Previous posts introduced the simple/complicated/complex/chaotic quadrants of the Cynefin Framework and discussed how that can be used to analyze development issues.
Implications for economics
This framework has huge implications for discussions of economic issues. So many areas come to mind that are actually complex but we treat them as if they are complicated.
Take just one issue – minimum wage.
If this is a complicated issue, then to make life better for people, we can just increase the minimum wage. Go to $8. Maybe $10.
Why not $20?
The result? People working at the bottom of the pay scale can afford a much better life. Problem solved.
If we look at wages as a complex issue, we realize there are a host of other variables:
- People at the entry-level of employment have not, at this moment, developed their skills to the point where they contribute value greater than the arbitrary wage cutoff. People just starting their work life will not be employable. That entry-level job is needed in order to develop one’s skills to get the next job.
- An increase in pay for the least skilled staff will create pressure to increase wages for those with higher skills.
- Employers having other options when the cost of labor is artificially high.
- Technology developments could make it economical to trade off a machine for a person.
- Off-shoring becomes a more economical option.
When one considers those factors and others (count me in that school of thought), the issue of improving the lives of poor people (the concern for everyone who ponders minimum wage laws) is actually in the complex quadrant. There are messy, barely visible, interconnected causes and effects that we ought to consider.
If we don’t treat wages as a complex issue, we could hurt the people we are trying to help.
Unintended consequences
As I ponder the Cynefin Framework and many of the posts I’ve written on unintended consequences, I realize the underlying issue is treating a complex issue as if it were complicated.
Hunger in Haiti? One complicated quadrant solution is to ship pallets of peanut butter and give them away. Complex quadrant effects are to destroy local peanut farmers.
Same with shoes and used clothes. Complicated quadrant goal: clothe the needy. Complex quadrant effect: devastate local industry.
Provide eggs to a village in Rwanda? Good idea except that is a complex issue. Result? Destroy the local egg farmer.
All of a sudden, the messiness of other issues becomes clear: How do you give out a wad of cash to some people in some villages without causing a lot of unintended consequences?
The reason things can go sour? A local economy is extremely complex. That is multiplied if you don’t understand the culture and moral norms and take those variables into consideration.
I hope the Cynefin Framework helps you sort out the messiness of the world. It has sure helped me.