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Chapter 2 presents our theory of property rights. The chapter begins by reviewing the literature on property rights, including all relevant theoretical perspective on the emergence of property rights. In our theory, property rights require definition and enforcement. Unlike political theories of property rights, which view the government as the source of property rights, we recognize that organizations whose authority lies outside the state often have an organizational structure comparable to governments. Unlike existing theories of informal property rights, we highlight that the emergence of self-governing property rights requires overcoming dilemmas like those confronting governments. Thus, states and non-state organizations, such as customary council or a tribe, confront similar challenges in establishing property rights. In our theory, property rights protection is more likely when the organization in question has a monopoly on authority, administrative and enforcement capacity, constraints on organizational decision makers, and decision-making institutions are inclusive. We use the theoretical discussion to clarify situations when property rights to land are provided as a public good, the success of self-governance at securing property rights to land, and when legal titling improves social welfare. The chapter concludes with clear empirical predictions that will guide the empirical studies.
The focus of this chapter is on the importance of identifying the various incentives that promote self-control. Indeed, whether intrinsic or extrinsic, those reasons can provide numerous insights into how we can incite action to facilitate goal pursuit. Importantly, the issue of motivation is expansive, but the simple exercise of identifying the fundamental reasons driving our goals offers invaluable insight into the incentives that motivate us to satisfy those reasons and manifest our goals across a range of circumstances.
There has always been a tension, in theory, between the public accountability and the professional efficiency of the agencies of the administrative state. How has that tension been handled? What would it be like for it to be well handled?
Environmental incentives are characterized by two distinct features: (1) a benefit-cost trade-off; and (2) private information about the trade-off. This suggests a degree of freedom of where to attach the private information, either to the benefit or the costs, as long as these choices imply the same behavior absent incentives (‘observation equivalent’). However, we show that different observation equivalent specifications can lead to different incentives. This is demonstrated for two cases: rainforest protection and contributions to a public good. Therefore, the choice of a private information parameter must be justified against observation equivalent alternatives.
This chapter critically examines the argument for giving shareholders alone the right to vote based on their ownership of the corporate residual. The argument is that shareholders are only paid what's left over after all other contractual participants – employees, customers, creditors, and suppliers – have been satisfied. Because shareholders receive the marginal gains, they have the best incentives to exercise discretion on the part of the entire firm, and hence should be accorded ultimate control. Shareholders, though, are not the unidimensional profit maximizers used to get this argument up and running. Moreover, shareholders do not, by virtue of their relationship with the firm, have ready access to the information necessary to cast informed votes, and many shareholders – such as index fund shareholders – lack real incentives to seek out that information. Finally, this vision of shareholders as the sole owners of the residual is just descriptively wrong – employees, too, are invested in the long-term interest of the firm, cannot easily diversify that interest, and often possess firm-specific skills as well as contributions to the ongoing value of the business.
This chapter first considers the existing academic evidence that private equity-backed companies outperform their peers and then looks at standard explanations for this outperformance. It is argued that existing explanations are inadequate.
The chapter introduces core concepts to be explored throughout the book. The chapter begins by discussing the recent growth in public service motivation research and growth in related intellectual capital. In addition to a growth in research, more practical applications for examining public service values and motivations have emerged. The chapter subsequently addresses the continuing pressure being placed on traditional service systems. In the face of warnings about long-term mismanagement of human capital, governments around the world are under pressure. The chapter then outlines factors that tend to allow civil service systems to persist. Operating rules, which have rational origins as solutions to perceived problems, sensitize actors to values. The evolution of motivation is then discussed, with special attention towards New Public Management, contracting out, agentification, and high-powered incentives. Public service motivation is then proposed to be a foundation for reform. A comprehensive, coherent, evidence-based argument is outlined. The chapter concludes with a description of the organization of the book.
The chapter synthesizes research on compensation and motivation, identifying compensation strategies to optimize outcomes in public organizations. While public service motivation is most closely linked with performance-based pay in research, other facets of compensation policy are relevant to public service motivation. The chapter outlines these other facets and discusses specific strategies to improve outcomes through compensation. First, the chapter argues for the use of total compensation for benchmark comparisons to control the extrinsic-to-intrinsic reward ratio. The chapter subsequently discusses base pay, different base pay schemes like alternative wages and efficiency wages, and strategies to maximize the value of these schemes. Next, mobility systems, like pay for ability, skills, and performance, are discussed. The chapter discusses the viability of the contest and tournament models and makes other recommendations for mobility systems. Penultimately, the chapter discusses incentives, motivation crowding and recommends that governments avoid high-power incentives that crowd-out public service motivation. The chapter concludes with a discussion of position classification.
This chapter provides an overview of economic and behavioral economic approaches to behavior change. The chapter begins with a description of the traditional or neoclassical economic view of decision-making using expected utility theory as its basis. Attempts by an external party (e.g., a government or agency) to change behavior are viewed as justifiable in a limited number of circumstances, such as when there are externalities or coordination failures. When behavior change is warranted, neoclassical economics has focused on four options: provide information, increase incentives, reduce prices, or increase subsidies, or impose regulations. To be successful, the approach must change the net benefits of the promoted behavior. The chapter then describes the rationale behind behavioral economic approaches to behavior change, emphasizing the role that “nudges” play in behavior change. Examples are provided of common heuristics and associated decision errors that can result, and how nudges are designed to overcome these decision errors. The underlying rationale and steps for developing nudges are summarized. Current evidence suggests that some nudges can be effective in changing behavior, but more research is needed to demonstrate the effectiveness of many nudge strategies. The chapter concludes with a discussion of the likely long-term impact of nudges in the field of behavior change.
Inland waters and their biodiversity are a valuable resource. They are a source of fresh water, helping to purify it, and provide habitat for organisms (e.g. fishes) that may be eaten or used by humans. To improve the condition of fresh waters globally, it is imperative to link biodiversity conservation to human well-being. The concept of ecosystem services - the benefits humans derive from ecosystems - offers a means to make this link explicit, resolving the conflict between human water use and biodiversity protection. Ecosystem services thus serve as a proxy for biodiversity, assuming that maintaining the former will serve to protect the latter, representing a win-win conservation solution. While relevant for fisheries (a provisioning service), the substitution may be less applicable to supporting services that depend upon maintaining ecological functioning, not maximizing final services for humans. While valuation of biodiversity (and its subsequent monetization) is problematic, payment for ecosystem (or watershed) services can incentivize land-owners to protect sources of clean water for downstream users.
Generating innovative antibiotics is an essential part of addressing antimicrobial resistance. New policies and incentives are necessary to overcoming the multiplicity of scientific, regulatory, and economic hurdles that obstruct antibiotic discovery and development. This chapter assesses the changing landscape of the antibiotics market, barriers to drug discovery and development, incentive mechanisms and strategies to overcome these barriers, and the current product pipeline for antibiotics and alternative therapies. Over recent years, many incentive programmes have been implemented to foster the antibiotic value chain. This chapter proceeds to review the key multilateral, European Union, United States, United Kingdom and regulatory initiatives incentivizing antibiotic research and development. While these initiatives have helped lift the antibiotic pipeline out of dormancy, the recent progresses in development are not sufficient to counter the unrelenting advancement of antimicrobial resistance. We argue that the current global incentive package could be strengthened by ensuring that a continuum of incentives is offered to developers, reflecting the economic need, cost distribution, and barriers of the antibiotic value chain. A global governing body that provides overarching guidance to international and national-level incentive programmes will be critical to achieving such a continuum.
Human behaviour is a critical part of the conservation problem and its solution. I provide an introduction to behavioural science as it applies to conservation and the wider sustainability agenda and argue that conventional assumptions of behaviour are flawed. From this flawed perspective emerge common tools of regulation, economic incentives, value-based campaigns and awareness-raising efforts. While these have merit in the right circumstances, they can also fail or even backfire. A more nuanced account of behaviour puts more emphasis on the non-conscious and non-rational cognitive processes, as well the profound influence of our social and physical context. Drawing on insights from cognitive and social psychobiology, behavioural economics and nudge theory, I present a range of novel strategies for behaviour change which can supplement and improve conventional approaches, including harnessing emotion, meaning and narrative; leveraging social influence; nudging through manipulation of the 'choice architecture' (setting and framing); and designing more effective monetary and non-monetary incentives through the lens of behavioural science.
This chapter introduces some terminology and themes that pervade the book. Compensation is defined broadly to include everything a worker likes about the job. “Strategic compensation” is about managing the compensation system to advance a specific organizational objective, typically profit maximization. The chapter discusses how this relates to talent management, turnover, retention, and employee productivity. Four recurring themes are introduced: (1) “Incentive effects” and “sorting effects (both of which affect the company’s labor productivity) arise when the compensation system is changed; (2) Market competition largely dictates pay levels, whereas employers have more control over pay design; (3) Competition forces employers to care about their employees’ preferences about pay; (4) Bargaining power also affects pay levels. The metaphor of a “3-legged stool” is introduced, in which compensation depends on workers’ desires, skills, and mobility. There’s discussion of what constitutes “fair” pay and the tradeoffs associated with allowing employees to know each other’s pay versus keeping compensation secret. The appendix offers a detailed treatment of nominal versus real compensation.
We focus here on the resilience and sustainability of the Greek language in southern Albania, looking at it from the perspective of both economics and the ecology of language. Greek is a minority language in the region, spoken by as many as 100,000 speakers in a number of small villages and small urban centers. We chronicle here the ways in which the language has survived despite a near-perfect storm of factors working against it, and we provide an economic-theory rationale. A parallel is drawn to the fate of Turkish in Bulgaria.
This chapter assesses the neoliberalization of copyright law. It begins with the historical emergence of copyright as a form of public biopolitics. It then looks at three areas where copyright has become neoliberal. The first is incentives theory, which treats all creation as an economic calculation geared toward market rewards. I outline the theory, and show how it works not just to model, but to produce a certain kind of creator, to the exclusion of other forms of creativity. The second is litigation around hip-hop sampling. Here the demand for licensing works to nudge music into commercial channels, where all cultural borrowing is mediated through market transactions. The third is the recent expansion of copyright into what scholars have termed “paracopyright”: a prohibition on circumventing copyright protection technologies, which generally function as forms of “digital rights management” (DRM). Through a detailed examination of how DRM technologies (such as the regional restrictions on DVDs) function, I show how this addition to the law clearly marks a move in the direction of copyright into training individuals that they are consumers of the products of culture.
This is a book about two of the core activities integral in the field of human resource management: managing employee performance and managing how employees are rewarded. As we shall see throughout the book, there is a close and complex inter-dependence between these two activities; so much so that it makes little sense to consider them in isolation from each other. Equally, while the book’s central concerns are with performance and reward practices and processes, attention is also paid throughout to recognising and analysing the interconnectedness of these and other aspects of human resource management. Performance management systems provide inputs into other HR functions such as training and employee development, as well as evaluating HR decisions such as recruitment and selection.