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Unformatted text preview: The Global Economy and World Politics
Professor Edward Weisband Lecture 6: Hierarchy and Heteronomy as Alternative Forms of Governance A Summary of Part I: Productivity Productivity links labor time with Invention and innovation To reduce opportunity costs by means of Sectoral Diversification and Sectoral Synergy In the production of GDP outputs up scales of value addedness The key to national economic productivity is specialization Across many diversified and interdependent economic sectors Designed to enhance or increase value addedness And thus contribute to national economic competitiveness And ultimately economic prosperity and social justice First Cut Specialization, Risk, and the Indispensability of Economic Governance
Specialization promotes interdependence BUT also RISK As specialization deepens across and within sectors, industries, and services The interdependence generated within an economy requires greater degrees of TRUST and, ultimately, GOVERNANCE The proposition that grounds the basic logic stream, therefore, is that national economic productivity is a function of not only specialization and interdependence but of risk reduction, trust, and economic governance Hierarchy v. Heteronomy As economies confront risk in both the public and private sector The immediate tendency is to attempt to reduce it through economic governance By bringing specialization "under one roof" In the form of administrative control through hierarchy topdown Examples: Institutions (public) and firms (private) BUT there is an alternative to this hierarchical distinction Economic governance can also take the form of market heteronomy Or rule by small decisions, bottomup Second Cut Vertical Hierarchy as a Mechanism of Economic Governance A basic mechanism in economic governance That aims at coordination of specialized inputs Designed to counter risk and to promote efficiency Is vertical hierarchy From the perspective of economic governance Hierarchical mechanisms are organized centrally According to rank or echelon And manage specialization By means of merit systems or seniority Centralized Managerial Control Systems to Coordinate Performance Vertical hierarchies take many forms including Public sector (government) institutions especially bureaucracies Private sector organizations including profit seeking firms, nonprofit organizations (including universities), and nongovernmental organizations Within these institutions Governance is exercised through managerial control systems and directive rules That require certain sets of behaviors more or less on the basis of performative criteria and/or seniority Vertical Administration and the Institutional Mission Bureaucratically administered institutions create cultures of obligation to the institutional mission Professionals who represent specialized divisions of labor work together under the coordinating control and authority represented by rank and echelon Services or outputs from such institutions and organizations are the responsibility of the institution as a whole And thus obligation as well as liability attaches to the institution rather than to the specialized staff, technicians, or professionals within it The Weberian Hierarchical Triangle The graphic representation of this form of economic governance was first established by Max Weber's triangle Horizontal offices represent divisions of labor and technical specialization The vertical axis from the base to the apex represents centralized control The sides represent fixed boundaries between inside and outside The Dilemmas of Vertical Coordination The essential question of institutionalized vertically coordinated forms of governance arises within the context of risk versus efficiency To what extent are the carrying costs of vertical control and integration offset by the productivity generated by institutional forms of integration? Do institutional hierarchies generate sufficient efficiencies to justify this form of organization? Efficient Bureaucratic Institutions Bureaucratic institutions are efficient to the extent that they reduce the transaction costs of converting specialized capital inputs into more profitable forms of output available to end users Thus the University remains an efficient bureaucratic institution Because it lowers the transaction costs of becoming credentialed through professional degrees By bringing faculty, specialized courses, and other resources together and making them available to students "If you had to find me..." Centralized Control and the Suppression of Economic Choice Individuals within bureaucratic institutions must submit to the institutional regimes, routines, restrictions, and requirements In the name of institutional coordination and directives In ways that may diminish choice and thus reduce greater overall productivity Centralized routines and restrictions limit choice in order to minimize economic risks In doing so, they can suppress innovation and invention Relative to specialized capital inputs up scales of value addedness In the production of GDP output Beyond the Boundaries of Bureaucracy Third Cut Specialization linked to sectoral diversification and interdependence linked to sectoral synergy As well as value addedness anchored to invention and innovation Require a level of risk reduction, trust, and economic governance That must be organized in ways beyond the bureaucratic boundaries Of hierarchical control and vertical coordination The Counter-Productivity of Centralized Control BECAUSE no set of centralized decision makers or hierarchically organized institutions Can centrally determine the complex range of choices and interdependent relationships Demanded by the kinds of collaborative or cooperative relationships That contribute to productivity based on the relationship between specialized capital inputs and profitable GDP outputs Bureaucratic Inefficiency and the Need for Markets as Economic Coordinators Bureaucracies can become counterproductive to the extent that they suppress the dynamism in the interdependent relationship between value addedness and GDP output For these reasons markets emerge as an alternative form of economic governance to coordinate choices absent hierarchical control We call this dynamic heteronomy Hierarchy v. Heteronomy Vertical v. Horizontal Directive v. Promissory Heteronomous Economic Governance NOMOS is the Greek word for rule or governance Nomothetic vs. Idiosyncratic Autonomy: self governance Heteronomy: rule by small choices Heteronomy is a form of governance Organized, managed, and controlled by small decisions Heteronomy as Economic Governance Heteronomy is a form of coordination and control in economic governance That maximizes choice and reduces the carrying costs of institutions By establishing trust through contract and promissory obligations Individuals and households represent heteronomous decision makers to the extent that they express choices and values in ways that reflect preferences in open markets ...
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This note was uploaded on 03/30/2008 for the course PSCI 2064 taught by Professor Eweisband during the Spring '08 term at Virginia Tech.
- Spring '08