November 30, 2003

Define Pristine....

Juan Non-Volokh over at the Consipiracy has an interesting post on Natural Rainforest or "Pristine Myth"?. He points to an article in Science that debunks the myth that prior to European colonization, the forests of the Americas, both old growth in North America and rainforests in South America, were "pristine". In fact, there is significant evidence that they were highly managed by the natives.

I recently saw an article (which I've lost the link to) about the Hutcheson Memorial Forest in New Jersey, which had much the same point. The old growth forest was turned into a preserve with a "no-management" policy. Unfortunately (to some), it turns out that the old white oaks which originally dominated the forest do so at least partly due to human intervention. Some of the trees are close to 300 years old and show evidence of ground fires at 11 year intervals -- most likely controlled burns by Native Americans. Under the "no-management" policy they are being squeezed out by maples and beeches which are much less unique to old growth forests.

Anyway, the point is that the interactions in these systems are complicated, and thinking that acting a certain way will "preserve" what we think it will is often not justified by the facts. Humans have been having an impact on the natural world for thousands of years and even a policy of "do-nothing" is still a policy, and one that will cause change in ways we probably don't expect.

Posted by richard at 05:24 PM | Comments (3)

November 15, 2003

Loss of Transparency

I was just reading the comments from a post over at Asymmetrical Information about bonuses to non-exempt employees at Ralphs in California. Basically, it seems that a court has decided that Ralphs' bonus plan, which pays low-income workers a bonus based on net income, is illegal under California law because it, in effect, reduces their pay for prohibited expenses. These prohibited expenses include shrinkage expense (i.e. losses from shoplifting), worker's compensation, and cash shortages.

This law obviously exists to make sure that a sales clerk cannot have his or her pay docked because a worker gets hurt or someone steals something from the store, which seems fair — although you can argue whether the state or the market should decide these things. In my mind, it's difficult to see that this should extend to bonuses, but that's not the point of my post.

As one of the commenters to the above post said, instead of having a clear, well-publicized bonus plan that is tied to profitability, the board of directors of Kroger (which owns Ralphs) could simply change to a system where the compensation committee consults on a yearly basis and, taking into consideration the financial health of the business, including profitabilty, arbitrarily determines the bonus amount. It would seem that this would be perfectly legal. But what have we lost here?

It ended up reminding me of the Grutter and Gratz decisions about affirmative action at the University of Michigan. The outcome of those two cases seemed to be that diversity is a compelling state interest (Grutter) but a clear, formulaic system is not allowed (Gratz). Many universities will surely scrap their point systems in favor for arbitrary processes decided by admission boards behind closed doors.

In both cases, the fear is that through good intentions, legislation and litigation we've pushed the actors towards more opaque systems. Is the price paid worth it? Is this even something that can be controlled, or is it an inevitable offshoot of regulation? What are the effects on a democracy (or a market economy) when the incentives are to obscure decision-making processes?

Can anyone think of other examples of this phenomenon?

Posted by richard at 07:53 PM | Comments (2)