Why Today’s Big Problems Keep Getting Worse, and What We Can Do About It [Part II of III]

How to keep capitalism and democracy working for us all

Photo by Yarenci Hdz on Unsplash

Last edited: October 4, 2020.

[Please note: this is Part II of an ambitious 3-part series and is very much a work in progress. So if you have questions or comments, feel free to post them. All contributions are welcome. And if you like what you’ve read, stay tuned for Part III. Thanks!]

Introduction

Today’s private progress has coincided with growing public peril.

Search “top inventions in the 21st century” on Google, and this is what you’ll get. Nanobots. Flying drones. Birth control patches. Head-of-a-pin operating systems. Virtual reality. Particle accelerators. Digital currency. Gene editing. Artificial intelligence. 3D printing. Lab-grown pancreases. Reusable rockets to Mars… and on and on, among the 6.33 million search results returned in 0.58 seconds.

Search “top issues of the 21st century” on Google, and this is what you’ll get. Global warming. Poverty. Nuclear proliferation. Fake news. Terrorism. Inequality. Famine. Obesity (?!). Deforestation. Population imbalances. Pandemics. Leadership crises… and on and on, among the 237 million search results returned in 0.70 seconds.

So doing the math here, we’re faced with nearly 40 times as many questions as answers — despite the fact that answers include the likes of “nanobots” and “lab-grown pancreases.” Indeed, we can do (dubious) math like this in mere seconds only thanks to the magic of equally mind-boggling internet search technology.

Trite though observations like this may by now be — and pessimistic as some truly are — it still jars to juxtapose human progress with human perils. We can build rocketships for passenger service to Mars, yet we plunder what remains of our plant, air, water, and other scarce bounty back home on Earth. As private sector tech approaches escape velocity, some of our vital public needs seem to be left in the dust.

We can break this phenomenon down.

This series argues that the best approach to solving today’s big issues will be to couple individuals’ self-interest with the global public good; and it will propose a way to do this. The series comes in three Parts.

1.The first paper (published previously) presented Part I, identifying the source of today’s biggest issues. We saw that government historically solved pressing public problems well — especially when partnering with the private sector — and that government couldn’t have done this alone. But we also saw that today’s issues will be harder for governments to solve, largely because the private sector won’t be as helpful as it was in the past. We ultimately concluded that governments, firms, and individuals collectively express insufficient will and ability to address today’s biggest public issues — and especially those that require global coordination.

2. This second paper presents Part II, introducing a framework to describe what yields collective will and ability to achieve desired outcomes in a given human system; and it uses this framework to identify a class of solutions promising to provide greater focus in solving public problems. In Part II, we’ll see that focus can be improved by reorienting incentives, capabilities, and power relationships among society’s key actors. And we’ll see that coupling individual incentives more tightly with the global public good would be the single most effective and principled way to bring greater focus to addressing global issues. We’ll see further that creating individual incentives that align with the global good could also reduce firms’ problematic and growing power over government as well, addressing both issues in a single stroke.

3. Finally, the third paper (published recently) will present Part III, evaluating a particular idea that lives within the class of solutions arrived at in Part II. I’ll argue that we can create individual incentives to pursue the global public good without jeopardizing the time-tested profit motive, by putting them together. And we’ll see that addressing the root cause of the collective action problems outlined in Part I could solve many of its manifestations presenting today around the world.

Part II: Framing the Solution Space

In general, public outcomes are driven by incentives, capabilities, and power relationships among individuals, firms, and government.

Part I concluded that governments, firms, and individuals collectively express insufficient will and ability to address today’s biggest public issues — and especially those that require global coordination. This begs the question of what drives the expression of will and ability in a given human system, and how this translates into (public) outcomes. To address these (big) questions, it will be useful to introduce a simplifying analytical framework to help direct our focus.

We’ll start with 1 proposed conceptual blueprint, then gather 2 sets of analytical raw materials to fill it in, amounting to 3 broad claims:

  1. Human beings produce outcomes through (i) negotiated choices — “power” — in (ii) how to use our time, talents, and resources — “capabilities” — to achieve (iii) desired results — “incentives.
  2. Neoclassical economics describes capabilities and incentives, but less so political power.
  3. Sociology furnishes the missing thinking on (political) power needed to describe how political-economic systems yield (public) outcomes.

And piecing these together provides a self-contained framework, depicting that power mediates between different actors’ incentives and capabilities to yield expressed will and ability, which results in (public) outcomes. The upshot is that (public) outcomes are driven by incentives, capabilities, and power relationships among individuals, firms, and government.

We can take points 1–3 by turn.

1. Human beings produce outcomes through (i) negotiated choices in (ii) how to use our time, talents, and resources to achieve (iii) desired results. This wide claim starts from the basic premise that all outcomes on Earth result from natural forces, human choices, and everything in between. Natural forces include the movements of tectonic plates, the seasonality of global winds and ocean currents, the forces driving the emergence and spread of novel pathogens and sustaining the planet’s technicolour biodiversity. Human choices, subject to these natural forces, aim to produce desired outcomes, and inadvertently cause some undesirable ones too. And human activity as a whole reflects what might be called ‘human forces:’ changes in human populations that follow predictable patterns — in the creation and distribution of economic and political rewards; in changes in health, demographics, and the character of our families; in the spread of ideas, attitudes, values, and aspirations that become codified in shared patterns of behaviour; and in the salience of our various identities economic, political, national, ideological, religious, gender, race, age, or otherwise in our strategic interactions to get what we want.

So put another way, all outcomes on Earth are subject to complex and interconnected natural and human forces; but within this context, human beings make choices. And more specifically, we produce outcomes both intentional and inadvertent through (i) negotiated choices (“power”) in (ii) how to use our time, talents, and resources (“capabilities”) to achieve (iii) desired results (“incentives”) — which then feed back into longer-term forces. Put like this, it’s these three factors — power, capabilities, and incentives — that underpin all human activity, produce today’s outcomes, and shape the natural and human forces that govern the outcomes of tomorrow.

…inspired by the psychology literature…

This 100,000-foot representation of what drives (public) outcomes is in part inspired by the psychology literature, and in particular Icek Ajzen’s seminal theory of planned behaviour. Ajzen’s theory posits that an individual’s behavioural intention is driven by attitudes, perceived behavioural control, and subjective norms; and these 3 factors are strongly suggestive of the proposed 3 factors. “Attitudes” amount to one’s volition or motivation to achieve, characterizing the “incentives” element in the proposed representation. “Perceived behavioural control” reflects the notion that people do what they (believe they) have the “capabilities” to do. And “subjective norms” speak to the idea that individuals account for the expected social costs and benefits of taking given actions, which is indicative of the “power” relationships that are important in all human interactions.

This representation is also consistent with the economics game theory literature, which reflects that actors use their capabilities to maximize their expected outcomes given other strategic actors’ expected behaviour, based on the information at hand.

This representation also appears to be ‘MECE’ — ‘mutually exclusive and collectively exhaustive.’ “Capabilities” represent the objective expression of human activity. “Incentives” represent subjective motivations, independent of others’ will. And “power” represents subjective motivations dependent on others’ will. Construed this way, this representation accommodates any factor that drives individuals’ will and ability.

So formulating human activity in terms of incentives, capabilities and power appears at least to be conceptually complete and consistent with prior thought across multiple academic traditions. It is also arguably actionable, in the sense that it’s possible to incentivize, enable, or empower a given person or group, and thus achieve desired (e.g. public) outcomes more effectively.

But most importantly, this representation also seems to reflect reality. On this point, that incentives focus behaviour and capabilities define what can be achieved are self-evident, and have been borne out in countless studies in any case. But it’s maybe somewhat less immediately evident that power regulates how society’s key actors — individuals, firms, and government — spend their efforts to achieve their objectives. And here, it’s instructive to consider especially international relations, which offer ready case studies in uses of and responses to power.

…strategic actors do certainly appear to respond to power…

When new state leaders adopt more permissive foreign policies with respect to international partners, for example, partners may duly take advantage, reflecting that strategic actors do indeed respond to power. For real-world examples of this, we need look no further than at U.S. influences on global international relations over the past 4 years. Since the 2016 U.S. presidential election, for example, many foreign states have appeared very much emboldened in the degree to which they flout previously sacrosanct tenets of the global world order, the enforcement of which has been historically led by the U.S. government. Russian operatives these days hardly bother to hide their interference with foreign elections, including those in the U.S. Saudi officials order the assassinations of meddlesome journalists at home and abroad. China now openly represses democratic activists in Hong Kong, despite long-held assurances to maintain the model of “One Country, Two Systems.” Turkey invades politically-fragile Kurdish territory. And all of this is arguably possible only with the at-least-tacit approval (if not open support, in some cases) of the current Oval Office occupant. So where previously, U.S. power held countries accountable to well-established norms of international comity, now without this willingness to enforce such standards, states around the world with the independent incentive and capability to break norms for their own benefit have lately done so. Strategic actors do certainly appear to respond to power.

So representing human activity in terms of incentives, capabilities and power is on its face consistent with reality, in addition to being arguably also theoretically credible, logical, and actionable. Supposing this is true, then this representation meets the basic tests of a useful abstraction of reality, giving license to develop more fully its key concepts of incentives, capabilities, and power.

2. Economic theory has lots to say about capabilities and incentives; but it has less to say about how political power relationships develop and influence outcomes. Now, economic theory has a lot to say about capabilities and incentives. “Production functions” model how labour, capital, and any other generic set of time, talents, and resources combine to produce goods and services within given capacities (“budget constraints”). “Utility functions” model how individuals value outcomes separately and jointly. And both ideas have been analyzed extensively to wring out every juicy drop of refreshing insight.

…economic theory … has much to say about what it takes to ensure “fair” markets…

Economic theory also has a fair amount to say about power relationships, but primarily when it comes to economic power. Theory describes the significance of economic power in determining economic outcomes, clarifying that power between firms and labour determines wages, that power between firms and consumers determines prices, and that supply and demand determine these powers. Hence why economic theory also has much to say about what it takes to ensure “fair” markets that are less susceptible to market power abuses that cause so-called “deadweight loss.”

But economic theory has less to say about political power relationships.

And political power dynamics are perhaps singularly important in understanding what yields public outcomes, by the following logic. Many public outcomes — and especially those facing us today — don’t promise profits, and so won’t be pursued by private actors (as explored in Part I). So if public outcomes are to be pursued, it would be by government — the designated steward of the public good (in western democracies, at least). These governments (are meant to) represent their people(s), and so inherit their “desired” outcomes (“incentives”) from those they are institutionally designed to represent. Thus, power relationships between government and constituents — built into the institutional design that mediates the interests of public officials and other elements in society — are decisive in determining which constituents (and so whose (public) outcomes) government will be most inclined to serve.

Of course, it’s by this reasoning that the “people” are made sovereign in democracies — on the theory that if individuals possess power over government by being able to elect its members, government will serve citizens’ interests. If instead firms possess power over government, we will perhaps tend more toward oligarchy and corporate clientelism. And if neither firms nor individuals possess power over government, government may tend towards tyranny (communism, here, represents perhaps a cautionary tale).

So, any unified theory describing how human activity produces (public) outcomes will need to describe political power in how it develops and influences outcomes.

3. Sociology furnishes the missing thinking on political power needed to describe how political-economic systems yield (public) outcomes. Now, since classical economics lacks a well-developed theory of political power, we must seek a more mature theory elsewhere. Fortunately, we can find a rich tradition on power in the sociology literature, represented foremost by Richard Emerson’s seminal power-dependence theory.[1] In fact, after inspecting the foundations of this theory, we’ll see that we can actually recast it in game theoretic terms. And this will transform it into just the analytical scaffolding we’ll need to construct a unified framework accommodating power, capabilities, and incentives, which as posited can together describe how human activity yields (public) outcomes.

So first, inspecting the foundations of Emerson’s theory, we are instructed that the power of one person — ‘A’ — over another — ‘B’ — derives from B’s dependence on A. B’s dependence is directly proportional to his ‘motivational investment’ in outcomes that A has control over, and inversely proportional to the ‘availability’ of alternatives to achieve desired outcomes. So if B cares a lot about outcomes that A controls, and faces few alternatives to achieve them, A has a lot of power over B. If B doesn’t have reciprocal influence over things that A cares about, then A moreover has a lot of net power over B. And A can use this net power to compel B to do things that matter to A, in exchange for only very little from A.

Now second, with little contrivance, we’ll see that we can recast these key ideas into game theoretic terms. Using only time-tested economic primitives — utility functions, production functions, and game theory methods to identify preferred strategies — it seems possible to derive the power relationships between a given set of entities. The only conceptual innovation required to infer power relationships in this way appears to be to explicitly account for strategic actors’ ever-present option to ‘coerce’ any other. Appendix A illustrates this conjecture with a simple worked example.

…power relationships … depend on 4 key drivers…

So using the simple example set out in Appendix A, we can show that actors will be inclined to coerce and obey if there exists a net power differential. Per the basic model set out in Appendix A, power relationships between α and β appear to depend on 4 key drivers:

  1. ∂(outcomesᵦ)/∂(effortₐ): how much β’s outcomes depend on α’s effort;
  2. ∂(outcomesᵦ)/∂(effortᵦ): how much β’s outcomes depend on β’s effort;
  3. ∂(outcomesₐ)/∂(effortᵦ): how much α’s outcomes depend on β’s effort;
  4. ∂(outcomesₐ)/∂(effortₐ): how much α’s outcomes depend on α’s effort.

A moment’s reflection will confirm that these terms express the essential relationships that Emerson identifies — namely, that power pivots on (i) parties’ relative motivational investments in given outcomes, and (ii) the relative scarcity of parties’ capabilities (or “efforts,” as labelled above) to (help) deliver valued outcomes.

This representation of power in terms of economic primitives is useful for a number of reasons. It is amenable to standard economic analytical methods. It allows us now to quantify political power relationships and trace their boundaries, within given mathematical specifications. It enables prediction of not only who will have net political power given certain economic primitives, but also how actors will tend to use that power. And this last fact enables the reduction of any given power relationship between two actors into a single index for these purposes (excluding Emerson’s other useful notions of “cohesion,” etc.), reflecting which groups will extract unreciprocated talent, tools, and other tribute from others.

So finally third, translating Emerson’s ideas into economic language transforms them into the analytical scaffolding we need to support an integrated model of political economy. Now, all key economic and political relationships can be represented with a single set of variables applying to society’s key actors:

►“Incentives,” represented by value/utility functions — what does each group care about?

►“Capabilities” — how much does each group have to give, and how effectively are those contributions deployed?

  • Capacities/budget constraints — what relative levels of time, talent, and resources do groups have the capacity to devote to achieving outcomes?
  • Effort-outcome/production functions — how (efficiently) do individuals’ and groups’ efforts combine to result in outcomes, both intentional and inadvertent?

►“Power relationships” — to what degree will powerful parties be able to influence others to pursue outcomes that matter to the powerful?

These variables cover off those typical of a standard economic setup (above, embodied in the primitives defined by “incentives” and “capabilities”) — plus the addition of “power relationships,” which we’ve posited can be derived from “incentives” and “capabilities.”

…these concepts together … describe how human activity … translates into outcomes…

So combined with an understanding of deeper socio-economic forces (as outlined in Part I), we’ve now defined perhaps the most pivotal concepts we need to model the source(s) of present human institutions’ systemic failure to address (global) public outcomes.[2] These concepts together promise to enable us to describe how human activity today translates into outcomes both private and public, intended and inadvertent.

For future ease of reference, we can capture these key framework inputs in a diagram like the one found in Appendix B. That Appendix exhibits the idea set out here that public outcomes are driven by incentives, capabilities, and power relationships among individuals, firms, and government.

Coupling individual incentives more tightly with the global public good would be the single most effective and principled way to better address global issues.

Representing western capitalist democracies today in terms of the framework outlined above helps clarify that coupling individual incentives with achievement of the global public good would be the single most effective way to better address global issues. Two claims get us there:

  1. Western capitalist democracies today exhibit insufficient power-adjusted incentive on the part of individuals, firms, and government to pursue the global public good.
  2. Imbuing individuals with greater incentive would represent the most principled and effective way to better address global issues.

We can take these claims in turn.

1. Western capitalist democracies today exhibit insufficient power-adjusted incentive on the part of individuals, firms, and government to pursue the global public good. Populating the framework above to describe individuals, firms, and government raises 3 observations that together lead to this conclusion. First, (a) government and firms have the capabilities to pursue the global public good, but not the independent incentive. Second, (b) individuals (and firms) have the power to influence government, potentially to pursue the global public good. But, third, in the final analysis, (c) still no one has the power-adjusted incentive to pursue the global public good.

(a) Firms and government both have the capabilities to pursue the global public good, but not the independent incentive.

This becomes clear after summarizing the outcomes that individuals, firms, and government value, and also the capacities and interdependencies (effort-outcome functions) each faces in achieving desired outcomes.

So to start, individuals do generally value the global public good; but the data show that, unsurprisingly, most of us care relatively much more about things posing more immediate concern to our personal wellbeing: health, safety, economic security, recreation, and the like.[3] Indeed, the less of these one has, naturally the more one prioritizes these; and relatively greater focus on one’s own private interest is therefore intensified by today’s widening inequality, driven by reasons described in Part I. And individuals don’t possess great standalone capacity to achieve (global) public outcomes: only as members of firms (a catch-all term representing all manner of private sector organization, with their specialized talent and resources) do we multiply our capabilities to express our maximum potential to deliver outcomes.

…given today’s prevailing effort-outcome functions … the problematic result is that public outcomes systematically suffer…

Second, firms and the shareholders they represent, on the other hand, seek not their own ‘utility,’ per se, but instead typically profits.[4] And given today’s prevailing effort-outcome functions (here, “production functions”) — which tend to entail negative externalities to mental health and wellbeing, democratic integrity, the stability of foreign states, and global sustainability, as described in Part I — the problematic result is that public outcomes systematically suffer. But as also discussed in Part I, firms have perhaps the most combined capability to improve (global) public outcomes, able as they are to flexibly enlist in effective combination the talent and resources needed to achieve any given corporate aim, for a fee acceptable to the market.

Finally, government in its idealized characterization has few outcomes that it values independently of the constituents it represents. Now in reality, public officials occupying public office are human too, and so seek to keep their position and grow their influence — and whose outcomes they prioritize (individuals’ or firms’, e.g.) to do this will depend on prevailing power dynamics between government, firms, and individuals, as discussed in section (b) below. But in any event, like firms, government has material capabilities to pursue the global public good, even if they may be somewhat more constrained than firms, all as discussed in Part I.

These specifications are set out graphically for convenience in Appendix C.

(b) Individuals (and firms) have the power to influence well-functioning democratic government, potentially to pursue the global public good.

Having canvassed the value functions, capacities, and effort-outcome functions vis-à-vis the global public good applying to individuals, firms, and government, we can now derive relevant power relationships by applying the factors put forth by Emerson and translated into economic terms:

  1. ∂(outcomesᵦ)/∂(effortₐ): how much β’s outcomes depend on α’s effort;
  2. ∂(outcomesᵦ)/∂(effortᵦ): how much β’s outcomes depend on β’s effort;
  3. ∂(outcomesₐ)/∂(effortᵦ): how much α’s outcomes depend on β’s effort;
  4. ∂(outcomesₐ)/∂(effortₐ): how much α’s outcomes depend on α’s effort.

Individuals’ and firms’ power becomes evident after reviewing these 4 factors as they apply to 3 key power relationships: between (i) individuals and government, (ii) individuals and firms, and (iii) firms and government.

(i) So first, individuals still fortunately have a fair amount of power over government in western capitalist democracies. Individuals’ valued outcomes depend on government to create the conditions and provide the public goods and services needed to enjoy a high standard of living: financial regulation, healthcare systems, transportation networks, educational systems, and the like. These things definitely matter to us; but our individual outcomes depend much more on our own efforts: to earn an education, get a well-paying job, find a mate maybe, cultivate our passions with like-minded others — which undertakings most often don’t involve the government. So in “normal” times, we generally have much more direct control over the things that matter to us than do public officials, meaning that public officials have relatively less power over us as individuals.

…public officials depend much more on us to sustain their livelihoods…

By contrast, public officials depend much more on us to sustain their livelihoods, in that individuals provide scarce and valuable votes that can’t be got anywhere else. This is true when electoral mechanisms work, political alternatives exist, and public officials cannot override these controls to secure enduring private gain. So under these conditions — fortunately relatively “normal” in 20th- and 21st-century liberal western states — individuals have a lot of net power over public officials in a democracy.

(ii) Now, power analyses between individuals and firms run along similar lines. Individuals play two key roles vis-à-vis firms and the investors/ shareholders they represent: our role as ‘consumer’ and our role as ‘worker.’ But in each case, power relationships are governed by market forces — namely supply and demand in product markets, and supply and demand in labour markets. And these supply-demand relationships embody the essential elements of relative ‘motivational investment’ and relative ‘availability’ as set out by Emerson, but in the economic context.

(iii) So third, firms enjoy power over government. Firms’ outcomes — namely profits — depend on government to create a hospitable environment to make large sales at low cost. Government has a fair amount of power here, able as it is to set corporate tax rates, cast or cut regulation to help or hinder firms’ conduct of business, and generally encourage or suppress economic growth that determines the size and shape of customer bases and labour pools that firms need to earn their profits. Government may in the case of some firms even directly purchase or supply goods and services. But still, in a globalized world, (large) firms have options: if domestic environments become too inhospitable, firms can typically relocate or outsource (certain of) their operations. (Some authors assert that large firms are still less mobile today than may be commonly assumed.[5] But especially as Covid-19 has forced the world to stay at home, in turn forcing firms to plan for such contingencies in the future and proving the potential benefits of running remotely, virtualization is arguably going to continue to become more and more the norm, supporting the assertion that large firms are and will increasingly become quite mobile.)

Now, looking at the other side of the power relationship between domestic firms and government, politicians’ outcomes depend on firms for campaign financing, and public officials’ outcomes rely on firms for corporate tax revenues and jobs benefiting officials’ other masters of their fate — “the people.” These funds and jobs are pivotal to politicians’ election hopes, and can’t be got in the same supply anywhere else in countries that distrust the unbridled expansion of government (and so can’t be furnished by government itself).

…government depends on firms for valuable and scarce funds and jobs…

Thus, whereas (large) domestic firms tend to have options around the world to turn a profit, and so need (domestic) government less, government depends on firms for valuable and scarce funds and jobs that are hard to find in the same supply elsewhere. So large, mobile firms today — representing an increasing share of all firms — enjoy material net power over government.

Having addressed each key power relationship between individuals, firms, and government, it becomes clear upon review that individuals (and firms) have power over well-functioning democratic government. These specifications are set out graphically, for convenience, in Appendix C.

(Now before moving on, it’s worth noting one thing about government’s power over itself. As can be seen from the power analyses above, well-functioning democratic government has perhaps (and perhaps ironically) the least power over other parts of society. This (happy) circumstance is by design, but shouldn’t be taken for granted or assumed to hold forever. Public officials, being human, do what they can to rewrite democratic rules to their own advantage, and to insulate themselves from competition, as Katherine Gehl and Michael Porter note.[6] Gerrymandering creates electoral maps favourable to governing coalitions. Laws restricting independents’ access to the general election ballot discourage new political alternatives to incumbent parties. And arcane parliamentary rules restricting what gets debated in legislative chambers prevent good ideas from getting enacted (see the self-serving “Hastert Rule” in the U.S., for example).

Thanks to the foresight of some of history’s most profound political thinkers and constitutional designers, large federal democratic states will hopefully be able to avoid some of government’s worst possible tendencies toward tyranny, since sub-federal jurisdictions would also need to be overcome to bring about absolute totalitarianism. But sustained incremental perversions to electoral systems can substantially weaken the force with which citizens can direct government action and hold government accountable.

While government still today responds to the will of its constituents (at least somewhat), constituents need to remain ever vigilant to ensure that government keeps working for them.)

(c) Still, no one has the power-adjusted incentive to pursue the global public good.

The result of section (b) is that, since individuals (and firms) have power over well-functioning democratic government, government will tend to pursue what matters to individuals and firms, because public officials must win votes from individuals (and financing from firms) to keep hold of their public titles, as mentioned in section (a). And this holds so long as electoral mechanisms work, political alternatives exist, and public officials lack the ability to override electoral controls to secure enduring private gain.

Inconveniently, though, individuals and firms place value on the (global) public good relatively less than they do on matters that directly impact their private wellbeing, as mentioned in section (a). Individuals justifiably care much more about things posing more immediate concern to our personal wellbeing: health, safety, material well-being, recreation, and the like; and firms exist to make a profit. And this suggests that neither individuals nor firms have sufficient incentive to compel government to use its capabilities to pursue the global public good.

Thus, in the final analysis, pursuit of the global public good is weak ultimately because no group expresses the power-adjusted incentive needed to pursue the global public good. And so, any viable solution must necessarily (and perhaps even sufficiently) instil this incentive.

2. Imbuing individuals with this incentive would be the most principled and effective way to better address global public issues. Tepid pursuit of the global public good appears to derive from a lack of power-adjusted incentive on the part of society’s key actors to pursue the global public good. So outside of a scenario where pursuit of today’s (global) public issues arises as a by-product of other private activity, any answer will need to instil sufficient incentive somewhere to pursue the global public good. And entrusting this incentive to individuals would be most principled and effective at improving this pursuit, which we can see by process of elimination.

First, one might reasonably ask why it wouldn’t be best to incentivize firms directly for achieving the (global) public good. Firms have the necessary capabilities; and despite that today’s most powerful firms tend to exacerbate many of our presently most-pressing public issues (as described in Part I), firms are still on balance a force for good in the world, continuing to work wonders where properly motivated. Indeed, politicians and jurists increasingly seem to support the idea that firms should be made directly responsible for making corporate decisions that align with the public good. One can see this in, for example, the Supreme Court of Canada decision in BCE Inc. v. 1976 Debentureholders, which holds that directors’ fiduciary duty is owed to the “corporation,” and not to shareholders, as in previously well-established ratios.[7]

…to assign firms … would ultimately be dangerous and undemocratic…

But alas, to assign firms to the task would ultimately be dangerous and undemocratic. Firm leadership is not elected by citizens but instead by shareholders, and so is unaccountable to anyone but shareholders. To assign firms would be to diffuse the very focused incentives that underpin private sector effectiveness in the first place (as discussed in Part I), introducing uncertainty on the part of shareholders who entrust their funds to firms explicitly to earn a return, and giving practically unbounded license to corporate management to deploy corporate coffers — 3rd-party funds — however it sees fit, under the legal aegis of the “business judgment rule.”

Then second, if stronger firm incentives to pursue the global public good aren’t the answer, what about government incentives? Again, government is probably capable enough to effectively pursue the global public good, if properly motivated. The likely reason government doesn’t pursue the global public good effectively is that public officials are beholden to their citizens (for votes), and to a growing extent, firms (for campaign financing, corporate tax revenues, and jobs) — and neither individuals nor firms have to date represented sufficient demand for more intentional government action to pursue the global public good, relative to matters that improve individuals’ lives more directly (jobs, healthcare, education, tax-reduction, etc.), or firms’ profits. And incentivizing government to pursue the global public good as distinct from the demands of individuals and firms would weaken democracy, as it would require weakening constituents’ power over governments, or establishing institutional incentives altogether detached from public demands. And neither of these would be desirable in a democracy, where sovereignty is rightly designed to be vested in the people.

Some may suggest, at this stage, that the answer lies in some form of global government, such as a United Nations armed with coercive powers. This deserves much more thorough treatment than can be offered here; but suffice it to say that those who recognize people’s lust for power would be wise to eschew a supreme global force endowed with coercive powers, which risks irreversible tyranny. To be sure, the world’s most attractive societies throughout history have tended to be designed in a way that corrals human greed and the drive for power such that these ultimately benefit one’s fellow man, by checking these natural human drives with regulated competition. Indeed, this is just what capitalism and democracy are designed to do — establish systems whereby one gains personally by competing for the privilege of selling to and serving others. To establish a single ultimately-unchecked global authority would be to invite irreversible global tyranny.

…provid[ing] individuals with relatively stronger incentives … would sit nicely in principle alongside existing liberal institutions…

So finally third are individuals. And greater incentives to pursue the global public good sit nicely with individuals. Individuals as a group aren’t themselves particularly capable of achieving the global public good, as discussed, when working outside of broader organizations like firms or governments. But individuals as voters do have the power to direct government to pursue the global public good more intentionally. Appropriately incentivized individuals as consumers would also have the power to pay firms — and perhaps an entirely new crop of firms devoted specifically to solving public issues for a profit — to pursue the global public good. And this is how accountability is intended to work in democratic capitalist societies. So were there a way to provide individuals with relatively stronger incentives to pursue the global public good, this would sit nicely in principle alongside existing liberal institutions that have until relatively recently served modern civilization demonstrably quite well.

Thus, coupling individual incentives with achievement of the global public good would arguably be the most principled and effective way to better address global public issues.

Coupling individual incentives with achievement of the global good could also reduce firms’ problematic and growing power over government, addressing both issues in a single stroke.

Part I remarked that private sector actors will continue to grow in capability and power at the expense of governments, largely as a result of natural and uncontrollable capitalist forces. But coupling individual incentives with achievement of the global public good promises to break this trend.

Clarifying the drivers of group power enables more precise analysis, ultimately suggesting that coupling incentives promises to leave government freer to pursue what’s right for individuals:

  1. Group power is a function of three things: (i) the group’s relative ability to condition the valued outcomes of another group, (ii) coordination among group members, and (iii) strategic relationships with outside groups.
  2. As matters currently stand, all drivers of firm power will tend to grow (at least weakly) relative to those of the state.
  3. But coupling individual incentives with the global public good promises to reverse these trends, leaving government freer to pursue what’s right for individuals.

We can take these claims in turn.

1. Group power is a function of (i) the group’s relative ability to condition valued outcomes, (ii) coordination among group members, and (iii) strategic relationships with outside groups. Emerson’s power-dependence theory is premised on the notion that a “group,” so defined, acts as a single unitary entity. In the discussion so far, “groups” have represented a looser collection of entities, which by and large possess comparable aims, capabilities, and power relationships — but by no means act perfectly as one. To accommodate this difference in definition, we must adjust for the fact that “individuals” and “firms” are composed of independent actors with at-times idiosyncratic aims (accepting the simplifying assumption that “government” acts as one). And we must also adjust for the fact that domestic “individuals,” “firms,” and “government” exist within a broader ecosystem of other strategic actors (e.g. international actors), all of whom can have power relations with one another.

On this understanding, then, one group’s power over another is a function of three drivers: i) the degree to which the group can unilaterally condition the target outcomes of another, if acting perfectly in concert, per Emerson’s formulation and following much the same analysis as performed above; ii) the degree to which the group itself can coordinate to act in concert; and iii) the degree to which the group can act strategically with other groups to condition another’s target outcomes. And this construction enables analysis of groups’ relative power with respect to each driver, as discussed next.

2. As matters currently stand, all three drivers of firms’ power as a group will tend to grow relative to those of government. We’ll explore these three drivers in turn.

With respect to the first driver (i) of group powerone party’s ability to condition the target outcomes of another partyfirms are gaining power over government as a result of the systemic effects of natural capitalist dynamics, as discussed in Part I. This result is apparent upon review of how firms’ and government’s sources of the power are likely to evolve.

Recall that firms have power over government in that they can i) finance super PACs, ii) pay corporate taxes, and iii) furnish jobs that matter to government’s other masters — individual citizens. And governments have power over firms in that they can condition firms’ ability to profit within the government’s jurisdiction.

…all of the sources of firms’ power over government are growing…

Now, as firms become larger as a result of innovation relationships (causing consolidation, automation, and the like as described in Part I), all of the sources of firms’ power over government are growing, while those of government over firms are shrinking. Firms’ power is growing as rising corporate profits in the hands of fewer firms represents greater, scarcer potential to fill super PAC campaign war-chests and government coffers, in the form of (corporate) tax revenues and payroll taxes on highly-paid employees. And larger firms are becoming increasingly significant and scarce in furnishing good jobs that voters (and so by extension, government) care about. These dynamics give (larger) firms more power to help deliver the valued outcomes of politicians and public officials.

By contrast, western democratic government’s power over firms is shrinking. These governments have power over firms by virtue of their ability to provision access to, and to set the terms of trade in, attractive markets. But western markets are becoming less appealing to firms, as markets stagnate relative to other places (e.g. China, India, Brazil), for related reasons described in Part I. So, that firms need western (democratic) governments less, while these governments need firms more, erodes western governments’ ability to influence firm behaviour in their jurisdictions; and indeed, firms are gaining greater (lobbying and other) power vis-a-vis government.

Now, with respect to the second driver (ii) of group powercoordination among group membersfirms tend toward greater concentration as described in Part I; and this translates into greater coordination relative to government. This follows from the fact that it’s easier to coordinate among fewer bodies, and also from the fact that the mega-corporations that have emerged victorious in global capitalist conquest increasingly share the same aims and obstacles vis-à-vis government — namely, to cut corporate taxes, to scrap consumer protections, to bolster barriers to keep proprietary resources proprietary (IP, data, etc.), to increase access to and availability of cheap labour, and the like. And this greater unity of purpose among (large) firms further improves their ability to coordinate.

But finally, with respect to the third driver (iii) of group powerstrategic relationships with other groups — whether firms are gaining the upper hand in strategic relationships with other actors vis-à-vis domestic western governments appears, to this observer at least, more ambiguous. To evaluate this, we first recognize that strategic behaviour is predicated on any shared (and impermeable, stable, and legitimate) marker of entities’ identities (according to so-called preference-based group theories), in which strategic actors may root a relationship for mutual benefit (according to so-called belief-based group theories[8]) — for example, based on the main value categories enumerated by Spranger: theoretical, religious, social, political, aesthetic, and economic.[9] And key strategic actors besides domestic firms and governments include domestic individuals (usefully distinguished here between poorer and richer) and foreign governments, with whom domestic firms and governments have the potential to interact for mutual benefit.

…government may increasingly have more committed allies in (poorer) domestic individuals…

Now, as greater shares of western democratic populations become poorer (per the natural capitalist dynamics described in Part I), western governments may increasingly strategically align with domestic citizens as a group. This is largely because, generally, a greater proportion of the typical western capitalist democratic population shares a salient economic identity marked by financial struggle; and poorer individuals and government can increasingly both improve their outcomes by working together to support legislation to achieve objects generally seen as beneficial to (a greater number of) consumers and workers (each worth 1 vote) and perhaps at the expense of domestic firms. Indeed, this phenomenon is manifest in the rise of populist regimes across the democratic world — especially prominent since 2016, for example, shortly after the financial crash of 2008. All of this suggests that government may increasingly have more committed allies in (poorer) domestic individuals as trends continue per the underlying economic forces at work as described in Part I.

On the other hand, though, larger and richer firms increasingly enjoy greater strategic alignment with richer domestic individuals (for complementary reasons) — and also perhaps with foreign governments. As explored previously, large firms bring tax revenues and jobs that can make or break a country’s economic future; and as firms’ coffers and influence grow, so does their attractiveness to foreign states, which become more willing do what firms want to win their investment.

Reflecting these conflicting shifts in strategic alignments, while the world has seen a proliferation of populist rhetoric originating from historically liberal democratic states, this has not been matched with the same force in populist action from these same states. On balance, it’s perhaps ambiguous whether domestic firms are growing in power relative to domestic government in connection with their strategic relationships vis-à-vis other key strategic (domestic and foreign) actors.

Nevertheless, taken together, the three drivers of firm power will likely tend to at least weakly grow over time relative to those of government (trending ambiguously, in the case of the third driver). And this will likely result in firms continuing to gain power over government over time.

3. Coupling individual incentives with the (global) public good promises to reduce the power of firms over government, leaving government freer to pursue what’s right for individuals. With all of this said, coupling individual incentives with the (global) public good turns the immediately-preceding power calculus upside down.

Coupling individual incentives with the (global) public good promises to catalyze lifestyle-enhancing innovation (as defined in Part I). This result starts from the fact that new such incentives would turn individuals into potential new customers, who are willing to pay others to achieve the (global) public good to realize their own individual incentives. So firms would arise to deliver these (global) public outcomes for a fee, to meet the needs of these new customers. As long as individual incentives from achieving the public good outweigh the costs of retaining firms to hit target outcomes, individuals would profit, and so would firms. And the rise of these firms would represent lifestyle-enhancing innovation (as defined in Part I), as such a rise would be addressing an entirely new class of consumer needs.

…lifestyle-enhancing innovation … would effectively redistribute wealth from those … who have it … to those … who don’t…

Lifestyle-enhancing innovation serves ultimately to increase the total demand for labour, as described in Part I. And in today’s environment, this would effectively redistribute wealth from those (capital owners) who have it to those (labour owners) who don’t.

And in turn, this redistribution would reduce firms’ ability to condition government’s outcomes (the first driver of power that firms have over governments), as new firms arise to supply (i) new jobs that matter to voters, and (ii) new alternative sources of funding for super PACs and (corporate) tax revenues that matter to public officials. It would also increase government’s ability to condition firms’ outcomes (the first driver of power that government has over firms), as the healthier, more inclusive economies resulting from lifestyle-enhancing innovation make government’s previously-stagnating jurisdictions more attractive to firms. Moreover, this redistribution would directly reduce concentration and coordination among firms (operating to directly weaken the second driver of firm power with respect to government). And finally, given that this redistribution would generally balance wealth and income, this would tend to reverse trends in firms’, individuals’, and government’s strategic alignments, still leaving perhaps ambiguous effects here (in connection with firms’ third driver of power with respect to government).

All of this means that, ultimately, coupling individual incentives with the global public good could reduce firms’ problematic and growing power over government.

In short, the central premise of this Part II is that focus on the global public good could be improved principally by reorienting incentives, capabilities, and power relationships among individuals, firms, and government. If this is true, then coupling individual incentives more tightly with the global public good is perhaps the single most effective and principled way to better address global issues. And not only this, but this could also reduce firms’ problematic and growing power over government as well, addressing both issues in a single stroke.

[END OF PART II]

[Thanks for reading! Be sure to keep an eye out for the third in this series — Part III — which will evaluate a particular idea that lives within the class of solutions arrived at in this Part II. And of course, please feel free to post questions or comments inline or in the comments section below. Thanks again!]

Appendix A: Game Theoretic Representation of Emerson’s Power-Dependence Dynamics

Richard Emerson’s power-dependence theory posits that one’s power over another is rooted in the latter’s dependence on the former. We can arrive at this very conclusion within a game theoretic setting. After assigning to 3 hypothetical individuals (‘A,’ ‘B,’ and ‘C’) illustrative utility functions (‘U’) as a function of three outcomes (θ₁, θ₂, θ₃) and “capacities” (‘c’) (available efforts and/or resources to devote to pursuit of θ₁, θ₂, and θ₃), and after specifying illustrative “effort-outcome functions” (mapping individuals’ combined efforts ‘ε’ to outcomes), we will be able to infer which individuals stand to benefit by exerting power over others, and on what basis. We’ll start by specifying model parameters.

Illustrative model parameters

Model parameters include utility functions, capacities, and effort-outcome functions.

Utility functions for each individual A, B, and C (where “**” denotes exponentiation):

  • Uₐ = θ₁ ** ½
  • Uᵦ = θ₂ ** ½
  • U𝒸 = θ₃ ** ½

Capacities for each individual A, B, and C:

  • cₐ = εₐ₁ + εₐ₂ + εₐ₃, where εₐᵢ is the effort that ‘A’ devotes to achieving θᵢ
  • cᵦ = εᵦ₁ + εₐ₂ + εᵦ₃, where εᵦᵢ is the effort that ‘B’ devotes to achieving θᵢ
  • c𝒸 = ε𝒸₁ + ε𝒸₂ + ε𝒸₃, where ε𝒸ᵢ is the effort that ‘C’ devotes to achieving θᵢ

Effort-outcome functions for each outcome θ₁, θ₂, and θ₃:

  • θ₁ = εₐ₁ + εᵦ₁ + ε𝒸₁
  • θ₂ = εₐ₂ + εᵦ₂ + ε𝒸₂
  • θ₃ = ε𝒸₃ * (εₐ₃ + 1)

Individuals ‘A,’ ‘B,’ and ‘C’ choose efforts ‘ε’ to maximize their own utilities.

In this very simple setup, all individuals are equally well-placed to achieve outcomes θ₁ and θ₂ — the outcomes that matter to ‘A’ and ‘B,’ respectively. These outcomes are the straight sum of the effort that each individual devotes to them.

By contrast, only the efforts of individuals ‘A’ and ‘C’ matter in determining θ₃— the outcome that matters to ‘C.’ In fact, θ₃ is in part a multiple of the efforts of ‘A’ and ‘C,’ so ‘C’ would benefit materially from ‘A’s help in achieving θ₃.

Given these parameters, we can show that ‘C’s relative dependency on ‘A’ to achieve θ₃ (the outcome that matters to ‘C’) gives ‘A’ an incentive to compel ‘C’ to spend relatively more of ‘C’s effort achieving θ₁ (the outcome that matters to ‘A’), in exchange for ‘A’s reciprocating only in part to help out ‘C’ with θ₃.

Model solution

It will be convenient first to consider the world from ‘B’s perspective. First, we note that ‘B’s effort on θ₃ is irrelevant (as θ₁ is a function only of the efforts of ‘A’ and ‘B’); so ‘B’ logically considers spending effort on only θ₁ and θ₂; and of these two outcomes, ‘B’ cares only about θ₂. ‘A,’ who cares about θ₁, gains relatively no more from ‘B’s effort than his own in service of θ₁, and can provide relatively no more than B can in service of θ₂, so has no reason nor leverage to compel ‘B’ to devote effort to θ₁. The same goes for ‘B’ with respect to ‘A.’ So ‘B’ devotes all of his effort — his entire capacity ‘cᵦ’ — to θ₂:

►(1) εᵦ₁ = 0

►(2) εᵦ₂ = cᵦ

►(3) εᵦ₃ = 0

Next we can look at the world from ‘A’s and ‘C’s perspective, starting with ‘A’s.

Now, ‘A’ could follow ‘B’s lead, and devote all of his capacity to the outcome that he values, θ₁. In this case, ‘C’ would then likewise devote all of his capacity to his preferred outcome θ₃. And these choices would imply that ‘A’s valued outcome θ₁ would ultimately result in a value of cₐ:

  • θ₁ = (εₐ₁ = cₐ) + (εᵦ₁ = 0) + (ε𝒸₁ = 0) = cₐ
  • Uₐ= (θ₁ = cₐ) ** ½

And these choices would likewise imply that ‘C’s valued outcome of θ₃ would ultimately result in a value of c𝒸:

  • θ₃ = (ε𝒸₃ = c𝒸) * ((εₐ₃ = 0) + 1) = c𝒸
  • U𝒸= (θ₃ = c𝒸) ** ½.

But ‘A’ has another option here. ‘A’ could seek to compel (or if you prefer, “negotiate with”) ‘C’ into devoting strictly positive effort to ‘A’s valued outcome θ₁ (such that ε𝒸₁ > 0) in exchange for ‘A’s devoting some (lesser) positive effort to ‘C’s valued outcome θ₃ (such that ε𝒸₁ > εₐ₃ > 0). ‘A’ would reason that, since ‘A’s and ‘C’s efforts are equally potent in achieving θ₁, ‘C’s greater effort achieving θ₁ would more than make up for the loss of ‘A’s lesser efforts that go toward θ₃; and so ‘A’ would be better off.

In general, ‘A’ will be better off coercing if:

►Uₐ[Coerce] ≥ Uₐ[Refrain], where…

  • Uₐ[Coerce] = ((εₐ₁ = cₐ - εₐ₃) + (εᵦ₁ = 0) + (ε𝒸₁ = c𝒸 - ε𝒸₃)) ** ½)
  • Uₐ[Refrain] = cₐ ** ½

And ‘C’ will be better off acquiescing, if:

►U𝒸[Acquiesce] ≥ U𝒸[Resist], where…

  • U𝒸[Acquiesce] = ((ε𝒸₃ = c𝒸 - ε𝒸₁)*(εₐ₃ + 1)) ** ½
  • U𝒸[Resist] = c𝒸 ** ½

Using these inequalities and a bit of algebra, we can show that these conditions are met, in this model’s specification, when the following holds:

►(4) ε𝒸₁ ≥ εₐ₃ ≥ ε𝒸₁/(c𝒸 - ε𝒸₁)

Given the fact that ε𝒸₁ > 0 and (c𝒸 - ε𝒸₁) > 0, thus ε𝒸₁ > ε𝒸₁/(c𝒸 - ε𝒸₁), when (c𝒸 - ε𝒸₁) > 1, which is possible so long as c𝒸 > 1.

Combined with equation (4), this means that, so long as ‘C’s capacity is greater than 1, in this specification, there always exists a range of strictly positive values εₐ₃ where ‘A’ can compel ‘C’ to overcompensate ‘A’ so that both can get outcomes that are better for them than the base case where ‘A’ and ‘C’ each independently pursue only the outcomes that matter to each respectively.

Thus, ‘A’ will coerce ‘C,’ in this model, within the boundaries of ‘C’s relative dependence on ‘A,’ as alluded to at the outset.

Things to note in this model

The source of ‘C’s dependence on ‘A’ in this model is rooted in the fact that ‘A’s effort is, within a certain range, more potent than ‘C’s in helping ‘C’ achieve outcomes that matter to him, while at the same time ‘C’s effort is no more potent than ‘A’s in achieving outcomes that matter to ‘A.’ So ‘C’ is willing to trade more of his effort to help ‘A’ than ‘A’ needs to provide in return, and both ‘A’ and ‘C’ will still be better off than if they didn’t negotiate to achieve mutual aims. Thus, power-dependence relations in a simple setup such as this depend on 4 key relationships between a given individual ‘A’ and other individuals ‘i’:

  1. ∂(outcomesᵢ)/∂(effortₐ): how much i’s outcomes depend on α’s effort;
  2. ∂(outcomesᵢ)/∂(effortᵢ): how much i’s outcomes depend on i’s effort;
  3. ∂(outcomesₐ)/∂(effortᵢ): how much α’s outcomes depend on i’s effort;
  4. ∂(outcomesₐ)/∂(effortₐ): how much α’s outcomes depend on α’s effort.

It’s also worth noting that, if ‘B’s effort were more potent than ‘A’s in achieving θ₁, and if the three individuals could negotiate together at once, ‘A’ would have an incentive to try to strike a deal with both ‘C’ and ‘B,’ whereby ‘A’ helps out with θ₃ in exchange for ‘C’s overcompensating both ‘A’ and ‘B’, so that ‘B’ then provides some of his more potent efforts toward θ₁. This goes to show that this representation is also amenable to network solutions.

Appendix B: Framework of Political-Economic Parameters Predicting Pursuit of (Public) Outcomes

The framework introduced in this Part II suggests that incentives, capabilities, and power relationships determine the degree to which individuals, firms, and government will pursue the public good. We can depict these graphically for convenience, per the figure below.

Key parameters predicting pursuit of the public good

Appendix C: Populated Framework of Political-Economic Parameters

The framework introduced in this Part II suggests that incentives, capabilities, and power relationships determine the degree to which individuals, firms, and government will pursue the public good, as first depicted graphically in Appendix B. Once we populate these parameters, we can represent the results for convenience in a diagram like the one shown below.

Key parameters predicting pursuit of the public good, populated

Notes:

[1] Richard M. Emerson, “Power-Dependence Relations,” American Sociological Review 27, no. 1 (February, 1962): 31–41, http://webarchiv.ethz.ch/soms/sociology_course/Social_Interaction/R_M_Emerson_Power_Dependence_relations.pdf.

Thinkers have identified myriad sources and properties of power. Guerrero and Andersen observe that power applies only to relationships between entities. Kraus distinguishes between the power to build and the power to destroy. Dowding formalizes the definition of power to fit within economic rational choice frameworks. Sharp underscores that state power derives from subjects’ propensity to obey. Galbraith identifies that resources are often key sources of power. French and Raven apply a number of these ideas to identify 5 sources of power in an organizational context (later adapted to 6).

Such authors’ works would seem to support that power between parties is the relative degree to which one party can condition the expected target outcomes of another. Power is relative between parties, as Guerrero and Andersen note. Conditioning can be positive or negative, constructive or destructive, as Kraus notes. Power applies in connection with parties’ target outcomes, as implied in economic rational choice frameworks. Target outcomes are within the subjective control of parties themselves, and beyond the reach of purely objective determinism. Sources of power will be context-specific, depending on agents’ aims. (So in organizations, for example, where actors seek to achieve ultimately for pecuniary or reputational gain, another’s power comes from the ability to reward and punish yes — but also from expertise, relationships, information, position — all of which condition a worker’s ability to achieve.) This understanding is represented on the whole perhaps best by Richard Emerson’s seminal “Power-Dependence Relations.”

[2] Certain elements are necessarily still exogenous to this model — institutional and technological innovations that recast power relationships, for example (e.g., the introduction of central banking regimes, constitutional amendments, legal precedents, etc.). This representation is also lacking some of the political, sociological, and demographic “human forces” that may be necessary in a more complete long-term understanding.

[3] Tess Bonn, “Poll: Voters name health care as top issue going into 2020,” The Hill, last modified December 12, 2019, https://thehill.com/hilltv/rising/474327-voters-name-health-care-as-top-issue-going-into-2020.

[4] While non-profits do exist, of course, their capacities are limited by the charity of others, which tends to be dwarfed by what people are willing to spend on their own self-interest. Thus firms as a group can be relatively fairly represented in terms of aggregate activity by organizations solely of the for-profit variety.

[5] “How Compatible are Democracy and Capitalism?” The Economist, last modified June 13, 2019, https://www.economist.com/finance-and-economics/2019/06/13/how-compatible-are-democracy-and-capitalism. As The Economist notes, “for the system to hold a third pillar is needed: large firms that are not very mobile. … That increases the power of the state relative to firms, and allows it to tax and spend.”

[6] Katherine M. Gehl and Michael E. Porter, “Why Competition in the Politics Industry is Failing America,” Harvard Business School, last modified September 2017, https://www.hbs.edu/competitiveness/Documents/why-competition-in-the-politics-industry-is-failing-america.pdf.

[7] “Key Lessons from the BCE Decision,” Osler, last modified December 22, 2008, https://www.osler.com/en/resources/critical-situations/2010/key-lessons-from-the-bce-decision.

[8] Jim A. C. Everett, Nadira S. Faber, and Molly Crockett, “Preferences and Beliefs in Ingroup Favoritism,” Frontiers in Behavioral Neuroscience 9, no. 15, (February 2015): 1–21, https://www.frontiersin.org/articles/10.3389/fnbeh.2015.00015/full#h2.

[9] Ingolf Bamberger, “Values and Strategic Behaviour,” Management International Review 26, no. 4 (4th Quarter, 1986): 57–69, https://www.jstor.org/stable/pdf/40227818.pdf?seq=1.

Alex Mucalov is an observer of human social systems. He has enjoyed diverse and direct exposure to some of democratic society’s key economic and political institutions through varied strategy experience in financial services, government, and regulatory bodies. He holds a JD/MBA from the University of Toronto, a Master’s in Economics from the London School of Economics and Political Science, and a Bachelor’s in Commerce from Queen’s University.

Observer of social systems. Strategy lead, former regulator. JD/MBA from the University of Toronto, MSc Economics from the London School of Economics (LSE).

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