Saturday, February 19, 2011

Standards: A Mission of Government and Governance

As defined in my post "The Purpose of Government", creating and managing laws, regulations, policies, standards, and process (business) rules is a mission of governments and governance.  Governance through policies, standards, and process rules (which includes laws and regulations for governments) is the key method for reducing inter-/intra-organizational process friction.

As I state in my book, Organizational Economics: The Formation of Wealth (forthcoming), a process is "a set of activities, ordered to achieve some goal."  While process friction comes from many sources, the concept boils down to any phenomena that inhibits the communications of information or the transfer of goods and/services between the activities of a process.

Using an analog or tautology with friction as defined in the military, friction is anything that inhibits optimal execution of the mission and processes.  Consequently, friction can become very expensive.  For example, what would happen to the appliance industries if every power company in the US could choose whether or not to run AC or DC, 24 volts, 110 volts, 220 volts, or 440 volts, and 40 cycle, 50 cycle, 60 cycle, 100 cycle, or 200 cycle current, using any electrical socket of their choosing?  Further, what would happen if every household had to negotiate all of these items plus the number of plugs they were allowed?  This is exactly the type of situation the early stone age people faced.

The result was they started to rely on a strong leader or "wise" (religious) leader to set the policies and standards for living.  As I discuss in my book, allowing a single individual or a small group to set "The Law" enables them to gain Exploitative Political Value for themselves.  Initially, "the people" don't object because the value they gain is significant also.  They are willing to pay the tax because their standard of living has greatly increased. (as I discussed in my post "The Rationale for Taxes").  However, once this individual has gained the advantage, the power to tax, and the exploitative political value, it is easy for that individual to become a despot.

However, the point is that the use of laws, regulations, policies, standards, and rules in conjunction with knowledge and leadership create a multiplicative effect on the amount of value created by organizations.  The government should be able to tax a portion of this to maintain, enforce, and mediate/adjudicate these standards--but not too much, or the organization devolves into some form of tyranny, where those governing the policies and standard acquire great exploitative political value at the expense of the entire organization.

Also see my posts "Security: A Mission of Government and Governance" and "Infrastructure: A Mission of Government and Governance."

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