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/issues/issue12_9/picci/index.html)

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)

Discussion

“Openness”, “participation” and “reputation”: A convergence?

Lucio Picci [2]:

"To the extent that reputation–based governance gives voice to the people who are affected by the policies chosen by elected officials, and that it provides a framework to increase the accountability of the actors of governance, it can be seen as a set of procedures that, broadly speaking, make governance more democratic. Here, the effect on the “quantity and quality” of democracy is through the presence of ex post incentives: administrators and politicians would anticipate the increased level of accountability of their actions, and ex ante would presumably listen more to the needs of the people.

Reputation–based governance also lends itself to an increase of participation by allowing forms of mixed direct–representative democracy, such as the ones that have been adopted, albeit without a central role of the Internet, in the Brazilian city of Porto Alegre and in many other places around the worlds, to create a “participative budget” (Baiocchi, 2005). In fact, the availability of an information system as the one here envisioned would lend itself to innovative participative practices, where appropriate procedures allow the people also to express their opinion on prospective policies and to contribute to forms of collaborative design of policy options.

This extension, in turn, would allow for the introduction of reputational information also on the citizens. Such reputation could be formed retroactively: Citizens who contributed to the design of policies that are later successfully evaluated, would have their reputation improved. Or, it could more simply derive from the assessment that anyone’s contribution receives from her fellow citizens.

We witness here an interesting possible convergence between three issues that, in different circles, are today widely debated: “openness” (as in, open source software), “participation” (as in, participatory design) and “reputation”. The debate on open source software has already benefited from an enlargement of perspective, thanks to the consideration of historical antecedents, such as the rise of open science in the sixteenth and seventeenth centuries (David, 2004; Willinsky, 2005), and to the study of forms of mixed design/production of goods that overcome the traditional distinction of inventor/designer, producer, and consumer.

In the debate on “openness”, reputational considerations play an important role. In the production of open source software, accounts written by insightful advocates (as an example, see Raymond, 2000) and academic enquires (Dalle, et al., 2004) agree on the pivotal role of reputation in the governance of open source projects. Having a good reputation, besides advancing one’s position within the open source community, also signals good programmer’s qualities to potential employers (Lerner and Tirole, 2002).

From a broader point of view, the whole of “Internet governance” — indicating with this loose term the way that the Internet has been ruled — is to a great extent “open” and “reputation–based”: based on open standards, much open source software, and a series of institutions (such as the Internet Engineering Task Force or the World Wide Web Consortium) that are rather horizontal in the way the build consensus on technical standards, and where individual reputations play a prominent role in determining who has a bigger say on any problem.

It is important to realize that this emerging governance model is not determined by the Internet. Technologies may enable organizational forms, but they never determine them. Depending on the context, a better communication technology may support both more intense horizontal or more vertical relations within an organizational landscape.

The Roman Empire of the first century had many characteristics that resembled what today we would call a “network organization”. This situation derived in part from the difficulties of communication technologies of the time that, among other things, impeded navigation across the Mediterranean sea for most of the year. A century or so later, the same communication technology was supporting a much more centralized structure. For a contemporary example, the emergence of the Internet today is enabling not only horizontal hackerdom, but also quite vertical Wal–Mart" (http://www.firstmonday.org/issues/issue12_9/picci/index.html)

Overview of Challenges

Lucio Picci:

"Of all the open issues of reputation–based governance I here provide a nonexhaustive list, with some indications of possible solutions.

Some of the problems are shared with the Internet–based reputation systems of today such as eBay. For example, ratings of policies is a public good, so that we would expect it to be underprovided. However, we do witness a high degree of participation in many such systems, suggesting that sometimes people actually enjoy providing services that benefit others.

Other problems that affect existing systems would not be relevant within reputation–based governance. For example, the real identities of all actors would be known, so that opportunistic changes of identity to provide a fresh start to cheaters, or multiple identities, to provide fake consensus (see David and Pinch, 2006, for an example), would simply not be an issue.

Some issues are new with the proposed model of governance. One follows from the possibility that corrupt bureaucrats team up with opportunistic citizens to secure an unfair share of public resources. A bad and wasteful school in one’s neighbourhood may still be preferable to a good school located a long drive away. While this is a potentially serious issue, note that the “integrated statistics” that reputation–based governance would make available would include timely information both on the geographical distribution of resources, and on the standardized, or average, cost of a given output. This would make it more difficult for a coalition of bureaucrats, politicians and citizens to cover–up corrupt behaviours in exchange for an unfair share of public resources to a given constituency — or “pork barrel”, as it is sometimes called. Note also that these “distributive” practices are permitted by the relative secrecy of the legislative process. In the United States, for example, expenditure laws are often wrapped in “omnibus legislation”, discussed within committees and attracting support from both sides of the isle. Within reputation–based governance, at least in principle, it would be very easy to monitor who is getting what.

A further problematic issue involves the management of the information system and of privacy rights. Within today’s Internet–based reputation systems the problem is not very severe: one’s opinion, say, about a restaurant or a hotel that one has visited is hardly contentious. Within reputation–based governance, on the other hand, personal opinions are on sensitive political matters, and every person accesses the system with a real identity, as a citizen. Not guaranteeing the necessary privacy would allow abuses, making it possible, for example, for corrupt and dishonest politicians or bureaucrats to “buy” positive ratings from cynical, or simply poor, citizens. The management of the information system would need an appropriate institutional set–up. Participative practices always need adequate supporting institutions, and reputation–based governance is no exception." (http://www.firstmonday.org/issues/issue12_9/picci/index.html)

Proposed Roadmap

Lucio Picci:

"Important organizational and institutional changes are always difficult to obtain, particularly when they depend on the presence of a complex technological infrastructure. Seen as something entirely new to be established, reputation–based governance could appear to be an overly ambitious goal.

However, there is a more useful view point on the issue. There is an ongoing process where information technologies are becoming ubiquitous in the management of governance processes. To an increasing degree, policies are managed with the help of information systems where they are codified and accompanied by a vast amount of information. It is a fairly safe bet to affirm that the process of “digitalization of policies” sill spread and deepen, in a sense, regardless of what we think and do.

The issue, then, is on what particular shape these changes will take. Will they empower citizens, or will they not? Will they support an horizontal, network–shaped, organizational landscape or, to the contrary, will they tighten the bolts of traditional vertical organizations? Will they model the reputation of the actors of governance, or will they only describe the aspects of governance that are useful for societal control, with reputational information still exchanged within traditional social networks?

Reputation–based governance, then, can be seen as a proposal for the direction that many concurrent changes that are already happening should take. Implementing reputation–based governance is about steering an ongoing process, providing a coherent shape to it, and making sure that, among the many organizational forms that the Internet may support, the ones that will emerge will allow be characterized by an unprecedented degree of transparency and by an allocation of resources and of power that is strictly linked to past performances and to the reputation that derives from them. Then, reputation–based governance would also provide an ideal platform on which to implant innovative procedures, reputation–based themselves, that permit the participation of citizens in the design of policies." (http://www.firstmonday.org/issues/issue12_9/picci/index.html)

More Information

See our entry on Reputation