Judgement research in policy analysis

A primary purpose of futures research is to assist the formulation of policy; as such, futures research is an instrument of policy analysis. A parallel field of research in the behavioural sciences-judgement research-is also potentially an important instrument of policy analysis. Practitioners and consumers frequently overlook both the extent to which futures research is based heavily on judgements, and, therefore, the extent to which it would benefit from incorporating the principles and techniques of judgement research. This article explores the relationships between futures research and judgement research (and their links with policy analysis, and planning) and discusses the gains to policy analysis and formation-notably in the creative aspect of policy invention -from a linking of, and interaction between, the two areas. Two recent developments in applied research, symmetrical linkage systems (judgement research) and interactive cross-impact modelling (futures research), are used as vehicles for the discussion ; and the practical value of the behavioural sciences approach is indicated in a discussion of group decision making.     

Mass producing intelligence for a rational world

We have developed a series of all-purpose computer decision models, collectively called CADA, which provide easy assistance in making more comprehensive and rational decisions. They are part of an emerging computer artificial intelligence revolution that may soon mass produce rational decision analysis for public mass consumption. The article first describes CADA and its logic, and some real-world applications. The second part, starting on page 41, is a [fascinating] list of possible consequences of being able to make rational decisions for capitalism and world equality through to advertising and sex lives.     

Scientific methods in finance

Computer software can easily produce many financial models with technical skill, but investigators need to interpret and adapt computer output. Such analysis requires a deep knowledge of scientific fundamentals. We argue that an evidential perspective is more appropriate than a decision framework for model selection. We discuss four necessary conditions for any scientific investigation: observables, interpretables, replicables, and robustness in the context of examples familiar to finance professionals. Carefully planning the design of an experiment is the best way to address many econometric maladies. Furthermore, we emphasize the need for more sensitivity testing and for independent replication of empirical results within the finance profession.     

Stop making plans; start making decisions

Many executives have grown skeptical of strategic planning. Is it any wonder? Despite all the time and energy that go into it, strategic planning most often acts as a barrier to good decision making and does little to influence strategy. Strategic planning fails because of two factors: It typically occurs annually, and it focuses on individual business units. As such, the process is completely at odds with the way executives actually make important strategy decisions, which are neither constrained by the calendar nor defined by unit boundaries. Thus, according to a survey of 156 large companies, senior executives often make strategic decisions outside the planning process, in an ad hoc fashion and without rigorous analysis or productive debate. But companies can fix the process if they attack its root problems. A few forward-looking firms have thrown out their calendar-driven, business-unit-focused planning procedures and replaced them with continuous, issues-focused decision making. In doing so, they rely on several basic principles: They separate, but integrate, decision making and plan making. They focus on a few key themes. And they structure strategy reviews to produce real decisions. When companies change the timing and focus of strategic planning, they also change the nature of senior management's discussions about strategy--from "review and approve" to "debate and decide," in which top executives actively think through every major decision and its implications for the company's performance and value. The authors have found that these companies make more than twice as many important strategic decisions per year as companies that follow the traditional planning model.     

Optimal Monetary Policy in an Operational Medium‐Sized DSGE Model

We show how to construct optimal policy projections in Ramses, the Riksbank’s open‐economy medium‐sized dynamic stochastic general equilibrium model for forecasting and policy analysis. Bayesian estimation of the parameters of the model indicates that they are relatively invariant to alternative policy assumptions and supports our view that the model parameters may be regarded as unaffected by the monetary policy specification. We discuss how monetary policy, and in particular the choice of output gap measure, affects the transmission of shocks. Finally, we use the model to assess the recent Great Recession in the world economy and how its impact on the economic development in Sweden depends on the conduct of monetary policy. This provides an illustration on how Rames incoporates large international spillover effects.     

Life Insurance Lapse Behavior

Life insurance policy lapses are detrimental to issuing insurers when lapses substantially deviate from insurer expectations. The extant literature has proposed and tested, using macroeconomic data, several hypotheses regarding lapse determinants. While macroeconomic data are useful in providing a general test of lapse determinants, the use of aggregate data precludes an analysis of microeconomic factors that may drive the lapse decision. We develop and test a microeconomic model of voluntary life insurance lapse behavior and provide some of the first evidence regarding household factors related to life insurance lapses. Our findings support and extend the prior evidence regarding lapse determinants. Consistent with the emergency fund hypothesis we find that voluntary lapses are related to large income shocks, and consistent with the policy replacement hypothesis we find that the decision to lapse a life insurance policy is directly related to the purchase of a different life insurance policy. We also find that age is an important moderating factor in the lapse decision. Changes in income appear to more directly affect the decision to lapse for younger households, while they are generally unrelated to the lapse decision for older households.     

THE EFFECTS OF BORROWING ON THE RATE OF GROWTH OF CAPITAL AND THE RISK OF RUIN OF A FIRM

The research reported in this paper used Monte Carlo simulation to study the long term effects of borrowing policy on the rate of growth of capital and the risk (probability) of ruin of hypothetical firms, operating in explicitly described, realistic capital budgeting environments. The capital rationing environment is described explicitly. The debt policies modeled were based on the results of interviews with senior financial executives in eight major firms. The results indicate that three intuitively appealing ranking procedures performed equally well and all out-performed a random selection decision procedure: yielding higher rates of capital growth with lower risks of ruin. In general, an aggressive borrowing policy resulted in a higher average capital growth rate for a firm but a conservative borrowing policy resulted in a lower risk of ruin. It is believed that the results provide some interesting insights which indicate that a computer simulation model could be used to aid management in the evaluation of their capital budgeting procedures and borrowing policies.     

Hired Guns: Local Government Mergers in New South Wales and the KPMG Modelling Report

Across the developed world, including Australia, public policymaking now rests heavily on commissioned reports generated by for‐profit consultants, contrasting starkly with the earlier customary reliance on the civil service to provide informed policy advice to political decision makers. Dependence on commercial consultants is problematic, especially given the moral hazards involved in ‘hired guns’ providing support for policy ‘solutions’ desired by their political paymasters. This paper provides a vivid illustration of some of the dangers flowing from the use of consultants by examining the methodology employed by KPMG in its empirical analysis of the pecuniary consequences of proposed municipal mergers as part of the New South Wales’ (NSW) Government's Fit for the Future local government reform program. We show that the KPMG (2016) modelling methodology is awash with errors which render its conclusions on the financial viability of the NSW merger proposals fatally flawed.     

低碳视角下西安大城市地区空间增长调控初探(英文)

城市空间既是城市人生存发展的条件,同时又是这种发展的结果。在保证城市空间理性增长的同时,又有效地促使节能减排工作实现,是学界研究的热点。本文基于城市空间理性增长这一主题,立足于低碳视角下,从低碳区域空间格局、低碳城市空间规划等多个面向入手,结合西安大城市地区这个实例,探讨城市空间低碳化发展调控的具体措施,冀望能为城市可持续发展提供科学的决策依据及有所裨益。     

低碳视角下西安大城市地区空间增长调控初探

城市空间既是城市人生存发展的条件,同时又是这种发展的结果.在保证城市空间理性增长的同时,又有效地促使节能减排工作实现,是学界研究的热点.本文基于城市空间理性增长这一主题,立足于低碳视角下,从低碳区域空间格局、低碳城市空间规划等多个面向入手,结合西安大城市地区这个实例,探讨城市空间低碳化发展调控的具体措施,冀望能为城市可持续发展提供科学的决策依据及有所裨益.     

Information disclosure and the role of the accountant in collective bargaining—some comments

Disclosure of organisational information to trade union negotiators was recently identified as a contingency decision on the part of management by J.A. Craft. Here we extend his analysis with respect to dynamic and interactive aspects of components of the system of negotiations. A principal conclusion is that the disclosure decision must necessarily be considered in a strategic context, as part of the setting by top management of an overall information policy for the organisation.     

Strategic diagnostics and management decision making: a hybrid knowledge‐based approach

A conceptual model is introduced whereby the focus is placed on environmental scanning, diagnostics and decision‐making on the basis of managerial judgement through the application of tools such as intelligent agents, hybrid intelligent systems, scenario analysis and knowledge‐based systems. The model has a critical stage as an antecedent to the strategic advice that encompasses the issues of strategic fit to purpose (theme, industry, company and strategic business unit‐driven). A number of applications dealing with these four layers are shown, as well as an illustration of hybrid intelligent systems for strategic marketing planning. Copyright © 2007 John Wiley & Sons, Ltd.     

LEVERAGED BOND PORTFOLIO OPTIMIZATION UNDER UNCERTAINTY

This paper develops a multiperiod management model for balance sheets of bond assets and liabilities. The decision variables are the amounts to buy, sell, or hold for each bond maturity class and the amount to borrow or debt to be repurchased for each liability class. Decisions are made at the beginning of each period conditional on the revealed interest rates scenario. The investor's utility is maximized in a state-preference approach. The maturity structure of the initial holdings is an important component of the input parameters. The possible states of the world are described in terms of interest rate scenarios. The solution is subject to funds flow, inventory, liquidity, leverage, policy, and expiration constraints. The model leads to a large-scale linear programming model, with multi-indexed variables, that is solved with the Dantzig-Wolfe decomposition algorithm. A numerical application that was motivated by discussions with top management at the RepublicBank Trust Department is presented. The experiments suggest that optimal portfolios frequently have a barbell structure consisting of short and long maturities with few intermediate maturities.     

Global environmental risks: between political hazards and policy decisions

Environmental risks are both decision forcing situations and action forcing events. Rethinking the nature, scientific soundness and democratic character of environmental policy decisions have become critical political issues. And, although the environmental policy approach to address environmental risks enjoys ample support, the newly acquired custody has not been assumed without a degree of political hazard. It is this subject matter which circumvents the analysis of the risk political model, which Munch characterizes as a contingency of double political risks. Since environmental policy inaction is not an option, my interest here is simultaneously with a workable and legitimate model of reaching decisions driven by demands that set explicit goals, acceptable to concerned parties, implementable by policies, with positive impact on the protection against environmental risks. Filtered through the medium of deliberation, environmental risk protection is likely to gain public support and grow into a collective project, thus possibly offsetting the contingency of political hazards. A democratic model of deliberation, however, must be tested not simply by its formal procedural attributes, but also by its ability to deliver. Hence a deliberate model without explicit time frameworks will not do. Any deliberative process preoccupied with environmental risks must seriously consider the pragmatics of time . This implies stipulations of time limits per decision units. After all, time frameworks are embedded within the structuring of rules and decision-making processes, and as such, time has been transformed into both a scarce and a non-renewable resource. This is the more relevant in the context of environmental policy as the intensification of decision-making has been exacerbated in the process of globalization where scientific, technological and economic developments have generated a host of global environmental problems increasingly difficult to address in any decisive form.     

中国的通货膨胀预测：基于ARIMA模型的实证分析

通货膨胀预测已经成为中央银行制定货币政策的一个关键性变量。我们在研究国外学者对通货膨胀预测研究的基础上,根据我国1990年1月到2007年11月的CPI月度数据,运用ARIMA模型,对我国通货膨胀进行分析和短期预测。实证结果表明,运用ARIMA(1,1,10)模型为我国的通货膨胀提供了较好的预测,如果央行能依据通货膨胀预测的结果制定相应的货币政策,将有助于避免货币政策的时滞,有利于正确地引导和稳定市场预测,最终提高货币政策的有效性。     

Mexico’s low carbon futures: An integrated assessment for energy planning and climate change mitigation by 2050

This paper shows an integrated assessment for energy planning and climate change mitigation in Mexico, as an international case study. The Mexico 2050 Calculator was used to run a number of low carbon future scenarios by 2050. The calculator consists of a whole-systems model, which combines the main sectors of the Mexican economy into a single visual tool. By integrating energy and carbon dynamics across all sectors and carrying out a sensitivity analysis of the entire model, we compare four low carbon energy scenarios to assess current energy policy strategies in the country. The methodology proposed in this paper can also be applied to any other nation, particularly to those with similar models already available. Our findings show the relative impact of each sector and their various interactions for achieving Mexico’s ratified climate commitments. The paper also includes policy recommendations and highlights the need for scaling-up energy efficiency policy efforts in industry and transport, for having a higher focus on agricultural and land use policies, and for promoting integrated renewable energy policies.     

利率浮动政策、差别定价策略与金融机构对农户的信贷配给

本文从不完全契约理论视角构建了利率对农村金融机构信贷供给决策影响的模型,基于该模型分析利率及其变动对农户遭受信贷配给类型和程度的影响;然后运用实地调查数据和多元Logit回归模型进行了实证分析。研究发现:利率变动与农户遭受的信贷配给程度之间存在非线性关系,利率增加先减缓农户信贷配给,而后,利率进一步提升将会导致信贷配给程度的增强;当前利率已经处在相当高的水平上,利率提升引发的信贷配给已相当明显。     

A corporate strategy for realizing equal employment opportunity

This paper examines the American corporation's societal environment and finds that an Equal Employment Index (EEI) can serve as a measurement tool to evaluate alternative hiring policies in light of corporate Equal Employment objectives. To help managers choose the “best” hiring policy, a manpower planning model is developed in conjunction with the EEI to solve for the employment policy that comes as close as possible, within manpower flow constraints, to realizing Equal Employment objectives. With this knowledge the manager executes the hiring policy he chooses. The resulting changes in the work force are then evaluated via the EEI and compared to the a priori outcome of the manpower planning model. The difference is used to guide and direct managerial behavior toward attainment of Equal Employment objectives.     

Management control of complex,mission-critical processes

Because the failure of complex, mission-critical systems—such as certain process control and manufacturing operations—can be exceptionally costly to an organization, appropriate management control of these systems is imperative. This paper presents a theory of management control of complex systems that is the potential basis for an intelligent DSS, which would be capable of supporting human agents monitoring complex systems. The theory is derived from field studies of agent decision making under procedural guidance, and it focuses on the most crucial—and interesting—aspect of agent behavior, i.e. the decision to deviate from a procedure when the procedure is considered detrimental to the achievement of organizational goals. The theory is instantiated in a computer model of the agents' decision processes. The computer model in turn embeds a simulation of the agents' situation and goal assessment processes that produce procedural non-compliance. © 2000 John Wiley & Sons, Ltd.     

A brief history of decision making

Sometime around the middle of the past century, telephone executive Chester Barnard imported the term decision making from public administration into the business world. There it began to replace narrower terms, like "resource allocation" and "policy making," shifting the way managers thought about their role from continuous, Hamlet-like deliberation toward a crisp series of conclusions reached and actions taken. Yet, decision making is, of course, a broad and ancient human pursuit, flowing back to a time when people sought guidance from the stars. From those earliest days, we have strived to invent better tools for the purpose, from the Hindu-Arabic systems for numbering and algebra, to Aristotle's systematic empiricism, to friar Occam's advances in logic, to Francis Bacon's inductive reasoning, to Descartes's application of the scientific method. A growing sophistication with managing risk, along with a nuanced understanding of human behavior and advances in technology that support and mimic cognitive processes, has improved decision making in many situations. Even so, the history of decision-making strategies--captured in this time line and examined in the four accompanying essays on risk, group dynamics, technology, and instinct--has not marched steadily toward perfect rationalism. Twentieth-century theorists showed that the costs of acquiring information lead executives to make do with only good-enough decisions. Worse, people decide against their own economic interests even when they know better. And in the absence of emotion, it's impossible to make any decisions at all. Erroneous framing, bounded awareness, excessive optimism: The debunking of Descartes's rational man threatens to swamp our confidence in our choices. Is it really surprising, then, that even as technology dramatically increases our access to information, Malcolm Gladwell extols the virtues of gut decisions made, literally, in the blink of an eye?