Trade versus the Environment: Strategic Settlement from a Systems Engineering Perspective

Trade versus the Environment: Strategic Settlement from a

Systems Engineering Perspective

KEITH W. HIPELUniversity Professor, PhD, PEng, FIEEE, FCAE, FINCOSE, FEIC, FRSC, FAWRA

Department of Systems Design Engineering

University of Waterloo

Waterloo, Ontario, Canada N2L 3G1

Telephone (519) 888-4567, ext. 32830

Fax (519) 746-4791

Email: kwhipel@uwaterloo.ca

Home Page: www.systems.uwaterloo.ca/Faculty/Hipel/

Conflict Analysis Group: http://www.systems.uwaterloo.ca/Research/CAG/

ABSTRACT

The key goal of this research is to employ a Systems Engineering approach to conflict resolution to clearly identify the ubiquitous conflict taking place at the local, national and global levels between the basic values underlying trading agreements and those principles providing the foundations for environmental stewardship, and to suggest solutions as to how this most basic of disputes can be responsibly resolved. Subsequent to outlining the current situation involving free trade among nations and associated environmental problems, the positions of both sides in this chronic dispute between trade and the environment are summarized. Supporting the stance of free trade is the fundamental driving forces of profit maximization, while in direct opposition to this market-driven value system are the principles of maintaining a healthy environment and related social welfare objectives. Accordingly, this global clash of values is systematically studied as a game in which the values of the Global Market-Driven Economy (GMDE) are in confrontation with those of a Sustainable Ecosystem (SES) philosophy. A Systems Engineering tool for strategic analysis, called the Graph Model for Conflict, is utilized for realistically capturing the key characteristics of this type of complex conflict and for providing strategic insights regarding its potential resolution. In particular, a systematic Graph Model investigation reveals that the environment and social standards will continue to deteriorate if the entrenched positions and related value systems of both camps persist. However, based on the strategic understanding gained from this formal conflict study, a number of positive proposals are put forward for resolving this conflict from a win/win perspective, at least in the long run. To highlight inherent advantages of employing a formal Systems Engineering tool for addressing strategic conflict problems, the application is used for illustrating how the Graph Model can be conveniently applied to a specific dispute and comments regarding the capabilities and benefits of the conflict methodology are provided at each step in the modeling and analysis procedure.

REFERENCES

Hipel, K.W. and Obeidi, A., “Trade versus the Environment: Strategic Settlement from a Systems Engineering Perspective”, Systems Engineering, Vol. 8, No. 3, pp. 211-233, 2005.

See the web page of the Conflict Analysis Group at the University of Waterloo to obtain an extensive list of references.

Conflict Analysis Group: http://www.systems.uwaterloo.ca/Research/CAG/

OBJECTIVES

Model the conflict of values between the proponents of the Global Market-Driven Economy (GMDE) and those supporting a sustainable Ecosystem (SES).

Analyze this global conflict using the Graph Model for Conflict Resolution and its associated decision support system GMCR II to gain strategic insights.

Suggest what can be done politically to promote sustainable development, including responsible and equitable utilization of water.

RECOMMENDATIONS

Extensive educational and lobbying efforts are required for encouraging market-place proponents to change their value system by putting a higher priority on sustainable development.

International trade agreements such as those of the World Trade Organization (WTO) and North American Free Trade Agreement (NAFTA) must be reformed or replaced to reflect these values.

CONTENTS

TRADE AND THE ENVIRONMENT

CONCEPTUALIZING THE CONFLICT: A CLASH OF

VALUES

CONFLICT MODEL

ANALYTICAL RESULTS AND INSIGHTS

SENSITIVITY ANALYSIS: MODERATE PREFERENCE

CHANGE

ACHIEVING GLOBAL SUSTAINABLE DEVELOPMENT

REFORMING GLOBALIZATION

WORLD CRISIS

Consumption Energy Population growth

• Widening gap between rich and poor

• Pollution

• Extinction of species

• Water shortages

Encouraged by international trade agreements

INNER CONFLICT OF VALUES

Basic drive to survive and prosper

Versus

Desire to pressure environment in a pristine state

SOCIETAL LEVEL

Cumulative intense economic activities

Versus

Environmental preservation

SUSTAINABLE DEVELOPMENT

Economic needs of humanity

are balanced against

Preserving nature for future generations

AWARENESS AND RESPONSIBILITY

Society

Versus

The Environment

Humans must come to terms with this chronic conflict of values existing within and among themselves and take

responsible actions to resolve it.

TRADE AGREEMENTS

BRETTON WOODS AGREEMENTS:• World Bank• International Monetary Fund (IMF)• General Agreement on Tariffs and Trade (GATT)

(1947)

OTHER AGREEMENTS• WTO (1995)• NAFTA (1994)• FTAA (Free Trade Area of the Americas will replace

NAFTA)• Canada/US Auto Pact (socially responsible)• European Community (EC, integrated agreements)

TRANSNATIONAL ENVIRONMENTAL TREATIES

No comprehensive international environmental treaty is in place.

Some treaties exist in specific areas: Law of the Sea Montreal Protocol on Substances that Deplete the

Ozone Layer Basel Convention on banning trade in hazardous

wastes Kyoto Protocol for reducing greenhouse gases

ENVIRONMENTAL IMPACTS OF TRADE

Trade rules are globally operational

And

No encompassing environmental treaty exists.

Many specific cases in which trade-based decisions harmed the environment and human health.

CONCEPTUALIZING THE CONFLICT: A CLASH OF VALUES

Sustainable Ecosystem(SES)

Values

GLOBAL MARKET-DRIVEN ECONOMY(GMDE)Values

POSITIONS AND VALUE SYSTEMS

Global Market-Driven Economy (GMDE)

Sustainable Ecosystem (SES)

Background information for carrying out a formal conflict study

GMDE VALUE SYSTEM

Prioritizes free trade and globalization based on the principle of a market driven economy.

Many benefits will follow.

SES VALUE SYSTEM

Prioritizes environmental stewardship, biodiversity, sustainable development, human rights, democratic principles, and other related issues that are important to societal well-being.

Highly critical of current free trade agreements, such as WTO agreements and NAFTA which are founded on market economics.

CONFLICT OF VALUES

Trade

Versus

The Environment

Carry out strategic analyses to find ethical and just resolutions.

CONFLICT RESOLUTION

Use a formal systems engineering approach called the Graph Model for Conflict Resolution to model and analyze the Conflict of Values: Trade versus the Environment.

This flexible methodology is implemented using the decision support system GMCR II.

DECISION MAKERS AND OPTIONS

· Public education · Lobby governments to accommodate

environmental and ecosystem concerns into free trade agreements.

· Pressure trade negotiators to consider societal concerns through demonstrations.

Sustainable Ecosystem (SES)

· Influence states to adopt market-driven economic policies.

· Promote ideals of efficiency and prosperity.

· Reform its mandate to accommodate societal and environmental responsibilities.

Global Market-Driven Economy (GMDE)

CONFLICT OF VALUES

Reflects a generic conflict taking place around the globe.

Systematically studying this ubiquitous conflict can provide understanding and wisdom for

solving similar, but more complicated realworld disputes over trade and the environment.

First time that this generic conflict has been strategically analyzed.

Real World Conflict

Decision Makers

Options

States

Preferences

Individual Stabilities

Equilibria

Sensitivity Analyses

Resolution

Mod

elin

g A

naly

sis

CARRYING OUT A CONFLICT STUDY

GRAPH MODEL FOR CONFLICT RESOLUTION

Theory is founded upon a rigorous mathematical framework, utilizing concepts from graph theory, set theory and logic—the mathematics of relationships.

Design is mathematically based but completely nonquantitative in nature.

Can handle any finite number of decision makers and options.

Utilizes relative preferences. Can handle irreversible and common moves.

DESIGN FEATURES OF THE DECISION SUPPORT SYSTEM GMCR II

GMCR II is programmed in C++, possesses a carefully designed data structure, and can handle small, medium and large models.

A 32-bit doubleword represents a specific selection of options wherein each digit or bit equals 1 or 0 to indicate whether or not the option it represents is taken or not.

This design can accommodate up to 32 options, which is more than enough for all realworld applications considered to date.

GMCR II STRUCTURE

USER INTERFACE

INPUT DATA SUBSYSTEM

Decision MakersOptions

Feasible StatesState Transitions

Preferences

ANALYSIS ENGINE

GMCR ICoalition Analysis

OUTPUT DATA SUBSYSTEM

Individual StabilitiesEquilibria

Coalition Stability

USER INTERFACE

INPUT DATA SUBSYSTEM

Decision MakersOptions

Feasible StatesState Transitions

Preferences

ANALYSIS ENGINE

GMCR ICoalition Analysis

OUTPUT DATA SUBSYSTEM

Individual StabilitiesEquilibria

Coalition Stability

Table 1: Decision Makers and Options in the Conflict of Values

Decision Makers Options Status Quo State GMDE 1. Influence Y 2. Promote Y 3. Reform N

GMDE’s Strategy

SES 4. Educate Y 5. Lobby Y 6. Pressure Y

SES’s Strategy

CONFLICT MODEL

INFEASIBLE STATES

Each option can be selected or not taken. Hence, there exist states. Remove states that cannot occur in real world.

• Reform and influence are mutually exclusive.• Reform and promote are mutually exclusive.• Reform and pressure are mutually exclusive.

36 feasible states remain after removing the infeasible ones.

62 64

Table 2: Feasible States in the Conflict of Values

DMs Options States GMDE 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 1. Influence N Y N Y N N Y N Y N N Y N Y N N Y N 2. Promote N N Y Y N N N Y Y N N N Y Y N N N Y 3. Reform N N N N Y N N N N Y N N N N Y N N N SES 4. Educate N N N N N Y Y Y Y Y N N N N N Y Y Y 5. Lobby N N N N N N N N N N Y Y Y Y Y Y Y Y 6. Pressure N N N N N N N N N N N N N N N N N N

States GMDE 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 1. Influence Y N N Y N Y N Y N Y N Y N Y N Y N Y 2. Promote Y N N N Y Y N N Y Y N N Y Y N N Y Y 3. Reform N Y N N N N N N N N N N N N N N N N SES 4. Educate Y Y N N N N Y Y Y Y N N N N Y Y Y Y 5. Lobby Y Y N N N N N N N N Y Y Y Y Y Y Y Y 6. Pressure N N Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y

FEASIBLE STATES

Real World Conflict

Decision Makers

Options

States

Preferences

Individual Stabilities

Equilibria

Sensitivity Analyses

Resolution

Mod

elin

g A

naly

sis

EXECUTING A CONFLICT STUDY

PREFERENCES

Rank states from most to least preferred for each decision maker (DM) where ties are allowed.

In option prioritization, preferences of a DM are expressed using preference statements about options that are listed in a hierarchical fashion from most important at the top to least important at the bottom.

The preference statements follow the rules of first order logic.

PREFERENCES

Assuming transitivity, an algorithm uses the preference statements to rank the states for the DM.

States can be subsequently sorted manually using direct ranking.

Table 3: Preference Statements for the DMs in the Conflict of Values

GMDE SES -3|1 3 -6 -1

2 IF 4 4 2 5 IF -3|1 -4 6 IF -3|1 -5

REFERENCE STATEMENTS

GMDE PREFERENCE STATEMENTS

Preference Statements

Explanation

-3|1GMDE most prefers not to reform the WTO (-3) or to continue influencing countries (1)

-6Next, GMDE prefers that SES not pressure negotiators through demonstrations.

2 IF 4Then, GMDE prefers to promote its ideals (2) if SES chooses to rebut WTO principles through educating the general public (4).

2 GMDE next prefers to promote its ideas.

-4GMDE then would like SES not to carry out public education about environmental stewardship and societal well-being.

-5Finally, the least important preference statement for GMDE is that SES not lobby governments to incorporate environmental and ecosystem protection into free trade agreements.

SES PREFERENCE STATEMENTS

Preference Statements

Explanation

3The most important preference statement for SES is that GMDE reforms its mandate in order to accommodate environmental and societal responsibilities.

-1Next, most important for SES is that GMDE not influence states to adopt market-driven economic policies.

4SES then prefers to educate the public about environmental stewardship.

5 IF -3|1SES then prefers lobbying governments (5) if GMDE does not reform (-3) or continues influencing states (1).

6 IF -3|1 Finally, SES prefers pressuring trade negotiators (6) if GMDE does not reform (-3) or continues to influence states (-1).

Table 4: Preference Ranking of States in the Conflict of Values

GMDE SES (3,4) (10,20)

(13,14) (5,15) (8,9) (16,18)

(18,19) (33,35) (1,2) (6,8)

(11,12) (25,27) (6,7) (11,13)

(16,17) (29,31) (23,24) (1,3) (31,32) (21,23) (27,28) (17,19,34,36) (35,36) (7,9,26,28) (21,22) (12,14,30,32) (29,30) (2,4,22,24) (25,26) (33,34)

(5,10,15,20)

RANKING OF STATES

COMMENTS ON PREFERENCE ELICITATION

GMCR II only requires relative preferences for each decision maker.

The problem of obtaining cardinal preference information, such as utility values, is avoided.

GMCR II develops an ordinal ranking of states from most to least preferred and allows for ties.

The graph theory methodology can handle intransitive preferences.

TYPES OF VALUES

Held or protected value: an enduring, moral principle Example: Protecting the environment from

unwarranted economic activity. A held value should not be traded off with other

values.

Assigned value: worth of something to an individual or organization within a given context Illustration: aesthetics may be valued less if it

becomes too expensive.

CONFLICT, ETHICS AND VALUE SYSTEMS

Conflicts arise because of differences of objectives or value systems among participants.

Each participant or decision maker has his or her criteria for deciding upon its preferences among states or possible scenarios.

An ethical or moral environmentalist would prioritize criteria or objectives such as minimizing environmental impacts, as well as maximizing fairness and societal well being.

However, ethics is measured relative to a specific value system.

A participant's ethics is reflected in the choices he or she make in a given situation.

PREFERENCE ELICITATION IN GMCR II

Feasible States

Option Weighting

Option Prioritizing

Fine Tuning ?

State Ranking

Final Preferences

Real World Conflict

Decision Makers

Options

States

Preferences

Individual Stabilities

Equilibria

Sensitivity Analyses

Resolution

Mod

elin

g A

naly

sis

EXECUTING A CONFLICT STUDY

INPUT INTERFACE

Decision Makers Options Feasible States State Transitions Preferences

OUTPUT

Input information Individual stability results Equilibria Coalition analysis Sensitivity analysis Tracing the evolution of the conflict

STABILITY ANALYSIS

A state is stable for a DM if it is not advantageous for the DM to unilaterally move away from it.

Because people may behave differently under conflict, stability can brought about in a variety of ways.

A solution concept is a mathematical description of how a DM may behave in a dispute.

Table 5 lists a range of solution concepts.

Table 5: Solution Concepts and Human Behavior

Characteristics Solution Concepts

Stability Descriptions Foresight Disimprovement

Knowledge of Preferences

Strategic Risk

Nash Stability Focal DM cannot unilaterally move to a more preferred state.

Low Never Own Ignores risk.

General Metrationality

All of the focal DM’s unilateral improvements are sanctioned by subsequent unilateral moves by others.

Medium By Opponent Own Avoids risk; conservative

Symmetric Metarationality

All focal DM’s unilateral improvements are still sanctioned even after possible responses by the focal DM.

Medium By Opponent Own Avoids risks; conservative.

Sequential Stability

All of the focal DM’s unilateral improvements are sanctioned by subsequent unilateral improvements by others.

Medium Never All Takes some risks; strategizes.

Limited-move Stability (Lh)

All DMs are assumed to act optimally and a maximum number of state transitions (h) is specified.

Variable Strategic All Accepts risk; strategizes.

Non-myopic Stability

Limiting case of limited move stability as the maximum number of state transitions increases to infinity.

High Strategic All Accepts risk; strategizes.

SOLUTION CONCEPTS

COMMENTS ON REALISTICALLY DESCRIBING HUMAN BEHAVIOUR IN CONFLICT SITUATIONS

People can behave in different ways under conditions of conflict.

A range of solution concepts mathematically define different types of human behaviour.

Solution concepts are precisely stated using set theory, logic and graph theory-the mathematics of relationships.

Directed graphs or reachable lists keep track of movements when decision makers dynamically interact.

The graph model methodology is entirely nonquantitative yet completely mathematical and axiomatic.

ANALYTICAL INSIGHTS

Predict possible compromise resolutions. Determine how a given DM may wish to respond in an

optimal fashion within the social constraints of the conflict.

Ascertain if and when it is advantageous to cooperate with others in order to jointly reach a more preferred outcome.

Find out how the conflict could dynamically evolve from a status quo state to an eventual resolution.

STABILITY ANALYSIS

GMCR II analyzes each state for stability for each DM according to each solution concept.

An equilibrium is stable for all DMs with respect to a given solution concept.

An equilibrium constitutes a possible compromise resolution since the conflict will stop when it reaches an

equilibrium during the evolution of the dispute.

Table 6: Equilibria List for the Conflict of Values

Equilibria States 1 3 6 8 11 13 16 17 18 19 23 27 31 35 36 Nash Stability General Metarationality Symmetric Metarationality Sequential Stability Limit-move Stability (L2) Non-myopic Stability

EQUILIBRIA

DECISION MAKERS AND OPTIONS

· Public education · Lobby governments to accommodate

environmental and ecosystem concerns into free trade agreements.

· Pressure trade negotiators to consider societal concerns through demonstrations.

Sustainable Ecosystem (SES)

· Influence states to adopt market-driven economic policies.

· Promote ideals of efficiency and prosperity.

· Reform its mandate to accommodate societal and environmental responsibilities.

Global Market-Driven Economy (GMDE)

Table 7: State Transitions from the Status Quo State to the Final Outcome in the Conflict of Values

State Numbers 36 35 18 GMDE 1. Influence Y

N N

2. Promote Y Y Y 3. Reform N N N SES 4. Educate Y Y Y 5. Lobby Y Y Y 6. Pressure Y Y

N

CONFLICT EVOLUTION

SENSITIVITY ANALYSIS

Determine how meaningful changes in the model parameters can influence the stability results.

The specific types of sensitivity analyses to carry out are dictated by the particular characteristics of the problem being studied.

TYPES OF SENSITIVITY ANALYSES

Preference changes Option modification or expansion Side payments Bring other decision makers into the dispute Consideration of other kinds of human behaviour

(solution concepts) Coalitions Misunderstandings (called hypergames) Entertainment of other modes to bargaining and

negotiation

SENSITIVITY ANALYSIS: MODERATE PREFERENCE CHANGE

Make meaningful changes in the ranking of states for both GMDE and SES (see Section 5).

Determine how the equilibrium results change.

The findings are similar to the equilibria predicted by the original model.

Equilibrium results are fairly robust with respect to the preference changes

INSIGHTS

None of the strong equilibria in Tables 6 and 10 include GMDE’s reform option.

To obtain reform, GMDE must have a positive attitude towards environmental stewardship.

SES must understand that unless GMDE changes its value system reform is not possible.

SES could better educate the general public and GMDE about the advantages of being environmentally responsible and obtaining a win/win resolution.

ACHIEVING GLOBAL SUSTAINABLE DEVELOPMENT

Another form of sensitivity analysis is performed by assuming that GMDE substantially revises its relative preferences.

Demonstrations in Seattle, Quebec, Cancun and elsewhere against global trade are a chronic annoyance for GMDE.

GMDE may reform its agenda as long as these demonstrations are not perceived as a source of intimidation.

ENLIGHTENED PREFERENCES FOR GMDE

A revised preference structure is proposed based on the premise that GMDE intends to reform its agenda.

An enlightened preference structure for GMDE is proposed such that the most preferred states are those that contain reform or not influence if SES does not pressure trade negotiators (3|-1 IF -6). The second most important preference for GMDE is SES not pressure (-6).

REFORMED PREFERENCE STRUCTURE

Table 11: Modified Preference Statements for the DMs in the Conflict of Values

GMDE SES 3|-1 IF-6 3

-6 -1 2 IF 4 4

2 5 IF -3|1 -4 6 IF -3|1 -5

Table 3: Preference Statements for the DMs in the Conflict of Values

GMDE SES -3|1 3 -6 -1

2 IF 4 4 2 5 IF -3|1 -4 6 IF -3|1 -5

ORIGINAL PREFERENCE STATEMENTS

ENLIGHTENED PREFERENCES FOR GMDE

The modified preference statements for GMDE are shown on the left in Table 11 while the unchanged preferences for SES are listed on the right.

Table 3 shows the preference statements used in the original conflict analysis.

Notice that the only change in GMDE’s preferences is that its most important statement given in the top left of Table 3 as -3|1 is replaced by the conditional preference statement in the top left of Table 11 written as 3|-1 IF -6.

BREAKTHROUGH WITH GMDE’S ENLIGHTENED ATTITUDE

GMDE’s preference changes are not very dramatic.

Hence, they are credible and politically feasible

Equilibria are obtained that contain the reform option being taken (states 5, 10, 15, and 20)

State 20 is a strong equilibrium

DESIRABLE CONFLICT EVOLUTION

Table 13: Effect of Revised Value Systems for GMDE on the Evolution of the Conflict

State Numbers 36 19 20 GMDE 1. Influence Y Y

N 2. Promote Y Y

N 3. Reform N N

Y SES 4. Educate Y Y Y 5. Lobby Y Y Y 6. Pressure Y

N N

BREAKTHROUGH

The chronic Conflict of Values dispute is an example of what Burton (1987) calls a deep-rooted conflict.

Given a set of entrenched preferences or deep-rooted value systems, GMCR II can predict the possible resolutions and associated insights.

GMCR II shows that a reasonable change in GMDE’s preferences (see Tables 8 and 11) can result in reform taking place (Table 13).

Facilitation, mediation and other procedures can help participants in a conflict to better understand one another so positions can shift and thereby produce enhanced strategic results such as state 20.

REFORMING GLOBALIZATION

Strategic analyses reveal that a sustainable resolution to the conflict of trade versus the environment is possible.

Specific suggestions are put forward in this section as to how reform can be implemented.

1909 BOUNDARY WATERS TREATY BETWEEN CANADA AND THE USA

Example of a successful bilateral treaty that espouses integrative water resources management.

Deals with water quality, water quantity, air quality and other environmental issues between Canada and the USA.

Based on the principle of equity between the citizens of Canada and the USA and environmental integrity principles.

Is a good model for helping to design Multilateral Environmental Agreements.

INTERNATIONAL JOINT COMMISSION (IJC)

International mediator for boundary water disputes between Canada and the USA.

Composed of three members from Canada and three from the USA.

IJC’s mandate is dictated by the Boundary Waters Treaty of 1909.

Can make recommendations on a water or environmental dispute put forward by either country.

INTERNATIONAL JOINT COMMISSION (IJC) (Cont’d)

ICJ uses the best experts from both countries to carry out its background studies when it comes up with an impartial recommendation for settling the dispute.

In some cases, the ICJ can make a binding judgment. The Boundary Water Treaty has worked extremely well

over the years and is an ideal model for framing similar international treaties.

POLICY DESIGN

Design policies, laws, treaties and other agreements based upon ethical principles concerning the environment and people’s well-being.

These types of principles must be an integral part of any economic or trading agreement.

Take stakeholders’ viewpoints into account.

POLICY DESIGN (Cont’d)

Use both “carrot” (economic incentives) and “stick” (severe fines) approaches to ensure compliance.

Multiple Criteria Decision Analysis (MCDA) can be useful in policy design when evaluating policy alternatives using both nonquantitative and qualitative criteria where held principles are given higher priority.

Include an effective dispute resolution mechanism within which formal conflict techniques could be employed.

RELIABLE INFRASTRUCTURE FOR SOCIETAL SYSTEMS

Strong, equitable and reliable infrastructure is required to meet the basic needs of citizens.

Society needs properly designed electrical systems, reliable water distribution systems, and other policies and programs for societal

well-being and safety.

Solid infrastructure provides a high-level playing field upon which people and organizations can compete or cooperate to

economically produce high quality products and services that are sustainable.

Society requires policies and rules that encourage ethical behavior to produce overall results which are beneficial to society and do not

harm the environment.

PARTICULAR RESEARCH IN ETHICAL SYSTEMS DESIGN ENGINEERING

Reform or replace trade agreements such as the WTO agreements and NAFTA, which only take into account the one-dimensional goal of economic gain.

Society can prosper under policies that directly consider multiple objective needs that hold proper ethical values of both individuals and society at a higher level than profit maximization.

Only design intelligent and integrated systems that are ethical and effective.

ETHICAL TRADE AGREEMENTS

Follow principles of sustainable development. Environmental standards and controls as well as other

issues related to societal well-being must be incorporated into any trade agreement as binding clauses.

Monetary fines and other sanctions can be used to punish violators using “stick” approaches.

Financial and reputational “carrots” can be used to reward conformers.

This provides a level playing field for true competition to take place.

WATER CORPORATIONS DESIRE

Certainty

Permits sound economic planning

Performance-based regulations

Provides a level playing field within each type of industry.

THE GLOBAL PLAYING FIELD

Design a level global economic playing field resting on the foundations of environmental stewardship, key societal values, and reliable infrastructure.

Corporations and economic entities can openly compete according to their basic design and value systems of pursuing profit maximization.

The playing field would be entirely located within the realm of sustainable development so all economic competitors can claim they behave ethically according to their value systems.

WIN/WIN RESOLUTION

Strategic analyses show that environmental and social education are required to encourage proponents of the Global Market-Driven Economy to become environmentally and socially aware.

• Environmental and social concerns should be held at a higher priority than economic values in international agreements.

• WTO and NAFTA must be radically restructured or else replaced.

• Agreements should empower individuals and not large corporations and special interest groups.

THE LOBBYING DILEMMA

Citizens in both the USA and Canada have been essentially disenfranchised due to lobbying by large corporations and other interest groups.

Campaign donations by lobby groups win the loyalty of politicians.

Hence, electoral reform is urgently needed and only small campaign donations should be permitted by individuals.

END OF THE COLD WAR

Anatol Rapoport predicted that an enlightened Soviet Leader would end the Cold War.

(1983 presentation at the University of Waterloo)

The US Government was incapable of instituting real change because of its suffocating lobbying system.

Soviet Premier Gorbachev stopped the ridiculous Clod War in 1990.

Likewise, China has a unique historical opportunity to lead the world in green house gas reduction.

ADAPTIVE SYSTEM OF SYSTEMS DESIGN TO ENSURE ROBUSTNESS

Deng Xiao Ping’s economic system design of the late 1970’s was highly successful in modernizing China.

Global warming was not perceived as a serious physical systems problem at that time.

If China does not update or replace its economic model to substantially reduce greenhouse gas emissions, the current

economic system will dramatically fail.

Require an integrative systems model that adapts to changing environmental and societal conditions.

ENHANCED DECISION MAKING

Engineering is all about design.

Design is creative problem solving.

Informed decision making to benefit stakeholders within a sustainable, integrative and adaptive system of systems

perspective.

SYSTEMS THINKING

Systems Engineering

Operational Research

Management Science

Decision Analysis

Provide formal tools for addressing challenging large scale system of systems problems from a complex adaptive

systems viewpoint.

……

STRATEGIC OPPORTUNITIES IN SYSTEMS ENGINEERING

Expand the theory of system of systems engineering including complex adaptive system of systems theory.

Tackle pressing global complex system of systems problems.

Reference: Hipel K.W., Jamshidi, M.M., Tien, J.M., and White III, C.C. “The Future of Systems, Man, and Cybernetics: Application Domains and Research Methods”, IEEE Transactions on Systems, Man, and Cybernetics – Part C: Applications and Reviews, Vol. 37, No. 5., pages 726-743, 2007.

GLOBAL SYSTEM OF SYSTEMS CHALLENGES

Extreme Overpopulation

Climate change Food

Water Infrastructure

Pollution Services

Deforestation Finances

Energy Industry

Widening gap between rich and poor

Security Nuclear weapons

War Unknown unknowns

……

AMERICAN FINANCIAL SYSTEM

Value system is in reverse.

Society serves the system.

Financial system should serve society.

Unethical and unfair to individual citizens.

84

AMERICAN FINANCIAL SYSTEM

Removal of regulations protecting society.

Market “fox” is guarding the chicken coop.

System collapses from greed and indigestion.

Robustness removed.

85

AMERICAN FINANCIAL SYSTEM

Subprime mortgages traded globally

Mortgages lenders disconnected from the mortgage buyers.

Unbounded uncertainty in this complex system of systems.

86

GLOBAL WARMING

Distorted value system.

Economics is held at a much higher priority than humans’ life support system of systems.

Atmospheric systems is highly unstable.

Irreversible change may gradually or unexpectedly occur.

87

END OF THE COLD WAR

Anatol Rapoport predicted that an enlightened Soviet Leader would end the Cold War.

(1983 presentation at the University of Waterloo)

The US Government was incapable of instituting real change because of its suffocating lobbying system.

Soviet Premier Gorbachev stopped the ridiculous Clod War in 1990.

Likewise, China has a unique historical opportunity to lead the world in green house gas reduction.

US MEDICAL SYSTEM

Distorted value system.

Profit maximization.

The sicker you are, the more you pay.

Unfair society.

89

CANADIAN, GERMAN AND FRENCH MEDICAL SYSTEM

Ethical value system.

Universal coverage.

Equal risk sharing.

Everyone pays the same.

Robust society.

90

INSIGHT

An equal risk sharing, universal coverage, medical system can be designed using a:

public,

private or

mixed system

Design a system that can deliver in practice according to the underlying values of equal risk

sharing and universal coverage.

91

EFFECTIVE MEDICAL SYSTEM

Decide upon underlying values.

Design a system that works in practice according to culture, tradition, and other factors.

Compare the various implementation designs according to criteria that reflect the underlying values.

Improve system according to performance criteria.

92

OPPORTUNITY FOR THE GLOBE AND US LEADERSHIP

US President Barak Obama could use the financial crisis to meaningfully address climate change as well as other

environmental and social issues.

Institute an integrative and adaptive global governance system.

A unique historical opportunity for the USA.

93

CHINA

Bright highly educated leaders.

An enlightened leader has the power to implement dramatic changes (ex. Deng Xiao Ping’s economic

reforms of the late 1970’s).

Increasing gaps between the rich and poor.

Massive environmental problems.

Huge investments in education and infrastructure.

94

USA

Legacy of neo-conservative incompetence.

Financial crisis gives chance of real reform by Obama.

Smothering lobbying system stifles needed political initiatives.

Setbacks in social and environmental reforms.

Increasing gap between the rich and poor.

A spirit of innovation and entrepreneurship.

95

EUROPEAN UNION

Informed, highly trained leaders.

Cooperatively implemented real free trade over many years.

Socially and environmentally responsible.

Fairness in wealth sharing.

Huge investment in research and development.

A race to the top.

96

MODELING PHILOSOPHY OF THE GRAPH MODEL FOR CONFLICT RESOLUTION

Determine the best a decision maker can do on his or her own.

Check if the decision maker can do even better by cooperating with others through coalition formation.

Competition and Cooperation

Noncooperative Behaviour

Cooperative Behaviour

Nash

General Metarationality

Symmetric Metarationality

Sequential Stability

Limited Move Stability

Nonmyopic

Coalitional versions

of the

noncooperative

solution concepts

Coalitions

Competition and Cooperation in Conflict Resolution

Conflict Resolution

CompetitionCooperation

(Coalitions, Group Decision Making)

Graph Model for Conflict Resolution

Multiple Criteria Decision Analysis

Fair Resource Allocation

Noncooperative Behaviour

Coalition Analysis

Implementation Algorithms

Decision Support Systems

Research in the Graph Model for Conflict Resolution

Graph Model for Conflict Resolution

Competition Cooperation

Human BehaviourSolution Concepts

Metarational Tree

PreferencesStrength,Uncertain

(non-probabilistic, info-gap, fuzzy)

Psychological FactorsEmotions, attitudes, misunderstanding

(hypergames)

Human BehaviourCoalition Formation,

Solution Concepts

CoalitionMetarational Tree

GeneralizationsCooperative versions

of competition developments

Conflict DynamicsEvolution of a

conflict (status quo analysis)

IntegrationMatrix and other algorithms

Decision Support System: Next GenerationInput, Engine, Output, Interface

Applications: Testing and RefinementBrownfield redevelopment, water resources,

governance, environmental management, military science, policy analysis

Multiple Criteria Decision Analysis (MCDA)

Consideration of both quantitative and qualitative criteria when comparing alternative solutions to a problem

Screening out inferior solutions from further analyses Modelling interdependencies among alternatives when

considering combinations of alternatives as possible final choices

Handling uncertainty using fuzzy set theory and rough sets

Classification of alternatives according to nominal categories

MCDA-based bargaining and negotiation Sorting according to case-based reasoning Decision support systems in MCDA

Decision Maker

Criteria SetC={c1,…,cj,…,c|C|}

Alternative SetA={a1,…,ai,…,a|A|}

Data

a1 a2 ● ● ● a|A|

c1

c2●●●

c|C|

Cri

teri

a

Alternatives

Decision Protocols

a2

Sorting

1. Problem construction 2. Preference elicitation and aggregation 3. Implementation and outcome

Most preferred alternative

Least preferred alternative

a2

a1

a|A|

●●●

a3

Group 1a2; a1; a6

Group 2a5; a4; a7; a3

More preferred group

Less preferred group●●●

●●

●

Overall Procedure of Multiple Criteria Decision Analysis

MULTIPLE CRITERIA NOMINAL CLASSIFICATION

Multiple Criteria

Nominal Classification:

Overview and Modelling

MULTIPLE CRITERIA SCREENING

Sequential Screening

Screening in Subset

Selection

MULTIPLE CRITERIA SORTING

Sorting Techniques in

MCDA

Multiple Criteria

Sequential Sorting

Rough Set Approach to

Multiple Criteria ABC

Analysis

Multiple Criteria

Nominal Classification:

Analysis Procedure and

Application

Index Aggregation

Approach to Country

Comparison

Case-based Distance

Approach to Screening

CASE-BASED DISTANCE APPROACH

Case-based Distance

Approach to Sorting

Case-based Distance

Approach to Bilateral

Negotiation

Case-based Distance

Approach to Ranking

Case-based Distance

Approach to Multiple

Criteria ABC Analysis

Using A Benchmark in

Case-Based Multiple

Criteria Ranking

Screening Techniques

and Applications

MULTIPLE CRITERIA CLASSIFICATION DECISION ANALYSIS

APPLICATIONS AND EXTENSIONS

Applications

Case studies to assess and demonstrate the validity of new methodologies and their implementation

Studies in bargaining and negotiation in water resources management, environmental engineering, labour-management relationships, international trade, privatization of public infrastructure, sustainable development, brownfield redevelopment, and other fields

Practical policies for improving environmental enforcement

Multiple criteria decision analysis in water supply, pollution clean-up, waste disposal, infrastructure privatization, and other alternative-choice problems