Book of the Day: Reputation-Based Governance

Reputation-based Governance

Definition

“Reputation–based governance is a way of executing (and as we will see, possibly, of choosing) policies that hinges on the reputation of the actors involved, by a systematic use of an appropriate digital information system that computes reputation measures and makes them accessible to all.” [http://www.firstmonday.org/ojs/index.php/fm/article/view/2010]

Description

From an article with the same title by Lucio Picci [1]

“Policies can be either projects, i.e., initiatives having a goal well specified in advance and lasting a definite amount of time (such as, the building of a new bridge), or programs, i.e., services that are delivered over a period of time (for example, an educational degree offered at a public university). Note however that paying attention to public policies does not imply that private actors are outside our visual range, because governments increasingly collaborate with non–governmental actors and with firms to pursue their goals. We’ll consider a public procurement example below, where a public administration explicitly asks private actors to provide goods or services.

Reputation affects incentives. The underlying behavioural assumption is rooted in what social scientists call “rational choice theory”. In a nutshell, I posit that social actors act to advance their self–interest. Firms maximize profits, and having a good reputation helps them in this respect. Within public administrations, I adopt the so called “economics of career concerns approach” (see Holmström, 1982; Dewatripont, et al., 1999), according to which bureaucrats are motivated by their desire to step up the career ladder, in a situation where a good past performance advances one’s chances of obtaining a promotion.

Note that such view on human behaviour does not rule out the presence of non–monetary incentives, including some of those that have been advanced in advocates’ accounts of open source software production — such as “egoboo”, or the personal satisfaction that derives from public recognition of one’s (voluntary) work (see Raymond, 2000). Personal satisfaction also is a positive function of reputation, at least for all who are not snobbish to the point of enjoying not being appreciated by the masses, so incentives of this type would actually reinforce the role of reputation.

Reputational effects have three main positive effects on governance.

First, at a given moment in time they help discriminating between providers of different quality — at least when a choice is possible. If the task is choosing a restaurant, knowing about their reputation allows to pick a good one.

Secondly, they allow selection forces to weed out the least fit. Bad restaurants eventually go out of business, and mediocre bureaucrats, when they do not get fired, at least do not obtain promotions so that they progressively become less relevant.

Thirdly, they provide incentives to invest in quality. The owner of a restaurant, or the bureaucrat, operating in a context where performance matters, has a strong reason to try to improve his skills.

These effect, in varying measures, are present wherever reputational considerations play at least some role in governance. Within reputation–based governance, the link between past performances and reputation is particularly strong, following the presence of two of the three motives mentioned above: The unprecedented publicity of reputational information afforded by the Internet, and the possibility of designing the reputation system and metric according to needs.” (http://www.firstmonday.org/issues/issue12_9/picci/index.html)

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