Pascal Lamy was the director general of the World Trade Organization from 2005 to 2013, and currently serves as a president emeritus of the Notre Europe – Jacques Delors Institute. On 28 and 29 August he is taking part in a meeting of the Alpbach-Laxenburg Group, focused on new models for sustainable business development.
As the former director general of the WTO, you have extensive experience in global trade and economic development. How does this background inform your perspective on the issues of the sustainable development? To put it very simply, there is a very well-understood interaction between trade and growth, starting in the 18th century until now. The understanding of the relationship between global trade and sustainable development, i.e. including the environment dimension, is much more recent, understandably because environmental issues only came into the picture much more recently than the 18th century.
The reality is today that the communities working on trade and environmental issues are rather poorly connected. You belong either to one or to the other. There are not that many people who have feet on both sides, which does not help because the issue is complex.
In theory it’s very simple. Take climate change for instance: If you put the carbon price at the proper level, i.e. the one that takes into account the externalities of climate change and CO2 emissions, all you have to do is price CO2 properly, and problem is solved: markets will reallocate production factors accordingly. That’s what theory tells us. The little problem is actually agreeing on a set price for the entire planet. And this triggers a lot of suboptimal propositions, solutions.
I think that the overall stance now is that that trade is not an end. Trade is a means to improve growth in climate, welfare, sustainability, including environment sustainability. This was in fact part of the WTO charter from 1994. When I was DG of the WTO we did quite a lot of work in collaboration with environmental international organizations such as UNEP for instance. We looked into the big question on this topic: Is the expansion of trade good or bad for the environment? There are arguments on both sides, and it is a vast set of issues. But overall I think there are ways and means to reconcile, to synergize the benefits of trade opening for a more environmentally sustainable world.
What do you see as the biggest challenge in achieving the Sustainable Development Goals? It’s a very long and vast set of issues. So it’s not a single thing—what you have to address issues on inequality, on education, on oceans, on poverty—it’s a lot of different things.
But overall, I think the biggest challenge—and this is why a number of us are working on that—is to properly organize the accountability of these SDGs. That means providing proper metrics, proper review, proper debate, and proper public accountability. Now that the goals have been agreed by the UN, the issue is whether or not they can be achieved, and whether we can properly organize public pressure on sovereign nation states, through civil society, involvement of businesses. So in my view the main issue is building and agreeing on a proper follow up transparency system.
How do you think that the private sector could help in achieving the SDGs? In doing what private businesses have been doing increasingly, which is integrating this sustainable development focus into their global strategies. Most big businesses now have a set of principles, a set of values that include sustainability.
What’s happening for instance around the push towards green finance, notably since the COP21 in Paris, is a good example of how some businesses can be on the front line of a larger coalition. We need coalitions like this to bind public authorities at the national, regional, and city levels, to civil society organizations focused on sustainability, climate, environment, biodiversity, and development, and businesses, whether big or small.
So from your perspective it sounds like business is already on the right track. What further changes would be needed in the private sector in order to fully embrace the SDG agenda? It will happen if and when businesses realize that it matters to their consumers, to their staff, and to their shareholders, or their finance providers more generally. This is the frame within which they have to optimize what they do—clients, consumers, their people, and where they get their financial resources from. And if these various sides of the triangle push in that direction, inevitably businesses will push in this direction. They’ll have to.
The Alpbach-Laxenburg Group brings together leaders from business, and young entrepreneurs, along with government leaders and science experts. What do you think can be gained from a meeting of this type? What’s unusual is that it links you with people whom you may not meet every day, so it’s an occasion of diversity connecting on a topic. Plus, there is something which tends to come out of this sort of environment, which is innovation. People exchanging ideas, not just theoretically, “What should we do?” “Where are we?” “Where are we going?” but, “This is what I suggest to do,” “This is what I tried and it worked,” and “This is what I tried and it didn’t work.” It’s more about experiences on the ground, which may then inspire more general conclusions.
Further reading Pascal Lamy (2016). “Négociations climatiques et négociations commerciales : antinomie évidente ?“. Speech delivered at the 24th Meeting about Risk Management, AMRAE, at Lille, France, February 5th 2016. Download speech (PDF)
Gloria Benedikt was born to dance. She started at the age of three and since the age of 12 she has been training every day—applying the laws of physics to the body. But with a degree in government and an interest in current affairs, Benedikt now builds bridges between these fields to make a difference, as IIASA’s first science and art associate.
Conducted and edited by Anneke Brand, IIASA science communication intern 2016.
When and how did you start to connect dance to broader societal questions? The tipping point was when I was working in the library as an undergraduate student at Harvard University. I had to go to the theater for a performance, and thought to myself: I wish I could stay here, because there is more creativity involved in writing a paper than in going on stage executing the choreography of an abstract ballet. I realized that I had to get out of ballet company life and try to create work that establishes the missing link between ballet and the real world.
To follow my academic interest, I could write papers, but I had another language that I could use—dance—and I knew that there is a lot of power in this language. So I started choreographing papers that I wrote and rather than publishing them in journals, I performed them. The first work was called Growth, a duet illustrating how our actions on one side of the world impact the other side. As dancers we need to concentrate and listen to each other, take intelligent risks and not let go. If one of us lets go, we would both fall on our faces.
What motivated you make this career change? We as contemporary artists have to redefine our roles. In recent decades we became very specialized, which is great, but we lost our connection to society. Now it’s time to bring art back into society, where it can create an impact. I am not a scientist. I don’t know exactly how the data is produced, but I can see the results, make sense of it and connect it to the things that I am specialized in.
How did you get involved with IIASA? I first started interdisciplinary thinking with the economist Tomáš Sedláček who I met at the European Culture Forum 2013. A year later I had a public debate with Tomáš and the composer Merlijn Twaalfhoven in Vienna. Pavel Kabat, IIASA Director General and CEO, attended this and invited me to come to IIASA.
What have you done at IIASA so far? For the first year at IIASA I created a variety of works to reach out to scientists and policymakers and with every work I went a step further. This year, for the first time I tried to integrate the two groups by actively involving scientists in the creation process. The result, COURAGE, an interdisciplinary performance debate will premiere at the European Forum Alpbach 2016. In September, I will co-direct a new project called Citizen Artist Incubator at IIASA, for performing artists who aim to apply artistic innovation to real-world problems.
How do scientists react to your work? The response to my performances at the European Forum Alpbach 2015 and the European Commission’s Joint Research Centre (EU-JRC) was extremely positive. It was amazing to see how people reacted—some even in tears. Afterwards they said that they didn’t understand what I was trying to say for the past two days, but the moment that they saw the piece, they got it. Of course people are skeptical at first—if they were not, I will not be able to make a difference.
Gloria and Mimmo Miccolis rehearsing at Festspielhaus St. Pölten for COURAGE which will premiere at the European Forum Alpbach 2016.
What are you trying to achieve? I’m trying to figure out how to connect the knowledge of art and science so that we can tackle the problems we face more efficiently. There are multiple dimensions to it. One is trying to figure out how we can communicate science better. Can we appeal to reason and emotion at the same time to win over hearts and minds? As dancers we can physically illustrate scientific findings. For instance, in order to perform certain complicated movements, timing is extremely critical. The same goes for implementation of the Sustainable Development Goals.
Are you planning on doing research of your own? At the moment I am trying something, evaluating the results, and seeing what can be improved, so in a way that is a type of research. For instance, some preliminary results came from the creation of COURAGE. We found that if we as scientists and artists want to work together, both parties will have to compromise, operate beyond our comfort zones, trust each other, and above all keep our audience at heart. That is exactly what we expect humanity to do when tackling global challenges. We have to be team players. It’s like putting a performance on stage. Everyone has to work together.
In July 2015, representatives from the five Arctic Ocean coastal states (Canada, Denmark, Norway, Russia and the United States) signed the Declaration Concerning the Prevention of Unregulated High Seas Fishing in the Central Arctic Ocean. In the declaration text it is clearly stated that “commercial fishing in the high seas portion of the central Arctic Ocean is unlikely to occur in the near future.” This approach increases the stature of the Precautionary Principle, a strategy that copes with possible risks in cases where scientific information is limited. The declaration is the first official attempt to regulate international waters of the Central Arctic Basin. While commercial fishing in the central Arctic Ocean is unlikely to become common anytime soon, fisheries management in the region includes complex decision making challenges, while it is also complicated by multiple factors, including transboundary fish stocks—those crossing boundaries of Exclusive Economic Zones (EEZs) — and straddling stocks (those typically found in the high seas adjacent to the EEZ) arising from the unsettled maritime boundary lines, thus often calling for the establishment of an effective bilateral or multilateral regime.
The contentious and divisive issue of how to handle Arctic fisheries has mostly been discussed so far in literature from a biodiversity standpoint rather than an economic one. Yet looking at the problem from an economic standpoint could help provide information that could prevent optimal use of resources and thus contribute to preventing irrational behaviors that may lead to the collapse or disruption of the ecosystem. Optimization theory provides critical insights for individual fishers or countries pursuing the most profitable strategy (higher payoffs). At the same time it can also prove useful for broader decision-making processes whereby all interested parties cooperate on the management of Central Arctic fish stocks.
Game theory can potentially contribute in a more complex setting, with two or more actors—states in our case—involved in fishing resource management and with each state being able to choose among a set of available options, with their payoff dependent on other states’ choices.
There are a number of different types of games available in the game theoretical framework. Given the existing risks and uncertainties over Arctic marine resources I would propose a differential game setting as a baseline scenario. A differential game is a mathematical formulation used for either conflict or cooperation where players’ strategies are changing over time.
A differential game seems suitable since there is an underlying assumption that the “Arctic players” involved make decisions at all time points and not necessarily in specific time intervals. Furthermore a repeated static game (players deciding simultaneously with no prior knowledge of other players’ choices), such as the Prisoner’s Dilemma, would probably not work as well here, since the payoff functions of our players would not be time-dependent.
If we are looking for a solution where all involved Arctic states agree to cooperate on the management of marine resources in the Central Arctic, we would probably need to solve it as a standard optimal control problem, through the use of maximum principle or dynamic programming. In other words the outcome of optimizing a joint welfare function should be examined regarding its efficiency, which brings together the different Arctic players in a joint effort to maximize their average individual welfare.
Another theory known as Nash equilibrium could provide useful insights with regard to incentives and motivations, especially in cases, like the one described here, where it is rather daunting to predict how different players will behave in a game. A Nash equilibrium comes down to a set of different strategies for each one of the players included in the game, indicating that neither player has incentive to change their choice (taking others’ choices as given) since their payoffs are not improving anyway.
An open-loop solution that gives Nash equilibrium would result in all players having absolutely no incentive to deviate from their specific strategic path, given the path of other players or in other words having the players at a Nash Equilibrium would make them unwilling to act differently, since they would be worse off if they did.
An Open Loop Nash Equilibrium can be examined where there is exclusive dependence on the time variable; if a player deviates from the equilibrium control, even if briefly, and decides to return to its former behavior, the equilibrium is broken. Conversely, in a feedback (or closed-loop) Nash Equilibrium which is strongly time consistent, the dependence lies on the current state of the system. Differential games can generally help towards answering whether a potential cooperative solution can be achieved through a Nash equilibrium of a non-cooperative game.
Yet another question is whether countries would prefer to cooperate instead of competing for fishing in the Central Arctic. A cooperative scenario would require a Net Present Value (sum of benefits minus sum of costs, both in present values) larger than the non-cooperative scenario, thus covering the opportunity costs arising from the cooperative case. If this condition is not satisfied we will have to accept that there will be a non-cooperative behavior up to the point that cooperation turns lucrative for all players.
Game theoretic approaches with regard to stock management have provided useful insights and directed new lines of inquiry, but the dynamically changing Arctic raises issues that call for coordinated responses, for example through the use of more robust tools such as evolutionary game theory. Given that many species are expected to expand to yet unexploited parts of Arctic waters, one major concern is the consequences of coastal states’ harvesting activities on society’s wellbeing, and the ways in which it will be made possible to leave a positive legacy for future generations.
Looking at the interplay of ecology and economic behavior is one way that scientists can begin to answer these questions. Meticulous research on strategies of defection, cooperation and enforcement can be a cornerstone for establishing and managing effective ways to protect the Arctic marine environment, taking into account the current dearth of research in existing and future biodiversity.
This year’s theme of the UN World Water Day is “Water and Jobs.” It focuses on how adequate water management can change workers’ lives. Indeed, water management and job creation are tightly linked. Nearly all jobs depend on water, and without reliable and safe access to water, neither small activities nor major global industries can endure. Similarly, labor is necessary to build, maintain, operate, and manage the water system, and to run water-based projects. Furthermore, job creation can be a thirsty business in both developing and developed countries. In many developing countries irrigation projects, requiring significant amounts of water, are considered the main engine for the economy and source of employment. In developed countries, less water is needed but it still requires sufficient quality for manufacturing and service projects creating job opportunities.
(cc) Albert Gonzlez Farran – UNAMID
Freshwater bodies such as rivers and aquifers supply the water that people and businesses rely on. But pressures on these bodies have been mounting worldwide during the last century. Population and economic growth have led to greater water use and increased pollution, with many basins around the world undergoing pervasive water shortages and quality degradation. Researchers expect the impacts of climate change to exacerbate these damages. At the same time, the global economy needs to continue growing to be able to adequately sustain the world’s rising population. However, the linkage between water and economic growth has increased global concerns about the impacts of water-related risks such as scarcity, droughts, floods, and pollution on economies’ ability to grow and create jobs. In fact, the World Economic Forum’s 2016 Global Risks Reportranks water as the highest global risk on economies over the next ten years.
As we look towards the future, the link between water and employment becomes even more crucial. Water-related risks, which are expected to intensify due to climate change, will likely have adverse impacts on economy and employment, leading to major consequences beyond the water industry. For instance, researchers have linked the extreme drought in Syria between 2007 and 2010 to the uprising that began there in 2011. Several years of drought caused an extensive crop failure and massive losses of livestock, which resulted in 2 to 3 million people driven into unemployment and poverty. This situation contributed to a mass rural exodus into economically depressed cities, deepening existing instability in that country.
How do we avoid more crises like this? The complex and evolving water challenges of the future can only be addressed by investing in sustainable and integrated water management solutions such as those being identified and tested by the Water Futures and Solutions (WFaS) initiative at IIASA . WFaS is a cross-sector, collaborative, global initiative aimed at developing plausible scenarios of future water supply and demand, and identifying robust and no-regret portfolio of solutions for balancing water systems. The initiative brings together researchers and decision makers from governmental and non-governmental organizations as well as from the private industry and from a wide variety of sectors influencing water management. The potential water solutions include improved water policies and governance structures and the adoption of more innovative and environmentally friendly water technologies. Sustainable water resource management does not only address water-related risks, but it can also create green job opportunities for local and disadvantaged communities, for example in efficiency improvement works, in the production of alternative water sources, and in aquatic ecosystem restoration projects.
How can we best tackle risks in our complex and interconnected economies? With globalization and information technologies, people and processes are increasingly interdependent. Great ideas and innovations can spread like wildfire. However, so can turbulence and crises. The propagation of risks is a key concern for policymakers and business leaders. Take the example of production disruption: with global supply chains, local disasters or man-made accidents can propagate from one place to another, and generate significant impact. How can this be prevented?
Risk propagation is like a domino effect. Credit: Martin Fisch (cc) via Flickr
As part of my PhD research, I met professionals on the ground and realized that supply risk propagation is a particularly tricky issue, since most parts of the chains are out of their control. Supply chains can be very long, and change with time. It is difficult to keep track of who is working with whom, and who is exposed to which hazard. How then can individual decisions mitigate systemic risks? This question directly connects to the deep nature of systemic problems: everyone is in the same boat, shaping it and interacting with each other, but no one is individually able to steer it. Surprising phenomena can emerge from such interactions, wonderfully illustrated by bird flocking and fish schooling.
As an applied mathematician thrilled by such complexities, I was enthusiastic to work on this question. I built a model where firms produce and interact through supply chain relationships. Pen and paper analyses helped me understand how a few firms could optimally react to disruptions. But to study the behavior of truly complex chains, I needed the calculation power of computers. I programmed networks involving a large number of firms, and I analyzed how localized failures spread throughout these networks, and generate aggregate losses. Given the supply strategy adopted by each firm, how could systemic risk be mitigated?
With my collaborators at IIASA, Åke Brännström, Elena Rovenskaya, and Ulf Dieckmann, we have highlighted the key role of coordination in managing risks. Each individual firm affects how risks propagate along the chain. If they all solely focus on maximizing their own profit, significant amounts of risk remain. But if they cooperate, and take into account the impact of their decisions on the risk profile of their trade partners, risk can be effectively mitigated. Reducing systemic risks can thus be seen as a common good: costs are heterogeneously borne by firms while benefits are shared. Interestingly, even in long supply chains, most systemic risks can be mitigated if firms only cooperate with only one or two partners. By facilitating coordination along critical supply chains, policy-makers can therefore contribute to the reduction of risk propagation.
Colon’s model analyzes how firms produce and interact through supply chain relationships. Credit: Jan Buchholtz (cc) via Flickr
Drawing robust conclusions from such models is a real challenge. On this matter, I benefited from the experience of my IIASA supervisors. Their scientific intuitions greatly helped me focusing on the most fertile ground. It was particularly exciting to borrow techniques from evolutionary ecology and apply them to an economic context. Conceptually, how economic agents co-adapt and influence each other shares many similarities with the co-evolution of individuals in an ecological environment. To address such complex issues, I strongly believe in the plurality of approaches: by illuminating a problem from different angles, we can hope to see it more clearly!
Note: This article gives the views of the author, and not the position of the Nexus blog, nor of the International Institute for Applied Systems Analysis.