Differences in the strengths of evidence matters in risk–risk trade-offs

Making decisions between alternatives are challenging when there is weak or unreliable knowledge about the risks and benefits of the alternatives. This requires a trade-off between risks (and benefits). Here, we comment on a recent paper on risk–risk trade-offs and highlight the difficulties of making such trade-offs when the available evidence is of different strength. One current example of a risk–risk trade-off under weak evidence is the restriction and reevaluation of the risks of neonicotinoid insecticides to bees conducted by the European Food Safety Authority (EFSA). We argue that a risk–risk trade-off is essential in this context. Although considerable research efforts have been focused at determining the risks of neonicotinoids to bees, the evidence base is still limited. However, focus on strengthening evidence on impacts of one substance may lead policy-makers and public to believe that its substitutes are less harmful, when in fact evidence is weak on the impacts of these substitutes as well. We argue that a broader management of uncertainty is needed and that the difference in uncertainty underlying evidence of risk for different alternatives needs to be communicated to policy-makers. We suggest that this can be done, for example, using measures of uncertainty, which take into account strength in evidence, and combine these with principles to guide decision-making.     

Volatility trade-offs in exchange rate target zones

The volatility trade-offs (i.e. the negative relationships between exchange rate variability and the interest rate differential) exhibited in the Krugman [Krugman, P. (1991). Target zones and exchange rate dynamics. Quarterly Journal of Economics, 106, 669–682.] model depend on the assumption of uncovered interest rate parity (UIP). However, the bands for several economies in Latin America and Eastern Europe are substantially different from those within the European Monetary System (EMS), in that their parity relationship deviates from UIP and volatility trade-offs do not exist. This paper develops a graphical exposition and uses it to show that the degree of capital mobility may serve as a plausible vehicle to explain the empirical evidence found in Krugman's regime of exchange rate target zones. Based on a Fleming-type stochastic macro model, we find that when capital mobility is relatively low, exchange rate variability exhibits a positive relationship with the interest rate differential. This result can be regarded as a possible way of resolving the conflicting outcomes between Krugman's prediction and existing empirical observations.     

Causal chains,policy trade offs and sustainability: Analysing land (mis)use in seven countries in the South

The need to enhance sustainable development of land use is more urgent than ever; specifically in developing countries where poverty and land degradation are often interlinked. To promote a common understanding of land use problems by experts, stakeholders and decision makers, it is essential to understand the system characteristics, including the complex feedbacks between drivers and impacts. To enhance sustainable development, appropriate policies need to be identified. In this paper, we analysed and compared seven case studies in Kenya, Mali, Tunisia, China, India, Indonesia and Brazil, representing different biophysical and socio-economic conditions and challenges. We analysed Driver Pressure State Impact Response (DPSIR) story lines of the land use problems, policy priorities and value trade-offs as identified by stakeholders and experts in National Policy Forums. Important drivers of land use change impacting main land use problems among the case studies were economic growth, technological development, immigration and agricultural intensification, in addition to existing policies. Of the latter the most important were related to domestic support through various forms of subsidies or access to credit, land tenure polices and liberalization policies. In the policy prioritization, the value trade-offs made by the National Policy Forums emphasize the environment rather than increased economic production. It is recognized that the environment needs to be improved to maintain and improve economic production in the long term, both in agriculture and in other sectors.     

Corporate tax behaviour and environmental disclosure: Strategic trade-offs across elements of CSR?

This study explores strategic trade-offs between corporate tax behaviour and environmental performance disclosure, both important elements of corporate social responsibility (CSR). Tax finances public goods and reduces investor wealth. Corporate strategies may balance such incompatible stakeholder interests through trade-offs across CSR elements. In this empirical study of Norwegian companies, there are no indications of trade-offs between corporate tax aggressiveness (TAG) and mandatory disclosure, in line with stick-to-the-rules/compliant behaviour for both. However, the positive relationship between TAG and voluntary disclosure indicates that strategic trade-offs exist and ensure an acceptable level of legitimacy from different stakeholders overall. Hence, corporate strategies differ for mandatory and voluntary actions, in line with a multidimensional legitimacy risk and legitimation strategy framework.     

Logrolling Procedure for Multi-Issue Negotiation

In order to better deal with the complexity in multi-issue negotiation, a quantitative method which produces Pareto optimal solutions through jointly improving exchange of issues is proposed. The trade-off process is modelled using logrolling, in which loss in some issues is traded for gain in others, resulting in overall gain for all parties. This mutual gain approach is designed based on the integrative negotiation strategy. The objective of the logrolling method is in negotiation support by providing a structure and systematic analysis for ill-defined multi-issue negotiation problems. This study presents a formal representation of logrolling, the sequential logrolling procedure that is based on the exchange of two issues, and the general properties of the efficient frontier produced by logrolling under a linear preference assumption. The study also includes some discussion on implementation aspects of the logrolling method.     

Supplier selection or collaboration? Determining factors of performance improvement when outsourcing manufacturing

An empirical study was designed to determine factors of performance improvement when outsourcing manufacturing. Findings from a survey of 136 manufacturing plants in Sweden show that most of them achieve their outsourcing motives, but not without trade-offs. Factors of performance improvements such as economies of scale or operations in low-cost countries can improve one performance dimension, such as product cost, yet negatively impact volume flexibility, speed or product innovation. The results show part characteristics and supplier operating capabilities are more important than supplier relationship strategies when outsourcing manufacturing, meaning that supplier selection trumps supplier collaboration in the make-or-buy decision.     

Trade-offs at a regional level in spatial planning: Two case studies as a source of inspiration

Societal and technological changes are influencing the spatial expression of human activity and governance. The focus on the regional level is stronger and there is greater cooperation at more levels between public and private stakeholders. Furthermore, there is a growing demand for a better quality of space and new concepts for funding spatial interventions. This whole intricate scenario is in need of new planning instruments that can be deployed at a regional level.     

The experience of private investment in the South African water sector: The Mbombela Concession

South Africa is a water-stressed country that over a protracted period has suffered from poor water service delivery. The major problems are inefficient operations, lack of capacity in spending allocated budgets, unclear management structures, and a long-term decline in capital expenditure. Economists have long argued that private investment will bring good fiscal control and efficient structures and will improve service delivery. However, there may be trade-offs between this improved economic efficiency and the necessity to pursue more egalitarian social outcomes. The purpose of this research is to explore the experience of private-sector investment on operational efficiencies and social objectives in the South African water sector in the Mbombela Concession. The study concludes that, in this case, private investment has enhanced service delivery by improving efficiency, technical skills and the capacity to spend allocated budgets without any significant negative impacts on equitable water distribution.     

Urbanization as a land use change driver of forest ecosystem services

Land use change in the form of urbanization is a direct driver affecting the provision of ecosystem services from forests. To better understand this driver, we modeled the effects of urbanization on three regulating and provisioning ecosystem services in two disparate watersheds in Florida, USA. The study integrated available geospatial and plot-level forest inventory data to assess future changes in carbon storage, timber volume and water yield during a period of 57 years. A 2003–2060 urbanization and land use change scenario was developed using land cover data and a population distribution model. The Integrated Valuation and Ecosystem Services Tradeoffs model was then used to quantify changes in ecosystem services. Carbon storage was reduced by 16% and 26% in the urbanized 2060 scenario in both the rural Lower Suwannee and urban Pensacola Bay watersheds, respectively. Timber volume was reduced by 11% in the Lower Suwannee and 21% in the Pensacola Bay watershed. Water yield, however, increased in both watersheds by 4%. Specific sub-watersheds that were most susceptible to urbanization were identified and mapped and ecosystem service interactions, or trade-offs and synergies, are discussed. Findings reveal how urbanization drives the spatio-temporal dynamics of ecosystem services and their trade-offs. This study provides policy makers and planners an approach to better develop integrated modeling scenarios as well as designing mapping and monitoring protocols for land use change and ecosystem service assessments.