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Chapter 5 - Environmental decision making

Accounting for environmental decision making:
Chapter 6
New institutions

6. NEW INSTITUTIONS
RATIONALITY
ACCOUNTABILITY AND INTERNAL UNCERTAINTY
NEW INSTITUTIONS

6. New institutions

"We learn from history that we learn nothing from history", Shaw, G.B., "The Revolutionist's Handbook"

Including environmental values into accounting systems is not enough if systems of decision making based on these values are unresponsive to the nature of their information (Dryzek 1995). Current institutional systems may not be able to produce adequate responses to environmental uncertainty. For example, the market system cannot support firms that are unprofitable (Drzyek 1992). The abstraction to a response to uncertainty from the profitability of a firm requires the following steps. A firm produces goods and services for customers who can choose between other goods and services produced by different firms. The actions that the firm needs to take to produce those goods have associated costs and environmental effects. A one dimensional system of value (be it based on money, emergy, etc.) will constrain a set of actions that are allowable in that system. These actions interact with their environment producing internal uncertainty.

A response to uncertainty is a action or set of actions that tries to limit the effects of uncertainty. The problem in a system of internal uncertainty is that a limited set of actions may be insufficient in responding to the uncertainty that they create. This comes back to the problem of trying to describe an internally uncertain system in a one-dimensional framework of value, to paraphrase Månsson and McGlade (1993). How can we try in overcome this problem?

Multiple systems of value may be able produce responses the cover the weaknesses of their component systems. This would require a recognition of the weaknesses of particular systems, and a harmonious way of organising the multiple system. This could be achieved by monitoring the validity of the systems of value that we choose to use and changing them where necessary. Maintaining multiple value systems within society may enable adjustments between values to be made with minimal disruption. Gray (1993) and Dryzek (1995) advocate the adoption of participative democracy to counter the failures of simple solutions in a complex world.


Rationality

How do internal and external uncertainty relate to our ability to rationally respond to that uncertainty? It depends how you define rationality. Habermas (1987) calls rationality the ability "to provide valid reasons for acts and expressions" (McGlade, 1993) and distinguishes two types: goal rationality and communicative rationality. Goal rationality is choosing means to meet ends, whereas communicative rationality involves questioning ends and establishing new ends by argumentation and debate.

Goal rationality can tame external uncertainty because the means employed do not alter the validity of the goal. It can be inefficient at resolving internal uncertainty because the need to define a goal means that goal may be unhelpful in forming possible actions (i.e. defining sustainability as a goal). Defining a sub-goal at lower level potentially invalidates the sub-goal as a realistic step to achieving the primary goal. Communicative rationality be able to resolve internal uncertainty by allowing the validity of sub-goals to be checked and altered where necessary.

Communicative action theoretically requires an "ideal speech situation". The assumptions of this are that:

1. everyone with competence to speak and act is allowed to take part in discourse.
2. everyone allowed to question any assertation whatever, introduce any assertation into discourse, and express attitudes, desires and needs.
3. no speaker may be prevented by either internal or external coercion from exercising his rights as laid down in 1. or 2. (McGlade 1993)

This situation is unlikely to be totally met in practice, but Dryzek (1987) lists some cases where a approximation to this situation was obtained. He lists the common properties of the cases as:

1. A pressing unresolved problem of interest to all the parties.
2. An initially high degree of conflict.
3. A neutral third party to mediate discussions.
4. Discussion is prolonged, face-to-face and governed by formal or informal canons of reasoned discourse.
5. Any product of the process is a reasoned, action-orientated consensus. No judgement is reached by the third party.
6. They are fluid and transient, lasting no longer than a particular problem.

He notes that "these procedures have often managed to generate substantial consensus among initially hostile parties". Dryzek (1995) presents communicative rationality (in the context of participative democracy) as the best tool for resolving problems of internal uncertainty.


Accountability and internal uncertainty

Gray et. al . (1993) say that the uncertainty of the environmental agenda requires the adoption of social and environment accountability. This would take the form of Corporate Social Reports published by firms to account for the social and environmental effects of their production processes. This creates a situation where responsibility is more defined in the system. If information about some of the consequences of a consumer decision is available it allows choices to be made over more than one value system (price, social costs, environmental costs). It initial{ly} defines one group, the producers, as the responsible parties, but anyone purchasing goods from the producers also must take responsibility.

New institutions

These ideas may help us to deal with internal uncertainty. Not by prescribing another value system, but by allowing the social system to respond to new problems with new value systems. The way the social system is set up would place limits on the time scales of responses to new problems. This would require the assumption that internal certainty can be viewed as a change in external uncertainty. Each new value system would satisfice the condition of limiting uncertainty at a particular temporal or spatial scale.

The ability of the social system to achieve this would be dependent on the degree of internal uncertainty. The actions prescribed by a particular value system will alter the environment. If this alteration is fast it will negate the assumption that internal uncertainty can be viewed as external. In this case systems that slow the processes of internal uncertainty (i.e. increase the time scale for effects to be become apparent) would be more effective.

Dryzek (1987) says that actors taking part in communicative rationality can choose to use instrumental (goal) rational systems if they so wish. The effectiveness of these systems is largely context dependent, but we can study these system. The ability of these systems to different types of uncertainty will allow us to make better decisions about the relevance of a particular system at a particular time. The way that we apply and discard these systems must be based on an understanding of why they fail. This understanding can be based on many sources, two that I will look at in particular are analogies with biological systems and modelling.


Chapter 7 - Natural responses to uncertainty

Finished 13/9/96
Created 18/9/98
Last modified 25/1/00