The Sensory Order and other Adaptive Classifying Systems

Synopsis Hayek’s cognitive theory, which seeks to describe the operation of a particular order, in fact provides a paradigmatic account of knowledge-generating orders in general. We claim that this paradigm provides a fertile conceptual framework for exploring a variety of problems in economics and social theory. In particular, we shall show that Hayek’s conception of the ‘map’ and the ‘model’, which he uses to explain the operation of the complex adaptive classifying system called ‘mind’, are promising analytical devices with applications extending to social structures of various kinds and complexity. We use Hayek’s notion of the map and model to analyze how different social structures – regarded as classifying systems – work in terms of their input, processing, and output capabilities. The adaptive characteristics of such systems, via communicative routines, multi-level classification, and feedback, form central motifs for our discussion of markets, science, and other social structures. We show that by analyzing the knowledge-generating characteristics of such structures we are also able to gain insights about the circumstances affecting their adaptive properties.     

Responding to climate and other change processes in complex contexts:: Challenges facing development of adaptive policy frameworks in the Ganga Basin

The Ganga Basin, one of the world's most densely populated and vulnerable regions, is also among the world's most dynamic hydrological systems. Rivers exiting the Himalaya deposit massive amounts of sediment in the plains and shift their courses regularly. The natural dynamics of this system have a direct impact on populations. On August 18th, 2008, for example, embankments on the Kosi River (a tributary to the Ganges), failed and the channel shifted by as much as 120 km (Sinha, 2008 [1]) displacing over sixty thousand people in Nepal and three and a half million in India. Transport and power systems disrupted across large areas. The embankment failure was not caused by an extreme event. Instead the breach represented a failure of interlinked physical and institutional infrastructure systems in an area characterized by complex social, political, and environmental relationships.Projected climate changes in the Ganga Basin are likely to greatly exacerbate vulnerability (Adaptation Study Team, 2008 [2]). While the Kosi breach had nothing to do with climate change, such events will increase if climatic variability, sediment transport, and extreme events increase. Understanding how populations can respond to the dynamic nature of rivers such as the Kosi is, as a result, essential to develop strategies for adapting to climatic change. Understanding is also essential at the policy level for building adaptive capacity. The challenge is to identify policy frameworks and their relationship to interlinked physical and institutional infrastructure combinations that create environments enabling adaptation within households, communities, and regions.This paper explores the challenges and opportunities facing the development of adaptive policy frameworks in the Ganga Basin. The characteristics of frameworks that are adaptive in themselves and enable adaptation along with their relationship to different types of interlinked institutional and infrastructure systems are explored first. Following this, the case of the Kosi embankment along with the projected impacts of climate change across the Ganga Basin is used to identify the key challenges and opportunities that are common in many regions. The paper concludes with specific observations on the development of adaptive policy frameworks for responding to climate change in complex developing country contexts.     

Coupled economic-ecological systems with slow and fast dynamics — Modelling and analysis method

The purpose of this article is to contribute to the exploration of non-convex dynamics in coupled human-nature systems. We study welfare issues associated with the management of a human-nature complex adaptive system with a threshold and a stochastic driver. We exemplify with a specific system where we link changes in the number and diversity of birds to the abundance of a pest (insects) that causes damages to goods and services valuable to human beings. We present a method that simplifies the analysis and helps us discuss different management models that combine direct and indirect controls of the pest. This allows us to show that 1) the choice of control method depends in a highly non-linear way on biodiversity characteristics and 2) the socially optimal outcome may not be reachable using price instruments. Hence the price vs. quantity debate needs to be revisited using a complex adaptive system lens.     

Systems of Benevolent Utility Functions

This paper studies systems of utility functions in which each person's utility depends on his or her own consumption as well as on the utilities of others. We consider the question of when a system of interdependent utility functions induces unique utility functions over allocations and identifies the class of transformations on interdependent utility functions that are equivalent in the sense of inducing the same preferences over allocations. We show that well-behaved systems of this kind can be studied by means of the theory of dominant-diagonal matrices and that the theory of dominant-diagonal matrices with finitely many elements extends in a satisfactory way to denumerable matrices. The theory of denumerable dominant diagonal matrices allows an elegant analysis of systems of intergenerational benevolence. We also revisit and extend the theory of two-sided altruism as formulated by Kimball and by Hori and Kanaya.     

Environmental prospects for the next century: Implications for long-term policy and research strategies

This report examines environmental prospects for the twenty-first century, and then suggests some appropriate long-term management strategies and research priorities. A few current global trends (e.g., increasing concentrations of atmospheric trace gases, population, agricultural production) are practically irreversible over the next couple of decades due to inertias in the systems involved. However, there are bound to be nonlinearities, discontinuities, and surprises in the behavior of many environmental and socioeconomic systems. In fact, the main challenge for managers, policy analysts, and politicians is to develop strategies that are robust in response to these surprises, exploiting the opportunities as well as softening the shocks that may arise.The main characteristics of such strategies are that they be adaptive, interdisciplinary, and cross-sectoral. As pointed out by Harvey Brooks [2], we must avoid partial solutions that may be optimal for a particular sector or decade, but which are far from optimal for the biosphere as a whole over the long term.     

Enabling sustainability transitions in Asia: The importance of vertical and horizontal linkages

The phrase “sustainable development” appears increasingly in national policies in Asian countries and there are many successful ‘sustainability experiments’ documented at local level throughout the region. We explore why, despite the efforts made at the national level and the good practices at local level, underlying trends are away from sustainability. Drawing on the multi-level perspective on system innovation, we argue that linkages between different levels in socio-technical systems are critical to explaining the emergence of sustainable development pathways. The absence of these linkages in many Asian contexts is an important factor obstructing sustainability transitions in Asia. We argue that while the importance of vertical linkages is recognized and theorized in the multi-level perspective, the horizontal and the temporal dimensions are under-explored. We develop a set of propositions for exploring linkages in socio-technical systems, supporting these with empirical examples from the region.     

Using choice experiments to assess smallholder farmers' preferences for pig breeding traits in different production systems in North-West Vietnam

Livestock form key components of the livelihood strategies of many of the world's poorest people. However, despite the potential to alleviate poverty and improve food security through livestock development interventions, the lack of smallholders' participation in the planning and design of breeding programs has often been a major cause of the failure of such programs. Particularly in developing countries where livestock production is still mostly subsistence-oriented and livestock fulfil manifold functions a considerable number of livestock breeding programs have failed. The development of adequate tools to characterise these functions, bearing in mind that these are expressed only rarely in properly functioning markets, is therefore important.This paper seeks to advance the application of such methodologies to the smallholder pig sector in Vietnam. A choice experiment was applied across 140 households involved in pig breeding in order to assess farmers' preferences and the trade-offs for a list of adaptive and productive traits. These included growth, reproduction, disease resistance, feed requirements and appearance.The findings indicate that smallholders highly value both adaptive and performance traits, particularly in resource-driven (i.e. subsistence) production systems. Performance traits were more highly valued in the demand-driven (i.e. market-oriented) systems. These findings have implications for breeding program breed choice and breeding objectives.     

Convergence for difference equations with vanishing time-dependence, with applications to adaptive learning

Summary. We provide conditions for local stability and instability of an equilibrium point in certain systems of nonautonomous nonstochastic difference equations. In the systems under study the influence of time is present through a positive scalar “gain” parameter which converges in the limit to zero. These systems have recently been used to study the dynamics of adaptive learning in economic models, and we provide two economic illustrations of the formal results. Received: October 7, 1997; revised version: February 8, 1999     

Applying agent-based modeling to the evolution of eco-industrial systems

Agent-based modeling is simply a modeling technique for describing complex adaptive systems in a form that can be solved by computers. In this paper, agent-based modeling is applied to eco-industrial systems to gain new insights into their behavior. The factory in the eco-industrial systems is taken as an agent, and the objects, attributes and behaviors are determined. Some important interaction mechanisms between agents are also designed. Besides, the sustainability evolution is also studied through emergy theory. More importantly, a new concept, the Internal-flow emergy, is used to indicate the evolution direction of an eco-industrial system. Finally, a hypothetical eco-industrial park utilizing natural gas and halite as the main raw material inputs is adopted as a case study to illustrate the effectiveness of the agent-based modeling.     

日本人力资源管理模式在中国环境下的挑战与变迁——以日本在华企业为例

为了适应来自外部劳动力市场、文化差异等方面的挑战,日本在华企业放弃了以终身雇佣、年功序列为核心的日本式人力资源管理,转向寻求一种市场导向和业绩导向的人力资源管理模式。日本在华企业人力资源管理模式的这种变迁为探索全球化背景下不同人力资源管理模式的融合提供了一个可供观察的视角,并且对中国企业如何构建高效能的人力资源管理系统具有一定的指导意义。     

The labor market effects of introducing unemployment benefits in an economy with high informality

Unemployment benefit systems are nonexistent in many developing economies. Introducing such systems poses many challenges which are partly due to the high level of informality in the labor markets of these economies. This paper studies the consequences on the labor market of implementing an unemployment benefit system in economies with large informal sectors and high flows of workers between formality and informality. We build a search and matching model with endogenous destruction, on-the-job search, and intersectoral flows, where agents in the economy decide optimally whether or not to formalize jobs. We calibrate the model for Mexico, and show that the introduction of an unemployment benefit system, where workers contribute when employed in the formal market and collect benefits when they lose their jobs, even if they obtain informal jobs, can lead to an increase in formality in the economy, while also producing small increases in unemployment. The exact impact of incorporating such benefits depends on the relative strength of two opposing effects: the generosity of the benefits and the level of the contributions that finance those benefits. We also show important policy complementarities with other interventions in the labor market. In particular, combining the unemployment benefit program with policies that reduce the cost of formality, such as lower employment taxes and firing costs, can produce greater decreases in informality and lower impacts on unemployment than when the program is applied in isolation.     

Ecological sustainability in policy assessments: A wide-angle view and a close watch

We give a perspective from two practitioners on some of the challenges of addressing sustainability concerns in environmental policy assessments. We focus on the ecological dimension of sustainability, which is closely related to the concept of “ecosystem resilience.” First, we discuss several recent benefit-cost analyses conducted by EPA that illustrate many of the practical difficulties analysts have faced when attempting to assess the ecological benefits of proposed regulations. Next, we discuss the importance of increased coordination of policy assessments among offices and agencies that traditionally operate more or less independently. We conclude by using a stylized model to illustrate how using an “adaptive management” approach to designing and evaluating policies can help to avoid some of the limitations of standard policy assessments highlighted in this special section of Ecological Economics and elsewhere.     

Adaptation and Mitigation in Global Pollution Problems: Economic Impacts of Productivity, Sensitivity, and Adaptive Capacity

This paper studies the influence of productivity, pollution sensitivity, and adaptive capacity on optimal mitigation and adaptation in a two-country global pollution model. We investigate the effects of changes of these parameters on the allocation of emissions, adaptation expenditures, and welfare. In our analysis we distinguish between cooperative and non-cooperative behavior. Our findings imply that unilateral improvements in productivity and adaptive capacity have strategic significance and do not necessarily lead to mutual welfare improvements. They raise the emissions not only in the country where the technological improvement takes place, but also globally. An improvement in global welfare is guaranteed only under cooperative behavior with respect to emission and adaptation choices.     

Market Power and Welfare in Electricity Markets Employing Tradable Green Certificate Systems

Within the last 25 years, liberalization (deregulation) of electricity markets around the world has been undertaken with the goal of replacing long-standing monopoly rights with fully competitive markets. In addition, many nations have begun employing “tradable green certificate” systems to promote electricity generation from renewable (“green”) energy sources (wind, solar, biomass, hydroelectric, etc.), with the primary objective of mitigation of greenhouse gas emissions from fossil fuel (“black”) producers. In this paper, we examine some welfare implications of the use of green certificate systems in electricity markets under alternative market structures. We demonstrate that under a wide variety of scenarios, an oligopolistic market structure may perform better in terms of welfare than a competitive market structure. We also demonstrate that there will typically be an optimal level of market power summarized by a conjectural variations parameter that depends on the cost structure of both green and black firms. Our model provides insights into the policy challenge of electricity market design and suggests an approach that could be applied in a more general model.     

A resilience-based framework for evaluating adaptive co-management: Linking ecology, economics and society in a complex world

Adaptive co-management brings together collaborative and adaptive approaches in pursuit of sustainable resource use and social-ecological resilience. Enthusiasm for this management approach, however, is countered by recent critiques regarding outcomes. A lack of evidence from consistent evaluation of adaptive co-management further exacerbates this situation. This paper revisits the issue of evaluation in natural resource management and recasts it in light of complex adaptive systems thinking. An evaluative framework for adaptive co-management is developed which directs attention toward three broad components: ecosystem conditions, livelihood outcomes and process and institutional conditions. Scale-specific parameters are offered for each component to facilitate systematic learning from experience and encourage cross-site comparisons. Conclusions highlight the importance of systematically incorporating evaluation into the adaptive co-management process and recognize the challenge for resource agencies and researchers to shift from a conventional to a complex adaptive system perspective.     

Adaptive ARFIMA models with applications to inflation

Many previous analyses of inflation have used either long memory or nonlinear time series models. This paper suggests a simple adaptive modification of the basic ARFIMA model, which uses a flexible Fourier form to allow for a time varying intercept. Simulation evidence suggests that the model provides a good representation of various forms of structural breaks and also that the new model can be efficiently estimated by a QMLE approach. We investigate monthly CPI inflation series for the G7 countries and find evidence of stable long memory parameters across regimes and also of significant nonlinear effects. The estimated adaptive ARFIMA models generally have less persistent long memory parameters than previous studies, with the estimated time dependent intercept being an important component. The model is also supplemented with an adaptive FIGARCH component, yielding a double nonlinear long memory model.     

Conserving biodiversity with tradable permits under changing conservation costs and habitat restoration time lags

Tradable permits are a common environmental policy instrument that has recently been applied also to the conservation of biodiversity. Biodiversity conservation differs in many respects to the classical applications of tradable permits like emissions control. One particularity is that, even if the permit system maintains a constant total amount of species habitat, habitat turnover (the destruction of a habitat and restoration elsewhere) affects the ecosystem. Another particularity is that the restoration of habitats often takes much time, leading to time lags between the initiation of restoration activities and the time when restored habitat is available for trading. We use an agent-based model of a tradable permit market to study the influence of heterogeneous and dynamic conservation costs and habitat restoration time lags on key variables of the market, such as the costs incurred to the market participants and the amount of habitat turnover. Our results show that there may be trade-offs between these key variables. We also find that restoration time lags can lead to fluctuations in permit prices that reduce the efficiency of the permit market. We conclude that temporal lags deserve a careful analysis when implementing tradable permit systems for the preservation of natural habitats and biodiversity.     

Reconciling sustainability, systems theory and discounting

Most definitions of sustainability imply that a system is to be maintained at a certain level, held within certain limits, into the indefinite future. Sustainability denies run-away growth, but it also avoids any decline or destruction. This sustainability path is hard to reconcile with the renewal cycle that can be observed in many natural systems developing according to their intrinsic mechanisms and in social systems responding to internal and external pressures. Systems are parts of hierarchies where systems of higher levels are made up of subsystems from lower levels. Renewal in components is an important factor of adaptation and evolution. If a system is sustained for too long, it borrows from the sustainability of a supersystem and rests upon lack of sustainability in subsystems. Therefore by sustaining certain systems beyond their renewal cycle, we decrease the sustainability of larger, higher-level systems. For example, Schumpeter's theory of creative destruction posits that in a capitalist economy, the collapse and renewal of firms and industries is necessary to sustain the vitality of the larger economic system. However, if the capitalist economic system relies on endless growth, then sustaining it for too long will inevitably borrow from the sustainability of the global ecosystem. This could prove catastrophic for humans and other species. To reconcile sustainability with hierarchy theory, we must decide which hierarchical level in a system we want to sustain indefinitely, and accept that lower level subsystems must have shorter life spans. In economic analysis, inter-temporal discount rates essentially tell us how long we should care about sustaining any given system. Economists distinguish between discount rates for individuals based on personal time preference, lower discount rates for firms based on the opportunity cost of capital, and even lower discount rates for society. For issues affecting even higher-level systems, such as global climate change, many economists question the suitability of discounting future values at all. We argue that to reconcile sustainability with inter-temporal discounting, discount rates should be determined by the hierarchical level of the system being analyzed.     

Learning and international transmission of shocks

This paper studies the implications of adaptive learning in the modelling of inter-country linkages in a two-region MSG G-cubed model built on micro-founded behaviors of firms and households. The nature of the transmission process under rational expectations versus adaptive learning is explored. We investigate the propagation mechanism within and across borders for various shocks and policy changes within the United States: change in inflation target, fiscal policy, productivity shock, and rise in equity risk. Adaptive learning is found to change the short run sign of transmission in most cases but this also depends on the fraction of forward-looking agents in the economy.     

The conservation against development paradigm in protected areas: Valuation of ecosystem services in the Doñana social-ecological system (southwestern Spain)

The ecosystems of the Doñana social-ecological system (southwestern Spain) provide numerous ecosystem services to society. We valued the most important ecosystem services through a market-based approach, revealed-preference and stated-preference methods to assess the conservation effectiveness of the Doñana Protected Area, with consideration of existing human activities in surrounding lands. We also analysed the spatial distribution of the ecosystem services beneficiaries and the scale of their related markets. We found a clear trade-off between the local and global market values of ecosystem services because landscape management outside of the Doñana Protected Area promotes the provision of ecosystem services associated with international markets. Our results suggest that a conservation against development model occurs in the Doñana social-ecological system, in which land use intensification takes place outside of the Protected Area borders as a result of promoting marketed ecosystem services, while biodiversity conservation is the main activity inside the Protected Area. We conclude that protected areas should be part of a larger-scale, adaptive landscape management strategy in which conservation planning should be the focal element in coordinating sectoral policies in the context of social-ecological systems.