allow payers to distinguish strongly between more and less efficient health systems.

So what are some of the strategies currently being pursued by system administrators to allow their systems to survive in the new fiscal and regulatory environment? The mantra is the patient-centered medical home. Systems are seeking improvements in coordination of health care for the patient, quarterbacked by the primary care physician; a shift of emphasis towards wellness for the population rather than disease intervention; improvements in process efficiency; close attention to cost centers; competition for patients and referrals within the region; development of recognized specialty areas with higher margins and reimbursement rates; and implementation of the Electronic Medical Record and all the processes that need to surround this technology. Another visible strategy around the country is consolidation, as more successful hospitals absorb or merge with less successful ones. The goal is to create a system of "integrated and accountable care," achieving both goals of quality and cost effectiveness.

One of the current areas of focus is the concept of an "Accountable Care Organization," a concept introduced through the PPACA legislation but not explicitly defined. (Here is a 2009 discussion paper by the Urban Institute.)  It is a level of organization that will figure crucially in the administration of future payment systems and regulations, and health systems are attempting to formulate their own ACOs. Here is a working definition:

An ACO is a group of providers working as a team taking fiscal responsibility for outcomes and costs for a defined population.

If one is interested in the fate of a particular regional healthcare system or hospital, now is the time to be paying close attention to the planning and reform its leaders and physicians are currently carrying out. The stakes are very high. Tthe business environment is changing rapidly and abruptly, and some community hospitals and health systems will not survive. Moreover, some experts expect a significant decline in the percentage of employers who offer health coverage -- bad news for currently insured workers.

So the next few years portend some very deep changes for almost all Americans when it comes to healthcare.

(Here's a link to a position paper by the Robert Wood Johnson Foundation.  Thanks to Maxine for the link.)

Works councils and US labor relations

image: Diego Rivera, Rouge Plant mural, Detroit Institute of Arts

The United States has one of the lowest rates of union representation of all developed countries. The 1994 level of unionized workers in the US had fallen to about 12 percent of private sector employment, and the trend is downward.  And the sole institutional form through which representation occurs in the US context is the union.  So the vast majority of American workers are left with no formal representation within the firm when it comes to wages, benefits, or work practices.

This situation contrasts strikingly with the labor-management institutions in place in much of Europe and Japan. In most other countries legislation establishes the opportunity or the mandate for a second form of worker representation within the workplace, the works council. Industry-wide unions establish wage levels; public policy stipulates the level of the "social wage"; and works councils provide an institutionalized context in which management and employees consult with each other, exchange workplace information, and work out firm-specific implementations of industry-wide agreements.  And, as Kathleen Thelen demonstrates, differences in the institutions surrounding labor in a market society can have major effects on important social and economic factors in the societies in which they are embedded (How Institutions Evolve: The Political Economy of Skills in Germany, Britain, the United States, and Japan).

Joel Rogers and Wolfgang Streek's Works Councils: Consultation, Representation, and Cooperation in Industrial Relations is the result of an extensive NBER cross-country study of the economic and social effects of broadly implemented works councils in Europe and Japan. The bottom line is fairly clear: where they exist, these formal institutions of labor representation within the firm have clear theoretical and empirical benefits for productivity, worker skill levels, and willing patterns of cooperation between workers and management. (Richard Freeman's America Works: Critical Thoughts on the Exceptional U.S. Labor Market (2007) is a more general discussion of the singular nature of the American labor system.)

Generally speaking a works council system can be defined in these terms:

We define works councils as institutionalized bodies for representative communication between a single employer ("management") and the employees ("workforce") of a single plant or enterprise ("workplace"). (Rogers and Streek, 6)

This involves several aspects:

• It is a system of mandatory consultation by management to give organized expression to the considered views of employees to contemplated changes.
• Works councils do not have the authority to negotiate for wages and benefits; this is typically done by sectoral unions.
• Works councils are typically firm-specific, limited to consultation and exchange of information about local decision-making.

The benefits associated with works councils in Europe and Japan are many and well documented  More specifically, the contributors found that works councils facilitate a number of welfare-enhancing outcomes:

• Exchange of information
• Enforcement of regulations
• Improvement of mutual trust and labor productivity
• Greater democracy and freedom for workers
• Enhancement of productivity
• Incentives for both management and employees to increase skill levels

Each of these outcomes is a substantial benefit within a market-based economic system. Take the issue of the enforcement of regulations, including OSHA rules, environmental regulations, and food safety assurance regimes. The inspectorate of the agencies responsible for these regulatory regimes cannot be sized to the levels needed to ensure enforcement through inspection and fines. There are simply too many workplaces and firms. And the only other current mechanism, private litigation when violations lead to individual damages, is too sporadic to constitute an effective enforcement regime.  So, for example, workplace accident rates are dramatically higher in the United States than Japan and Sweden; the US death rate is 3.5 times that of Japan and 5.8 times that of Sweden (398).  Works councils specifically empowered to gain knowledge about the regulatory requirements combined with detailed workplace knowledge can change this situation.

Or take the area of a cooperative exchange of information within the firm. When various actors have the opportunity and incentive to hoard information to further their particular interests -- whether management or employee -- then decisions will be faulty, efficiencies will be overlooked, and the production process will be less efficient than it could be. Works councils give employees a greater degree of confidence and trust in management and therefore a greater willingness to share useful workplace information. And management has a legal mandate to share pertinent information and to consult with employees about prospective decisions. These intersecting incentives and obligations promote a valuable cooperative exchange of information.

Richard Freeman and Edward Lazear go into detail in laying out the reasons grounded in microeconomics for expecting that works councils will be welfare-enhancing but need to be mandatory rather than voluntary.  Central to their analysis is the issue of information flow within a firm:

Economic theory recognizes that asymmetries in information between labor and management can produce inefficient social outcomes.  Different levels of a firm's hierarchy can use private information opportunistically, possibly through coalitions against other levels of the hierarchy. ...  Legal requirements that management disclose information to elected works councils raises the possibility that councils may help resolve the communication problem and raise rents. (33)

They also emphasize the benefits for quality of decision making that flow from the obligation to consult with employees.  "Consultation can increase enterprise surplus when workers offer solutions to firm problems that management fails to see ... and when management and labor together discover solutions to company problems that neither would have conceived separately" (44).

On first principles it would seem that the US economy would be better served by a system that incorporates works councils as a supplement to union representation. And workers are likely to be benefited in very specific ways --greater satisfaction in the workplace, greater involvement in a high-skills (and high-wage) economy, and a greater level of democratic equality. So what stands in the way of reforms leading in this direction? Joel Rogers considers this question in discouraging detail in the concluding chapter. The foundations of US labor law directly prohibit these forms of workplace representation, and the political will for implementing these policy changes is lacking on both sides. And it is difficult to see a gradual process of evolution in this direction based on voluntary establishment of these institutions by employers; the history of labor relations after both world wars suggest that these forms tend to extinguish when based on voluntary choices by enterprise owners. So it is difficult to see where the political will for this major reform of US labor relations might originate.

There is another consideration that favors the establishment of works councils that is not highlighted in this report -- the terrible situation of workers in the informal sector in the United States. Restaurant workers, day laborers, taxi drivers, non-unionized hotel workers, nannies, and housekeepers have very little ability to protect their interests and defend their legal rights. Health and safety standards apply to informal workplaces; all workers have a right to receive their wages in a timely way; and physical or verbal abuse should not be accepted in any workplace. But informal sector workers have very few means at their disposal to secure their rights in even these basic ways. Often undocumented, always in desperate need for a job, they are often at the mercy of bosses and managers who take advantage of them. There are emerging efforts to create analogs for works councils to help workers in these sectors to defend their rights and their livelihoods.  Intriguing experiments have emerged; for example, Restaurant Opportunity Centers in several cities (link) and Domestic Workers United in New York City (link). See Janice Fine, Worker Centers: Organizing Communities at the Edge of the Dream.  Here is an extended description of the book (link) and here is a link to her Economic Policy Institute working paper, "Worker Centers: Organizing Communities at the Edge of the Dream".  Also of interest is the website for WorkingAmerica, the policy organization associated with the AFL-CIO.  Progress along these lines would sigificantly improve basic features of social justice in our society.

Hobbes an institutionalist?

Here is a surprising idea: of all the modern political philosophers, Thomas Hobbes comes closest to sharing the logic and worldview of modern social science. In Leviathan (1651) he sets out the problem of understanding the social world in terms that resemble a modern institutionalist and rational-choice approach to social explanation. It is a constructive approach, proceeding from reasoning about the constituents of society, to aggregative conclusions about the wholes that are constituted by these individuals. He puts forward a theory of agency -- how individuals reason and what their most basic motives are. Individuals are rational and self-concerned; they are strategic, in that they anticipate the likely behaviors of other agents; and they are risk-averse, in that they take steps to avoid attack by other agents. And he puts forward a description of two institutional settings within which social action takes place: the state of nature, where no "overawing" political institutions exist; and the sovereign state, where a single sovereign power imposes a set of laws regulating individuals' actions.

In the first institutional setting, he argues that individual competition in the context of the absence of sovereignty leads to perpetual violent competition. In the second institutional setting, he argues that individual self-striving within the context of a system of law leads to the accumulation of property and peaceful coexistence.

Here are some of Hobbes's premises about individual agents from chapter XIII of Leviathan:

From this equality of ability ariseth equality of hope in the attaining of our ends. And therefore if any two men desire the same thing, which nevertheless they cannot both enjoy, they become enemies; and in the way to their end (which is principally their own conservation, and sometimes their delectation only) endeavour to destroy or subdue one another. And from hence it comes to pass that where an invader hath no more to fear than another man's single power, if one plant, sow, build, or possess a convenient seat, others may probably be expected to come prepared with forces united to dispossess and deprive him, not only of the fruit of his labour, but also of his life or liberty. And the invader again is in the like danger of another.

So that in the nature of man, we find three principal causes of quarrel. First, competition; secondly, diffidence; thirdly, glory. The first maketh men invade for gain; the second, for safety; and the third, for reputation. The first use violence, to make themselves masters of other men's persons, wives, children, and cattle; the second, to defend them; the third, for trifles, as a word, a smile, a different opinion, and any other sign of undervalue, either direct in their persons or by reflection in their kindred, their friends, their nation, their profession, or their name.

The passions that incline men to peace are: fear of death; desire of such things as are necessary to commodious living; and a hope by their industry to obtain them. And reason suggesteth convenient articles of peace upon which men may be drawn to agreement. These articles are they which otherwise are called the laws of nature, whereof I shall speak more particularly in the two following chapters.

And these motives and forms of behavior by individuals lead to a predictable outcome for the collectivity in the state of nature: a war of all against all.

Whatsoever therefore is consequent to a time of war, where every man is enemy to every man, the same consequent to the time wherein men live without other security than what their own strength and their own invention shall furnish them withal. In such condition there is no place for industry, because the fruit thereof is uncertain: and consequently no culture of the earth; no navigation, nor use of the commodities that may be imported by sea; no commodious building; no instruments of moving and removing such things as require much force; no knowledge of the face of the earth; no account of time; no arts; no letters; no society; and which is worst of all, continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short.

This is an institutionalist argument. It models the behavior that is expected of a certain kind of agent within a certain kind of institutional setting; and it projects the consequences of these "microfoundations" for the aggregate society. In other words, Hobbes is offering a micro- to macro-argument based on analysis of modes of agency and assumptions about a particular institutional context.

Compare this logic with a description of the logic of social explanation offered by contemporary rational-choice social theorist James Coleman in Foundations of Social Theory:

A second mode of explanation of the behavior of social systems entails examining processes internal to the system, involving its component parts, or units at a level below that of the system. The prototypical case is that in which the component parts are individuals who are members of the social system. In other cases the component parts may be institutions within the system or subgroups that are part of the system. In all cases the analysis can be seen as moving to a lower level than that of the system, explaining the behavior of the system by recourse to the behavior of its parts. This mode of explanation is not uniquely quantitative or uniquely qualitative, but may be either. (2)

So the logic of Hobbes's argument is fairly clear; and it is deeply similar to that of institutionalist rational-choice theorists. Thomas Schelling's title, Micromotives and Macrobehavior, captures the idea in three words: derive descriptions of macro-level social arrangements and behavior from premises concerning individual-level motivation and action.

It is not a profound criticism of Hobbes's philosophical analysis to quarrel with Hobbes's specific assumptions about what is possible within the state of nature. And in fact, a number of contemporary political scientists argue that it is possible for men and women to create non-political institutions within the context of what Hobbes calls the state of nature. Coordination and cooperation are indeed possible within a "state of nature"; it is possible to achieve coordination within anarchy. From a sociological point of view, this is really a friendly amendment; it simply adds a further premise about the feasibility of certain kinds of cooperation. So the "cooperation within anarchy" criticism of Hobbes is advanced as a substantive argument about the feasibility of durable social institutions that do not depend upon a central coercive authority. And it depends upon several specific assumptions about the circumstances and mechanisms through which local groups of people can establish self-enforcing forms of cooperation that overcome free-riders and predatorial behavior. It is likely enough that Hobbes would not have been persuaded by this argument; but ultimately it is an empirical question.

Several arguments against Hobbes's conclusions about the state of nature are especially valuable from this point of view. First, I find Michael Taylor's arguments in Community, Anarchy and Liberty particularly convincing -- essentially, that peasant communities have traditionally found ways of creating and sustaining cooperative institutions and relationships that persist without the force of law to stabilize them. "Contracts" backed by legal systems are not the only way of establishing coordination and cooperation among independent agents. Robert Netting provides relevant examples in Smallholders, Householders: Farm Families and the Ecology of Intensive, Sustainable Agriculture, around traditional forms of labor-sharing and seasonal cooperation. And Elinor Ostrom and her collaborators make similar arguments in their historical and sociological studies of "common property resource regimes" -- essentially, stable patterns of cooperation maintained by local voluntary enforcement rather than central legislation (Governing the Commons: The Evolution of Institutions for Collective Action). Ostrom documents dozens of important historical cases where traditional communities have managed fisheries, forests, water resources, and other common properties without having a central state to support these patterns of cooperation and coordination.

But these are empirical and theoretical refinements to a fundamentally coherent model of social explanation that is full-fledged in Hobbes's work in the mid-seventeenth century: explain aggregate (macro) social outcomes as the result of mechanisms and actions at the level of individual actors.

Scientific misconduct as a principal-agent problem

How does an organization assure that its agents perform their duties truthfully and faithfully? We have ample evidence of the other kind of performance -- theft, misappropriation, lies, fraud, diversion of assets for personal use, and a variety of deceptive accounting schemes. And we have whole professions devoted to detecting and punishing these various forms of dishonesty -- accountants, investigative reporters, management consultants, insurance experts, prosecutors and their investigators. And yet dishonest behavior is common, in business, finance, government, and even the food industry. (See several earlier postings for discussions of the issues of corruption and trust in society.)

Here I'm especially interested in a particular kind of activity -- scientific and medical research. Consider a short but sobering list of scientific and medical frauds in the past fifty years: Cyril Burt's intelligence studies, Dr. Hwang Woo-suk's stem cell cloning fraud, the Anjan Kumar Banerjee case in Britain, the MMR vaccine-autism case, a spate of recent cases in China, and numerous other examples. And consider recent reports that a percentage of scientific photos in leading publications had been photoshopped in ways that favored the researcher's findings (link). (Here are some comments by Edward Tufte on the issue of scientific imaging, and here are some journal guidelines from the Council of Science Editors attempting to regulate the issue.) Plainly, fraud and misconduct sometimes occur within the institutions of scientific and medical research. And each case has consequences -- for citizens, for patients, and for the future course of research.

Here is how the editor of Family Practice describes the problem of research misconduct in a review of Fraud and Misconduct in Medical Research (third edition):

Fraud and misconduct are, it seems, endemic in scientific research. Even Galileo, Newton and Mendel appear to have fudged some of their results. From palaeontology to nanotechnology, scientific fraud reappears with alarming regularity. The Office of Research Integrity in the USA investigated 127 serious allegations of scientific fraud last year. The reasons for conducting fraudulent research and misrepresenting research in scientific publications are complex. The pressures to publish and to achieve career progression and promotion and the lure of fame and money may all play a part, but deeper forces often seem to be at work.

How important are fraud and misconduct in primary care research? As far as Family Practice goes, mercifully rare, as I pointed out in a recent editorial. Sadly, however, there are examples, all along the continuum from the beginning of a clinical trial to submission of a final manuscript, of dishonesty and deceit in general practice and primary care research. Patients have been invented to increase numbers (and profits) in clinical trials, ethical guidance on consent and confidentiality have been breached, and ‘salami’ and duplicate publication crop up from time to time.

The problem is particularly acute in the area of scientific and medical research because the public at large has very little ability to independently evaluate the validity of a research finding, let alone validate the integrity of the research. And this extends to science and medicine journalists in large part as well, since they are rarely given access to underlying records and data for a study.

The stakes are high -- dishonest research can cost lives or delay legitimate research, not to speak of the cost of supporting the fraudulent research in the first place. The temptations for researchers are large as well -- funding from drug and device makers, the incentives and pressures of career advancement, and pure vanity, to name several. And we know that instances of fraud and other forms of serious scientific misconduct continue to occur.

So, thinking of this topic as an organizational problem -- what measures can be taken to minimize the incidence of fraud and misconduct in scientific research?

One way of describing the situation is as a gigantic principal-agent problem. (Khalid Abdalla provides a simple explanation of the principal-agent problem here.) It falls within the scope of the more general challenge of motivating, managing, and supervising highly skilled and independent professionals. The "agent" is the individual researcher and research team. And the "principal" may be construed at a range of levels: society at large, the Federal government, the NIH, the research institute, or the department chair. But it seems likely that the problem is most tractable if we focus attention on the more proximate relationships -- the NIH, the research institute, and the researcher.

So this is a good problem to consider from the point of view of institutional design and complex interactive social behavior. We know what kind of behavior we want; the problem is to create the institutional settings and motivational processes through which the desired behavior is encouraged and the undesired behavior is detected and punished.

One response from the research institutions (research universities, institutes, and medical schools) is to emphasize training programs in scientific professional ethics, to more deeply instill the values of strict scientific integrity in each researcher and each institution. The hope here is that pervasive attention to the importance of scientific integrity will have the effect of reducing the incidence of misconduct. A second approach, from universities, research organizations, and journals, is to increase oversight and internal controls surrounding scientific fraud. One example -- some journals require that the statistical analysis of results be performed by a qualified, independent, academic statistician. Strict requirements governing conflicts of interest are another institutional response. And a third approach from institutions such as the NIH and NSF is to ratchet up the consequences of misconduct. The United States Office of Research Integrity (link) has a number of training and enforcement programs designed to minimize scientific misconduct. The British government has set up a similar organization to combat research fraud, the UK Research Integrity Office (link). Individuals found culpable will be denied access to research funds -- effectively halting their scientific careers, and criminal prosecution is possible as well. So the sanctions for misconduct are significant. (Here's an egregious example leading to criminal prosecution).

And, of course, the first and last line of defense against scientific misconduct is the fundamental requirement of peer review. Scientific journals use expert peers to evaluate the research to be considered for publication, and universities turn to expert peers when they consider scientists for promotion and tenure. Both processes create a strong likelihood of detecting fraud if it exists. Who is better qualified to detect a potentially fraudulent research finding than a researcher in the same field?

But is all of this sufficient? It's unclear. The most favorable interpretation would be the judgment that this combination of motivational factors and local and global institutional constraints will contain the problem to an acceptable level. But is there empirical evidence for this optimism? Or is misconduct becoming more widespread over time? The efforts to deepen researchers' attachment to a code of research integrity are certainly positive -- but what about the small percentage of people who are not motivated by an internal compass? Greater internal controls are certainly a good idea -- but they are surely less effective in the area of research than accounting controls are in the financial arena. Oversight is just more difficult to achieve in the area of scientific research. (And of course we all know how porous those controls are in the financial sector -- witness Enron and other accounting frauds. ) And if the likelihood of detection is low, then the threat of punishment is weakened. So the measures mentioned here have serious limitations in likely effectiveness.

Brian Deer is one of Britain's leading journalists covering medical research (website). His work in the Sunday Times of London established the medical fraud underlying the spurious claim that MMR vaccine causes autism mentioned above. Following a recent public lecture to a medical audience he was asked the question, how can we get a handle on frauds like these? And his answer was blunt: with snap inspections, investigative policing, and serious penalties. In his perception, the stakes are too high to leave the matter to professional ethics.

It perhaps goes without saying that the vast majority of scientific researchers are honest investigators who are guided by the advancement of science and medicine. But it is also apparent that there are a small number of researchers of whom these statements are not true. And the problem confronting the organizations of scientific research is a hard one: how to create the institutional structures where misconduct is unlikely to occur and where misconduct is most likely to be detected when it does.

There is one other connection that strikes me as important, and it is a connection to the philosophy of science. It is an item of faith for philosophers of science that the scientific enterprise is truth-enhancing, in this sense: the community of researchers follows a set of institutionally embodied processes that are well designed to enhancing the comprehensiveness and veridicality of our theories and weeding out the false theories. Our theories get better through the empirical and logical testing that occurs as a result of these socially embodied procedures of science. But if the corrupting influences mentioned above are indeed common, then the confidence we have in the epistemic value of the procedures of science takes a big hit. And this is worrisome news indeed.

Institutions, procedures, norms

One of the noteworthy aspects of the framing offered by Victor Nee and Mary Brinton of the assumptions of the new institutionalism is the very close connection they postulate between institutions and norms. (See the prior posting on this subject). So what is the connection between institutions and norms?

The idea that an institution is nothing more than a collections of norms, formal and informal, seems incomplete on its face. Institutions also depend on rules, procedures, protocols, sanctions, and habits and practices. These other social behavioral factors perhaps intersect in various ways with the workings of social norms, but they are not reducible to a set of norms. And this is to say that institutions are not reducible to a collection of norms.

Consider for example the institutions that embody the patient safety regime in a hospital. What are the constituents of the institutions through which hospitals provide for patient safety? Certainly there are norms, both formal and informal, that are deliberately inculcated and reinforced and that influence the behavior of nurses, pharmacists, technicians, and doctors. But there are also procedures -- checklists in operating rooms; training programs -- rehearsals of complex crisis activities; routinized behaviors -- "always confirm the patient's birthday before initiating a procedure"; and rules -- "physicians must disclose financial relationships with suppliers". So the institutions defining the management of patient safety are a heterogeneous mix of social factors and processes.

A key feature of an institution, then, is the set of procedures and protocols that it embodies. In fact, we might consider a short-hand way of specifying an institution in terms of the set of procedures it specifies for behavior in stereotyped circumstances of crisis, conflict, cooperation, and mundane interactions with stakeholders. Organizations have usually created specific ways of handling typical situations: handling an intoxicated customer in a restaurant, making sure that no "wrong site" surgeries occur in an operating room, handling the flow of emergency supplies into a region when a large disaster occurs. The idea here is that the performance of the organization, and the individuals within it, will be more effective at achieving the desired goals of the organization if plans and procedures have been developed to coordinate actions in the most effective way possible. This is the purpose of an airline pilot's checklist before takeoff; it forces the pilot to go through a complete procedure that has been developed for the purpose of avoiding mistakes. Spontaneous, improvised action is sometimes unavoidable; but organizations have learned that they are more effective when they thoughtfully develop procedures for handling their high-risk activities.

This is the point at which the categories of management oversight and staff training come into play. It is one thing to have designed an effective set of procedures for handling a given complex task; but this achievement is only genuinely effective if agents within the organization in fact follow the procedures and protocols. Training is the umbrella activity that describes the processes through which the organization attempts to achieve a high level of shared knowledge about the organization's procedures. And management oversight is the umbrella activity that describes the processes of supervision and motivation through which the organization attempts to ensure that its agents follow the procedures and protocols.

In fact, one of the central findings in the area of safety research is that the specific content of the procedures of an organization that engages in high-risk activities is crucially important to the overall safety performance of the organization. Apparently small differences in procedure can have an important effect on safety. To take a fairly trivial example, the construction of a stylized vocabulary and syntax for air traffic controllers and pilots increases safety by reducing the possibility of ambiguous communications; so two air traffic systems that were identical except with respect to the issue of standardized communications protocols will be expected to have different safety records. Another key finding falls more on the "norms and culture" side of the equation; it is frequently observed that high-risk organizations need to embody a culture of safety that permeates the whole organization.

We might postulate that norms come into the story when we get to the point of asking what motivates a person to conform to the prescribed procedure or rule -- though there are several other social-behavioral mechanisms that work at this level as well (trained habits, well enforced sanctions, for example). But more fundamentally, the explanatory value of the micro-institutional analysis may come in at the level of the details of the procedures and rules in contrast to other possible embodiments -- rather than at the level of the question, what makes these procedures effective in most participants' conduct?

We might say, then, that an institution can be fully specified when we provide information about:

• the procedures, policies, and protocols it imposes on its participants
• the training and educational processes the institution relies on for instilling appropriate knowledge about its procedures and rules in its participants
• the management, supervision, enforcement, and incentive mechanisms it embodies to assure a sufficient level of compliance among its participants
• the norms of behavior that typical participants have internalized with respect to action within the institution
  

And the distinctive performance characteristics of the institution may derive from the specific nature of the arrangements that are described at each of these levels.

System safety is a good example to consider from the point of view of the new institutionalism. Two airlines may have significantly different safety records. And the explanation may be at any of these levels: they may have differences in formalized procedures, they may have differences in training regimes, they may have differences in management oversight effectiveness, or they may have different normative cultures at the rank-and-file level. It is a central insight of the new institutionalism that the first level may be the most important for explaining the overall safety records of the two companies, even though mechanisms may fail at any of the other levels as well. Procedural differences generally lead to significant and measurable differences in the quality of organizational results. (Nancy Leveson's Safeware: System Safety and Computers provides a great discussion of many of these issues.)

The new institutionalism

The new institutionalism in sociology is a particularly promising prism through which to understand a lot of social behavior and change. Victor Nee and Paul Ingram define the approach in these terms in "Embeddedness and Beyond" in The New Institutionalism in Sociology:

Specifying the mechanisms through which institutions shape the parameters of choice is important to an adequate sociological understanding of economic action. These social mechanisms, we argue, involve processes that are built into ongoing social relationships -- the domain of network analysis in sociology. Yet, how institutions and networks combine to determine economic and organizational performance is inadequately theorized in the sociological study of economic life.

An institution is a web of interrelated norms -- formal and informal -- governing social relationships. It is by structuring social interactions that institutions produce group performance, in such primary groups as families and work units as well as in social units as large as organizations and even entire economies. (Nee and Ingram, p. 19)

The new institutional economics is essentially a marriage of the familiar assumptions of rational choice theory with the observation that “institutions matter”—that is, that the behavior of purposive individuals depends critically on the institutional constraints within which they act, and the institutional constraints themselves are under-determined by material and economic circumstances. So institutions evolve in response to the strategic actions of a field of actors. The paragraphs quoted above make it clear that the approach stipulates a very tight relationship between institutions and norms regulating behavior. The approach pays close attention to the importance of transaction costs in economic activity (the costs of supervision of a work force, for example, or the cost of collecting information on compliance with a contract). And it postulates that institutions emerge and persist as a solution to specific problems of social coordination.

Topics of central concern to the practitioners of the new institutionalism include principal-agent problems (the costs of assuring that one’s agents are performing their functions according to the interests of the principal); the design of alternative systems of property rights; collective action problems; and mechanisms of collective decision-making. In each instance the analysis is designed to illuminate the ways in which institutional arrangements have been selected (or have evolved) in such ways as to respond to an important element of transaction costs. It bears pointing out that this approach does not assume that “optimal” institutions emerge, since the actual institutions selected depend on the distribution of political power across groups and their antecedent interests. This point is richly born out in Robert Bates’s important arguments concerning government agricultural policies in other parts of Africa (Markets and States in Tropical Africa: The Political Basis of Agricultural Policies) and also in Jack Knight's efforts to frame the conflictual elements of institutions (Institutions and Social Conflict).

Here is a striking example of a new-institutionalist analysis of a concrete sociological phenomenon: Jean Ensminger's account of bridewealth in the cattle-herding culture of Kenya (Making a Market: The Institutional Transformation of an African Society). First, some background. The cattle-herding economic regime of the Orma pastoralists of Kenya underwent substantial changes in the 1970s and 1980s. Commons grazing practices began to give way to restricted pasturage; wage labor among herders came to replace familial and patron-client relations; and a whole series of changes in the property system surrounding the cattle economy transpired as well. This is an excellent example for empirical study from a new-institutionalist perspective. What explained the particular configuration of norms and institutions of the earlier period? And what social pressures led to the transition towards a more impersonal relationship between owners and herders?

Ensminger examines these questions from the perspective of the new institutionalism. Building on the theoretical frameworks of Douglass North and others, she undertakes to provide an analysis of the workings of traditional Orma cattle-management practices and an explanation of the process of change and dissolution that these practices underwent in the decades following 1960. The book puts forward a combination of close ethnographic detail and sophisticated use of theoretical ideas to explain complex local phenomena.

How does the new institutionalism approach help to explain the features of the traditional Orma cattle regime identified by Ensminger’s study? The key institutions in the earlier period are the terms of employment of cattle herders in mobile cattle camps. The traditional employment practice takes the pattern of an embroidered patron-client relation. The cattle owner provides a basic wage contract to the herder (food, clothing, and one head of cattle per year). The good herder is treated paternally, with additional “gifts” at the end of the season (additional clothing, an additional animal, and payment of the herder’s bridewealth after years of service). The relation between patron and client is multi-stranded, enduring, and paternal.

Ensminger understands this traditional practice as a solution to an obvious principal-agent problem associated with mobile cattle camps. Supervision costs are very high, since the owner does not travel with the camp. The owner must depend on the herder to use his skill and diligence in a variety of difficult circumstances—rescuing stranded cattle, searching out lost animals, and maintaining control of the herd during harsh conditions. There are obvious short-term incentives and opportunities for the herder to cheat the employer—e.g. allowing stranded animals to perish, giving up on searches for lost animals, or even selling animals during times of distress. The patron-client relation gives the herder a long-term incentive to provide high-quality labor, for the quality of work can be assessed at the end of the season by assessment of the health and size of the herd. The patron has an incentive to cheat the client—e.g. by refusing to pay the herder’s bridewealth after years of service. But here the patron’s interest in reputation comes into play: a cattle owner with a reputation for cheating his clients will find it difficult to recruit high-quality herders.

This account serves to explain the evolution and persistence of the patron-client relation in cattle-camps on the basis of transaction costs (costs of supervision). Arrangements will be selected that serve to minimize transaction costs. In the circumstances of traditional cattle-rearing among the Orma the transaction costs of a straight wage-labor system are substantially greater than those associated with a patron-client system. Therefore the patron-client system is selected.

This framework would also suggest that if transaction costs change substantially (through improved transportation, for example, or through the creation of fixed grazing areas), that the terms of employment would change as well (in the direction of less costly pure wage-labor contracts). And in fact this is what Ensminger finds among the Orma. When villages begin to establish “restricted grazing areas” in the environs of the village, it is feasible for cattle owners to directly supervise the management of their herds; and in these circumstances Ensminger finds an increase in pure wage labor contracts.

New institutionalism is a particularly appealing sociological framework from the point of view of the philosophy of society involved here because it asks the right sorts of questions at the right level. The level of analysis is fairly close to the ground -- fairly proximate to the actions of socially embedded agents. And the questions that are posed are key: what social problems is a given set of institutions solving? How do these institutions relate to the purposive actions of individuals? And what are the social mechanisms that stabilize or destabilize a given institutional configuration at a certain point in time?

What is "methodological localism"?

Quite a few of the posts in the blog are grounded in a theory of social ontology that I refer to as methodological localism. This theory of social entities affirms that there are large social structures and facts that influence social outcomes. But it insists that these structures are only possible insofar as they are embodied in the actions and states of socially constructed individuals. The “molecule” of all social life is the socially constructed and socially situated individual, who lives, acts, and develops within a set of local social relationships, institutions, norms, and rules.

With methodological individualism, this position embraces the point that individuals are the bearers of social structures and causes. There is no such thing as an autonomous social force; rather, all social properties and effects are conveyed through the individuals who constitute a population at a time. Against individualism, however, methodological localism affirms the “social-ness” of social actors. Methodological localism denies the possibility or desirability of characterizing the individual extra-socially. Instead, the individual is understood as a socially constituted actor, affected by large current social facts such as value systems, social structures, extended social networks, and the like. In other words, ML denies the possibility of reductionism from the level of the social to the level of a population of non-social individuals. Rather, the individual is formed by locally embodied social facts, and the social facts are in turn constituted by the current characteristics of the persons who make them up.

This account begins with the socially constituted person. Human beings are subjective, intentional, and relational agents. They interact with other persons in ways that involve competition and cooperation. They form relationships, enmities, alliances, and networks; they compose institutions and organizations. They create material embodiments that reflect and affect human intentionality. They acquire beliefs, norms, practices, and worldviews, and they socialize their children, their friends, and others with whom they interact. Some of the products of human social interaction are short-lived and local (indigenous fishing practices); others are long-duration but local (oral traditions, stories, and jokes); and yet others are built up into social organizations of great geographical scope and extended duration (states, trade routes, knowledge systems). But always we have individual agents interacting with other agents, making use of resources (material and social), and pursuing their goals, desires, and impulses.

Social action takes place within spaces that are themselves socially structured by the actions and purposes of others—by property, by prejudice, by law and custom, and by systems of knowledge. So our account needs to identify the local social environments through which action is structured and projected: the inter-personal networks, the systems of rules, the social institutions. The social thus has to do with the behaviorally, cognitively, and materially embodied reality of social institutions.

An institution, we might say, is an embodied set of rules, incentives, and opportunities that have the potential of influencing agents’ choices and behavior. An institution is a complex of socially embodied powers, limitations, and opportunities within which individuals pursue their lives and goals. A property system, a legal system, and a professional baseball league all represent examples of institutions. Institutions have effects that are in varying degrees independent from the individual or “larger” than the individual. Each of these social entities is embodied in the social states of a number of actors—their beliefs, intentions, reasoning, dispositions, and histories. Actors perform their actions within the context of social frameworks represented as rules, institutions, and organizations, and their actions and dispositions embody the causal effectiveness of those frameworks. And institutions influence individuals by offering incentives and constraints on their actions, by framing the knowledge and information on the basis of which they choose, and by conveying sets of normative commitments (ethical, religious, interpersonal) that influence individual action.

It is important to emphasize that ML affirms the existence of social constructs beyond the purview of the individual actor or group. Political institutions exist—and they are embodied in the actions and states of officials, citizens, criminals, and opportunistic others. These institutions have real effects on individual behavior and on social processes and outcomes—but always mediated through the structured circumstances of agency of the myriad participants in these institutions and the affected society. This perspective emphasizes the contingency of social processes, the mutability of social structures over space and time, and the variability of human social systems (norms, urban arrangements, social practices, and so on).

Power as influence

We've looked at power as the socially embodied ability of some people to compel the behavior of other people. But this isn't the whole of what we would want to include within the scope of the uses of power. Other important aspects of power are more impersonal, having to do with influencing outcomes rather than controlling behavior. Powerful agents have the ability to set the agenda; to influence the rules of the game (whatever game one is involved in, including the state); to influence the flow of resources; and to make decisions that will have important consequences for other people.

Consider a few examples.

• A large employer is concerned about rising health care costs. The compensation team lays out several choices: eliminate higher-cost insurance plans; eliminate subsidy for dependents; or shift more costs to employees through a higher premium copay formula. The CEO has the ability to choose one option over others; he/she exercises this authority in favor of option 3. This is an exercise of power.
• The vice president of the United States wants to see a reduction in the rate of the capital gains tax. He quietly lobbies with legislators to incorporate this provision into upcoming tax legislation. He prevails. This too is an exercise of power -- an ability to bend outcomes to the VP's will. And it proceeds through the ability to influence other decision-makers.
• The mayor of a small city is in a position to influence which development projects will be permitted. He/she exercises this power to give the nod to A and to deny B. A receives a substantial business benefit and B is left out.
• A faculty reappointment committee considers the case of Assistant Professor X. It considers his/her dossier of research and teaching in relation to the standards. The case is not clear-cut. The committee has the power to end X's career at the university. It chooses not to support reappointment. It thereby exercises its power with respect to X's continuing employment. It emerges that one member had an animus against X and spoke persuasively against X. This member used a private form of power and influence against X and in furtherance of his own wishes.

These examples illustrate much of what C. Wright Mills hoped to capture in his theory of the "power elite" -- a relatively compact group of people who are in a position to shape social outcomes to their liking by influencing the agenda, the rules, or the decisions (The Power Elite).

And it goes with this social empowerment of small groups, that the possibilities of self-serving and self-interest arise. When individuals are in a position to determine the way social outcomes will occur, we have to consider the likelihood that they will have favored outcomes that serve their own interests best. So power in this circumstance has a lot to do with distributive outcomes -- who wins and who loses. And it had a lot to do with setting the rules of the game in ways that favor some people and disfavor others.

These aspects of power are tremendously important in a complex society. People in positions to influence important decisions -- private, corporate, or governmental -- have a greatly amplified ability to shape outcomes to their own will. And this in turn permits elites to shape the social environment in ways that best serve their private interests. (Stephen Lukes's book, Power: A Radical View, is particularly useful.)

And this in turn makes the strongest possible case for democratic transparency. We want the decisions that affect us to be made fairly, with full consideration of the impact they have on everyone affected by them. The decisions that influence everyone's well-being need to be made within a culture of openness and transparency. But all too often, this expectation is frustrated.

Rawls's schematic sociology

John Rawls offers an interesting thought along the way in his development of the theory of justice, on the question of the stability of a well-ordered society.  Basically, the idea is that a set of principles of justice need to satisfy a condition of publicity and social stability: the principles need to be such that, when everyone knows that these are the principles that regulate their social interactions and know that all others have the same knowledge, the society remains stable.

Rawls puts the point this way:

Now a well-ordered society is also regulated by its public conception of justice.  This fact implies that its members have a strong and normally effective desire to act as the principles of justice require.  Since a well-ordered society endures over time, its conception of justice is presumably stable: that is, when institutions are just (as defined by this conception), those taking part in these arrangements acquire the corresponding sense of justice and desire to do their part in maintaining them.  One conception of justice is more stable than another if the sense of justice that it tends to generate is stronger and more likely to override disruptive inclinations and if the institutions it allows foster weaker impulses and temptations to act unjustly.  The stability of a conception depends upon a balance of motives: the sense of justice that it cultivates and the aims that it encourages must normally win out against propensities toward injustice.  (A Theory of Justice, pp. 454-455)

What is interesting here is that Rawls is engaging in a bit of sociological theorizing in this passage -- not simply apriori moral philosophy.  He is offering an analysis of the social psychology and motivations of people living within various frameworks of justice -- the principles governing the basic institutions and laws of a society -- and he hypothesizes that the social psychology of citizens is influenced by the features of justice that are embodied in their society.  The resulting social psychology in turn produces behavior that is more or less compatible with the continued stability of the institutions and laws.  A given set of institutions, generated by a certain theory of justice, gives rise to motivations on the part of citizens in ordinary life; and these motivations can be either stabilizing or destabilizing to the postulated institutions and framework of justice.  There is a feedback loop from institutions to social psychology to behavior to basic institutions.

This raises an interesting question: how much of a role does a shared sense of justice play in sustaining a peaceful and stable society?

One piece of the answer is straightforward: injustice is a common cause of societal conflict and violence. Basic social relations that are perceived to involve unfair exploitation of one group by another are an obvious source of motivation towards resistance and group violence. Contrastively, institutions that are publicly recognized to treat all citizens fairly may promote a social psychology and a set of behaviors that are affirming of the institutions -- leading to harmonious social life and stable institutions.

So Rawls's argument here does suggest an interesting conjunction of sociological reality and normative reasoning about justice.  Rawls returns to this topic in Political Liberalism, where he questions the strong assumptions associated with the idea of a well-ordered society. He offers instead the somewhat less demanding idea of an "overlapping consensus" as sufficient for a stable democracy.

But a sense of being treated unfairly is only one out of numerous causes of social conflict. Conflict can arise over numerous other types of issues as well: ethnic or religious identities, racism, neighborhood boundaries, and state policy, to name several.  And these areas of potential conflict are not addressed by Rawls's sketch of the sociology of a just society.

Public versus hidden faces of organizations

Think of a range of complex organizations and institutions -- police departments, zoning boards, corporations, security agencies, and so on indefinitely. These organizations all have missions, personnel, constituencies, and policies and practices. They all do various things -- they affect individuals in society and they bring about significant social effects. And, in each case there are at least three aspects of their realities -- the ways they publicly present themselves, the ways their behaviors and effects are perceived by the public, and the usually unobservable reality of how they actually behave. Usually the public persona of the institution is benign, fair, and public- spirited. But how close is this public persona to the truth? In many of our basic institutions, the answer seems to be, not very. We are daily confronted with cases of official corruption, corporations that abuse their power, legislators who take advantage of insider status, and the like. So how can we conceptualize the task of getting a reasonably accurate perception of the hidden workings of our major institutions and organizations?

First, let's consider whether it is possible to specify a minimum charter of good organizational behavior in a democratic society. This would be a partial answer to a part of our question: what defines the conditions of a socially acceptable and publicly defensible organization? Consider these aspirations --

• The organization should have goals that are compatible with enhancing the public good.
• The organization should have appropriate policies about behavior towards employees and the public.
• The organization should genuinely incorporate a commitment of compliance to law and regulation.
• The corporation should embody a faithful commitment to exerting its efforts on behalf of its stated mission and stakeholders.
• The organization should be committed to transparency and accountability.

Bad business practices and corruption can often be traced to a violation of one or more of these principles. The most offensive practices by powerful organizations -- predatory behavior, asset stripping, the use of coercion and threat to achieve organizational goals, fraud, deception, illegal behavior, toxic waste dumping, evasion of regulations, and bribery -- all fall within the categories identified here.

So how are we to determine whether our existing organizations and institutions satisfy these minimal conditions? We might imagine a routine "scan" of major institutions and organizations that asks a small set of questions along these lines:

• What are the real operational goals and priorities of the organization?
• What are the operational policies that govern corporate action?
• How do agents of the organization actually treat members of the public in carrying out their tasks?
• To what extent are there discrepancies between policy and practice?
• To what extent do powerful leaders and managers use their positions to favor their own private interests? (conflict of interest)
• To what extent do business crimes occur -- accounting fraud, investor deception, evasion of regulations for health and safety?
• And, most generally, to what extent is there a discrepancy between the official story about the organization and its actual practices?

It is very easy to think of examples of bad organizational behavior illustrating each of these questions -- waste management companies fronting for organized crime groups, pharmaceutical companies producing defective generic drugs, police officers accepting bribes from speeding drivers, mining companies hiring "security workers" to evict "squatters." And it would be a very interesting exercise to try to provide brief but accurate answers to each of these questions for a number of organizations. Based on the answers to questions like these that we are able to establish, we could then make an effort to answer the question of how great a discrepancy there is between the benign public persona of major institutions and their actual workings.

In theory we might say that answering these questions is no more difficult than putting a man on the moon -- costly but straightforward. However, as was said twenty years ago in the context of anti-ballistic missile technology, the difference is that the moon doesn't fight back. Organizations -- particularly large governmental and corporate organizations -- are very adept at covering their tracks, concealing bad behavior, and re-telling the story in their own interests. So the investigative challenge is a huge one -- we might speculate that corruption multiplies geometrically, while investigative capacity multiplies arithmetically (a sort of Malthusian theory of misbehavior). Any given abuse can be uncovered in the New Yorker or on the 6 o'clock news -- but bad behavior outstrips investigative resources.

So the task of understanding this aspect of modern society amounts to finding effective ways of shining a light on the real practices and priorities of important organizations and institutions. And the practical interest we have in controlling bad organizations -- controlling corruption, ensuring good environmental and labor practices, eliminating coercion and violence -- comes down to the challenge of enhancing the ability of democracies to investigate, regulate, and publicize the standards and outcomes of behavior that are required.

(Earlier posts have addressed aspects of this issue, including comments on corruption and publicity.)