Need of a Balance between Fragmented and Coordinated Decision-Making

Need of a Balance between Fragmented and Coordinated Decision-Making

DOI: 10.4018/978-1-4666-3643-9.ch001
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Abstract

This chapter looks at fragmentation and implications in different decision-making contexts with a focus on new technology and enterprise creation in developing economies. Coordination is introduced as the response to external effects of fragmented and scattered decisions. The most important features of this framework are captured under a simplified theoretical economic model. The evidence on economic sectors is provided in the literature review, but the data from “Doing Business” of the World Bank is used to test for the high costs implied by the implicit scattering and fragmentation of decisions related to enterprise creation. The attained results either from access to new technologies or from the empirical analysis of “Doing Business” data show the prevalence of anti-commons and fragmentation in developing economies. This points out how anti-commons and fragmentation can limit development through reducing business expansion and social benefits, even when national and international institutions exhibit clear intentions for coordination.
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Introduction

Large arrays of empirical evidence about the high private and social costs related to scattered decisions (fragmented)1 among different inter-related economic and social agents and units do exist. While the development of selfishness and individualistic behaviors are increasingly engines for the promotion of market economies, it is shown that the effects of externalities and lack of recognition of interconnections may impose higher direct and indirect costs that could lead to market failures and misallocations of resources.

This chapter aims at addressing the role of coordination2 by opposition to fragmentation, in promoting social and economic activities at the levels of individuals, groups and organizations. The focus is placed on the implicit costs related to fragmentation. By opposition to coordination, fragmentation and scattered operations are often found to produce inefficiencies and thus lead to higher private and social costs. As some areas can be found to be interdependent such as markets and economies3, the lack of knowledge about these links implies a lack of benefits from any type of coordination. This happens when individuals, groups, and organizations are ignorant about the existing interdependencies between at least two operations, two economic agents, markets, and economies3. This can be for example, a situation where the cross-effects of nutrition, education and health are not known or ignored. At the level of a Government, the Ministry of health may not coordinate enough with the departments of education and of social affairs. This leads to inefficiencies as some social benefits will not be captured and eliminated with this absence of knowledge followed by a lack of coordination. Similar examples can be provided in relation to health, education, and economic activities that exhibit series of components that need to be coordinated. Issues such as the economic and social problems related to the youngest segments of the population are also matters related to the needs and situation of women. It is also well known, that research itself can benefit from further coordinated networks. Technologies that are either specific or general can favor coordination and ICTs are the best examples of drivers and engines for the enhancement of social benefits at both individuals and global levels. There are of course major variations across situations, but the trend taking place appear to be promising for the enhancement of benefits through ensuring coordination and producing higher prospects.

Economics, as in other sciences, has been referring to the pool of knowledge and expertise scattered among different poorly connected decision making public and private agents as “anti-commons” with resources utilized in a sub-optimal and inefficient way. As a result, transversal development policies and private business promotion can fail to gather all the necessary information, knowledge, resources, and capital, that diminish chances of success, leading to the tragedy of anti-commons and thus to failure to contribute to the enlargement of new economic and social opportunities (Heller, 1998; Kennedy & Michelman, 1980; Buchanan & Yoon, 2000). While in “common4 pool” open access resources, no actor has the right to exclude another until full depletion of the resource, the anti-commons is the reverse as too many have the right to exclude (Aoki, 1998) creating thus the tragedy of anti-commons5 that is the total under-use of the resource.

Economic and social policies in the developing world are today increasingly required to benefit optimally from transversal and coordinated actions in all areas and sectors. This includes also the bilateral and world relations.

The growing evidence and consensus has been showing that poverty is a complex and multidimensional phenomenon. It requires solutions at multiple levels such as in health, education and employment rather than accounting only for a single sector. The needed transversal policies necessitate the collaboration of an overlapping web of government bodies and private partners that control the relevant knowledge and expertise relative to each policy dimension. Besides that, new and diversified sets of inputs that are informational, technological, and institutional are continuously needed. Transversal policies and actions in developing countries are likely to be penalized by the scattering of expertise.

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