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UBC Theses and Dissertations

Scarcity and organizational theory Moudgill, Pravin 1975

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S C A R C I T Y A N D O R G A N I Z A T I O N A L T H E O R Y by PRAVIN MOUDGILL Graduate of the I n s t i t u t i o n of Mechanical Engineers (London), 1964 Graduate of the I n s t i t u t i o n of Production Engineers (London), 1968 M.Sc. ( I n d u s t r i a l Engineering), North Carolina State U n i v e r s i t y Raleigh, U.S.A., 1971 M.B.A., University of B r i t i s h Columbia, 1972 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY in the Faculty of Commerce and Business Administration We accept t h i s thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA June, 1975 In presenting th i s thes is in par t i a l fu l f i lment of the requirements for an advanced degree at the Univers i ty of B r i t i s h Columbia, I agree that the L ibrary sha l l make it f ree ly ava i l ab le for reference and study. I fur ther agree that permission for extensive copying of th i s thesis for scho lar ly purposes may be granted by the Head of my Department or by his representat ives. It is understood that copying or pub l i ca t ion of th is thes is fo r f i nanc i a l gain sha l l not be allowed without my written permiss ion. Department of C p <~JL(. 6. The Univers i ty of B r i t i s h Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5 Date ii ABSTRACT There i s reason to believe that the world i s approaching i t s l i m i t s to growth. The l e v e l of natural resources i s dwindling r a p i d l y . This diminution i s expected to have major consequences f or a l l human a c t i v i t y . The possible e f f e c t s of environmental s c a r c i t y on organi-z a t i o n a l behaviour were analyzed i n t h i s d i s s e r t a t i o n . The operational problem as defined was: to study at the macro l e v e l . o f analysis the organizational consequences of reduction of matter-energy inputs. It was pointed out that current organizational theory COT) i s both consciously and unwittingly biased towards abundance and growth, and that there i s l i t t l e understanding of the imperatives of s c a r c i t y i n O.T. Evidence to t h i s e f f e c t was presented. The concept of s c a r c i t y was introduced and the c e n t r a l i t y of s u r v i v a l as a determinant of behaviour was used to obtain a d e f i n i t i o n of scarcity. 7 Two types of d e f i n i t i o n s were generated: (1) r e l a t i v e s c a r c i t y , i . e . , s c a r c i t y as i t r e l a t e s to the f o c a l organization, and ( i i ) absolute s c a r c i t y , i . e . , s c a r c i t y i n the context of the larger geo-p o l i t i c a l system. These d e f i n i t i o n s were explicated with the help of some basic tools of microeconomic a n a l y s i s . The d e f i n i t i o n s were relevant to both organizational as w e l l as nonorganizational behaviour. The i n t e r - and i n t r a - o r g a n i z a t i o n a l consequences of s c a r c i t y were studied separately. Interorganizational s t r a t e g i e s which seek to reverse the antecedents of s c a r c i t y or to avoid experiencing i t s conse-quences were analyzed i n d e t a i l . The various p r e s c r i p t i o n s were presented i n the form of propositions, and contrasted to those c h a r a c t e r i s t i c of behaviour under abundance. A new d e f i n i t i o n of power was also developed. i i i It was noted that s c a r c i t y may be expected to be ( i ) temporary, ( i i ) permanent, but not so severe as to cause f a i l u r e i n the long run, and ( i i i ) gradually worsening s c a r c i t y such that the organisation expects to f a i l i n the long run. Intraorganisational consequences of the three d i f f e r e n t modes of s c a r c i t y were discussed separately. The p a r t i c u l a r response strategies to be used under norms of r a t i o n a l i t y , i . e . , to insure s u r v i v a l , were developed i n the p r o p o s i t i o n a l form i n each case. These strategies were compared and contrasted to those c h a r a c t e r i s t i c of abundance. Scarcity of a v a i l a b i l i t y of supplies i s generally accompanied by uncertainty regarding t h e i r a v a i l a b i l i t y . Two " i d e a l types" of organisations were described; and i t was suggested that, depending on the degree of s c a r c i t y , the two types are most l i k e l y to survive under condi-tions of permanent low l e v e l a v a i l a b i l i t y of matter-energy inputs. iv TABLE OF CONTENTS Page Table of Contents i v L i s t of Tables V L i s t of Figures v i Acknowledgements i x Chapter 1: Introduction 1 Chapter 2: The bias i n organizational theory 7 Chapter 3: The concept of s c a r c i t y 34 Chapter 4: Development of the concept of s c a r c i t y 43 Chapter 5: Problem d e f i n i t i o n 67 Chapter 6: Absolute s c a r c i t y 84 Chapter 7: Relative s c a r c i t y 120 Chapter 8: Scarc i t y and the organization 189 References 199 Appendix 1: An a l t e r n a t i v e d e f i n i t i o n of s c a r c i t y 207 Appendix 2: Li m i t a t i o n to the f i r s t l e v e l d e f i n i t i o n of s c a r c i t y 211 Appendix 3: Development of the concept of s c a r c i t y : Human beings and t h e i r aggregations 214 V LIST OF TABLES Table No. T i t l e Page I Rank order of elements according to the slack and distance rules 102 II Differences between abundance and s c a r c i t y 118 III Comparison of c e r t a i n i n t r a -organizational response st r a t e g i e s under mode ( i i ) with those under 153 mode ( i ) s c a r c i t y IV Comparison of c e r t a i n organizational c h a r a c t e r i s t i c s across abundance and mode ( i i ) s c a r c i t y 160 V Comparison of i n t r a o r g a n i z a t i o n a l processes p a r t i c u l a r to mode ( i i ) s c a r c i t y with those c h a r a c t e r i s t i c of abundance 174 VI Comparison of c e r t a i n organizational structures p a r t i c u l a r to mode ( i i ) s c a r c i t y with those under abundance 181 v i LIST OF FIGURES Figure No. T i t l e Page 1 General model of adaptive motivated behaviour 17 2 Indifference curves: The e s s e n t i a l and i n e s s e n t i a l goods 45 3 Demand curve f o r the i n e s s e n t i a l good 48 4 Demand curve f o r the e s s e n t i a l good 49 5 Consumption as a function of the l e v e l of resources: E s s e n t i a l and i n e s s e n t i a l goods 50 6 Locus of i n t e r s e c t i o n of the aggregate supply and demand curves f o r good A(B) for organi-zations A*(B*) 52 7 Locus of i n t e r s e c t i o n of the aggregate supply and demand curves for good A(B) for organi-zations A*(B*) : Approximate representation 54 8 Aggregate demand curve for i n e s s e n t i a l good A(B) for organizations B*(A*) 55 9 Locus of i n t e r s e c t i o n of the aggregate supply and demand curves for A(B) 56 10 Changes i n aggregate consumption corresponding to v a r i a t i o n s i n the l e v e l of resources: A*(B*) 58 11 Consumption of A and B as a function of the l e v e l of resources: Aggregations of A*, B*, and A* and B* 60 12 Functions i n an organization 69 v i i Figure No. T i t l e : Page 13 Consequences of intervention I : 75 Reduction i n the t o t a l amount av a i l a b l e to the g e o - p o l i t i c a l system 14 Consequences of intervention -II.- 77 H i s t o r i c a l amounts at. higher p r i c e s 15 Reduction i n aggregate demand 91 corresponding to a reduction i n supply 16 Apparent inconsistency within the . organization under s c a r c i t y 192 17 The medium uncertainty s c a r c i t y c organization 194 18 The high uncertainty s c a r c i t y organization 196 19 Indifference curves 218 20 Indifference curves: The e s s e n t i a l and the i n e s s e n t i a l - r g o M / f d t i ^ i v i d u a l s 220 21 . Optimal a l l o c a t i o n , of l i m i t e d resources across, the e s s e n t i a l and i n e s s e n t i a l goods 222 22 The e f f e c t of p r i c e changes on the consumption of e s s e n t i a l and i n e s s e n t i a l goods 224 23 Demand curve for the - i n e s s e n t i a l good 225 24 Demand curve f or the e s s e n t i a l good for an i n d i v i d u a l 227 25 E f f e c t of reduction i n income on con-sumption of e s s e n t i a l and i n e s s e n t i a l goods 228 26 Consumption as a function of the l e v e l of resources: E s s e n t i a l and i n e s s e n t i a l goods - i n d i v i d u a l s 229 27 Locus of i n t e r s e c t i o n of the aggregate supply and demand curves f or the e s s e n t i a l good f o r i n d i v i d u a l s 231 v i i i T i t l e Locus of i n t e r s e c t i o n of the aggregate supply and demand curves f or the e s s e n t i a l good for i n d i v i d u a l s : Approximate representation Changes i n aggregate consumption corresponding to v a r i a t i o n s i n the l e v e l of resources: Individuals Changes i n aggregate consumption corresponding to v a r i a t i o n s i n the l e v e l of resources: Individuals approximate representation - i x ACKNOWLEDGEMENTS This venture has been blessed by s u b s t a n t i a l inputs from many sources. While i t i s impossible to repay the several debts, some of the contributions are acknowledged below. While I have always been interested i n the future and environ-mental s c a r c i t y , the present project was triggered i n September, 1974 by Scott's (1974) a r t i c l e . He sowed the seed. Credit for growth goes l a r g e l y to my advisor, Vance M i t c h e l l , who encouraged me i n many ways during the development of the d i s s e r t a t i o n . He contributed as an academic advisor, administrative f a c i l i t a t o r , a kindly mentor, and most of a l l as an enthusiastic f r i e n d . I value the opportunity of having learned under him. The Ph.D. committee was very supportive and h e l p f u l , both i n t h e i r comments as w e l l as i n t h e i r j u d i c i o u s r e f r a i n i n g from comment. My thanks to Peter Frost, Larry Moore, Rick P o l l a y , and Gordon Walter. Peter Frost also contributed s u b s t a n t i a l l y towards the f i n a l stage and i s responsible for increasing the comprehensibility of Chapters 6 and 7. Craig Pinder of the O.B. D i v i s i o n was most enthusiastic i n h i s support. Thanks, Peter and Craig. Substantive contributions are acknowledged i n the body of the paper. Any shortcomings regarding presentation and content are mine. I received abundant support from off-campus sources. My wife Indra did not allow any domestic or parental constraints to operate and was t r u l y a f a c i l i t a t o r . My thanks to her. A group of friends contributed immeasurably through prayer. I am convinced that the d i s s e r t a t i o n could not have been written i n t h i s short time (and with so l i t t l e trauma) without divine b l e s s i n g . I always wondered why i t was customary to acknowledge the s e c r e t a r i a l e f f o r t i n such an undertaking. Now I know. My thanks to Marilyn Logan f o r typing the d i s s e r t a t i o n under severe time constraints. The K i l l a m Bredoctoral and Xerox fellowships and other f i n a n c i a l assistance from the Faculty of Commerce made th i s venture p o s s i b l e . Pravin Moudgill U n i v e r s i t y of B r i t i s h Columbia, Vancouver May, 1975 xi dedicated to JESUS (Let the redeemed of the Lord say s o — P s . 107.2) CHAPTER 1 INTRODUCTION Pu b l i c a t i o n of the Club of Rome study (Meadows, et a l . , 1972) has revived once again the Malthus-Condorcet debate. S t a r t i n g with two fundamental postulates: " F i r s t , that food i s necessary to the existence of man. Secondly, that the passion between the sexes i s necessary, and w i l l remain nearly i n i t s present s t a t e " (Malthus, 1798, reprinted i n 1965: p. 11) Malthus concluded that "The natural i n e q u a l i t y of the two powers of population and of production i n the earth, and that great law of our nature which must constantly keep t h e i r e f f o r t s equal, form the great d i f f i c u l t y that to me appears insurmountable i n the way to p e r f e c t i b i l i t y of so c i e t y . " (p. 16) Malthus thus forecast that the i n a b i l i t y of nature to continue to support an ever increasing human population would ultimately lead to chaos. His conclusions were b i t t e r l y contested by some of his contemporaries. Condorcet, among others, took i t upon himself to reply to the Malthusian doomsaying: "To the question 'can the earth always be r e l i e d upon to supply s u f f i c i e n t means of subsistence?' Condorcet says 'either science w i l l be able to increase the means of subsistence or reason w i l l prevent an inordinate growth of population.'" (Gide & R i s t , n.d., p. 11) Condorcet thus f e l t e i t h e r science or reason would p r e v a i l and calamity would be f o r e s t a l l e d . Meadows et a l . (1972) question the a b i l i t y of science to increase the means of subsistence by emphasizing the f i n i t e l i m i t s to growth.''" With XWhile there has been some debate about the s p e c i f i c l i m i t s , i t i s generally agreed that natural resources are l i m i t e d . (See, e.g., Ayres and Kneese, 1971; Boulding, 1966; Coale, 1970; Hardin, 1968; and Heilbroner, 1970.) The argument now centres around the a b i l i t y to recycle and transform h i t h e r t o unusable material; and can be reduced to a debate over the l i m i t s of energy and the a b i l i t y of the ecosystem to survive an increase i n temperature (Randers and Meadows, 1973: p. 319). -2-the highest world population growth rate i n human h i s t o r y — o v e r 2% per year i n contrast to about 0.7% at the time of the o r i g i n a l debate (Coale, 1974)— the argument of reason preventing an inordinate growth of population i s also very weak. The evidence i s currently heavily i n favour of Malthus. The facts are d i f f i c u l t to ignore. The e f f e c t s of the increasing gap between need and a v a i l a b i l i t y are being f e l t a l l over the world. In and around Bangladesh and i n the sub-Saharan Sahelian countries i n A f r i c a nature i s moving i n a Malthusian fashion to restore the balance between 2 population and natural resources. While the consequences are not nearly as d r a s t i c i n the developed countries, the unprecedented double fi g u r e i n f l a t i o n rates (well into the 20s i n Japan and some European countries) r e f l e c t i n part the outs t r i p p i n g of supply by demand. The depletion of l i m i t e d world reserves of natural resources at ever j Tincreasing rates i s r e s u l t i n g i n an ubiquitous c a l l for reduced consumption, economy, r e c y c l i n g , conservation, and the l i k e . National values of growth and consumption are being questioned i n the r i c h i n -d u s t r i a l i z e d countries; and the world i s discovering anew the importance of a g r i c u l t u r e . The adage "the more the merrier" i s being displaced from i t s time honoured r o l e as the guiding value-—both i n production and procreation. The increasing c r e d i b i l i t y of the Malthusian scenario i s thus causing, among other things, the peoples of the world to undergo \ h e sub-Saharan Sahelian countries are Chad, Gambia, M a l i , Mauritania, Senegal, Upper Volta, and Niger. In addition famine or near famine conditions p r e v a i l i n Et h i o p i a , northeastern B r a z i l , and India (Time, November 11, 1974: p. 76). -3-a value c r i s e s . " This value change, d r a s t i c as i t i s i n i t s consequences f o r the human race, can be reduced to the conceptual difference between abundance or "more than enough" on the one hand and Malthusian s c a r c i t y or "l e s s than enough" on the other hand. The two are q u a l i t a t i v e l y d i f f e r e n t phenomena. The Western people have t r a d i t i o n a l l y l i v e d amidst plenty, and consequently have considerable understanding of behaviour i n the context of abundance. They are experiencing d i f f i c u l t y however i n coping with the present conditions: While awareness of the p o s s i b i l i t y of s c a r c i t y has existed for at least two hundred years, the Western world i s not prepared for the contingency of poverty; and possesses l i t t l e or no r e f l e c t i v e understanding of human behaviour i n an environment of extreme s c a r c i t y . There e x i s t s today an extensive and varied formal body of 4 theory across the s i x major behavioural d i s c i p l i n e s . With l i t t l e exception however most of t h i s knowledge concerns i t s e l f with behaviour under conditions of abundance. There i s some understanding i n anthropology, JThe following are some examples of economic conditions a f f e c t i n g n a t i o n a l values: Abundance: When Russia was undergoing a recession l a s t year, Brezhnev demanded "serious e f f o r t s to improve" planning. Reforms were however not mentioned t h i s year (Time, January 6, 1975: p. 65). S c a r c i t y : a White House aid described President'Ford's recent energy proposal as follows: " P h i l o s o p h i c a l l y , i t i s cast i n terms of a c r i s i s " (Time, January 20, 1975: p. 14). : The 1974 e l e c t i o n was fought l a r g e l y on economic issues i n contrast to the s o c i a l and p o l i t i c a l issues which characterized previous ele c t i o n s (Time, November 18, 1974: p. 15). 4 The s i x behavioural d i s c i p l i n e s are anthropology, economics, organizational behaviour, p o l i t i c a l science, psychology, and sociology. -4-sociology, and psychology of behaviour under, for example, conditions of starvation, i s o l a t i o n , sensory deprivation, and excessive crowding; but the knowledge i s rather disconnected both within and across the d i s c i p l i n e s . There i s no attempt at a comprehensive theory of human behaviour under conditions of extreme s c a r c i t y . Scarce goods, as distinguished from free goods, are the raison d'etre of economics. While v a r i a t i o n s i n the degree of s c a r c i t y are recognized i n p r i c i n g behaviour, no q u a l i t a t i v e d i s t i n c t i o n i s made between "abundance" and "not enough". The d i s c i p l i n e i s symmetrical, as i t were, across abundance and s c a r c i t y , and thus does not provide any understanding of behaviour p a r t i c u l a r to Malthusian s c a r c i t y . Organizational theory, the d i s c i p l i n e of i n t e r e s t to the present w r i t e r , does not address i t s e l f to the issue e i t h e r . The world today i s l a r g e l y an organizational world.^ B i r t h and death are usually o r g a n i z a t i o n a l l y located. Organizations are used to make war, and i n some cases, peace. The e n t i r e continuum of human a c t i v i t y has organizations as a ce n t r a l or important component. In an i n d u s t r i a l i z e d , technological society they provide i n t e r a l i a , employment, education, recreation, and consumables. They are agents as we l l as r e s i s t e r s of s o c i a l change. In the past decade the amount of discussion of organizations have been focused around what they do to and for society and the i n d i v i d u a l . Research has been dire c t e d toward these issues and also toward an understanding of the organization i t s e l f . The present knowledge about organizations i s however l i m i t e d to that obtained i n an environment of abundance. ^This and the following paragraph are based on Ha l l (1972). -5-Organizational theory has t r a d i t i o n a l l y been a study of the behaviour of organizations under conditions of abundance: Scott (1974) i n a rather provocative a r t i c l e suggests that the theory i s founded i n t e r a l i a on the ultimate p r i o r values of growth and abundance. I f s c a r c i t y and decay are expected to be the future mode, then i t i s necessary to supplement e x i s t i n g knowledge i n organizational theory. Organizational responses to s c a r c i t y may be either r a t i o n a l or i r r a t i o n a l . Sabotage, arson, or l o o t i n g are examples of the l a t t e r . While i t i s important to understand the antecedents of i r r a t i o n a l organi-z a t i o n a l behaviour, the present analysis w i l l be l i m i t e d to study of r a t i o n a l responses to environmental s c a r c i t y . Before proceeding with the study however i t i s necessary to examine Scott's contention that organizational theory has a bias toward growth. Evidence for a growth o r i e n t a t i o n as revealed by a l i t e r a t u r e survey i s presented i n Chapter 2. (Successful development of a s c a r c i t y r e l a t e d theory which i s d i f f e r e n t from present organizational theory i t s e l f constitutes evidence for a growth bias. Such evidence i s presented i n Chapters 6, 7, and 8.) There i s some argument over the p r o b a b i l i t y of occurence of s c a r c i t y and decay; and differences i n p r i o r s o c i o - t e c h n i c a l philosophy (DeGreene, 1973) may lead to d i f f e r e n t i a l i n t e r p r e t a t i o n of the evidence. Heilbroner (1970), Meadows, et a l . (1972), and Resources and Man (1969), f o r example, argue f o r a very high p r o b a b i l i t y of s c a r c i t y . Ayres and Kneese (1971) and Daly (1971) maintain that technology i s subject to diminishing returns, and a n t i c i p a t e the p o s s i b i l i t y of a stationary economy. (The p o s s i b i l i t y that "nature had begun to y i e l d a decreasing response to human e f f o r t " was a r t i c u l a t e d , among others, by Keynes i n his famous Economic Consequences of the Peace, 1919). Maddox (1972), Nordhaus and Tobin (1972), and P a s s e l l et a l . (1972) question the doomsaying, and a n t i c i p a t e no major changes i n the present pattern of growth. The exact p r o b a b i l i t y of s c a r c i t y i s however i r r e l e v a n t to the present study. A l l that i s necessary i s to show that there i s a reasonable p o s s i b i l i t y of s c a r c i t y i n the future. (In f a c t , as argued on pp. 7-8, a s c a r c i t y oriented OT may provide valuable i n s i g h t s into organizational be-haviour even during periods of abundance.) -6-Having reviewed the evidence concerning the existence of an abundance bia s , the concept of s c a r c i t y i s introduced i n Chapter 3. D e f i n i t i o n s are presented, and are then developed i n Chapter kJ The operational problem i s defined i n Chapter 5. Extraorganizational responses to s c a r c i t y are discussed i n Chapter 6, and the i n t r a o r g a n i -z a t i o n a l consequences at the macro l e v e l of analysis are examined i n Chapter 7. P r e s c r i p t i o n s for behaviour under norms of r a t i o n a l i t y are presented i n p r o p o s i t i o n a l form. Chapter 8 contains a d e s c r i p t i o n of two organizational forms which are expected to be v i a b l e under s c a r c i t y . As shown i n Appendix 3, these concepts and d e f i n i t i o n s are generalizable to the behaviour of i n d i v i d u a l human beings and t h e i r aggregations, and thus constitute the foundations of a possible integrated theory of s c a r c i t y relevant to i n d i v i d u a l s and t h e i r aggregations on the one hand and organi-zations (at both the micro and the macro l e v e l s of analysis) and t h e i r aggre-gations on the other hand. -7-CHAPTER 2 THE BIAS IN ORGANIZATIONAL THEORY1 Two p o s s i b i l i t i e s were i d e n t i f i e d i n the previous chapter: (i ) that e x i s t i n g organizational theory (OT) i s biased towards abundance and growth, and ( i i ) that i n c r e a s i n g l y widespread s c a r c i t y may be the coming mode. I t was suggested that these two p o s s i b i l i t i e s provide j u s t i f i c a t i o n for the present study. The f i r s t w i l l be examined i n d e t a i l i n t h i s chapter. While the p o s s i b i l i t y of widespread s c a r c i t y has been discussed elsewhere (see, e.g., the references c i t e d i n the introductory chapter), i t i s believed that the abundance bias of OT j u s t i f i e s the present study even though widespread environmental s c a r c i t y might not occur. Indeed, i t i s believed that an understanding of the norms of behaviour during extreme s c a r c i t y can provide valuable i n s i g h t s into the behaviour of organizations even during s o - c a l l e d "normal" periods. Let us examine t h i s b e l i e f : I t has been mentioned e a r l i e r that economics i s a study of market rationed goods as d i s t i n c t from free goods. The economist thus uses a perspective of "nonfree" or market rationed s c a r c i t y to study the consumption behaviour of organizations. In the present study a scarce good i s defined as one the u n a v a i l a b i l i t y of which causes an organization to f a l l . (See Chapter 3 f o r a d e t a i l e d development of th i s concept.) The present study therefore brings a "'"For the purpose of the present d i s s e r t a t i o n the term Organizational Theory (OT) w i l l be applied to that body of theory which i s concerned with analysis at the inter-group and higher l e v e l s ; and the terms OT and macro theory w i l l be used interchangeably. In contrast, the terms micro organizational be-haviour or micro behaviour w i l l apply to analysis and explanation focused on i n d i v i d u a l and intra-group behaviour. -8-d i f f e r e n t perspective of s c a r c i t y — t h a t of "nonfailure" or Malthusian s c a r c i t y — t o the analysis of organizational consumption. Thus the same phenomenon—consumption of goods by o r g a n i z a t i o n s — c a n be studied from two extremely d i s s i m i l a r points of view. I t stands to reason that d i f f e r e n t aspects of behaviour w i l l be highlighted by the two perspectives. Using the "nonfree" perspective only w i l l r e s u l t i n a l i m i t e d r e a l i z a t i o n of the p o t e n t i a l f o r understanding organizational behaviour, while a p p l i c a t i o n of both approaches simultaneously i s expected to add considerably to 2 knowledge i n OT. A high p r i o r p r o b a b i l i t y of s c a r c i t y i s not e s s e n t i a l ; evidence f o r a bias against s c a r c i t y i n OT i s the only j u s t i f i c a t i o n necessary for the present study. Evidence for the l a t t e r i s presented below. The Strategy Sca r c i t y of the type envisaged by Malthus i s expected to r e s u l t i n decay and shrinkage. Thus i n order to i d e n t i f y a bias i n OT against s c a r c i t y i t i s necessary to e s t a b l i s h that the d i s c i p l i n e does not address 3 i t s e l f to behaviour relevant to s c a r c i t y , decay, and shrinkage. Conversely, a bias against such s c a r c i t y may be established by presenting evidence of a p r e d i l e c t i o n f o r growth i n the body of e x i s t i n g theory. The preference f o r growth may take two forms: conscious and overt, and subconscious and n o n r e f l e c t i v e . __ An organization can generally be viewed from several quite d i f f e r e n t view-points or positions and each can y i e l d some useful truths" (Perrow, 1970: p.85). The word s c a r c i t y w i l l hereafter imply Malthusian or " l e s s than enough" s c a r c i t y which i s expected to r e s u l t i n shrinkage and e x t i n c t i o n over time. -9-Part of OT i s value f r e e , and i s symmetrical, as i t were, across s c a r c i t y and abundance. This portion of OT i s expected to be, at least i n p r i n c i p l e , j u s t as relevant i n the context of s c a r c i t y as i t i s i n an environment of abundance. Evidence for reduced relevance under s c a r c i t y w i l l therefore constitute evidence for a bias toward abundance. Thus i n order to e s t a b l i s h a bias i n OT for abundance and growth i t i s necessary to demonstrate that: 1. OT lacks a component which i s exclusive to behaviour under s c a r c i t y and shrinkage. 2. There i s a conscious preference for growth i n OT (as w e l l as an awareness of such a preference) both i n the theory and i n e m p i r i c a l l y observed behaviour of organizational thought and p r a c t i c e . 3. Certain portions of OT reveal an unconscious bias for growth. This bias may be r e f l e c t e d i n the t h e o r e t i c a l formulations themselves or i n the predictions derived from such theory. 4. Some of the value free components of OT have not been applied h i s t o r i c a l l y to actual or anticipated problems p a r t i c u l a r to conditions of s c a r c i t y and shrinkage. 5. A portion of OT i s not relevant to, or i s less meaningful -10-i n , the context of s c a r c i t y . ' Let us consider f i r s t the evidence for lack of a study of s c a r c i t y r e l a t e d behaviour. Lack of a Sca r c i t y Component The following eleven OT texts were examined i n search of a component exclusive to behaviour under s c a r c i t y : Blau and Scott (1962), Cyert and March (1963), Emery and T r i s t (1973), E t z i o n i (1961), Gibson, Ivancevich, and Donnelly (1973), H a l l (1972), Kast and Rosenzweig (1970), Katz and Kahn (1966), March and Simon (1958) , Scott and M i t c h e l l (1972), and Thompson (1967). None of these texts dealt with the problems which are exclusive to s c a r c i t y . The indexes of a majority of the books above contained l i s t i n g s t i t l e d growth and/or s i z e . The t i t l e s decay, decline, negative growth, reduction, s c a r c i t y , shortage, shrinkage, (even conservation and contain-ment) were however absent i n a l l cases. The author i s not aware of any a r t i c l e s (other than Scott, 1974) H I t may be noted that evidence for any one of the following i s s u f f i c i e n t to demonstrate a bias. "'while no attempt was made to conduct an exhaustive search for material fo r items 3, 4, and 5 above, a f i r s t cut across standard works i n OT revealed an indubitable bias for growth and abundance. I t was also found that the various authors had borrowed f r e e l y from each other, r e s u l t i n g i n considerable overlap. Any one p a r t i c u l a r bias could thus be i d e n t i f i e d i n d i f f e r e n t forms i n d i f f e r e n t books. Instead of drawing attention to each andsevery instance of bias however, analysis was l i m i t e d to comment upon eit h e r the o r i g i n a l contribution (when i d e n t i f i a b l e ) or a convenient i l l u s t r a t i o n of one of the many v a r i a t i o n s of a p a r t i c u l a r concept. Since the search was f a r from exhaustive i t i s quite possible that other instances of bias may have been overlooked. concerning s c a r c i t y and i t s implications i n the l i t e r a t u r e . " In the absence of s c a r c i t y r e l a t e d content i n textbooks and journal a r t i c l e s , i t seems reasonable to i n f e r that OT i s biased against s c a r c i t y . Evidence of a conscious p r e d i l e c t i o n toward growth i s presented below. Conscious Preference f o r Growth Preference f o r growth may take many forms i n the actual be-haviour of organizations as w e l l as i n re l a t e d theory. This preference may, for example, become an organizational value and be r e f l e c t e d i n management thought and p r a c t i c e . I d e n t i f i c a t i o n of such influence would therefore constitute evidence of a bias toward growth. I f OT i s biased towards abundance c e r t a i n portions of the theory would, for example, be expected to take organizational inputs for granted. In other words, i t would be assumed that inputs w i l l not impose operating constraints, and the p a r t i c u l a r theory would thus be "free " to address i t s e l f to other issues. Evidence for the existence of such assumptions i n a p a r t i c u l a r theory would thus also serve to e s t a b l i s h a bias against environmental s c a r c i t y . In order therefore to e s t a b l i s h a bias f o r growth and abundance, evidence w i l l be presented f o r (i) i d e n t i f i c a t i o n of growth as an organi-z a t i o n a l value, which ( i i ) colours management p o l i c i e s , and ( i i i ) i s also subsumed i n some parts of OT. Further, attention w i l l be drawn to those portions of OT which (iv) assume a v a i l a b i l i t y of inputs. I t may In contrast there i s no dearth of studies r e l a t e d to growth. Even as f a r back as 10 years ago Starbuck's (1965) a r t i c l e "Organizational Growth and Development" l i s t e d over two hundred d e s c r i p t i v e studies of growth and development published i n the United States. These, i t may be noted, had p a r t i c u l a r relevance f o r business firms, and were drawn from a s t i l l  l arger set of growth re l a t e d studies. -12-be noted however that t h i s section i s based e n t i r e l y on i d e n t i f i c a t i o n of the value/bias by others, and thus also constitutes an argument for an awareness i n OT of the bias against s c a r c i t y and toward growth. Organizational Value The following assortment of quotes r e f l e c t s the organizational bias for growthr "Size i s a f a c t of l i f e i n the United States" (Gibson, et a l . , 1973: p. 317). "In America there i s a p o s i t i v e c u l t u r a l value placed on bigness and growth" (Katz and Kahn, 1966: p. 104). "Growth has become ... a preoccupation of American business and i s held by ... many commentators to be the true goal of p r o f e s s i o n a l managers" and " i s a v a l i d a t i o n of success" (Perrow, 1970: p. 152). "Growth may be valued as a symbol of achievement" (Starbuck, 1965: p. 454). " A l l organizations have inherent tendencies to expand" (Downs, 1967: p. 264). An organi-zation must "expand t o , j u s t i f y i t s e l f " (Katona, 1951: p. 205). "Seeking to expand the j u r i s d i c t i o n of one's department i s a managerial r e s p o n s i b i l i t y " (Blau and Scott, 1962: p. 174). Kast and Rosenzweig (1973: p.'315) and Scott (1961: p. 21), among others, observe that growth i s an organizational goal.^ Empirical evidence to t h i s e f f e c t i s provided by England (1967) i n h i s survey of 1,072 American managers where growth was i d e n t i f i e d as one of ^Providing evidence for an abundance bias Perrow (1970) suggests that "As the economy grows, there i s room for a l l organizations to grow. But should the economy f a l t e r i n the future, we may f i n d that other c r i t e r i a are held up by s o c i a l s c i e n t i s t s as the goal of the p r o f e s s i o n a l l y managed firm. Growth may appear at the present time to be an i n e v i t a b l e goal of p r o f e s s i o n a l l y managed firms i n the view of s o c i a l s c i e n t i s t s , merely because i t was achieved with r e l a t i v e ease i n the 1960s." (p. 153) -13-the major organizational objectives. Management P o l i c i e s This p r e d i l e c t i o n for growth can also be i d e n t i f i e d i n managerial p o l i c i e s . According to A l d r i c h (1972) for example, the value of growth i s r e f l e c t e d i n the i n t e r o r g a n i z a t i o n a l p o l i c i e s of , 8 management. "Given the p r e v a i l i n g business values of ' s i z e ' and 'growth' i t i s highlynunlikely that a s u t i l i t a r i a n organization w i l l use the c o n s t r i c t i o n strategy except as a short-run t a c t i c that i s taken out of absolute economic necessity. I t i s more l i k e l y that such organizations w i l l choose the expansion strategy when engaged i n i n t e r o r g a n i z a t i o n a l competition and c o n f l i c t . " (p. 290) Scott (1974) goes so f a r as to suggest that management thought and p r a c t i c e are founded i n t e r a l i a upon the ultimate p r i o r values of A preference for growth over containment i s r e f l e c t e d i n the i n t r a o r g a n i z -a t i o n a l micro l e v e l p o l i c i e s as w e l l . The prevalent management paradigm, for example, presumes that "organizational growth creates organizational abundance, or surplus" (Scott, 1974: p. 245). Growth i s thus expected to r e s u l t i n surplus. Part of t h i s surplus i s expected to be diverted to s a t i s f a c t i o n enhancement as d i s t i n c t from production enhancement. Just as macro theory l e g i t i m i z e s growth, micro theory assumes that the f r u i t of growth w i l l be a v a i l a b l e . On a n o n r e f l e c t i v e empirical basis a d i s t r i b u t i o n of excess may be used to purchase compromise or, perhaps, a consensus. Taylor recognized, for example, that " i n t e r n a l consensus i s the outcome of growth-created surplus d i s t r i b u t e d by a s c i e n t i f i c a l l y enlightened management as a side payment for a harmony of i n t e r e s t s " (Scott, 1974: p. 245). But on a more normative l e v e l the human r e l a t i o n i s t s i n s i s t that organizations have a moral o b l i g a t i o n to increase the l e v e l of s a t i s f a c t i o n and s e l f - a c t u a l i z a t i o n of employees. (See, e.g., L i k e r t , 1961; Schein, 1970.) Subsumed under t h i s maxim of course, i s the assumption that organizations w i l l have a surplus. Maslow (1965) makes t h i s e x p l i c i t i n t h i s argument for eupsychian management: He suggests that the Theory Y kind of philosophy " i s a l l very true i n the long run under good conditions ( s i c ) . (But) i t i s d e f i n i t e l y not true ... under bad conditions, e s p e c i a l l y under conditions of s c a r c i t y (emphasis added)" (pp. 115-116). By i m p l i c a t i o n then, i n as much as organizational surplus i s a p r e r e q u i s i t e to a c t u a l i z a t i o n of the employees, and accrual of surplus i s a consequence of growth, organi-zations have a moral r e s p o n s i b i l i t y for growth. Management t y p i c a l l y s t r i v e s to f u l f i l l t h i s r e s p o n s i b i l i t y . -14-growth and abundance, (See Scott, 1974: pp. 244-245, for h i s discussion regarding the primacy of these values.) The following quote conveys the flavour of h i s argument: "What p o l i t i c i a n , p ublic administrator, or business executive i n p r a c t i c e supports overtly to h i s constituents p o l i c i e s of economic contraction, reduction of agency services, or s t a b i l i z a t i o n of sales volume and corporate earnings? How many u n i v e r s i t y courses are offered i n 'How to Shrink a Business?' How frequently do a r t i c l e s appear i n the pr o f e s s i o n a l l i t e r a t u r e about management str a t e g i e s of organizational s t a b i l i t y or decay? These things seldom happen because they r e f l e c t values that are foreign to American expectations and, thereby, are foreign to the mainstream of management thought and p r a c t i c e . " (p. 247) Bias for Growth C l a s s i c a l OT i s i n part biased towards growth. Two of the four key p i l l a r s of c l a s s i c a l OT (namely, d i v i s i o n of labour and the scalar and f u n c t i o n a l processes), for example, subsume organizational growth (Scott, 1961: pp. 9-10). One of Weber's (1947) major i n t e r e s t s i n the study of organizations appears to have been to i d e n t i f y "bureaucracy" and to "describe i t s growth and reasons for i t s growth" (March and Simon, 1958: p. 36). Taylor (1934) arguing for s c i e n t i f i c management suggests that a p p l i c a t i o n of h i s p r i n c i p l e s w i l l r e s u l t i n growth, and 9 both the employer and the employee w i l l b e n e f i t . Organizational Inputs I t i s suggested that OT i n general, and c e r t a i n portions of OT Note the irony underlying Taylor's advocacy of s c i e n t i f i c management: In his P r i n c i p l e s of S c i e n t i f i c Management (1934), Taylor grounded h i s argu-ments for "national e f f i c i e n c y " i n the plea for "conservation of our n a t i o n a l resources" by President Roosevelt (p. 5). He suggests on the one hand that a p p l i c a t i o n of s c i e n t i f i c p r i n c i p l e s w i l l r e s u l t i n conservation of na t i o n a l resources, but on the other hand advocates (unwittingly) an increased expenditure ( a l b e i t e f f i c i e n t ) of these same resources. \ i n p a r t i c u l a r , take organizational inputs for granted. Since organi-z a t i o n a l continuity ( i n as much as i t i s dependent upon matter-energy inflows) i s assured, analysis then focuses instead e i t h e r on other possible d i s r u p t i v e antecedents (e.g., i n t r a o r g a n i z a t i o n a l c o n f l i c t , f l u c t u a t i o n s i n market demand), or psychosocial variables (e.g., power and influence) or on structures and processes p a r t i c u l a r to constant-si z e or growing organizations (e.g., the administrative function). To take an analogy from need theory: OT assumes, as i t were, that the "p h y s i o l o g i c a l needs" of the organization are s a t i s f i e d , and then focuses e x c l u s i v e l y on the "higher needs". Consider the following instance of t h i s preemptive emphasis on the higher needs: Twenty-seven f a c u l t y members from several American u n i v e r s i t i e s representing various d i s c i p l i n e s attended a seminar i n the S o c i a l Science of Organizations i n 1963. The purpose of the seminar was to assess the art of organizational design and to move the f i e l d toward better science. The f i v e papers which resulted were " i n a r e a l sense, the product of a l l twenty-seven p a r t i c i p a n t s " (Thompson, 1971: p. x ) . The following s t a t e -ment r e f l e c t s the l i m i t of these scholars' concern for matter-energy inflows: "Theorists often ignore material inputs" ( S t o g d i l l , 1971: p. 31). (This sentence was the only one regarding material inputs i n the whole book on organizational design.) As w i l l be argued i n more d e t a i l l a t e r , the h i s t o r i c a v a i l a b i l i t y of raw materials and successful growth of organizations are l a r g e l y responsible f o r the bias toward growth i n OT. Since material inputs have not heretofore imposed operating constraints, s o c i a l s c i e n t i s t s believe -16-that "the s o c i a l environment must be regarded as a far more potent force than the p h y s i c a l environment i n determining the purpose and form of organization" ( S t o g d i l l , 1971: p. 41). (Their bias i s understandable.) The presumption of a v a i l a b i l i t y of inputs i n the case of c l a s s i c a l OT has been highlighted by modern w r i t e r s . The r a t i o n a l model of organi-zations used by c l a s s i c a l t h e o r i s t s assumes, among other things, that " a l l resources are appropriate resources, and t h e i r a l l o c a t i o n f i t s a master plan" (Thompson, 1967: p. 6). " S c i e n t i f i c management (for example, assumes that ) ... resources i n uniform quantities are a v a i l a b l e " (p. 5). S i m i l a r l y , "administrative management also assumes that ... resources are automatically a v a i l a b l e to the organization" (p. 5). This presumption leads to environmental i n s u l a r i t y ; and i n the i d e n t i f i c a t i o n of t h e i r closed-system perspective the c l a s s i c a l writers have been c r i t i c i z e d — unwittingly, and by i m p l i c a t i o n — f o r t h e i r bias against s c a r c i t y . "The ' major misconception (of the closed-system perspective) i s the f a i l u r e to recognize f u l l y that the organization i s continually dependent upon inputs from the environment and that the inflows of materials ... i s not constant" (Katz and Kahn, 1966: p. 26). The a v a i l a b i l i t y of inputs, as i t were, i s also subsumed i n March and Simon's (1958) general model of adaptive behaviour. Or, to be more precise, t h e i r model can be applied to search behaviour for organi-z a t i o n a l inputs only i f i t i s assumed that such material exists and can be obtained: The general model of adaptive behaviour i s presented i n Figure 1. -17-FIGURE 1 GENERAL MODEL OF ADAPTIVE MOTIVATED BEHAVIOUR + + Expected value of reward » i S a t i s f a c t i o n Search + Level of As p i r a t i o n Adapted from March and Simon (1958: p. 49) -18-While i t was formulated to model the behaviour of an organism, the authors subsequently used i t to study macro behaviour (see, e.g., t h e i r pp. 132-3). According to March and Simon "1. The lower the s a t i s f a c t i o n . . . o f the organism, the more search for a l t e r n a t i v e programs... i t w i l l undertake... 2. The more search, the higher the expected value  of the reward..." (p. 48) The authors q u a l i f y t h e i r model by pointing out that "the search behaviour s p e c i f i e d (above) depends on an underlying b e l i e f . . . that the environment i s benign and on the fact that search i s usually reasonable e f f e c t i v e . By our verbal hypothesis 2, we are a l l e g i n g that such requirements are, i n f a c t , met. Hypothesis 1 w i l l be true only of organisms that do perceive the world as benign. If the environment i s perceived as malevolent and/or barren, search behaviour w i l l not follow from a decrease i n s a t i s f a c t i o n . Thus aggression, withdrawal, and regression are c e r t a i n l y observable reactions to d i s s a t i s f a c t i o n that lead to frustration...These 'neurotic' reactions are excluded from t h i s model. S i m i l a r l y , hypotheses 2 w i l l not be true i f search i s i n e f f e c t u a l . I n e f f e c t i v e s e a r c h — c y c l i n g , stereo-typy^ e t c . — i s an important part of human problem-solving that i s not included i n the present model. Ultimately, we w i l l require a set of hypotheses that deals with the switching from 'normal' to 'neurotic' reactions and from e f f e c t i v e to i n e f f e c t i v e search." (p. 50) Needless to say, a model dealing with neurotic reactions and i n e f f e c t i v e macro search behaviour does not e x i s t i n OT. Since i t i s l i m i t e d to the study of r a t i o n a l behaviour the present d i s s e r t a t i o n does not provide such a model eit h e r . Hidden Bias for Growth In the above section an argument was presented for a bias toward growth together with an awareness thereof (either by the o r i g i n a l -19-authors or by subsequent c r i t i c s ) . Arguments for a bias h i t h e r t o un-i d e n t i f i e d are presented below. The P r i c e Output Decision Cyert and March (1963) have developed computer models to study p r i c e and output decisions (see, e.g., t h e i r Chapters 7 and 8). The models assume ( i m p l i c i t l y ) an e l a s t i c demand for the firm's output and examine the p o s s i b i l i t y of increasing t o t a l revenue by decreasing markup on cost. A p r i c e reduction i s expected to lead to greater s a l e s , r e s u l t i n g i n l a r g e r absolute (not percentage) p r o f i t . Greater sales however imply increased consumption of raw material. Thus the p r i c e output model assumes a v a i l -a b i l i t y of s u p p l i e s . 1 ^ I t i s suggested that under c e r t a i n conditions of environmental s c a r c i t y i t i s not possible to increase inputs at a l l . The p r a c t i c e of manipulating mark-up and the p r i c e output decision-making exercise are thus i r r e l e v a n t under these circumstances. Intraorganizational C o n f l i c t In t h e i r discussion of i n t r a o r g a n i z a t i o n a l c o n f l i c t (pp. 129-131), March and Simon (1958) suggest that organizations react to c o n f l i c t by four major processes: ( i ) problem-solving, ( i i ) persuasion, ( i i i ) bargaining, and (iv) " p o l i t i c s . " . According to them, i n the case of problem-solving, i t i s assumed that objectives are shared and that the decision problem i s to i d e n t i f y a s o l u t i o n that s a t i s f i e s the shared c r i t e r i a . In persuasion, i t i s assumed that i n d i v i d u a l goals may d i f f e r within the organization but that goals may not be taken as f i x e d . "^The p a r t i a l model of organizational choice (Cyert and March, 1963: pp.84-86) s i m i l a r l y assumes a v a i l a b i l i t y of inputs. -20-( I m p l i c i t i n the use of persuasion i s the b e l i e f that at some l e v e l objectives are shared and that disagreement over subgoals can be mediated by reference to common goals.) Where bargaining i s used, disagreement over goals i s taken as f i x e d , and agreeement without persuasion i s sought. " P o l i t i c s " i s defined as a process i n which the basic s i t u a t i o n i s the same as bargaining, but the arena of bargaining i s not taken as fixed by the p a r t i c i p a n t s . The f i r s t two processes are c a l l e d a n a l y t i c , and the l a s t two are l a b e l l e d bargaining processes. The authors then go on to suggest that organizational c o n f l i c t of the i n t r a i n d i v i d u a l v a r i e t y w i l l tend to be resolved through a n a l y t i c processes, while "the more organizational c o n f l i c t represents intergroup d i f f e r e n c e s , the greater ( w i l l be) the use of bargaining" (p. 130). In other words, c o n f l i c t at the macro l e v e l w i l l tend to be resolved by bargaining processes. This assertion i s j u s t i f i e d by suggesting that "bargaining acknowledges and l e g i t i m i z e s heterogeneity of goals i n the organization" (p. 131). During times of abundance organizations t y p i c a l l y enjoy consider-able slack. This i s expended i n s e r v i c i n g those subgoals of i n d i v i d u a l s and departments which do not correspond to the organizational goals. In other words, organizational slack f a c i l i t a t e s the existence and continuity of a heterogeneity of goals. S c a r c i t y i s however expected to r e s u l t i n reduction of slack. This w i l l lead to abandonment of nonorganizational subgoals. Only those goals which are d i r e c t l y relevant to the organi-z a t i o n a l purpose w i l l be retained. There w i l l i n e f f e c t be a pressure towards sharing of objectives. Intergroup c o n f l i c t w i l l thus be resolved -21-through persuasion. In the extreme case, when there i s no organizational slack, i . e . , the parties subscribe t o t a l l y to common goals, intergroup c o n f l i c t w i l l be resolved through problem-solving. Thus, contrary to the processes used during abundance, a l l i n t r a o r g a n i z a t i o n a l c o n f l i c t w i l l tend to be resolved through a n a l y t i c processes i n the context of s c a r c i t y . The p r e s c r i p t i o n f or use of bargaining processes r e f l e c t s the abundance bi a s . While they assumed a v a i l a b i l i t y of c e r t a i n organizational inputs, the foregoing formulations were otherwise "neutral". In contrast the two formulations discussed below contain a d e f i n i t e pressure for growth. Excess Capacity Organizations acquire c e r t a i n components i n order to handle c r u c i a l contingencies posed by the task environment. Acquisiton of components of unequal capacity raises balancing problems. Thompson (1967) however "expect(s) organizations subject to r a t i o n a l i t y norms to seek to grow u n t i l the le a s t reducible component i s approximately f u l l y occupied. If necessary i n order to achieve t h i s state, organizations with excess  capacity w i l l seek to enlarge t h e i r domains" (p. 50; emphasis added). While i t i s reasonable to expect organizations to make use of excess capacity, i t follows from the antecedents of the above proposition that enlargement of domain i s l i a b l e to r e s u l t i n further balancing problems. Resolution of these w i l l , i n turn, r e s u l t i n further growth, and consequently new balancing problems. The above p r e s c r i p t i o n thus incorporates, i n e f f e c t a p o s i t i v e feedback loop f o r organizational growth. -22-I t i s admitted that the above model i s a reasonable d e s c r i p t i o n of organizational behaviour during abundance. As w i l l be argued l a t e r i n the context of s c a r c i t y however, excess capacity w i l l be either l e f t unused, or used as a basis f o r mergers (a process of growth d i f f e r e n t from that suggested by Thompson's model). Adaptive Behaviour The March and Simon (1958) general model of adaptive behaviour has been introduced e a r l i e r . This model has been used by them to explain innovative macro behaviour (pp. 182-3). In a discussion of the determinants of the c r i t e r i a of organizational s a t i s f a c t i o n they note that "(t)he most important proposition i s that, over time, the a s p i r a t i o n l e v e l tends to adjust to the l e v e l of achievement" (p. 182). In other words when the environment i s "good" more w i l l be desired and consumed, and when i t i s "bad" less w i l l be consumed and (with some delay) desired. The munificence of the environment i s thus the exogenous v a r i a b l e , and when the environment i t s e l f i s i n a steady state the system should enjoy a stable equilibrium. According to the authors however, even i n the absence of environmental change " a s p i r a t i o n l e v e l s do not remain absolutely constant •but tend to r i s e slowly" (1958: p. 183). They suggest that, among other things, "organizations adjust t h e i r c r i t e r i a to the l e v e l s achieved by other organizations" (p. 183). Thus i f another (comparable) organization i s experiencing "abundance", the f o c a l organization tends to notch up i t s a s p i r a t i o n l e v e l . I f i t s own p a r t i c u l a r environment does not prove to be benevolent however i t w i l l , i n time, r e v i s e i t s expectations downward again. -23-Assuming no change i n the environment of the referrent organization, the a s p i r a t i o n l e v e l of the f o c a l organization i s thus expected to f l u c t u a t e i n d e f i n i t e l y . But, i f the t o t a l environment i s " t r u l y " homogenous, the a s p i r a t i o n l e v e l s of a l l organizations w i l l , i n course of time, a t t a i n steady states. This, i t may be noted, corresponds to Keynes' concept of the stationary economy, and does not imply a bias for growth. A verbal d e s c r i p t i o n of the general model of adaptive motivated behaviour thus does not r e f l e c t a growth b i a s . The bias i s introduced rather through a d d i t i o n a l assumptions p r i o r to t r a n s l a t i o n into mathematical form. (The authors do not provide an explanation of the p r i o r l o g i c of these assumptions.) According to t h e i r system of equations "at equilibrium the a s p i r a t i o n l e v e l w i l l exceed the reward" (March and Simon, 1958: p. 49, emphasis added. See also Cyert and March, 1963: p. 34). This formulation contains a b u i l t - i n pressure for growth, and operates independently of the condition of the environment (and hence of the a v a i l a b i l i t y of rewards). The t r a n s l a t i o n prevents a system from ever a t t a i n i n g a "stationary" equilibrium, but rather requires a "growing" equilibrium. Thus according to t h e i r set of equations a system w i l l a t t a i n a durable correspondence between environmental munificence and organizational expectations only when the environment i t s e l f i s growing. When the environment i s stationary or shrinking however, the model dooms the organization to endless fl u c t u a t i o n s i n the l e v e l of a s p i r a t i o n . There i s considerable evidence for successful upward r e v i s i o n of a s p i r a t i o n l e v e l s i n America. This has corresponded to a period of economic growth. I t i s suggested however that the h i s t o r i c a l affluence of America i s -24-only a p a r t i c u l a r r e a l i t y , and i s not necessar i l y a t o t a l r e f l e c t i o n of the "nature of things". Thus while the March and Simon model (as well:as Thompson's model above) are v a l i d descriptions of an "abundant" r e a l i t y , they are not u n i v e r s a l l y relevant. Arguments for nonrelevance of the model to a s c a r c i t y economy are presented below. Foster (1967) i n his study of the Tzintzuntzan peasants of Mexico has observed that the v i l l a g e f o l k have a perspective of a l i m i t e d good. In other words, they perceive that every good, including intangibles l i k e prestige and status, has f i n i t e l i m i t s . L i f e to them i s a zero-sum game, and an i n d i v i d u a l or a family can benefit only at the expense of others. Their mores thus discourage growth and development, and for generations the v i l l a g e r s have avoided e x p l o i t i n g opportunities for s e l f -improvement. (The only s o c i a l l y acceptable instances of growth are those which can be explained as a r i s i n g from luck or good fortune; v i s i b l e s t r i v i n g for betterment i s frowned upon.) Sim i l a r nonexploitative behaviour can be observed i n cultures and r e l i g i o n s which emphasize asceticism as the way of l i f e . Buddhism, for example, preaches, among other things, a s i m p l i c i t y of l i f e ; and i n early Buddhism the monastic l i f e of poverty was the norm. The monk was expected to s t r i v e for le s s (subject to a minimum—perhaps) instead of (a l i m i t l e s s ) more, and h i s aspirations were independent of environmental a v a i l a b i l i t y . I t i s suggested that i f a mathematical mode of the adaptive behaviour of the Tzinuero or the monk were to be developed, i t would -25-have to be such that, at equilibrium, the a s p i r a t i o n l e v e l w i l l be l e s s  than or equal to the reward. That i s , a s p i r a t i o n l e v e l s w i l l not be expected to r i s e with time, even though there i s an increase i n environ-mental p o t e n t i a l . While the above examples may not be admissible as evidence with regard to macro behaviour of formal organizations, i t i s submitted that they cast reasonable doubt upon the g e n e r a l i z a b i l i t y of statements which require a s p i r a t i o n l e v e l s to contain an inherent pressure for growth. I t i s suggested that assertions of the v a r i e t y "at equilibrium the a s p i r a t i o n l e v e l exceeds the reward" and " a s p i r a t i o n l e v e l s do not remain absolutely constant but tend to r i s e slowly" portray a c u l t u r a l bias (based under-standably on a long h i s t o r y of economic success). Biased Development of the Neutral Component The section above contained some examples of an u n r e f l e c t i v e bias for growth i n OT. In contrast to the inherent bias i d e n t i f i e d i n the foregoing formulations, the theory discussed below i s , i n p r i n c i p l e , value n e u t r a l . I t w i l l be argued however that portions of such neutral OT have not h i s t o r i c a l l y been applied to behaviour p e c u l i a r to s c a r c i t y and shrinkage. Only two examples w i l l be discussed. Game theory and the theory of c o n f l i c t study various optimizing, c o n c i l l i a t i o n , and bargaining s t r a t e g i e s . In game theory there i s an understanding of the difference between zero-sum and nonzero-sum contexts. (See e.g., M i l l e r , D.W., 1971; Shubik, 1964.) Study of the l a t t e r i s however t y p i c a l l y l i m i t e d to growth s i t u a t i o n s where the contenders play for shares of an expanding pie. No study of competition or c o l l a b o r a t i o n i n a shrinking pie s i t u a t i o n has been found i n the l i t e r a t u r e . The phenomenon of i n s u f f i c i e n t resources i s e x p l i c i t l y recognized i n the study of c o n f l i c t behaviour within organizations (see, e.g., Pondy, 1969; Walton and Dutton, 1969). The c o n f l i c t i s however t y p i c a l l y not for s u r v i v a l . Since the c o n f l i c t i n g p a r t i e s are e s s e n t i a l elements of the same organizational system, the contest i s generally not of the "struggle unto death" t y p e — t h e higher echelon i s expected to intervene before organi-z a t i o n a l effectiveness i s s i g n i f i c a n t l y impaired. Organizational c o n f l i c t thus takes the form of jockeying f o r r e l a t i v e power and status, within d e f i n i t e and r e l a t i v e l y narrow l i m i t s , by acquiring c o n t r o l over l i m i t e d resources (e.g., Pondy, 1967). Reduced Relevance of the Neutral Component It has been suggested above that c e r t a i n portions of the neutral component of OT have not been applied to or developed i n the context of s c a r c i t y . In t h i s section i t w i l l be argued that c e r t a i n other parts of OT, which also are e s s e n t i a l l y value n e u t r a l , have l i t t l e relevance to organizational behaviour under s c a r c i t y ; and that, i n the l i m i t , they become t o t a l l y vacuous. Management by Exception The concept of management by exception has meaning i n the context of c e r t a i n t y . A c e r t a i n environment i s conducive to a r a t i o n a l model organi-L"The game "So Long Sucker" (Rapoport, 1970: Ch. 18) i s the s o l i t a r y exception. It provides remarkable ins i g h t into behaviour i n and of inherently unstable c o a l i t i o n s . There are no t h e o r e t i c a l underpinnings to the game however, and there has been no attempt at development of a formal theory of unstable c o a l i t i o n s since the game was invented i n 1950. zation, and a l l organizational a c t i v i t y thus tends to be determinate. Under the closed-system type of organization i t i s possible to develop standard operating procedures f o r almost a l l i n t e r n a l a c t i v i t y , and there i s l i t t l e need for exercise of d i s c r e t i o n . Under such circumstances therefore, management i s t r u l y by exception (Ansoff, 1965: p. 176). It w i l l be argued l a t e r that an abundant environment i s also a r e l a t i v e l y c e r t a i n environment; a scarce environment may on the other hand be eit h e r c e r t a i n or uncertain (see Chapter 7). Insofar as the scarce environment i s also uncertain, the concept of management by exception cannot be applied to materials management (procurement, inventory c o n t r o l , scheduling, etc.) i n the context of s c a r c i t y . E q u i f i n a l i t y According to the p r i n c i p l e of e q u i f i n a l i t y (Bertalanffy, 1968) an open system may, s t a r t i n g from a p a r t i c u l a r i n i t i a l s t a t e , a t t a i n a p a r t i c u l a r f i n a l state through d i f f e r e n t means or paths. That i s , a system may have, at any time, several options, each of which i s expected to r e s u l t i n the achievement of a p a r t i c u l a r goal. Since each of these a l t e r n a t i v e s i s instrumental, i . e . , insures goal attainment, the system i s expected to choose among them according to some other c r i t e r i o n , e.g., e f f i c i e n c y . Organizations as open systems share the c h a r a c t e r i s t i c of e q u i f i n a l i t y (Katz and Kahn, 1966: p. 28). The p r i n c i p l e of e q u i f i n a l i t y i s r e f l e c t e d i n , among others, (i ) the separation of system goals from output goals (Perrow, 1970) , -28-( i i ) the d i s t i n c t i o n between s a t i s f i c i n g and optimizing (Simon, 1957), and ( i i i ) the sequential evaluation of organizational a l t e r n a t i v e s (Cyert 12 and March, 1963). The three statements are b r i e f l y described below. Perrow (1970: pp. 135-36) i d e n t i f i e s f i v e types of organizational goals: s o c i e t a l , output, system, product, and derived goals. The system goals r e f e r to the state or manner of functioning of the organization, independent of the goods i t produces. An organization may choose, for example, between growth and s t a b i l i t y , or between being t i g h t l y or loosely c o n t r o l l e d or structured, as i t s mode of functioning. According to Perrow "organizations have options i n these respects" (P. 135) which may be exercised independent of the output or product goals. March and Simon (1958) suggest that organizational decision making i s t y p i c a l l y "concerned with the discovery and s e l e c t i o n of s a t i s f a c t o r y a l t e r n a t i v e s ; only i n exceptional cases i s i t concerned with the discovery and s e l e c t i o n of optimal a l t e r n a t i v e s " (p. 140-141). To i l l u s t r a t e : "an example i s the dif f e r e n c e between searching a haystack to.cfind the sharpest (sic) needle i n i t and searching the haystack to f i n d a needle sharp enough to sew with" (p. 141). In t h e i r study of organizational choice behaviour, Cyert and March (1963) suggest that organizations tend towards "sequential consider-ation of a l t e r n a t i v e s " (p. 113). Thus "the method by which a l t e r n a t i v e s are generated i s of considerable importance since i t a f f e c t s the order i n which they are evaluated" (p. 86). This i s not to suggest that the authors were consciously applying the p r i n c i p l e of e q u i f i n a l i t y , but rather that the assumptions underlying t h e i r formulations are common to those underlying the p r i n c i p l e . -29-The above observations of organizational behaviour have one assumption i n common: the existence of more than one a l t e r n a t i v e . A benevolent environment may, for example, permit growth, and the organi-zation may then be free to choose between growth and s t a b i l i t y . The haystack may contain several needles sharp enough to sew with, allowing the decision-maker to s a t i s f i c e . There may be a plethora of possible s o l u t i o n s , and the sequence of a l t e r n a t i v e generation may t r u l y have important organizational consequences. The underlying assumption however has relevance only i n the context of abundance. I t i s suggested that environmental s c a r c i t y may severely l i m i t the number of options: there 13 may be, i n the l i m i t , only one s o l u t i o n . Environmental s c a r c i t y i s expected to r e s u l t i n the reduction,or even elimination, of organizational e q u i f i n a l i t y . In order to remain v i a b l e i n the midst of s c a r c i t y , organizations must s t r i v e towards a loose structure with t i g h t c o n t r o l ; and indeed have l i t t l e choice i n the matter. There may be j u s t one needle i n the haystack, so that the d i s t i n c t i o n between s a t i s f i c i n g and optimizing i s void of meaning. If there i s only one possible s o l u t i o n to a p a r t i c u l a r organizational problem, then the e n t i r e theory of a l t e r n a t i v e generation and search behaviour be-comes vacuous. The Mechanistic P r i n c i p l e Burns and Stalker (1961) i d e n t i f y two types of organizational responses to change: mechanistic and organic. According to them 13 Theorists who associate the p r i n c i p l e of e q u i f i n a l i t y with organizations recognize that "as open systems move toward regulatory mechanisms to co n t r o l t h e i r operations, the amount of e q u i f i n a l i t y may be reduced" (Katz and Kahn, 1966: p. 26). The implications of regulation and con t r o l are however not pursued to t h e i r l o g i c a l conclusion. -30-"In firms which operated according to mechanistic p r i n c i p l e s , the response to change was usually to create a new group, or r e c o n s t i t u t e the e x i s t i n g structure, or to expand an e x i s t i n g group which would be l a r g e l y responsible for meeting the new s i t u a t i o n , and so 'not disrupt the e x i s t i n g organi-z a t i o n ' . " 1 4 (p. 8) While such an approach involves minimum d i s r u p t i o n of e x i s t i n g structure, and i s hence r e l a t i v e l y nonthreatening, i t i s suggested that t h i s i s an " i n e f f i c i e n t " method of problem-solving. While i t may have been c h a r a c t e r i s t i c of abundance, i t w i l l be argued l a t e r that under s c a r c i t y organizations w i l l not have the "mechanistic" option, but w i l l be forced to reorganize. Sealing Off the Technical Core Thompson (1967) suggests that under norms of r a t i o n a l i t y , organi-zations seek to seal o f f t h e i r core technologies from environmental influences. But since complete closure i s impossible, organizations "seek to buffer environmental influences by surrounding t h e i r t e c h n i c a l core with input and output components. Because b u f f e r i n g does not handle a l l v a r i a t i o n s i n an unsteady, environment, organizations seek to smooth (or level) input and output transactions ..., and to a n t i c i p a t e and adapt to environmental changes which cannot be buffered or smoothed..., and f i n a l l y , when bu f f e r i n g , l e v e l i n g , and forecasting do;,?.not protect t h e i r t e c h n i c a l cores from environmental f l u c t u a t i o n s . . . , "Perhaps the outstanding example of the subordination of structure i n our time was provided by Franklin Delano Roosevelt. His creation of new agencies of government produced an alphabet of bureaucracy and became a joke i n the hands of h i s friends and enemies. The c e n t r a l t r u t h , however, was that the government was taking on new functions, e s p e c i a l l y during the early years of the New Deal, and that i t had an overwhelming mandate to do so. To have attempted the accomplishment of these functions e n t i r e l y within e x i s t i n g structures of government would have been extremely d i f f i c u l t , given the background and ideologies of the o l d - l i n e government agencies. I t was f a r wiser to permit the o l d - l i n e agencies to remain i n t h e i r mausoleums while new agencies of government, lodged i n temporary quarters of a l l s o r t s , got on f.with the new and c r u c i a l jobs". (Katz and Kahn, 1966: p. 217). -31-organizations resort to r a t i o n i n g . " (p. 24; emphasis added) Buffering i s i l l u s t r a t e d by the s t o c k p i l i n g of materials and supplies on the input side and by f i n i s h e d goods inventories on the output side. Smoothing and l e v e l i n g involve manipulation of demand to eliminate undesirable f l u c t u a t i o n s . A n t i c i p a t i o n and adaptation are operationalized as forecasting of demand and consequent scheduling of the production a c t i v i t y . Rationing requires assigning allotment p r i o r i t i e s to consumers of output on the one hand and to alternate use of inputs on the other hand. (See pp. 20-23) (Thompson does not provide examples f or smoothing and l e v e l i n g of, or a n t i c i p a t i o n and adaptation to, input fluctuations.) It i s suggested that while the foregoing was a reasonable d e s c r i p t i o n of organizational behaviour during abundance, i t has l i t t l e or no relevance under s c a r c i t y . The concepts of bu f f e r i n g and r a t i o n i n g subsume i n the main an expectation of a constant l e v e l of a v a i l a b i l i t y i n the environment. The concepts are relevant l a r g e l y to operation under a steady s t a t e a n d lose much of t h e i r meaning when there are expectations of a steady decline i n a v a i l a b i l i t y of raw material. Indeed, instead of attempting to seal o f f the t e c h n i c a l core, i t w i l l be shown l a t e r that under s c a r c i t y the organization w i l l b u i l d i n a degree of f l e x i b i l i t y within the t e c h n i c a l core. Organizational Slack and Inconsistent Goals "Many i n t e r e s t i n g phenomena within the firm occur because slack i s t y p i c a l l y not zero" (Cyert and March, 1963: p. 36). S i m i l a r l y , the fact that r u l i n g c o a l i t i o n s i n v a r i a b l y contain a p o t e n t i a l for c o n f l i c t (because of v a r i a t i o n s among i n d i v i d u a l goals) both makes organizational -32-behaviour more i n t e r e s t i n g and OT r i c h e r . (It i s argued i n fa c t that i t i s l a r g e l y because of the existence of organizational s l a c k and goal c o n f l i c t s that the behavioural theory of the firm (see, e.g., Cyert and March, 1963) d i f f e r s from the economic theory of the firm.) It i s suggested that during s c a r c i t y there w i l l be l i t t l e i f any organizational slack. Also environmental pressure i s expected to force a consensus of goals among members of the c o a l i t i o n (heterogeneity i s expected to be minimized). Thus most of the t r a d i t i o n a l theory r e l a t e d to or derived from organizational slack and goal heterogeneity on the one hand and t h e i r consequences on the other hand w i l l become i r r e l e v a n t during s c a r c i t y . (It follows that economic c r i t e r i a w i l l be i n c r e a s i n g l y used for organizational decision making, and that i n the extreme non-economic behavioural c r i t e r i a w i l l be t o t a l l y subordinated to the l o g i c of the economics of the firm.) In Defence of the Bias Evidence for a bias toward growth and abundance has been presented above. The o r i g i n of the bias i s b r i e f l y explained i n t h i s section. Thus far i t has been argued that OT i s concerned with behaviour i n a m i l i e u of abundance. This concern with abundance and growth i s under-standable. Theoretical work can be expected to develop more during times of plenty and l e i s u r e than i n the midst of deprivation and s c a r c i t y . Note, for example, the contrast between "contributions to knowledge" during the Dark Ages i n Europe with those during the e a r l i e r A r i s t o t e l e a n and P l a t o n i c -33-15 periods. When money i s t i g h t very l i t t l e of i t can be expected to be invested i n a c t i v i t i e s which are not immediately productive, e.g., theory b u i l d i n g . H i s t o r i c a l l y America, where a large part of the theory of organi-z a t i o n a l behaviour was developed, has been a land of plenty. This resulted i n an optimism rooted i n f a i t h i n economic growth (Heilbroner, 1959; Reich, 1971). Thus both OT and micro organizational behaviour evolved i n a m i l i e u of abundance; and i t i s not s u r p r i s i n g that they r e f l e c t the ethos of the period. Since organizations i n general were experiencing growth and abundance, OT had to address i t s e l f to growth-related behaviour i n order to be relevant. A theory of s u r v i v a l behaviour under conditions of deprivation would be i r r e l e v a n t . Again, even i f a s c a r c i t y - o r i e n t e d theory had been conceived at that time, i t could not have developed f a r because of lack of empirical grounding. I t i s d i f f i c u l t to test postulates of s c a r c i t y motivated behaviour when abundance i s the p r e v a i l i n g mode.1^ Summary In t h i s chapter evidence has been presented f o r a bias i n OT toward abundance and growth. Further evidence to t h i s e f f e c t w i l l be pre-sented i n Chapters 6 and 7. It i s believed that the foregoing provides s u f f i c i e n t j u s t i f i c a t i o n for a study of macro theory i n a m i l i e u of s c a r c i t y . The concepts funda-mental to such a study are presented i n the next chapter. Merle Ace provided t h i s example. 16 Along somewhat s i m i l a r l i n e s A l d r i c h (1971) argues that because OT has been t r a d i t i o n a l l y l i m i t e d to the study of successful organizations, i t follows that there i s l i t t l e awareness i n OT of the " e s s e n t i a l differences between them ( i . e . , the survivors) and the organizations no longer around to be studied" (p. 282). -34-CHAPTER 3 THE CONCEPT OF SCARCITY The concept of long range s u r v i v a l i s basic to the behavioural sciences. I t i s r e f l e c t e d for example i n the h i e r a r c h i c a l need theories i n psychology (e.g., Barnes, 1960; Maslow, 1970) where p h y s i o l o g i c a l needs are considered prepotent. In organizational behaviour s u r v i v a l i s the long range goal of the organization (e.g., Gibson, Ivancevitch, and Donnelly, 1973; Moudgill, 1974a), and the concept i s used among other things to explain changes i n instrumental goals (e.g., E t z i o n i , 1964; Perrow, 1970). Survival i s the key to the theory of the fir m i n economics (e.g., Greenhut, 1970; Vickers, 1968), and determines investment and divestment strategy over time. I t i s also fundamental to the theory of p o l i t i c a l science, and i n the general systems expositions of such theories (e.g., Deutsch, 1966; Easton, 1965) the concept of s e l f - p r e s e r v a t i o n i s recognized e x p l i c i t l y . S o c i o l o g i s t s (e.g., Levy, 1952; Parsons, 1951) give c e n t r a l importance to s u r v i v a l and preservation as motivators of s o c i a l behaviour. Survival i n the struggle against nature i s the paradigm i n anthropological explanations of aggregate behaviour (e.g., R a d c l i f f e -Brown, 1952; Turnbull, 1972), and determines p a r t i c u l a r s o c i e t a l structures and i n s t i t u t i o n s . Thus, i r r e s p e c t i v e of the l e v e l or d i r e c t i o n of ana l y s i s , any explanation of human behaviour recognizes, e x p l i c i t l y or otherwise, the ca r d i n a l precept of s u r v i v a l . S u r v i v a l can be studied i n at least three d i f f e r e n t perspectives: i n a m i l i e u of growth, i n the context of s t a b i l i t y or containment, and i n an environment of s c a r c i t y and shrinkage. While i t may be argued that -35-these are merely d i f f e r e n t locations on the same continuum, i t i s suggested that the three perspectives have d i f f e r e n t implications for s u r v i v a l ; and the process and means of insuring s u r v i v a l i n the midst of plenty are d i f f e r e n t from, for example, those i n the midst of extreme s c a r c i t y . These contingencies of s u r v i v a l are r e f l e c t e d very c l e a r l y i n some anthropological studies: i t i s recognized, for example, that the degree of a v a i l a b i l i t y of means of sustenance e f f e c t s the st r u c t u r i n g of the family (as an aid to s u r v i v a l ) . Turnbull (1972) reports that among the Ik, a p r i m i t i v e people i n the northeastern corner of Uganda who have l i v e d on the verge of st a r v a t i o n f o r several generations, family t i e s are seen as a threat to s u r v i v a l . When there i s barely, enough food f o r one, sharing i t with another, say a c h i l d , may lead to ext i n c t i o n of both mother and c h i l d . Consequently the c h i l d i s abandoned to fend for i t s e l f at the age of three. There i s thus no "family" among the Ik. Among a g r i c u l t u r a l people i n contrast, where cooperation i s of the essence for s u r v i v a l , an extended family i s the mode (Mamdani, 1973; White, 1974: pp. 374-5). In i n d u s t r i a l i z e d countries however, i n further contrast, the very assurance of s u r v i v a l has a c e n t r i f u g a l e f f e c t on the family and f a c i l i t a t e s d i s i n t e g r a t i o n (Berelson and Steiner, 1964: pp. 311-2). There i s thus a d e f i n i t e recognition i n anthropology of, among other things, the d i f f e r e n t i a l s t r u c t u r a l e f f e c t of s u r v i v a l i n the midst of s c a r c i t y on the one hand and abundance on the other. Anthropological studies represent one extreme of aggregation for the purpose of analysis of human behaviour. At the other extreme, at the l e v e l of the i n d i v i d u a l , there i s e x p l i c i t recognition as well of d i f f e r e n t -36-s t r a t e g i e s i n the face of environmental s c a r c i t y or abundance. I t i s recognized i n psychology, f o r example, that s e l f i s h , suspicious, and h o s t i l e behaviour i s t y p i c a l of s c a r c i t y , while generosity, t r u s t and philanthropy are c h a r a c t e r i s t i c s of abundance (Maslow, 1970: Chs. 4 and 11). The two sets of attitudes or personality "structure" thus r e f l e c t the degree of a v a i l a b i l i t y of means of sustenance i n the environment. I t has been suggested above that there i s some understanding of behaviour under s c a r c i t y i n anthropology and psychology. In OT however, there i s l i t t l e awareness of the imperatives of s c a r c i t y . To draw an analogy from psychology to i l l u s t r a t e the point: OT i s not equipped to study, for example, the organizational equivalent of the behaviour of a starving r a t ; and there i s no counterpart i n OT of the considerable under-standing ( i n psychology) of deprivation-induced pathology. To take analogies from sociology: there i s a lack of understanding i n OT of the behaviour of people i n the face of a natural d i s a s t e r . There are no pre s c r i p t i o n s even f o r behaviour under "norms of r a t i o n a l i t y " i n the context of s c a r c i t y . What i s more important, there i s not even a formal d i s t i n c t i o n between s c a r c i t y and abundance. Consequently there i s l i t t l e i n OT that can q u a l i f y as a theory of s u r v i v a l behaviour i n a context of s c a r c i t y . To summarize: (i) there i s no s c a r c i t y r e l a t e d component i n OT, while ( i i ) there i s some understanding of s c a r c i t y r e l a t e d behaviour i n anthropology, sociology, and psychology. This knowledge however i s not d i r e c t l y applicable to the range of behaviour subsumed under con-temporary OT: The concepts and information r e l a t i n g to behaviour a v a i l a b l e i n , for example, psychology cannot be d i r e c t l y transferred to organizational behaviour at the macro l e v e l . This i s p a r t l y because of -37-th e conceptual problem of anthropomorphising organizations on the one hand, and p a r t l y because of the d i f f i c u l t y of conceptualizing the i n d i v i d u a l i n organizational macro terms on the other hand. Thus the concepts used to study deprivation induced pathology (sensory de p r i v a t i o n ) , f o r example, cannot be r e a d i l y applied to the study of organizational behaviour. This i s not to say that i t i s not possi b l e , i n p r i n c i p l e to transfer s c a r c i t y r e l a t e d knowledge from psychology to OT. The relevant information a v a i l a b l e i n psychology however tends to be rather d i f f u s e and fragmentary, and at times, mutually contradictory. I t would require considerable work (even for a psychologist) to c o l l e c t and integrate a l l t h i s information such that i t could be used f o r the purposes of the present d i s s e r t a t i o n . Such an undertaking i s d e f i n i t e l y beyond the scope of the present study. The understanding of behaviour i n the context of s c a r c i t y likewise i s not a v a i l a b l e i n a comprehensive form i n the l i t e r a t u r e of anthropology and sociology. Moreover, the e x i s t i n g d i f f u s e information i s not d i r e c t l y t r a n s f e r r a b l e into OT. Accordingly, i t was not pos s i b l e to obtain f r u i t f u l leads from anthropology (or sociology. Consequently a more p r a c t i c a l a l t e r n a t i v e was adopted: To attempt from f i r s t p r i n c i p l e s the study of organizational behaviour i n the context of s c a r c i t y — o r rather the formulation of concepts which are pre r e q u i s i t e s to such a study. The F i r s t Level D e f i n i t i o n s of S c a r c i t y For l o g i c a l reasons the analysis begins with a d e f i n i t i o n of s c a r c i t y . At the beginning of the chapter i t was suggested that the -38-concept of s u r v i v a l i s basic to explanations of human behaviour. This fundamental concept w i l l be used to develop a d e f i n i t i o n of s c a r c i t y . According to general systems theory, system maintenance or preservation requires an inflow of negentropic material (Bertalanffy, 1968): Organizations require an intake of p a r t i c u l a r b i t s of matter-energy- information i n order to survive. The greater the inputs the greater i s the p o s s i b i l i t y of s u r v i v a l , c e t e r i s paribus. I n s u f f i c i e n t r eceipts over time w i l l lead to reduction i n s u r v i v a l p o t e n t i a l and eventually to e x t i n c t i o n . 1 The amounts of input necessary for s u r v i v a l depends upon the i n d i v i d u a l organization, and varies with both i t s generic and i d i o s y n c r a t i c c h a r a c t e r i s t i c s . The organization i t s e l f provides the c r i t e r i o n f o r measuring the adequacy of the inputs: i f there i s no loss i n s u r v i v a l p o t e n t i a l over time then the input i s by d e f i n i t i o n adequate (Moudgill, 1974b). I f on the other hand the amount of inflow i s such that i t r e s u l t s i n the organization becoming extinct then input i s again by d e f i n i t i o n , i n s u f f i c i e n t . Each organization requires d i f f e r e n t types of inputs f o r s u r v i v a l . While there may be i n t e r a c t i o n e f f e c t s among d i f f e r e n t i n -flows, long range s u r v i v a l varies with the quantity of each i n d i v i d u a l input. I f the rate of intake of a p a r t i c u l a r input drops below a ce r t a i n threshold, the organization may per i s h . Above the threshold however the p a r t i c u l a r material does not pose a threat to s u r v i v a l . "'"The "degree of s u r v i v a l " or s u r v i v a l p o t e n t i a l can also be conceptualized as,organizational effectiveness (Moudgill, 1974b); and the greater the a b i l i t y of the organization to compete f or scarce resources, the greater i t s effectiveness (Yuchtman and Seashore, 1967). -39-This r e l a t i o n s h i p between the amount of input and i t s consequences for s u r v i v a l can be used to develop a d e f i n i t i o n of s c a r c i t y f or a p a r t i c u l a r material with respect to the f o c a l organization: A p a r t i c u l a r material can be said to be scarce with  respect to a p a r t i c u l a r organization i f the quantity of the material a v a i l a b l e to i t i s such that i t causes the organization to become extinct over time (and that the organization would have survived i f i t had received a greater amount of that input). The above w i l l be ref e r r e d to as the d e f i n i t i o n of r e l a t i v e s c a r c i t y . D i f f e r e n t organizations require varying quantities of d i f f e r e n t inputs. Some inputs are common across a large number of organizations; and several organizations within any g e o - p o l i t i c a l system may use the same material. The requirements of the i n d i v i d u a l organizations for a p a r t i c u l a r material can be added to obtain the t o t a l demand for that material i n the p a r t i c u l a r system. I f the t o t a l a v a i l a b i l i t y of the material i s such that a l l the organizations continue to survive over the long run, then we can say that i t i s av a i l a b l e i n s u f f i c i e n t quantity. I f however even one organization becomes e x t i n c t , the amount i s not enough: The good can then be said to be scarce. The r e l a t i o n s h i p between the t o t a l a v a i l a b i l i t y of a p a r t i c u l a r good i n a g e o - p o l i t i c a l system, and the s u r v i v a l of the using organi-zations within the system can be used to develop a d e f i n i t i o n of s c a r c i t y with respect to the system: -40-A p a r t i c u l a r material can be said to be scarce with  respect to a g e o - p o l i t i c a l system i f the t o t a l amount av a i l a b l e i n the system i s such that, for want of the material, at least one organization i n the system  experiences r e l a t i v e s c a r c i t y , i . e . , becomes extinct  over time (and that i t would have survived i f more of that material were a v a i l a b l e i n the system). The above w i l l be referred to as the d e f i n i t i o n of absolute  s c a r c i t y to d i s t i n g u i s h i t from the e a r l i e r d e f i n i t i o n of r e l a t i v e s c a r c i t y . The two together w i l l be c a l l e d f i r s t l e v e l d e f i n i t i o n s of s c a r c i t y . I t i s suggested that an organization may be viewed as an integrated system i n the sense that i t i s comprised of f u n c t i o n a l sub-units which are important to the s u r v i v a l of the system: The f a i l u r e of any fun c t i o n a l subsystem w i l l r e s u l t i n reduction of the s u r v i v a l p o t e n t i a l of the whole. I t may be noted that the d e f i n i t i o n of r e l a t i v e s c a r c i t y can be generalized to any integrated system, e.g., the human organism: In the case of a human being the loss of a f u n c t i o n a l organ may r e s u l t i n the death of the i n d i v i d u a l . In contrast to integrated systems aggregations may be viewed as loose c o l l e c t i v i t i e s : The f a i l u r e of any of the constituents of an aggregation w i l l not a f f e c t the s u r v i v a l of the rest of the members. The aggregation of organizations i n a g e o - p o l i t i c a l system i s a case i n point. I t i s suggested that the d e f i n i t i o n of absolute s c a r c i t y i s generalizable to a l l loose c o l l e c t i v i t i e s , e.g., aggregations of human beings: In the case of such an aggregation the death of an i n d i v i d u a l w i l l not endanger the s u r v i v a l of the others. -41-G e n e r a l i z a b i l i t y of the Concepts Organizational behaviour can be studied at two l e v e l s of analysis, the macro l e v e l and the micro l e v e l . The two l e v e l s are highly interconnected. Behaviour at the micro l e v e l and i n t r a -organizational behaviour at the macro l e v e l both influence each other to a considerable extent. Giving due regard to t h i s interdependence, i t would be valuable i f the s c a r c i t y - r e l a t e d concepts developed for the macro l e v e l could also be applied to the lower l e v e l . I d e a l l y of course the concepts should also be generalizable to the behaviour of i n d i v i d u a l s outside the organizational context on the one hand and to systems above the organizational l e v e l on the other hand. This would f a c i l i t a t e development of an integrated body of s c a r c i t y r e l a t e d knowledge which would be v a l i d across a l l l e v e l s of discourse, and would possess a l l the 2 attendant advantages of g e n e r a l i z a b i l i t y . As shown above the f i r s t l e v e l d e f i n i t i o n s are also applicable 3 to human behaviour (both within and outside the o r g a n i z a t i o n a l context). It i s suggested that these concepts constitute the foundations of an integrated theory of s c a r c i t y related behaviour, and can be developed i n any one or more of the following d i r e c t i o n s : 2 See, among others, Bertalanffy (1968) and James M i l l e r (1971) for arguments for an integrated body of knowledge and the advantages of g e n e r a l i z a b i l i t y across systems. 3 Seeking maximal g e n e r a l i z a b i l i t y a concept of s c a r c i t y was developed which was applicable to i n d i v i d u a l s , aggregations of i n d i v i d u a l s , organizations, aggregations of organizations, and the society. I t did not however provide any f r u i t f u l leads i n the study of s c a r c i t y r e l a t e d behaviour, and was consequently dropped. The concept has been included i n Appendix 1 for academic i n t e r e s t . The f i r s t l e v e l d e f i n i t i o n s developed above are not a p p l i c a b l e to the s o c i e t a l l e v e l of a n a l y s i s . These l i m i t a t i o n s are discussed i n Appendix 2. -42-(i) A study of i n d i v i d u a l s and t h e i r aggregations outside the organizational context. ( i i ) A study of i n d i v i d u a l s and t h e i r aggregations at the small group l e v e l i n the organizational context—micro or g a n i z a t i o n a l behaviour. ( i i i ) A study of organizations and t h e i r aggregations and the aggregations of small groups i n the organizational context—OT or macro theory. Because of the current i n t e r e s t s of the author i t was decided to pursue development at the macro l e v e l only. This i s done i n the 4 remaining chapters. Preliminary attempts at development of the concepts i n the context of i n d i v i d u a l human beings and t h e i r aggregations are however presented i n Appendix 3 as evidence of the p o s s i b i l i t y of a future integrated theory. - 4 3 -CHAPTER 4 DEVELOPMENT OF THE CONCEPT OF SCARCITY The f i r s t l e v e l concepts of r e l a t i v e and absolute s c a r c i t y were introduced i n Chapter 3. These concepts are developed i n the present chapter. Certain tools of microeconomic analysis are used for t h i s purpose. The chapter begins with the d i s t i n c t i o n between e s s e n t i a l and i n e s s e n t i a l goods. The consumption behaviour of organizations and t h e i r aggregations are then studied i n r e l a t i o n to v a r i a t i o n s i n the a v a i l a b i l i t y of e s s e n t i a l goods as well as the l e v e l of resources. E s s e n t i a l and I n e s s e n t i a l Goods Organizations t y p i c a l l y consume varying q u a n t i t i e s of a v a r i e t y of goods. Not a l l of these are v i t a l for organizational s u r v i v a l . Depending upon t h e i r c e n t r a l i t y for s u r v i v a l , goods can be categorized as ei t h e r e s s e n t i a l or i n e s s e n t i a l . I f reduction i n the intake of a p a r t i c u -l a r good below a c e r t a i n l e v e l causes the organization to f a i l , the good can be c l a s s i f i e d as e s s e n t i a l . I f the organization continues to survive even when consumption of a p a r t i c u l a r good has been reduced to zero, the good belongs to the i n e s s e n t i a l category. I t must noted that the property of being e s s e n t i a l and i n -e s s e n t i a l i s not i n t r i n s i c to the good; but derives instead from the nature of the organization. I t i s possible that while a p a r t i c u l a r good i s e s s e n t i a l for one organization, i t i s i n e s s e n t i a l with respect to another. "'"Those who are not comfortable with microeconomic analysis may prefer to read Appendix 3 before studying t h i s chapter. The use of i n d i f f e r e n c e , demand, and Engel curves i s explained i n some d e t a i l i n the Appendix ( i n the course of development of the concept of s c a r c i t y i n the context of i n d i v i d u a l human beings and t h e i r aggregations). The present chapter presumes a c e r t a i n f a m i l i a r i t y with these t o o l s . -44-Indifference Curves Let us assume that a l l the goods i n the world can be represented by two goods A and B. Let us also assume that there are only two types of organizations. A* and B*, such that good A i s e s s e n t i a l while good B i s i n e s s e n t i a l f o r organization A*, and B i s e s s e n t i a l and A i s i n e s s e n t i a l for organization B*; and that A* and B* are i d e n t i c a l i n a l l other respects. I t i s suggested that organizations may be i n d i f f e r e n t between c e r t a i n combinations of the e s s e n t i a l and i n e s s e n t i a l goods A and B. The 2 in d i f f e r e n c e curves for A*(B*) are presented i n Figure 2. OQ i s the minimum quantity of A(B) necessary for s u r v i v a l of the organization. I t i s possible that there e x i s t s a point Q^ on the i n d i f f e r e n c e map of the organization such that the in d i f f e r e n c e curves between Q and Q^ are v e r t i c a l l i n e s . This means that as long as the amount of the e s s e n t i a l good A(B) a v a i l a b l e to the organization i s less than OQ^, the consumption of any amount of the i n e s s e n t i a l good B(A) w i l l not add to the u t i l i t y of the organization. Consequently B(A) w i l l not be consumed at a l l . To the r i g h t of the point Q^ however the i n d i f f e r e n c e curves become concave when viewed from the top. When the amount of the e s s e n t i a l good A(B) consumed i s more than OQ^, the organization w i l l consume some amount of the i n -e s s e n t i a l good B(A). A s i m i l a r argument for B* ( i . e . , s i m i l a r to that for A*) can be developed by replacing A* by B*, A by B, and B by A i n the text. In the i n t e r e s t of parsimony however, a p a r a l l e l w i l l be indicated by incorporating the a l t e r -native i n parentheses along with the main argument. Thus instead of w r i t i n g "the i n d i f f e r e n c e curves for A* are ..." i n the context of organizations A* i n one paragraph, and then repeating "the i n d i f f e r e n c e curves f o r B* are ..." for organizations B* i n a second paragraph, the two have been collapsed into one paragraph by use of the a r t i f i c e "the i n d i f f e r e n c e curves f o r A*(B*) are ..." -45-FIGURE 2 INDIFFERENCE CURVES: THE ESSENTIAL AND INESSENTIAL GOODS Quantity of i n e s s e n t i a l good Quantity of e s s e n t i a l good OQ: Minimum quantity of e s s e n t i a l good necessary f or s u r v i v a l OQ.^  Amount of e s s e n t i a l good consumed when a l l org a n i z a t i o n a l slack i s taken up (the consumption of the i n e s s e n t i a l good drops to zero) -46-I t may be noted that the l o c a t i o n of the point v a r i e s with organizational s i z e . As the organization grows the point w i l l tend to s h i f t to the r i g h t . Conversely, when i t di v e s t s , the point w i l l move to the l e f t . A f t e r a period of s t a b i l i z a t i o n however the organi-zation may begin to consume i n e s s e n t i a l goods even though the intake of the e s s e n t i a l good i s s t i l l less than that p r i o r to shrinkage. Demand and Engel Curves, and Organizational Slack Let us assume that the resources of the organization are 3 independent of i t s consumption of the e s s e n t i a l and i n e s s e n t i a l goods. A l l o c a t i o n of resources between the two goods w i l l then be determined by the tangent of the budget l i n e with the highest i n d i f f e r e n c e curve. Reduction of the t o t a l a v a i l a b i l i t y of A and B, and orga n i z a t i o n a l resources R can then be depicted by s h i f t s i n the budget l i n e — w i t h consequent changes i n the amounts of A and B consumed. The changes are discussed below (see Figure 2). As the quantity of A(B) consumed approaches OQ^ l e s s and less B(A) w i l l be consumed, t i l l when A(B) i s equal to OQ^ the amount of B(A) consumed i s zero. The organization w i l l however continue to survive even when the quantity of A(B) consumed i s below t h i s l e v e l : i t w i l l divest and reduce i t s s i z e i n order to adapt to the diminished input. I t w i l l continue to decrease i n s i z e i n response to reduction i n the quantity of A(B) t i l l , below the c r i t i c a l point OQ, i t ceases to be v i a b l e because _ The assumption of independence has been made merely i n order to s i m p l i f y the discussion. The interdependence of organizational resources and product output i s e x p l i c i t l y recognized i n Chapter 5. -47-of diseconomies of scale. Consequently the organization has to shut down; or i t f a i l s . I t may be noted that as long as the organization consumes more than OQ^ units of A(B) there i s slack i n the system: Since i t can reduce i t s intake of A(B) without having to divest, i t i s consuming more than the necessary amount of the e s s e n t i a l good; also, resources are being 4 expended on the i n e s s e n t i a l good. Demand curves can be drawn by p l o t t i n g the changes i n the quantity of goods consumed corresponding to v a r i a t i o n s i n the p r i c e of each of the goods. S i m i l a r l y Engel curves can be obtained by p l o t t i n g consumption against v a r i a t i o n s i n the l e v e l of resources. The demand curves for the i n e s s e n t i a l and e s s e n t i a l goods are presented i n Figures 3 and 4 r e s p e c t i v e l y . The demand curve for the e s s e n t i a l good i s kinked at a point which corresponds to the state at which there i s no organi-zat i o n a l slack. OQ^ units of A(B) and zero units of B(A) are consumed at t h i s point. The curve terminates when the quantity of the e s s e n t i a l good consumed i s less than the c r i t i c a l l e v e l OQ. The Engel curves for the organization are presented i n Figure 5. The curve for A(B) i s s i m i l a r l y kinked at a point which corresponds to OQ^, and terminates at OQ. Aggregate Demand and Engel Curves Let us assume that a l l the organizations A* are i d e n t i c a l to each other, and that the organizations B* are s i m i l a r l y i d e n t i c a l to 4 The concept of organizational slack i s developed i n considerable d e t a i l i n Chapter 7. -48-FIGURE 3 DEMAND CURVE FOR THE INESSENTIAL GOOD Price of in e s s e n t i a l good 0 Quantity of i n e s s e n t i a l good -49-FIGURE 4 DEMAND CURVE FOR THE ESSENTIAL GOOD of e s s e n t i a l good 0 Q Q Quantity of e s s e n t i a l good OQ Minimum quantity of e s s e n t i a l good necessary f or s u r v i v a l OQ Amount of the e s s e n t i a l good consumed when a l l o r g a n i z a t i o n a l slack has been taken up -50-FIGURE 5 CONSUMPTION AS A FUNCTION OF THE LEVEL OF RESOURCES; ESSENTIAL AND INESSENTIAL GOODS u ^ ^1 Quantity of good consumed OQ: Minimum quantity of e s s e n t i a l good necessary f o r s u r v i v a l OR: Minimum l e v e l of resources necessary f o r s u r v i v a l OQ^: Amount of the e s s e n t i a l good consumed when a l l organizational slack has been taken up, i . e . , when the consumption of the i n e s s e n t i a l good i s zero -51-each other. The aggregate demand and Engel curves f o r the A*s and the B*s w i l l be s i m i l a r to those f o r i n d i v i d u a l organizations. The aggregate demand curve for the i n e s s e n t i a l and e s s e n t i a l goods w i l l be s i m i l a r to that i n Figures 3 and 4 re s p e c t i v e l y . The aggregate Engel curves w i l l be si m i l a r to those i n Figure 5. Changes i n the Supply of the E s s e n t i a l Good With demand being held constant, i f the supply of the e s s e n t i a l good i s reduced, i t s p r i c e w i l l be b i d up and the quantity consumed w i l l decline. The supply curve w i l l , i n e f f e c t , s h i f t to the l e f t . This w i l l cause the point of i n t e r s e c t i o n of the supply and demand curves to move upwards along the demand c u r v e — t i l l i t reaches the c r i t i c a l point for the aggregation ( i . e . , t i l l the t o t a l quantity of A transacted i s equal to the sum of OQs of a l l the A*s i n the aggregation). If the supply i s reduced some more, then at l e a s t one organization w i l l f a i l . This c r i t i c a l point i s represented by J i n Figure 6. A reduction i n the aggregation w i l l r e s u l t i n the demand curve s h i f t i n g l e f t , i n t e r s e c t i n g the supply curve at K^. A further reduction i n supply w i l l cause the supply curve to move upwards, t i l l at the quantity of A(B) consumed i s the minimum required f o r the s u r v i v a l of the res i d u a l aggregation of A*s(B*s). Reduction i n the a v a i l a b i l i t y of A(B) beyond t h i s point w i l l cause another A*;(B*) to f a i l , and the supply and (residual);-.demand curves w i l l now i n t e r s e c t at K^. The curves KJ, K^J^, K 2 J 2 K n J n t h u S r e P r e s e n t t n e l ° c u s o f i n t e r s e c t i o n of the supply and demand curves of the e s s e n t i a l good. If the aggregation i s large enough, i . e . , the points J , J 1 , J„, -52-FIGURE 6 LOCUS OF INTERSECTION OF THE AGGREGATE SUPPLY AND DEMAND CURVES FOR GOOD ACB) FOR ORGANIZATIONS A*(B*) Pr i c e per unit of the e s s e n t i a l good Quantity of the e s s e n t i a l good OQ1: The amount of A(B) necessary for s u r v i v a l of the l a s t organization OQ : The amount of A(B) necessary f o r s u r v i v a l of a l l the organizations i n the aggregation OQ^: The amount of A(B) consumed by the aggregation when a l l slack i s taken up -53-.... J are close enough to each other, the locus of i n t e r s e c t i o n to the n . ' l e f t of J can be approximated by the s t r a i g h t l i n e J J ^ i n Figure 7. The point corresponds to the minimum amount of A(B) necessary for the s u r v i v a l of the l a s t A*(B*). I t may be noted that the p r i c e of A(B) does not r i s e beyond the c r i t i c a l point. Also, when the supply curve moves to the r i g h t (because of increased a v a i l a b i l i t y ) from, say, C i n the c r i t i c a l region, the locus of i n t e r s e c t i o n w i l l not move r i g h t along the h o r i z o n t a l l i n e ; i t w i l l instead move southeast along the r e s i d u a l demand curve CD to the l e f t of the o r i g i n a l demand curve. I t must be remembered however that the good A(B) i s also consumed by organizations B*(A*), and that A(B) i s an i n e s s e n t i a l good for these organizations. The aggregate demand of B*s(A*s) for good A(B) i s presented i n Figure 8. The t o t a l demand for A(B) at any p r i c e can then be obtained by adding h o r i z o n t a l l y the curves i n Figures 7 and 8 . The locus of i n t e r -s e ction of the aggregate supply and demand curves f o r A and B i s presented i n Figure 9 (assuming an equal number of A*s and B*s, the curves are i d e n t i c a l ) . Changes i n the Level of Resources^ Let us now analyze v a r i a t i o n s i n aggregate consumption associated with changes i n the l e v e l of resources. Let us assume that there i s no change i n ei t h e r supply or demand. As aggregate resources decrease, consumption of both A and B w i l l reduce; t i l l at R^ the amount of the ^Comments by Vance M i t c h e l l were h e l p f u l i n development of the argument i n t h i s section. -54-. FIGURE 7 LOCUS OF INTERSECTION OF THE AGGREGATE SUPPLY AND DEMAND CURVES FOR GOOD A($) fOR ORGANIZATIONS'A*CB*): APPROXIMATE REPRESENTATION OQ : The amount of A(B) necessary f o r the s u r v i v a l of the l a s t organization OQ : The amount of A(B) necessary f o r the s u r v i v a l of a l l the organizations A*(B*) i n the aggregation OQ^: The amount of A(B) consumed by the aggregation when a l l slack i s taken up -55-FIGURE 8 AGGREGATE DEMAND CURVE FOR THE INESSENTIAL GOOD A(B) FOR ORGANIZATIONS B*(A*) P r i c e of i n e s s e n t i a l good Quantity of i n e s s e n t i a l good -56-'FIGURE 9 LOCUS OF INTERSECTION OF THE AGGREGATE SUPPLY AND DEMAND CURVES FOR ACB) OQ : The minimum amount of the A(B)'.necessary f o r s u r v i v a l of a l l the A*s(B*s) i n the aggregation OQ^: The amount of A(B) consumed when a l l organizational slack i s taken up i n the A*s(B*s) OQ1: The amount of A(B) consumed when there i s only one surviving A*(B*). -57-i n e s s e n t i a l good consumed i s zero. There i s now no organizational slack. Further reduction i n the l e v e l of resources w i l l r e s u l t i n the organi-zation d i v e s t i n g to reduce i t s consumption of A, t i l l at the c r i t i c a l l e v e l only the minimum amount of the e s s e n t i a l good necessary for s u r v i v a l i s consumed. The aggregate Engel curves corresponding to the foregoing reduction i n resources are presented i n Figure 10. If the l e v e l of resources i s decreased s t i l l more the aggregation of A*s(B*s) w i l l be unable to acquire the minimum A(B) necessary f o r s u r v i v a l . Thus at l e a s t one organization w i l l f a i l . This c r i t i c a l point i s represented by R i n Figure 10. If the resources continue to dwindle beyond R then the Engel curve f o r the r e s i d u a l aggregation w i l l be of the shape FF^; OQ^ being the minimum A(B) required f o r s u r v i v a l . I f resources f a l l below R 2 then another organization w i l l f a i l , and the Engel curve of the r e s i d u a l w i l l be of the shape F 2^3* ^ s resources continue to diminish more and more organizations w i l l f a i l , t i l l at l e v e l R 1 there i s only one A*(B*) which consumes OQ1 units of A(B). GF^ i s the Engel curve for the l a s t organi-zation. I f the l e v e l of resources increases from any point, say R^ below the c r i t i c a l l e v e l , the consumption of A w i l l be determined by Engel curves of the r e s i d u a l aggregation: The curve for the e s s e n t i a l good, ^3^3 w i l l be a continuation of the curve ^^2' 1'^ e o r 8 a n i z a t i ° n m a v o r m a v n o t however begin consumption of the i n e s s e n t i a l good, and the Engel curve for B may l i e anywhere between R3I3 a ^ d the o r i g i n a l curve at R^; It may be noted that i f the points F and G are joined by a s t r a i g h t l i n e then the various points F 2 , F^, F^ w i l l a l l l i e along -58-FIGURE 10 CHANGES IN AGGREGATE CONSUMPTION CORRESPONDING TO VARIATIONS IN THE LEVEL OF RESOURCES: A*(B*) Quantity of goods consumed by the organizations A*(B*) OQ1: The amount of A(B) necessary f o r s u r v i v a l of the l a s t organization A*(B*) OQ : The amount of A(B) necessary f o r s u r v i v a l of a l l the A*s(B*s) i n the aggregation OR1: The l e v e l of resources necessary f o r su rv iva l of the l a s t organization A* OR : The l e v e l of resources necessary f o r s u r v i v a l of a l l the A*s in.the aggregation -59-t h i s l i n e . I f the number of organizations i n the aggregation i s large such that the points F^, F^, etc., are close to each other, then the various Engel curves below F w i l l l i e close to the s t r a i g h t l i n e FG. The portion of the Engel curve below F can accordingly be approximated by a str a i g h t l i n e . Such curves f or the aggregations of B*s and A*s are presented i n Figure 11(a) and (b) r e s p e c t i v e l y . At the l e v e l of resources OR^ the quantity of the i n e s s e n t i a l good consumed i s z e r o — a l l slack i s taken up. As resources f a l l to j u s t below OR, at l e a s t one organization w i l l f a i l . I f they continue to f a l l organizations w i l l continue to perish, t i l l when the t o t a l resources a v a i l a b l e to the r e s i d u a l aggregation i s OR1, there i s only one surviving organization. The Engel curve for the aggregation of the organization A* and B* together are presented i n Figure 11(c). Because of our assumptions regarding A*s, B*s, i . e . , the organizations are i d e n t i c a l to each other i n a l l respects (except that A i s e s s e n t i a l to A* and B i s e s s e n t i a l to B*), the Engel curves f or A and B are i d e n t i c a l . D i s s i m i l a r Organizations It has been assumed so f a r that a l l the organizations A* are s i m i l a r , i . e . , they are of the same s i z e , have s i m i l a r demand schedules, and have equal amounts of resources. Let us relax t h i s assumption. The organizations f o r which a p a r t i c u l a r good i s e s s e n t i a l may have d i s -s i m i l a r c h a r a c t e r i s t i c s . A reduction i n the supply of the e s s e n t i a l good w i l l thus have a d i f f e r e n t e f f e c t on these organizations. If f o r any reason the t o t a l supply of the e s s e n t i a l good f a l l s below the t o t a l demand, the d i f f e r e n t organizations w i l l take up varying FIGURE II CONSUMPTION OF A AND B AS A FUNCTION OF THE LEVEL OF RESOURCES: AGGREGATIONS OF A*, B*, AND A* AND B* Level of resources R, (a) R R Level of (b) resources R RJ Level of (c) resources R-, R A,B 0 Q Q 1 Quantity of goods 0 Q Q 1 Quantity of goods 0 Q Q x Quantity of goods Aggregation of B*s 0RJ OR OR, Aggregation of A*s A*s and B*s together : Minimum l e v e l of resources necessary for the s u r v i v a l of the l a s t organization : Minimum l e v e l of resources necessary for the s u r v i v a l of a l l the organizations i n the aggregation : Level of resources at which a l l slack has been taken up : The resources are plotted to h a l f the scale used i n (a) and (b). -61-degrees of slack. Some organizations may shrink i n s i z e . If supply (demand) continues to reduce (increase), more and more organizations w i l l take up slack and divest t i l l , i n the l i m i t , one organization f a i l s . The p a r t i c u l a r good i s then scarce i n the absolute sense with respect to the o r i g i n a l population of organizations. I t i s possible that the supply now balances the r e s i d u a l demand and there are no subsequent f a i l u r e s . The good i s then no longer scarce with respect to the r e s i d u a l population. At the time of the f i r s t f a i l u r e the t o t a l slack i n the group of organizations w i l l be less than the slack during the period p r i o r to the f a i l u r e . S i m i l a r l y the surviving organizations w i l l , on the average, be closer to t h e i r minimum v i a b l e s i z e a f t e r the f a i l u r e than before the f a i l u r e . There i s thus less r e s i d u a l p o t e n t i a l to adapt to adverse changes. If now the supply (demand) continues to decrease (increase), the second f a i l u r e w i l l be brought about by a le s s e r absolute decrease (increase) i n supply (demand) compared to that f o r the f i r s t f a i l u r e . Subsequent f a i l u r e s w i l l require l e s s reduction (increase) i n t o t a l a v a i l a b i l i t y (demand). Thus because of reduced p o t e n t i a l f o r taking up slack and s i z e reduction a f t e r each f a i l u r e , the rate of f a i l u r e per unit decrease (increase) i n supply (demand) increases with further reduction (increase) i n supply (demand). Absolute and Relative S c a r c i t y It follows from the arguments i n t h i s chapter that aggregations Demand may increase because of an increase i n the number of consuming organizations or an increase i n consumption by some organizations. I f supply remains constant, then any increase i n consumption by some organizations must be accompanied by a corresponding decrease i n consumption by other organizations. This compensation may involve taking up slack, reduction i n s i z e , or f a i l u r e . -62-of organizations may experience s c a r c i t y due to one or more of the following reasons: (i) an increase i n demand for the e s s e n t i a l goods, ( i i ) a decrease i n the a v a i l a b i l i t y of these goods, and ( i i i ) a reduction i n the l e v e l of resources. Consuming organizations may or may not be able to influence the t o t a l supply. That i s , there may or may not be a monopsonic s i t u a t i o n . For s c a r c i t y to p r e v a i l however i t i s necessary that the supply schedule i s independent of the demand schedule.^ (If consumers can increase t o t a l a v a i l a b i l i t y there w i l l be no s c a r c i t y . ) Thus i t s h a l l be assumed here-a f t e r that the amount of a p a r t i c u l a r resource a v a i l a b l e i n the environment cannot be increased as a d i r e c t consequence of any action by the consuming organizations. Assuming that resources are constant, an excess of demand over supply may cause the equilibrium quantity to be les s than that required f o r organizational s u r v i v a l . This also means that the l e v e l of resources are no longer s u f f i c i e n t to procure adequate quantities of inputs. These phenomena can be expressed i n formal terms: A good can be said to be scarce i n the absolute sense i f : (i) The locus of i n t e r s e c t i o n of the supply and demand curves i s a h o r i z o n t a l s t r a i g h t l i n e (Figure 9); or ( i i ) The Engel curve i s a sloping s t r a i g h t l i n e to the l e f t of the c r i t i c a l point (Figure 11c). This i s true at a l l times under the assumption of perfect competition. In the present instance however the independence of supply follows from the l o g i c of s c a r c i t y , and i s independent of any assumptions regarding the nature of the market. -63-It has been assumed that the various organizations are d i s s i m i l a r . They w i l l thus react d i f f e r e n t l y to the reduction i n supply/ increase i n demand. The organization that i s the "weakest" w i l l be the g f i r s t to succumb. This organization w i l l then, by d e f i n i t i o n , experience r e l a t i v e s c a r c i t y . The concepts of r e l a t i v e and absolute s c a r c i t y were introduced i n the previous chapter, and d e s c r i p t i v e d e f i n i t i o n s were presented. The d e f i n i t i o n of absolute s c a r c i t y was based upon that of r e l a t i v e s c a r c i t y . The two concepts have been developed i n t h i s chapter, and a formal d e f i n i t i o n of absolute s c a r c i t y has been presented. The concept of r e l a t i v e s c a r c i t y i s "derived" from that of absolute s c a r c i t y i n the present exposition. As discussed below the two concepts have rather l i m i t e d a p p l i -c a t i o n . Before they can be used for a study of organizations they must be enlarged to incorporate a wider range of behaviour of i n t e r e s t to a study of s c a r c i t y . Second Level D e f i n i t i o n s of S c a r c i t y Relative s c a r c i t y was defined e a r l i e r as that which causes the f o c a l system to f a i l : I f an organization f a i l s because i t i s unable to secure adequate input of a c e r t a i n material, then the material was said to be scarce with respect to the organization. Relative s c a r c i t y i s thus, i n i t s f i r s t l e v e l d e f i n i t i o n a l sense, a "one point i n time" phenomenon: ~8~~ : Certain p r e s c r i p t i o n s for behaviour under norms of r a t i o n a l i t y are presented i n Chapters 6 and 7. I t i s suggested that, other things being equal, organizations which do not (or are unable to) operate according to these p r e s c r i p t i o n s w i l l be the f i r s t to succumb. -64-as long as the organization survives, the f o c a l good i s not scarce; the moment i t f a i l s however, the good becomes "scarce". A good i s thus c l a s s i f i e d as scarce only a f t e r the fac t of f a i l u r e . It follows from the above that i n order for an organization to come into being and continue to e x i s t , there must be a h i s t o r i c a l period of nonscarcity: An organization cannot ex i s t i f a p a r t i c u l a r input i s scarce. I t also follows that at any given point i n time, f o r any set of organizations, none of the relevant goods can be scarce. Thus according to our d e f i n i t i o n , a good cannot ever be c l a s s i f i e d as scarce r e l a t i v e to any e x i s t i n g organization. The concept of r e l a t i v e s c a r c i t y as defined above has l i t t l e a p p l i c a t i o n i n r e a l l i f e ; i t s a p p l i c a t i o n i s l i m i t e d at best to the study of organizations at the time of f a i l u r e . In order f o r the concept to be relevant to a broader area of i n t e r e s t i n the study of s c a r c i t y , i t i s necessary to modify the d e f i n i t i o n . Behaviour of organizations p r i o r to f a i l u r e , e s p e c i a l l y when f a i l u r e i s anticipated, i s r i c h i n i t s i n t e r e s t to a study of s c a r c i t y . It i s only proper that such behaviour i s covered i n a working d e f i n i t i o n of s c a r c i t y . The concept of r e l a t i v e s c a r c i t y i s accordingly redefined to include some states of the organization p r i o r to f a i l u r e . S p e c i f i c a l l y , the antecedents of taking up slack and divestment are included: (I) A p a r t i c u l a r material can be said to be scarce with respect to a p a r t i c u l a r organization i f the quantity of the material a v a i l a b l e to i t is such that i t causes the organization to (i) take up slack, or ( i i ) divest and reduce i t s s i z e , or_ ( i i i ) f a i l . -65-The above conditions t y p i c a l l y p r e v a i l as a consequence of reduction i n supply. An increase i n demand too may r e s u l t i n s c a r c i t y . According to the revised d e f i n i t i o n an organization may experience r e l a t i v e s c a r c i t y while i t i s growing: I t i s possible that an organi-zation increases the intake of a v a r i e t y of goods and begins to grow. Growth may be checked however because of the d i f f i c u l t y of acquiring a d d i t i o n a l quantities of a p a r t i c u l a r good. In order to procure more of t h i s material the organization may have to transfer resources from other goods. Thus the s c a r c i t y of the f o c a l good causes i t to take up 9 slack i n the process of growth. I f the good were not scarce then no i n t e r n a l r e a l l o c a t i o n of resources would have been necessary; the t o t a l expenditure on each good would have increased without any change i n the r e l a t i v e proportion of the amount spent on each good (except for changes a t t r i b u t a b l e to economies or diseconomies of s c a l e ) . I f an organization has no slack i t cannot grow by i n t e r n a l r e a l l o c a t i o n of resources: Consumption of i n e s s e n t i a l goods cannot be reduced because the organization i s not consuming them at a l l ; consumption of other e s s e n t i a l goods cannot be reduced because that would cause the organization to f a i l . This leads us to another possible d e f i n i t i o n of r e l a t i v e s c a r c i t y : (II) A p a r t i c u l a r good can be said to be scarce with  respect to a p a r t i c u l a r organization i f , when there i s no slack i n the organization, the quantity of the material a v a i l a b l e to i t i s such that the organization cannot grow i n s i z e . Taking up slack or divestment for reasons other than material s c a r c i t y , e.g., because of management p o l i c y , are excluded from the d e f i n i t i o n of r e l a t i v e s c a r c i t y . -66-The p o s s i b i l i t y of a p a r t i c u l a r organization experiencing r e l a t i v e s c a r c i t y due to an increase i n i t s demand has been discussed. It may be noted however that i t i s possible that an organization may experience s c a r c i t y due to an increase i n demand by other organizations: With supply remaining constant, an increase i n consumption by one organi-zation i n a p a r t i c u l a r g e o - p o l i t i c a l system must r e s u l t i n a compensating decrease i n inputs to another organization i n the system. Using the revised d e f i n i t i o n s of r e l a t i v e s c a r c i t y absolute  s c a r c i t y can now be redefined: A p a r t i c u l a r material can be said to be scarce with  respect to a g e o - p o l i t i c a l system i f the t o t a l amount ava i l a b l e to the system i s such that, for want of material, at l e a s t one organization i n the system experiences r e l a t i v e s c a r c i t y . The above d e f i n i t i o n s of r e l a t i v e and absolute s c a r c i t y w i l l be c a l l e d second l e v e l d e f i n i t i o n s . These w i l l constitute the working d e f i n i t i o n s to be used to study the behaviour of organizations i n the following chapters. -67-CHAPTER 5 PROBLEM DEFINITION The concept of s c a r c i t y was introduced and developed i n the l a s t two chapters, and working or second l e v e l d e f i n i t i o n s of absolute and r e l a t i v e s c a r c i t y were obtained. These can now be used i n the study of behaviour of organizations i n the context of s c a r c i t y . While these concepts have p o t e n t i a l for a p p l i c a t i o n to most aspects of organizational behaviour, only some of these w i l l be pursued i n the present study. This chapter i s devoted to development of the boundaries of the study and a d e f i n i t i o n of the problem to be analyzed. Antecedents of Sc a r c i t y I t has been mentioned e a r l i e r that there are three possible antecedents of s c a r c i t y : (i) reduction i n supply, ( i i ) increased demand, and ( i i i ) reduction i n the a b i l i t y to acquire e s s e n t i a l material, i . e . , reduced purchasing power. Any d e f i n i t i v e study of s c a r c i t y must address i t s e l f to a l l of these v a r i a b l e s . I t w i l l be r e c a l l e d from the i n t r o -ductory chapter that the focus of t h i s study i s on the exhaustion of natural resources. Accordingly, the present analysis i s l i m i t e d to organizational consequences of reduction i n supply. Changes i n demand and purchasing power w i l l be considered only when they have a d i r e c t bearing upon reduction i n inputs. The d i s t i n c t i o n between supply on the one hand and demand and purchasing power on the other i s operationalized as follows: L i t t e r e r (1973: p. 25) distinguishes among input, transformation, maintenance, regulation, and output functions. The various functions are presented -68-i n Figure 12. Maladies i n the transformation, maintenance, and regulation functions w i l l r e s u l t i n reduced production. Reduction i n demand or increased competition may r e s u l t i n lowered sales. While purchasing power may be independent of production/sales i n the short run ( e s p e c i a l l y i n government owned service organizations), reduced output w i l l , over time, lead to reduction i n revenue. Lowered income, i n i t s own turn, w i l l then r e s u l t i n reduced inflows of e s s e n t i a l goods, with consequent further reduction i n output. The a b i l i t y to acquire e s s e n t i a l goods and the input of these goods are thus mutually interdependent. There i s , i n e f f e c t , an input-revenue-input loop: a reduction i n one ultimately r e s u l t s i n the reduction of the other. A disturbance may be introduced into the revenue-input loop i n two ways: by a l t e r i n g e i t h e r the purchasing power, or by changing the l e v e l of inputs. Depending upon how they a f f e c t t h i s loop, the various antecedents of s c a r c i t y can be divided into two categories: those which r e s u l t f i r s t i n reduced purchasing power and those which a f f e c t f i r s t the input of e s s e n t i a l material. Lowered p r o d u c t i v i t y , poor sal e s , or externally imposed f i n a n c i a l penalties are examples of the former category. Monopolistic action by s u p p l i e r s , reduction i n import quotas, and increase i n aggregate demand with respect to a v a i l a b i l i t y are instances of the second type. The former category influences the inputs into an organi-zation by f i r s t lowering i t s purchasing power. The l a t t e r d i r e c t l y r e s u l t i n reduced inputs by reducing supply. (In t h i s instance the purchasing power can be said to be no longer s u f f i c i e n t to insure inputs at the h i s t o r i c a l l e v e l . ) -69-FIGURE 12 FUNCTIONS IN AN ORGANIZATION Input- Transformation -t> Output A Maintenance Regulation (Taken from L i t t e r e r , 1973: p. 25) -70-In keeping with the aim of the inqu i r y , analysis w i l l be l i m i t e d to study of the second type of phenomena, i . e . , changes which r e s u l t i n reduced inputs because of reduction i n the a v a i l a b i l i t y , o f the p a r t i c u l a r material. Factors which e f f e c t organizational resources f i r s t w i l l be ignored. Matter-energy and Information A l l inputs into organizations may be broadly c l a s s i f i e d as eith e r matter-energy or information. Some of the l a t t e r (as well as the former) are e s s e n t i a l to organizational s u r v i v a l , and i t i s possible that organizations may f a i l because of s c a r c i t y of information inputs. The l a t t e r are however q u a l i t a t i v e l y d i f f e r e n t from matter-energy inputs i n the present context: One of the assumptions basic to the Club of Rome doomsaying i s that the stock of matter-energy decreases with consumption—resulting i n s c a r c i t y . The stock of information does not however diminish the consumption i n a manner s i m i l a r to that for tangible goods. Given the general concern with the exponentially decreasing l e v e l s of natural resources as a consequence of increased consumption, the present study focuses upon analysis of matter-energy inflows. Information inputs are considered only as they r e l a t e to inflows of tangible goods. The Problem The f o c a l problem can now be defined. The present paper i s concerned with the organizational consequences of absolute s c a r c i t y of  matter-energy type of goods (where the s c a r c i t y i s caused by a reduction -71-i n t o t a l supply). The subsequent chapters describe some of the possible responses of an organization faced with reduced a v a i l a b i l i t y of raw material i n i t s g e o - p o l i t i c a l environment. Before proceeding with the study of the consequences of a reduction i n supply however, i t i s necessary to f i r s t e s t a b l i s h the circumstances under which reduced a v a i l a b i l i t y w i l l have organizational consequences.* In order to do t h i s i t i s necessary to d i s t i n g u i s h among natural and other antecedents of s c a r c i t y . Natural Sc a r c i t y Naturally a v a i l a b l e raw material t y p i c a l l y must be ( i ) extracted and ( i i ) processed before f i n a l consumption. 1 According to t h e i r r o l e i n "^Naturally occuring goods can be dichotomized as follows: Regenerative goods: those which replace themselves over time, e.g., c a t t l e , f i s h , grain, a g r i c u l t u r a l land, and timber. Nonregenerative goods: those which for a l l p r a c t i c a l purposes cannot replace themselves, e.g., b u i l d i n g stones, metal ores, f o s s i l f u e l s , and diamonds. At any given point i n time there are c e r t a i n stocks or l e v e l s of both types of goods i n nature. For the nonregenerative goods the t o t a l a v a i l a b i l i t y for use i s determined, i n the l i m i t , by the t o t a l stock. Consumption of such goods always r e s u l t s i n a depletion of stock, the rate of depletion being a d i r e c t function of the rate of consumption. Unless there i s a complete r e c y c l i n g , consumption at any f i n i t e rate w i l l , over time, r e s u l t i n t o t a l depletion. (It must be noted however that r e c y c l i n g requires expenditure of energy, a h i t h e r t o nonregenerative good, and thus cannot be continued i n d e f i n i t e l y . ) In contrast to nonregenerative goods, regenerative goods may be used i n d e f i n i t e l y — a s long as the rate of consumption does not exceed the rate of regeneration. If the rate of consumption i s greater than the l a t t e r however, the t o t a l stock w i l l diminish. This w i l l cause a p o s i t i v e feedback loop to betset up, and w i l l r e s u l t i n a progressive lowering of the rate of regeneration and hence of the t o t a l stock. I f the rate of consumption i s lowered to become equal to or le s s than the rate of regener-ati o n at any subsequent time, the (reduced l e v e l of) stock w i l l then l a s t i n d e f i n i t e l y . I t must be noted however that the Malthusian scenario assumes that the rate of consumption of regenerative goods exceeds t h e i r rate of regeneration. -72-the processes p r i o r to consumption, organizations may be categorized as e i t h e r suppliers or consumers with respect to a p a r t i c u l a r good: The former extract the good and supply i t to consuming organizations, while the l a t t e r either consume i t , or process the material and pass i t on for 2,3 consumption by other'units. ' Extraction i s subject to the law of diminishing returns to scale, and assuming that technology remains constant, the cost of extraction (and hence price) increases with a decrease i n stock. The process of extraction requires an investment i n c e r t a i n f a c t o r s . An increase i n the t o t a l demand for these factors causes t h e i r p r i c e to be b i d up, r e s u l t i n g i n an a d d i t i o n a l increase i n the cost of the f o c a l good. E i t h e r antecedent ( i . e . , reduction i n supply of the good or increase i n demand for a factor of production) r e s u l t s i n a leftward s h i f t of the supply curve. I t may be noted that, i n contrast to the demand for the factors of production, an increase i n demand for the good (either due to increased consumption per unit or an increase i n the t o t a l number of consumers) w i l l cause the aggregate demand curve to s h i f t to the r i g h t . The above d i s t i n c t i o n corresponds i n some ways to that made by Clark (1940) between primary and secondary industry. Organizations i n the service or t e r t i a r y industry which consume matter-energy are included i n the class of consuming organizations. 3 The suppliers concern themselves with the extraction of both nonregerativec and regenerative goods. In either case they t y p i c a l l y own or have access to a stock of raw material, e.g., mines, o i l w e l l s , timber, and deep-sea f i s h i n g , from which material can be extracted at various rates. I t may be noted however that there are c e r t a i n regenerative goods for which stocks do not e x i s t i n the sense that the word has been used so f a r . The suppliers own instead c e r t a i n factors (e.g., land) into which the good i s input i n the form of "seed", which then grows, r e s u l t i n g i n a stock of the good. Organi-zations i n the a g r i c u l t u r e , h o r t i c u l t u r e , p i s c i c u l t u r e , and animal breeding i n d u s t r i e s are examples of the above. Depending upon the context, these may be treated either as consumers of seed,or suppliers of primary goods. -73-The leftward s h i f t of the supply curve due to depletion of stock i s subsumed under Malthus' (1798: p. 16) f i r s t natural cause: l i m i t s to the power of "production i n the earth". The leftward s h i f t of the supply curve due to increased demand for f a c t o r s , as w e l l as the rightward s h i f t of the demand curve for the goods supplied, a r i s e from h i s second natural cause: the power of "population". Using Malthusian terminology therefore these antecedents of s c a r c i t y w i l l be c a l l e d Natural causes. Contrived S c a r c i t y The Natural causes for s c a r c i t y experienced by consuming organi-zations have been discussed above. Before some of the other antecedents of s c a r c i t y are studied however i t i s necessary to digress and define d e f i c i e n t and surplus g e o - p o l i t i c a l systems. D e f i c i e n t and surplus systems The t o t a l supply of a good within a p a r t i c u l a r g e o - p o l i t i c a l system i s the aggregation of the amount a v a i l a b l e at d i s c r e t e locations i n the system. S i m i l a r l y , the t o t a l demand i s the aggregation of the i n d i v i d u a l demands of the consuming organizations. The various sources of supply and demand are t y p i c a l l y unevenly d i s t r i b u t e d . I f the t o t a l supply i s more than the t o t a l demand within a g e o - p o l i t i c a l system, the system i s defined as a surplus system; i f the demand i s more than the 4 endogenous supply the system i s then a d e f i c i e n t system. _ It may be noted that g e o - p o l i t i c a l systems constitute one l e v e l of anal y s i s , and t h e i r constituent organizations are at the next lower l e v e l . D e f i c i e n t systems may thus experience absolute s c a r c i t y , causing organizations within the systems to experience r e l a t i v e s c a r c i t y . -74-Type I Antecedents In order that organizations i n d e f i c i e n t systems may survive i t i s necessary that the f o c a l good i s imported from a surplus system. I t i s assumed that during the nonscarcity steady state ( i . e . , the p r i o r "normal" period) the t o t a l imports are equal to the gap between demand and endogenous supply. The p o l i t y of the surplus system may however intervene and order a reduction of imports, e i t h e r due to domestic reasons or as p o l i t i c a l action against the d e f i c i e n t system. This w i l l cause the l a t t e r to experience absolute s c a r c i t y . The d e f i c i e n t system may s i m i l a r l y cause imports to be reduced, again because of either p o l i t i c a l or economic reasons. The p o l i t y of e i t h e r system may also a f f e c t supply by imposing a p r i c e c e i l i n g on the produce of the supplying o r g a n i z a t i o n s — c a u s i n g the l a t t e r to reduce supply to the l e v e l determined by the i n t e r s e c t i o n of the supply curve and the imposed p r i c e . It may be noted that the various interventions described above re s u l t i n a reduction of the t o t a l supply, and that h i s t o r i c a l amounts of the p a r t i c u l a r good are no longer a v a i l a b l e at any p r i c e . The supply curve terminates, as i t were, i n a v e r t i c a l l i n e to the l e f t of the o r i g i n a l point of equilibrium. The pre- and post-intervention e q u i l i b r i a are presented i n Figure 13. Interventions of the type discussed i n the above paragraphs w i l l be c a l l e d Type I interventions. Type II Antecedents In contrast to the Type I antecedents of contrived s c a r c i t y \ h e cross-system flow of goods may be reduced by e i t h e r l i m i t i n g the absolute quantity transferred or by manipulating the excise structure. -75-FIGURE .13 CONSEQUENCES OF INTERVENTION—1: REDUCTION LN THE TOTAL AMOUNT AVAILABLE TO THE GEO-POLITICAL SYSTEM Pr i c e aggregate supply curve V after intervention \ / aggregate supply curve \ y aggregate demand curve 0 A B Quantity OB To t a l quantity a v a i l a b l e before intervention OA To t a l quantity a v a i l a b l e a f t e r intervention -76-described above, there i s another type of intervention which may allow h i s t o r i c a l amounts of the good to be acquired at a higher p r i c e : The suppliers may, for example, a r b i t r a r i l y increase t h e i r p r o f i t margin or p r i c e per u n i t . This w i l l cause the supply curve to s h i f t upwards (or l e f t ) . I f the consuming organizations are prepared to pay the higher p r i c e , the demand curve w i l l , i n e f f e c t , s h i f t to the r i g h t , r e s u l t i n g i n equilibrium at the o r i g i n a l quantity of consumption. These s h i f t s i n the supply and demand curves are presented i n Figure 14. Interventions which r e s u l t i n h i s t o r i c a l quantities being a v a i l a b l e at higher prices w i l l be c a l l e d Type II antecedents of s c a r c i t y . I t i s possible that the demand curve may not s h i f t far enough to the r i g h t , and that the new equilibrium quantity may be less than the o r i g i n a l l e v e l . The p r o b a b i l i t y of a post-intervention equilibrium at the h i s t o r i c a l l e v e l i s , i n f a c t , rather low. The extreme case above has been presented as an i d e a l type merely to f a c i l i t a t e d i s t i n c t i o n between two possible scenarios: where more (or the h i s t o r i c a l l e v e l ) of the good i s not a v a i l a b l e at any p r i c e ; and where, provided a d d i t i o n a l revenue can be raised, a p a r t i c u l a r organization can buy as much as i t needs (or used to consume). E f f e c t on Consuming Organizations As noted above, the Type I antecedents of s c a r c i t y , i f allowed to p r e v a i l , w i l l i n e v i t a b l y r e s u l t i n absolute s c a r c i t y . The consequences of Natural and Type II interventions are not as obvious, and need to be examined i n some d e t a i l : -77-FIGURE 14 CONSEQUENCES OF INTERVENTION—II: HISTORICAL AMOUNTS AT HIGHER PRICES P r i c e supply curve a f t e r intervention supply curve before intervention demand curve a f t e r i n tervention demand curve before intervention Quantity ThShe i s no change i n the t o t a l quantity purchased by the consuming organisations. f -78-A leftward s h i f t i n the supply curve or a rightward s h i f t i n the aggregate demand function of the consuming organizations w i l l cause an increase i n unit p r i c e . A p a r t i c u l a r organization may either continue to expend e a r l i e r amounts of money and reduce inputs, or somehow generate a d d i t i o n a l revenue and thus maintain inflows at the h i s t o r i c a l l e v e l . I f i t adopts the former course, or i f a d d i t i o n a l funds are obtained by re-a l l o c a t i o n from other goods, the organization experiences r e l a t i v e s c a r c i t y (by d e f i n i t i o n ) . I t i s possible however that consuming organizations may be able to pass on a l l the extra expense to t h e i r buyers, with no consequent reduction i n the intake of either e s s e n t i a l or i n e s s e n t i a l goods. The increase i n revenue w i l l cause the aggregate demand curve of the consuming organizations to s h i f t to the r i g h t , r e s u l t i n g i n an equilibrium of the type described i n Figure 14. In such a case the Natural and Type II antecedents do not n e c e s s a r i l y r e s u l t i n s c a r c i t y f o r the consuming  organizations. The I n d i v i d u a l as the Customer Let us continue with the above argument: An increase i n expense w i l l cause the supply curve of the consuming organization to s h i f t upwards (or l e f t ) . This, i n t u r n , w i l l cause the aggregate supply curve of the product (produced by the f o c a l as w e l l as other organizations) to move up. 6 Funds may t y p i c a l l y be transferred from i n e s s e n t i a l goods. When the amount of other e s s e n t i a l goods consumed i s more than the minimum required (according to the production function), money may also be diverted from the procurement of these goods. The product i s purchased by eit h e r i n d i v i d u a l s or the p o l i t y ( s o c i a l good).' The aggregate demand curve f o r the former t y p i c a l l y slopes to the l e f t , and an upward s h i f t of the supply curve w i l l r e s u l t i n market equilibrium at a higher price/lower quantity. Unless the aggregate demand curve for the in d i v i d u a l s moves far enough to the ri g h t to f u l l y compensate f or the s h i f t i n the supply curve, the t o t a l quantity sold w i l l diminish. Reduced sales w i l l , over time, r e s u l t i n reduction of the t o t a l intake of the f o c a l good by the consuming organizations ( i n the aggregate). The p a r t i c u l a r geo-p o l i t i c a l system w i l l therefore experience absolute s c a r c i t y . Increased Demand It has been suggested above that organizations w i l l experience s c a r c i t y unless the aggregate demand curve f o r t h e i r product s h i f t s f a r enough to the r i g h t . Let us examine the antecedents of such a s h i f t f o r an aggregationsof i n d i v i d u a l s . The possible reasons are: (i) A change i n the preference hierarchy of the constituents i . e . , an increased desire f o r the f o c a l good; ( i i ) An increase i n the per capita income of the p a r t i c u l a r aggregation; and ( i i i ) An increase i n the number of consumers. It i s possible that a change i n tastes may be contemporaneous with a reduction i n supply, such that demand may increase i n s p i t e of an ^If i t i s purchased by another organization, the l a t t e r becomes a consuming organization; and the argument may then be repeated t i l l , f i n a l l y , the product i s purchased by eit h e r an i n d i v i d u a l or the p o l i t y . I f i t i s t o t a l l y consumed by an organization ( i . e . , does not constitute part of a f i n i s h e d product), then as longp.as the organization i s able to pass on the increase i n cost to i t s customers as part of the p r i c e of some of i t s other products, i t w i l l not.experience s c a r c i t y . -80-increase i n p r i c e s . The above contingency i s r e l a t i v e l y u n l i k e l y . I t i s possible however that demand may increase with p r i c e without a change i n the preference hierarchy. The i n f e r i o r goods of economics, e.g., oleo-margarine and potatoes ( i n Ireland i n the 19th century) are a case i n point (Ferguson, 1972: p. 69). The demand for c e r t a i n status enhancing goods also increases, within l i m i t s , with p r i c e — t h e phenomenon of conspicuous consumption. Sales of some luxury cars increased i n 1974, for example, i n s p i t e of a severe slump i n the auto industry i n general (Vancouver Sun, December-21, 1974: p. 2; February 9, 1975: p. 1). Expectations of a depression may also r e s u l t i n a temporary increase i n consumption—a desire to "splurge while you can f o r tomorrow you die". See, for example, a r t i c l e s t i t l e d Revelry and Apprehension (Time, January 13, 1975: p. 6) and Doom Boom (Time, February 3, 1975: p. 48). The expectations pointed out above are however r e l a t i v e l y few and/or transient i n t h e i r nature; and i t i s reasonable to conclude that, i n general, i n d i v i d u a l s do not increase t h e i r consumption of goods as a r e s u l t of increase i n p r i c e s . With regard to the second point above ( i . e . , increase i n per capita income), as long as the purchasing power of the customers increases enough to o f f s e t the increased cost of inputs, the consuming organizations w i l l not experience s c a r c i t y . Here again there i s no p r i o r reason for an increase i n cost to the consuming organization being associated with an increase i n the income of the buyers. ( H i s t o r i c a l l y however the two have been contemporaneous i n expanding economies. An increase i n per capita income during the 60s i n the USA, f o r example, correlated with increased per capita consumption of automobiles—notwithstanding increased cost of -81-raw materials and factors of production.) S i m i l a r l y , there i s no reason to believe that an increase i n prices w i l l be associated with an increase i n the number of consumers. The t h i r d p o s s i b i l i t y however presents an i n t e r e s t i n g paradox: While an increase i n population r e s u l t s i n an increase i n consumption of natural resources, i f there i s no drop i n per capita income however, increased aggregation may also prevent organizations from experiencing s c a r c i t y . I t may be noted that the l a s t two points h i g h l i g h t an important challenge to technology: In order that organizations may avoid experiencing s c a r c i t y i n the face of dwindling reserves of natural resources, technology must insure an increase i n per capita income i n r e a l terms—even i n the face of a possible increase i n the f o c a l population. Technology Technology may also be instrumental i n preventing s c a r c i t y by (i ) providing substitutes to the organization at comparable cost, or ( i i ) by not allowing the law of diminishing returns to p r e v a i l (by o f f s e t t i n g increase i n cost of extraction by technological innovation). It i s important to note the d i f f e r e n c e i n the two possible consequences of technological intervention. In the case of the interventions mentioned i n t h i s section, technology i s instrumental i n preventing a reduction of  supply to the consuming organizations. In the instances pointed out i n the e a r l i e r section however, technological intervention prevents the -82-organizations from experiencing s c a r c i t y as a consequence of reduction i n supply.^ The present study i s concerned with the behavioural consequences of s c a r c i t y . While technology may intervene to delay or hasten the advent of s c a r c i t y , such intervention w i l l not a f f e c t the arguments i n thejpaper. Consequently a l l of the possible e f f e c t s of technology (including changes i n transformation, maintenance, and regulation technology) w i l l be ignored i n the ensuing a n a l y s i s . The P o l i t y as the Customer The purchase of the produce of a consuming organization by in d i v i d u a l s has been discussed above. Let us now examine purchase by the p o l i t y . In contrast to the demand curve of i n d i v i d u a l s , the curve for the p o l i t y may be a v e r t i c a l l i n e — f o r c e r t a i n goods within a p a r t i c u l a r p r i c e range. The demand curves f o r some of the products consumed by the Department of Defence and NASA, for example, tend towards zero e l a s t i c i t y . In such ( r e l a t i v e l y few) instances Natural and Type II antecedents may, not, i n the short run, r e s u l t i n the consuming organizations experiencing s c a r c i t y . I t may be noted that the v e r t i c a l demand curves of the "money i s of no concern" type of consumers do not imply an unusual type of i n d i f f e r e n c e curves ( i . e . , d i f f e r e n t from those presented, e.g., i n Figure 16, Appendix 3). -g . — — • -Technology may also intervene i n a t h i r d way and d i r e c t l y a f f e c t the l e v e l of natural resources; causing them to increase as a consequence of innovation, or decrease as a r e s u l t of i t s e x t e r n a l i t i e s : For example, development of improved seeds l e d to an increase i n the world production of wheat—the Green Revolution (Friedman, 1973). The use of DDT on the other hand was responsible f o r , among other things, reduced reproduction among lake trout (Burdick et a l . , 1964). -83-The i n e l a s t i c i t y a r ises rather from the f a c t that the resources a v a i l a b l e to them are not l i m i t e d i n the sense that they are for the i n d i v i d u a l or the t y p i c a l organization. The p o l i t y , for example, may increase i t s revenue r e l a t i v e l y e a s i l y by a d d i t i o n a l taxation or borrowing; and may thus absorb the increased cost passed on by the processing ( i . e . , consuming) organization. Since the increase i n revenue must ultimately come from the i n d i v i d u a l and organizational constituents of the system, there are l i m i t s to the i n e l a s t i c i t y of the demand curve of the p o l i t y . Thus, unless there i s an increase i n per capita r e a l income, a leftward s h i f t of the supply curve must r e s u l t , i n the long run, i n the consuming organizations experiencing s c a r c i t y . In summary then, a reduction i n t o t a l a v a i l a b i l i t y (Type I antecedent) w i l l i n e v i t a b l y r e s u l t i n absolute s c a r c i t y . A leftward s h i f t of the supply curve (Natural and Type II antecedents) however w i l l r e s u l t i n the consuming organizations experiencing s c a r c i t y i n the long run i f there i s no corresponding increase i n the r e a l income of the ultimate consumers. I t i s possible however to reverse Type I antecedents and to avoid experiencing the consequences of Natural and Type II changes i n the short run. Such r e v e r s a l and short run avoidance strategies are examined i n the next chapter. -84-CHAPTER 6 ABSOLUTE SCARCITY The problem was defined i n the previous chapter: the paper seeks to study the organizational consequences of reduced a v a i l a b i l i t y of matter-energy type of goods. The conditions under which such a reduction would r e s u l t i n absolute s c a r c i t y were also examined. Organizational responses to absolute s c a r c i t y w i l l be analyzed i n t h i s chapter. Organizational responses to s c a r c i t y may be broadly categorized as follows: (i) Attempt to reverse (where possible) the antecedents of s c a r c i t y . ( i i ) I f r e v e r s a l s t r a t e g i e s are not successful, seek to avoid the consequences of the above adverse changes. ( i i i ) I f avoidance i s not p o s s i b l e , i . e . , the organi-zation i s experiencing s c a r c i t y , s t r i v e to minimize the e f f e c t s of s c a r c i t y . As w i l l become evident s h o r t l y , most of the strategies relevant to items (i) and ( i i ) above are extraorganizational i n nature. In contrast, a majority of the responses designed to mitigate the e f f e c t of r e l a t i v e s c a r c i t y tend to be i n t r a o r g a n i z a t i o n a l . The two must therefore be dealt with separately. Intraorganizational consequences of s c a r c i t y are examined i n the next chapter. The various r e v e r s a l and avoidance s t r a t e g i e s are described below. In the i n t e r e s t of parsimony these strategies are pre-sented i n bare o u t l i n e , and are i l l u s t r a t e d with examples drawn from the current North American scene. T h e o r e t i c a l discussion of the implications of these strategies i s reserved for the end of the chapter. Let us f i r s t -85-consider r e v e r s a l s t r a t e g i e s . REVERSAL STRATEGIES While Natural s c a r c i t y i s the i n e v i t a b l e consequence of c e r t a i n "natural" laws (see p. 7-3), contrived s c a r c i t y r e s u l t s instead from deliberate r e f l e c t i v e action. Since such s c a r c i t y i s "contrived" by d e f i n i t i o n , i t i s , at least i n p r i n c i p l e , r e v e r s i b l e . 1 Thus i t i s possible that powerful consuming organizations, or organizations of such organizations, may p r e v a i l upon the contrivers of s c a r c i t y to reverse t h e i r action. They may bring pressure upon those responsible by, for example, mobilizing public support, lobbying within the industry and the government, and by l e g i s l a t i o n . Some examples of contrived antecedents and i l l u s t r a t i o n s of attempts at t h e i r r e v e r s a l are presented below. Type I: Reduction of T o t a l A v a i l a b i l i t y A c e i l i n g on the p r i c e that may be charged by the supplying organization may cause i t to l i m i t supplies. It i s argued, for example, that the present p r i c e c e i l i n g i s discouraging producers of domestic o i l and natural gas from further exploration, and i s therefore causing them to l i m i t supplies. There i s pressure upon the U.S. Administration to with-draw t h i s c e i l i n g (Time, November 18, 1974: p. 85). Organizations may discontinue marginal products and s e r v i c e s . Railroads and buslines, for example, may sometimes discontinue (or threaten to withdraw) c e r t a i n marginal s e r v i c e s . This i s expected to r e s u l t i n It was pointed out i n the previous chapter that unless there i s an increase i n the l e v e l of natural resources i t i s not possible to reverse the antecedents of Natural s c a r c i t y . Technological intervention may r e s u l t i n an increase i n the stock of natural resources. But since technology i s assumed to be constant, the antecedents of Natural s c a r c i t y are i r r e v e r s i b l e . -86-s c a r c i t y for the commuters. Organizations of consumers or the p o l i t y t y p i c a l l y e i t h e r pressure the"suppliers into continuing with the service (Perrow, 1970: pp. 101-112) or subsidize them. Excessive exports of goods may r e s u l t i n the domestic market experiencing s c a r c i t y . Under such circumstances attempts are made to l i m i t exports, or at least insure that adequate amounts are a v a i l a b l e within the system. Increase i n domestic p r i c e s , for example, resulted i n President Ford ordering a reduction i n the export of wheat to Russia i n 1974. 2 Type I I : Increase i n P r i c e Organizations may sometimes a r b i t r a r i l y increase p r i c e s . Some of the larger s t e e l firms, e.g., U.S. S t e e l , had recently posted increases i n prices which were causing t h e i r consumers to experience s c a r c i t y . Responding to lobbying, President Ford jawboned these firms into r o l l i n g back t h e i r p r i c e s . The above l i s t of antecedents (and relevant examples) i s not meant to be exhaustive; but has been presented merely to i l l u s t r a t e the p o s s i b i l i t y of r e v e r s a l of contrived antecedents of absolute s c a r c i t y . Assuming however that r e v e r s a l i s not possibl e , the operating problem for the f o c a l organization then becomes: how to insure that r t does not experience the consequences of the various antecedents, i . e . , does not experience r e l a t i v e s c a r c i t y . Scarcity r e s u l t s i n c e r t a i n costs for the f o c a l organization. Avoidance of the consequences of s c a r c i t y w i l l involve a transf e r of these costs to other elements of the environment. I t i s submitted that (A.l) an organization would rather penalize the Craig Pinder provided t h i s example. ' g u i l t y ' than the innocent party. It follows that i t would seek to impose costs on the contrivers of s c a r c i t y rather than any other element. Thus, other things being equal (B.l) an organization w i l l prefer r e v e r s a l rather than avoidance s t r a t e g i e s . Strategies aimed at avoidance of the consequences of absolute s c a r c i t y w i l l be used only when the r e v e r s a l strategies have f a i l e d . Some avoidance strategies are discussed below. AVOIDANCE STRATEGIES The various avoidance s t r a t e g i e s can be broadly categorized into (i) those which seek to reduce the uncertainty of inflows, and ( i i ) those which are aimed at avoiding reduction i n the quantity of inputs. For reasons explained below the former s t r a t e g i e s w i l l not be examined i n d e t a i l . Discussion w i l l focus instead on the l a t t e r avoidance s t r a t e g i e s . Reduction of Uncertainty Uncertainty reduction s t r a t e g i e s have been discussed by, among others, Hanna, K i z i l b a s h , and Smart (1975), Meitz and Castleman (1975), and Moncza and Fearon (1974); t h e i r p r e s c r i p t i o n s are summarized below. In order to avoid uncertainty regarding procurement of materials 3 Certain p r i m i t i v e notions w i l l be introduced i n the course of the discussion i n t h i s chapter. These w i l l be used as foundational statements on which the subsequent argument w i l l be based. No attempt w i l l be made however to provide any argument i n support of these a s s e r t i v e statements. Such statements w i l l be numbered A . l , A.2, ... Conclusions derived from these p r i m i t i v e s or other arguments w i l l be presented i n the form of propositions and w i l l be numbered B . l , B.2, ... Since a p a r t i c u l a r proposition may be determined simultaneously by several v a r i a b l e s , no attempt w i l l be made to maintain a correspondence between the As and Bs. -88-organizations are required to ( i n b r i e f ) : 1. Improve the "image" of the company, thus causing the suppliers to want to do business with i t . 2. Insure a v a i l a b i l i t y through volume buying, long-term contracts, or v e r t i c a l i n t e g r a t i o n . 3. A s s i s t vendors i n supplying by providing f i n a n c i a l , t e c h n i c a l , and managerial assistance. 4. Where mutual interdependence can be established, enter into barter or " r e c i p r o c i t y " agreements. 5. Equalize power r e l a t i v e to the supplier through j o i n t purchase action ( i . e . , several consuming organizations may pool t h e i r needs) or by developing a l t e r n a t i v e sources of supply. 6. Require the customers to provide the raw material or obtain a p r i c e protection agreement. The above strategies of reduction of uncertainty regarding a v a i l -a b i l i t y of material are important for the s u r v i v a l of the firm, and may be-come c r i t i c a l i n the context of s c a r c i t y . These are however t r a d i t i o n a l and do not present novel t h e o r e t i c a l implications. This l i n e of inquiry w i l l therefore not be pursued. I t w i l l be assumed for the purpose of t h i s chapter that the organization has reasonable information i n the short run about how much input to expect. Discussion w i l l focus instead on strategies which seek to prevent a reduction i n the t o t a l quantity of inflows. Avoidance of Reduction i n Inputs It was pointed out i n Chapter 5 that unless there i s an increase i n the r e a l income (or product) of the consuming population, any of the antecedents of s c a r c i t y w i l l r e s u l t , i n the long run, i n the g e o - p o l i t i c a l system experiencing absolute s c a r c i t y . One of the outputs of most organi--89-zations i s a contribution to n a t i o n a l product. An increase i n such contributions however requires greater throughput and/or increased e f f i c i e n c y . The former p o s s i b i l i t y i s ruled out by the very f a c t of s c a r c i t y . And as long as organizational and other technologies are held constant (see p. 81), the p a r t i c u l a r group of consuming organi-4 zations cannot increase t h e i r c ontribution to n a t i o n a l product. Thus, for the purpose of the present paper, absolute s c a r c i t y cannot be avoided i n the long run by action by the affected organizations. Possible strategies of avoidance of the consequences of Natural and contrived antecedents i n the short run are discussed below. Relative s c a r c i t y has been defined as that which causes a reduction i n slack, diminution of s i z e , or, i n the l i m i t , f a i l u r e . In order to s u c c e s s f u l l y avoid experiencing r e l a t i v e s c a r c i t y therefore, an organization must neither permit reduction i n intake, nor allow i t s reserve of uncommitted resources to be depleted. In other words the organization must (i) continue to buy the same amount of the good at the h i s t o r i c p r i c e . ( i i ) I f the p r i c e increase i s unavoidable, buy h i s t o r i c a l amounts at a higher p r i c e , but arrange to pass on the increased cost  to others. ( i i i ) I f i t i s forced to absorb higher costs, the organization must renegotiate the p r i c e of  other goods so as to o f f s e t the increase i n the p r i c e of the f o c a l good. I t i s possible that other organizations may increase t h e i r contribution to the natural product ( i f they are not experiencing s c a r c i t y ) and thus counter the e f f e c t of absolute s c a r c i t y . Barring pressure from the p o l i t y however, i t i s u n l i k e l y that these other organizations w i l l increase t h e i r contribution;; at the behest of the a f f l i c t e d organizations, s o l e l y to a l l e v i a t e problems of the l a t t e r . The p o s s i b i l i t y i s therefore being ignored. -90-(iv) I f none of the above are possibl e , the organization must attempt to reduce expenses which do not r e s u l t ^ i n the a c q u i s i t i o n and consumption of pr i v a t e goods. 6,7 The various response strategies are explained and i l l u s t r a t e d below. Again, no attempt has been made to be exhaustive. Buy at the H i s t o r i c P r i c e A reduction i n supply w i l l cause the p r i c e of the good to be bid up. The supply curve w i l l i n e f f e c t s h i f t to the l e f t . The p r i c e at equilibrium i s obtained by the i n t e r s e c t i o n of the aggregate supply and demand curves. I f , by fo r c i n g other consuming organizations to reduce intake, the f o c a l organization can arrange for a compensatory leftward s h i f t of the aggregate demand curve, then the p r i c e w i l l be bid down. (E.g., there i s pressure upon u t i l i t i e s to charge higher rates from the big consumers of e l e c t r i c i t y so that smaller consumers are not penalized. Time, February 24, 1975: p. 24) I t may thus be possible to obtain a pre-intervention market p r i c e even a f t e r a reduction i n supply. The s h i f t s i n the supply 'and demand curves are presented i n Figure 15. It may be noted that t h i s strategy r e s u l t s i n pena l i z i n g other organi-zations which are competing for the f o c a l input. JSee Appendix 2 for the d i s t i n c t i o n between pri v a t e and public goods. I t i s assumed that, unlike the "runaway shops" i n the garment"industry which used to relocate to avoid paying higher wages (Carpenter, 1972: p. 547-51) , the organization cannot escape from the g e o - p o l i t i c a l system. That i s , i t must "stay home and f i g h t the 'in-law' b a t t l e " (Thompson, 1967: p. 30). T r a d i t i o n a l s t r a t e g i e s , e.g., increasing the market and/or reducing compe-t i t i o n within the g e o - p o l i t i c a l system are being ignored; these are commonly applied i n the context of abundance as we l l The s t r a t e g i e s discussed here are relevant, i n p r i n c i p l e , to environmental abundance. I t i s believed however that they are more suited to, and w i l l f i n d greater a p p l i c a t i o n i n s c a r c i t y . -91-FIGURE 15 REDUCTION IN AGGREGATE DEMAND CORRESPONDING TO A REDUCTION IN SUPPLY Pr i c e aggregate supply curve a f t e r i n t e r v e n t i o n aggregate-supply curve before intervention aggregate demand curve before i n t e r v e n t i o n aggregate demand curve a f t e r i ntervention Quantity There i s no change i n market p r i c e (the t o t a l quantity transacted i s however reduced) Pass on Increased Cost An organization may use the following strategies to su c c e s s f u l l y impose higher prices on i t s i n d i v i d u a l or organizational customers or the general p u b l i c : 1. Enter into cost-plus contracts with i t s customers or otherwise l e g i t i m i z e increase i n p r i c e s . E.g., i n some of the Department of Defence contracts, p r o f i t i s based on a percentage of expected costs (Goodhue, 1972: p. 97). To help the u t i l i t i e s with t h e i r financing d i f f i c u l t i e s , regulatory commissions i n many states allowed increases i n f u e l costs to be passed on d i r e c t l y to customers (Time, February 24, 1975: p. 24). 2. Arrange f o r subsidies or other f i n a n c i a l assistance f o r the ultimate consumer. E.g., the U.A.W. requested the Canadian government f or lower government subsidized i n t e r e s t rates for car buyers (Time, January 20, 1975). This strategy i s also subsumed i n Henry Ford II's lobbying for al.10% tax cut i n 1975 for in d i v i d u a l s making $25,000 or less (Time, February 10, 1975: p. 49). Since the consumer i s subsidized the penalty i s spread across the larger set of tax-payers. Thus the customer has to bear only part of the increase i n cost. Assuming that the population of consumers i s a f r a c t i o n of the t o t a l population, the increase i n cost to the i n d i v i d u a l w i l l be n e g l i g i b l e . For the purpose of the present argument therefore i t w i l l be assumed that (i) the i n d i v i d u a l customer i s not penalized at a l l and that ( i i ) the cost i s borne wholly by the r e s i d u a l set of tax-payers. 3. Reduce competition by imposition of t a r i f f s and quotas. E.g., the Canadian T e x t i l e and Clothing Board has recently introduced some quotas on South Korean and Japanese imports (Time, February 24, 1975: p. 7). The Jones Act s p e c i f i e s that only ships f l y i n g the U.S. f l a g can haul cargo between U.S. ports (Time, October 7, 1974: p. 34). -93-4. Costs may be passed on d i r e c t l y to the r e s i d u a l set of tax-payers ( i . e . , without involving the customer i n the transaction) by arranging for subsidies or "easy" loans to cover increase i n costs. E.g., Pan Am's f u e l b i l l increased by $194 m i l l i o n i n 1974 (Time, March 3, 1975: p. 20), causing i t to apply f o r a subsidy. Farmers want r e l i e f i n the form of emergency loans to o f f s e t increases i n feed prices (Time, November 18, 1974: p. 79). If the insurance rates or wages go up i n the shipping industry, the government pays the b i l l (Perrow, 1970: p. 157). Renegotiate Prices I t i s possible that under s c a r c i t y , an organization may be able to obtain other e s s e n t i a l goods at lower p r i c e s , and resultant savings used to o f f s e t the increase i n cost of the f o c a l good. For example, labour contracts may be negotiated with the labour and management both taking wage and salary cuts. Hugh Hefner of Playboy Enterprises has recently taken a 25% pay cut i n response to s c a r c i t y experienced by h i s organization (Time, February 10, 1975: p. 55). Henle (1973) reports s i x instances of employees accepting lower wage rates under s i m i l a r circumstances. Because of wide-spread s c a r c i t y Prime Minis t e r Trudeau suggested that "everyone w i l l have to accept a s l i g h t l y reduced salary ..." (Time, February 10, 1975: p. 8). I t may be noted that i n a l l these instances the costs are borne by organi-z a t i o n a l personnel. Instead of a d i r e c t reduction i n raw material p r i c e s , suppliers may sometimes a s s i s t consuming organizations by f a c i l i t a t i n g purchase of the higher priced f i n i s h e d good. E.g., some suppliers of automotive parts are paying rebates to t h e i r employees f or buying new cars (Time, February 3, 1975: p. 15B). -94-Elimination of Other Outflows Organizations sometimes incur cash outflows which are not part of a t y p i c a l exchange transaction. That i s , they pay out money, e.g., i n the form of taxes, without r e c e i v i n g any p r i v a t e good i n return. Any p u b l i c good consumed cannot be d i r e c t l y linked with a p a r t i c u l a r outflow, and services are not expected to be withdrawn i f payment i s avoided l e g a l l y . I f such expenses can be c u r t a i l e d , the organization w i l l not experience r e l a t i v e s c a r c i t y : The savings can be diverted towards purchase of the focalggood; a l s o , there i s no reduction i n the consumption of the p u b l i c good. Pressure for reduction of such outflows i s r e f l e c t e d i n the following examples: The Canadian government recently announced $100 m i l l i o n worth of tax w r i t e - o f f s f o r corporations (Time, February 3, 1975: p. 4). The U.S. Government i s considering a lower corporate income tax rate (Time, January 20, 1975: p. 14). A s t r i p mining b i l l passed by the U.S. House and the Senate was to have extracted fees from coal companies to restore the surface torn up by s t r i p miners. President Ford vetoed the b i l l because i t would have "hampered domestic coal production" (Time, January 13, 1975: p. 54). Use of the above strategies r e s u l t s i n p e n a l i z i n g the tax-payers. DISCUSSION Possible strategies for r e v e r s a l of absolute s c a r c i t y and avoidance of r e l a t i v e s c a r c i t y were presented above and i l l u s t r a t e d b r i e f l y . The i l l u s t r a t i o n s used were drawn from varied contexts and were d e l i b e r a t e l y chosen to i l l u s t r a t e c e r t a i n c h a r a c t e r i s t i c s of organi-z a t i o n a l behaviour. Some of these c h a r a c t e r i s t i c s are discussed below. -95-Commercial and P o l i t i c a l Strategies None of the strategies mentioned above are, i n p r i n c i p l e , exclusive to s c a r c i t y . They can a l l be, and have been, used under abundance. (Indeed, i t i s possible that p a r t i c u l a r organizations are operating i n an environment of abundance because they have s u c c e s s f u l l y used these strategies.) S i m i l a r l y , the strategies t r a d i t i o n a l to abundance continue to remain relevant under s c a r c i t y . The two are not meant to be mutually exclusive, but rather to supplement each others. There are however c e r t a i n patterned v a r i a t i o n s i n the choice between the "abundance" strategies and those i l l u s t r a t e d above. I t may be noted that the str a t e g i e s t r a d i t i o n a l to abundance are "commercial" i n nature. That i s , they tend to be l i m i t e d to marketing, production, f i n a n c i a l , and other strategies of l i k e nature. These st r a t e g i e s have a strong d i s c i p l i n a r y base, and enjoy a fir m foundation both i n theory and i n r e a l l i f e . They are taught i n schools of business and are widely known and used. They c o n s t i t u t e , i n e f f e c t , the guiding values of lower and middle management, and to some extent, of top management. And, what i s important, they have been h i s t o r i c a l l y successful i n e x p l o i t i n g the environment. In contrast to the commercial s t r a t e g i e s , the various r e v e r s a l g and avoidance strategies described above tend to be p o l i t i c a l i n nature, g I t may be argued that cost-plus contracts and renegotiation of wages are more commercial than p o l i t i c a l i n nature. I t may be pointed out however that cost-plus contracts are more c h a r a c t e r i s t i c of wartime, i . e . , operation under a predominantly p o l i t i c a l climate where the usual (commercial) c r i t e r i a of organizational e f f i c i e n c y become almost i r r e l e v a n t (Katz and Kahn, 1966: p. 168). Any management or union o f f i c i a l involved i n the downward renegotiation of wage and incentive agreements w i l l vouch that the pro-ceedings are more p o l i t i c a l than commercial. -96-In contrast to the above, the p o l i t i c a l s t r a t e g i e s relevant to the business world do not have a f i r m d i s c i p l i n a r y base, and are not taught i n conventional schools of business. Knowledge of the relevance of these strategies i s generally acquired through experience at the top management or i n s t i t u t i o n a l l e v e l s . P o l i t i c a l s t rategies do not, by d e f i n i t i o n , constitute the guiding values of the world of commerce and are not used extensively. To r e i t e r a t e , commercial strategies are w e l l known and have been successful i n the past. In contrast, p o l i t i c a l s t r a t e g i e s are not as w e l l known and have found l i t t l e a p p l i c a t i o n . According to the rule of biased search (Cyert and March, 1963: pp. 121-2) therefore, the problem or the environment i s perceived i n "commercial" terms; and as long as they are successful, the former strategies are preferred over p o l i t i c a l s t r a t e g i e s . There are a few exceptions however. Perrow (1970: pp. 154-155), for example, points out that Consolidated Edison of New York, the nation's largest gas and e l e c t r i c i t y u t i l i t y , has h i s t o r i c a l l y used a p o l i t i c a l strategy i n preference to commercial s t r a t e g i e s . He explains however that by t r a i n i n g and t r a d i t i o n Con Ed o f f i c i a l s have developed a p o l i t i c a l b i a s , and that they perceive the environment i n p o l i t i c a l terms. I t follows then, that as long as they are successful, Con Ed w i l l continue to prefer p o l i t i c a l over commercial s t r a t e g i e s . I t i s emphasized however that t h i s i s an exception to general patterns of behaviour. To summarize, then, organizations have h i s t o r i c a l l y tended to  use only one set o f s t r a t e g i e s to respond to environmental contingencies. -97-In the case of business organizations these s t r a t e g i e s have t y p i c a l l y been commercial i n nature. A l l s t r a t e g i e s are however subject to the law of diminishing returns. Because of depletion of natural resources and/or increase of population, there i s l e s s slack i n the environment. Any s i n g l e set of strategies are thus no longer s u f f i c i e n t to insure adequate returns to 9 organizational e f f o r t . I t i s submitted that (A.2) rthe t r a n s i t i o n from an organizational experience of abundance to the p o s s i b i l i t y of r e l a t i v e s c a r c i t y i s an i n d i c a t o r of the exhaustion of the p o t e n t i a l of h i s t o r i c a l s t r a t e g i e s . In order to survive i n the context of s c a r c i t y therefore, organizations must supplement t r a d i t i o n a l s t r a t e g i e s . In other words, i n order to avoid experiencing r e l a t i v e s c a r c i t y , (B.2) business organizations w i l l i n c r e a s i n g l y adopt p o l i t i c a l s t r a t e g i e s to supplement e x i s t i n g commercial s t r a t e g i e s . It follows that (B.3) the i n s t i t u t i o n a l subsystems (Parsons, 1960) w i l l i n creasingly supplant the managerial as the leading subsystem. °» In sad confirmation of the r u l e of simple-minded search (Cyert and March, 1963: p. 121) however, organizations p e r s i s t i n using t r a d i t i o n a l responses (see, e.g., Perrow, 1970: Ch. 5)—sometimes even to the point of e x t i n c t i o n . ^ T h e l e n (1960) uses the concept of leading system to designate "a component system whose output exerts the greatest influence on the inputs of other systems, and through t h i s , controls the i n t e r a c t i o n of the suprasystem." ^Even though they may a l l be e s s e n t i a l the various subsystems are not equipotential i n t h e i r influence or the t o t a l system. I t has been observed, for example, that during abundance "a coordinating (managerial) system ... (tends to be) permanently leading" (Katz and Kahn, 1966: p. 63). -98-Preference Among the P o l i t i c a l Strategies I t has been suggested above that p o l i t i c a l s t rategies as a set are expected to be increasingly used under s c a r c i t y . C r i t e r i a f o r es t a b l i s h i n g an order of preference among these s t r a t e g i e s w i l l be introduced i n th i s section. P r e s c r i p t i o n s regarding choice of str a t e g i e s w i l l also be made. In the context of s c a r c i t y , the world i s a shrinking-sum (or at best, a zero-sum) game. Thus any advantage accrued to the f o c a l organi-zation must be o f f s e t by at least an equivalent disadvantage to another organization or sector of society. I t may be noted however that d i f f e r e n t elements of the environment possess varying degrees of slack. Thus they vary i n t h e i r a b i l i t y to absorb disadvantages. Also, these elements vary i n t h e i r "distance" from the f o c a l organization. That i s , the cause-e f f e c t chains l i n k i n g organizational action to punitive consequences for these elements vary i n t h e i r length. It i s submitted that, other things being equal, (A.3) organizations w i l l prefer strategies which redound against elements which possess more rather than les s slack, and are (A.4) distant rather than near. Also (A.5) organizational personnel, the set of i n d i v i d u a l customers, and the r e s i d u a l set of tax-payers may be ranked i n that order as possessing i n -creasing amounts of slack ( l a r g e l y because of increasing size) and increasing distance from the organization. -99-I t follows from a p p l i c a t i o n of the slack and distance c r i t e r i a that, i n order to avoid s c a r c i t y , v~- organizations w i l l prefer to impose costs on (B.4) tax-payers rather than customers, and (B.5) customers rather than organizational personnel. In other words, organizations w i l l prefer to obtain subsidies, public loans, and tax w r i t e - o f f s rather than force higher costs on the customers or, what i s l e a s t desirable, renegotiate wages. If the customers can be subsidized for t h e i r purchase however, the penalty i s transferred to the r e s i d u a l set of tax-payers. The organization w i l l then be " i n d i f f e r e n t " between tax w r i t e - o f f s , etc., on the one hand and passing on higher costs (to the tax-payer through the customer) on the other hand. It i s believed that (A. 6) the r e s i d u a l set of tax-payers possess more slack and are also more distant than any p a r t i c u l a r organization i n the organization set. It follows that, other things being equal (B.6) the f o c a l organization w i l l seek action against the tax-payer rather than any p a r t i c u l a r organi-zation i n the organization set. I t i s suggested that when there i s absolute s c a r c i t y i n the g e o - p o l i t i c a l system, a l l organizations consuming the f o c a l good w i l l f e e l the pinch. Thus, other things being equal, organizations which compete for the p a r t i c u l a r good ( i . e . , s i m i l a r organizations) w i l l have less slack than compared to those which supply other e s s e n t i a l goods or consume the organizational output. That i s , (A.7) d i s s i m i l a r organizations w i l l have more slack than the s i m i l a r organizations. It follows from a p p l i c a t i o n of the slack c r i t e r i o n that (B.7) the f o c a l organization w i l l seek to penalize -100-the supplying or customer rather than competing organizations. In other words, the organization w i l l negotiate lower prices for the other e s s e n t i a l goods or charge higher prices for i t s output rather than attempt to force other s i m i l a r organizations to reduce intake of the f o c a l good. Because of the supplier-customer r e l a t i o n s h i p however i t i s suggested that (A.8) the f o c a l organization i s r e l a t i v e l y "close" to i t s suppliers on the one hand and customer organizations on the other hand. In contrast, i t i s r e l a t i v e l y d istant from other s i m i l a r organizations. It follows from a p p l i c a t i o n of the distance c r i t e r i o n that (B.8) the f o c a l organization w i l l seek action against competitors rather than d i s s i m i l a r organizations. It may be noted that, under the foregoing assumptions, the distance r u l e r e s u l t s i n a preference order which i s the reverse of that obtained by a p p l i c a t i o n of the slack r u l e . As explained below however, these two rules w i l l remain i n c o n f l i c t . o n l y i n the short run. The slack a v a i l a b l e with an organization may change over time. The f o c a l organization w i l l however always remain closer to the d i s s i m i l a r organizations than s i m i l a r organizations. A p p l i c a t i o n of the slack c r i t e r i o n (as well as environmental s c a r c i t y ) w i l l r e s u l t i n reduction of slack a v a i l a b l e with s i m i l a r organizations. When slack across the two sets of organizations i s balanced (or, i n the extreme, t o t a l l y eliminated) the slack r u l e w i l l cease to operate. The distance r u l e w i l l then be used -101-to choose from among the various p o l i t i c a l s t r a t e g i e s . Thus c o n f l i c t  between the two rules i s expected only i n the e a r l i e r stages of s c a r c i t y . In other words, the organization has a choice i n the beginning. To express i t i n yet another way, the organization i s permitted the luxury of e q u i f i n a l i t y before the s c a r c i t y becomes severe. Let us summarize the foregoing. In an attempt to avoid the consequences of absolute s c a r c i t y , the f o c a l organization may seek to pass on costs to any of the following elements: ( i ) aggregations of i n d i v i d u a l s : organizational personnel, i n d i v i d u a l customers, and the r e s i d u a l set of tax-payers. ( i i ) organizations: s i m i l a r or competing organizations, and d i s s i m i l a r or supplying/customer organizations. These elements are rank ordered according to the slack and distance rules i n Table I. I t may be noted that i n a l l cases the f o c a l organization w i l l prefer to pass on the costs of s c a r c i t y to the tax-payers rather than any of the other elements. Thus (B.9) the organization w i l l prefer strategies which r e s u l t i n (i) subsidies for t h e i r i n d i v i d u a l customers ( i n the form of, e.g., easy loans or lower tax rates) and/or ( i i ) easy loans, subsidies, tax w r i t e - o f f s , and/or lower tax rates for them-selves, over any of the other p o l i t i c a l s t r a t e g i e s . I t may also be noted that second i n the o v e r a l l order of preference, (B.lOa) the organization w i l l prefer i n the long run to penalize s i m i l a r rather than d i s s i m i l a r organizations. That i s , i t w i l l prefer, for example, v e r t i c a l i n t e g r a t i o n rather than -102-TABLE I RANK ORDER OF ELEMENTS ACCORDING TO THE SLACK AND DISTANCE RULES ^\JDecision ^ \ r u l e Order o r ^ - ^ _preference Slack or Distance Distance Slack High Preference Low Preference Residual set of tax-payers Individual consumers Organizational employees Residual set of tax-payers Similar organizations D i s s i m i l a r organizations Residual set of tax-payers D i s s i m i l a r 1 organizations Similar Organizations This rank order i s expected to be temporary. In the long run the order w i l l be reversed, and s i m i l a r organizations w i l l be preferred over d i s s i m i l a r organizations. -103-cooperating with other s i m i l a r organizations to (negotiate lower prices for inputs or f i x higher prices for customers). Interorganizational Posture But the preferred strategy above r e s u l t s i n accrual of benefits to a l l the consuming organizations (or the e n t i r e industry) at the expense of the tax-payer. Thus i t : subsumes;: a pressure for cooperation among s i m i l a r organizations. The remaining s t r a t e g i e s , i n contrast, require the f o c a l organization to compete with other s i m i l a r organizations, e s p e c i a l l y i n the long run. Following from the preference order above therefore, i t i s suggested that, i n the context of s c a r c i t y , organizations w i l l prefer cooperative over competitive s t r a t e g i e s . (Thus the possible short run c o n f l i c t between the slack and distance c r i t e r i a w i l l be pre-empted by the overarching necessity to cooperate.) In the previous chapter i t was pointed out that a l l of the antecedents of s c a r c i t y w i l l , i n the long run, r e s u l t i n the g e o - p o l i t i c a l system experiencing absolute s c a r c i t y . I t must therefore be r e a l i z e d that the cooperative strategies of s c a r c i t y avoidance can be expected to succeed i n the short run only. (There are l i m i t s to the slack a v a i l a b l e with the tax-payer.) Unless i t i s possible to reverse the antecedents of s c a r c i t y , h o r i z o n t a l c o a l i t i o n s ( i . e . , c o a l i t i o n s of s i m i l a r organizations) are bound to be unstable. Thus organizations w i l l , i n the long run, be forced to adopt a competitive posture. As the pie continues to shrink, the strategies v i s - a - v i s s i m i l a r organizations w i l l tend towards those c h a r a c t e r i s t i c s of "So Long Sucker" (Rapoport, 1970: Ch. 18), a game i n which c o a l i t i o n s are perceived to be and are indeed unstable. -104-I t may be noted that the foregoing p r e s c r i p t i o n f o r competition i n the long run i s reinforced by that obtained by using the distance c r i t e r i o n . I t w i l l be argued l a t e r that s c a r c i t y contains, rather paradoxically, several drives f o r growth. Increase i n s i z e i s however a n t i t h e t i c a l to the requirement of cooperation among s i m i l a r organizations. Also, there i s a q u a l i t a t i v e d i f f e r e n c e between interdependence among s i m i l a r organizations on the one hand and d i s s i m i l a r organizations on the other hand: Aid i n the l a t t e r case i s expected to improve the chances of s u r v i v a l of the donor. In the former case however i t might imperil the aid-granting organization i t s e l f . A l l the foregoing thus constitute an overwhelming argument i n support of proposition B.lOa (which may be restated as foll o w s ) : (B.lOb) Organizations prefer competitive over cooperative s t r a t e g i e s i n the long run. I t i s suggested that by observing i n t e r o r g a n i z a t i o n a l behaviour i t i s possible to i d e n t i f y organizational perceptions of the duration and s e v e r i t y of s c a r c i t y : The norms of cooperation within competition  i n d i c a t e h i s t o r i c a l abundance (or perhaps, mild and temporary s c a r c i t y ) . In h i s i n v e s t i g a t i o n of i n d u s t r i a l corporations Perrow (1970), f o r example "repeatedly found that short-term competitive advantages were not seized...(even though) competition did seem to be quite strong" (pp. 124-125). "Dog eat dog" behaviour on the other hand i s i n d i c a t i v e  of severe and long run s c a r c i t y . To i l l u s t r a t e : " I f there were one hundred people and there was food for ten, and ninety of these hundred had to die, then I would make mighty (expletive) sure that I would not be one of those ninety, and I'm quite sure that my morals and ethics -105-and so on would change (emphasis added) very r a d i c a l l y to f i t the jungle s i t u a t i o n " (Maslow, 1965: pp. 70-71). I t has been argued above that i n order to survive i n the long run organizations must compete with other s i m i l a r organizations. In order to do so suc c e s s f u l l y however they must cooperate with other d i s s i m i l a r organizations: Competitors pose constraints and contingencies for the f o c a l organization. The organization subject to r a t i o n a l i t y norms w i l l thus seek power over remaining sections of i t s task environment (Thompson, 1967: p. 36). That i s , i n order that i t may act without regard for the actions of other s i m i l a r organizations (p. 31), the f o c a l organi-zation w i l l seek to obtain power with respect to d i s s i m i l a r organizations. However, a c q u i s i t i o n of u n i l a t e r a l power i s not easy. The relevant d i s s i m i l a r organizations are also t y p i c a l l y faced with constraints and contingencies, and seek power. These l a t t e r organi-zations may obtain power through cooperating with other s i m i l a r (to them) organizations. I f however there are no such organizations (as i n the case of, e.g., a monopoly, or a quasi-independent community or c i t y ) or cooperation i s not pos s i b l e (these organizations too may be facing s c a r c i t y ) , then they w i l l seek power with respect to d i s s i m i l a r (to them) organizations. Once again, i t w i l l not be easy to obtain u n i l a t e r a l power. Power can however be obtained through interdependence. The greater the interdependence the greater the t o t a l power. Since the f o c a l organization can compete s u c c e s s f u l l y with other s i m i l a r organizations only by obtaining power r e l a t i v e to d i s s i m i l a r organizations, i t follows that -106-( B . l l ) the long run competitive s t r a t e g i e s contain a b u i l t - i n drive towards greater interdependence with d i s s i m i l a r organizations. 2* ^ (If the d i s s i m i l a r organizations do not need to cooperate, however, the p r i o r p r o b a b i l i t y of s u r v i v a l of the f o c a l organization w i l l be consider-ably lowered.) Power The task environment of the f o c a l organization can be conceptual-ized as an "organization set" (Evan, 1966), with each organization being assigned a p a r t i c u l a r r o l e or r o l e s . While interdependence f a c i l i t a t e s performance of the various r o l e s , i t also increases the p o t e n t i a l f o r d i s r u p t i o n of the r o l e of one organization by another; and the greater the interdependence, the greater i s the p o t e n t i a l for d i s r u p t i o n . Since power varies as the degree of interdependence, i t i s suggested that D e f i n i t i o n ; the greater the p o t e n t i a l for d i s r u p t i o n of the r o l e performance of a p a r t i c u l a r organization by another, the greater the p o t e n t i a l power of the l a t t e r over the former. Katz and Eisenstadt (1960) and Parsons and Bales (1955) have developed a s i m i l a r d e f i n i t i o n : power flows through a d i s r u p t i v e p o t e n t i a l . Katz and Eisenstadt i d e n t i f i e d the d i s r u p t i v e p o t e n t i a l — — • p o w e r phenomenon in the context of s o c i a l i z a t i o n of immigrants by I s r a e l i bureaucrats, while Parson and Bales did so i n parent-child r e l a t i o n s h i p s . The present d e f i n i t i o n i s d i f f e r e n t from t h e i r s however i n that i t stresses that the 12 As argued i n the next section, even i f there are no competitors, e.g., i n the case of a monopoly, the organization w i l l , i n the context of s c a r c i t y , seek to e s t a b l i s h interdependence. 13 This corresponds to the observation by Emery and T r i s t : "turbulent organi-zations require some r e l a t i o n s h i p between d i s s i m i l a r organizations whose fates are b a s i c a l l y , p o s i t i v e l y c o r r e l a t e d " (1965: p. 29). -107-p o t e n t i a l f o r power, and not power, v a r i e s with the p o t e n t i a l f o r disruption. Let us examine the s i g n i f i c a n c e of t h i s d i f f e r e n c e . I t i s necessary to d i s t i n g u i s h between two types of p o t e n t i a l for d i s r u p t i o n : ( i ) a p o t e n t i a l which can be r e a l i z e d by purposive be-haviour, and ( i i ) p o t e n t i a l which cannot be r e a l i z e d through d e l i b e r a t e action. As instances of the former, an organization may, e.g., p r e v a i l upon suppliers to absorb c e r t a i n costs (Perrow, 1970: pp. 122-123) or obtain monopoly p r o f i t s from consumers. E x p l o i t a t i o n of t h i s type i s permitted by society. The second p o s s i b i l i t y i s developed and i l l u s t r a t e d i n the following paragraphs: In addition to .its suppliers and customers, an organization i s also i n t e r r e l a t e d with the community (Blau and Scott, 1962: p. 199; Perrow, 1970: pp. 131-2). Organizational s t r a i n s may thus be transmitted to the surrounding community. "The community i t s e l f can become s o c i a l l y disorganized as a r e s u l t of tension within the industry or plant" (Berelson and Steiner, 1964: p. 617). Because of recession i n the automotive industry, for example, 3 out of 4 workers i n Chicago may be i d l e (Time, October 28, 1974: p. 71). Oshawa, i n Canada, " i s l i k e a ghost town when G.M. lays o f f " (Time, January 20, 1975: p. 8). Apathy, anomie, and crime may be £ome of the s o c i a l consequences of organizational s t r a i n . Organizations thus enjoy c e r t a i n power with respect to communities because 14 of t h e i r d i s r u p t i v e p o t e n t i a l for the l a t t e r . 14 The s o c i a l benefits of continuation of organizational a c t i v i t y do not appear on i t s balance sheet. There has been some stress l a t e l y f or the organization to absorb some of the hidden c o s t s — t h e e x t e r n a l i t i e s — o f doing business (see, e.g., Hardin, 1968). It i s suggested that there i s corresponding j u s t i f i c a t i o n f or the firm to formally recognize and enjoy i t s hidden be n e f i t s . -108-It i s suggested however that, i n contrast to power over other organizations, power over the community cannot be exercised d e l i b e r a t e l y . While manipulation of other organizations i s permissible, there are severe moral and s o c i a l sanctions against deliberate e x p l o i t a t i o n of the community— s p e c i a l l y when organizational action i s expected to r e s u l t i n disruption of the s o c i a l f a b r i c . Even though an organization may not be able to blackmail the community into cooperation, i t i s possible however to r e a l i z e i t s p o t e n t i a l power over the l a t t e r under c e r t a i n s p e c i a l circumstances: While unable to secure an advantage by threatening to disrupt the community unless i t concedes to organizational demands, the organization may consciously exercise i t s p o t e n t i a l for disruption i f i t can e s t a b l i s h that i t i s not doing so d e l i b e r a t e l y . That i s , (B.12) an organization can obtain support from the community (or other elements i n the organi-zation set) when, and only when, i t can convince the l a t t e r that i t has no desire to disrupt i t , but i s helpless i n the face of circumstances.^ The community may come to the aid of an organization which i s unable to survive through i t s own e f f o r t s . This help may take many forms: "Unions, employees, m u n i c i p a l i t i e s , customers, and suppliers may (for example) band together to t r y to save a firm that i s i n trouble i n order to protect the income or services that i t has provided them. C o l l e c t i v e l y they may make major attempts through the state and fede r a l government to promote l e g i s l a t i v e , administrative, or j u d i c i a l actions that w i l l help the firm to survive." ( D i l l , 1965: p. 1094) Just as society may impose i n e f f i c i e n c i e s upon organizations under emergencies, e.g., war, organizations too may subject the community to i n e f f i c i e n c i e s i n times of s t r e s s , e.g., s c a r c i t y . -109-The board of education i n San Francisco, for example, was constrained to eliminate c e r t a i n sports i n some schools because of f i n a n c i a l d i f f i c u l t i e s . The l o c a l parents and businessmen reacted to the possible disruption by r a i s i n g $71,200 i n p r i v a t e donations to rescue the teams (Time, March 3, 1975: p. 22). The subsidies enjoyed by shipping, a i r , and a g r i -culture i n d u s t r i e s are examples of aid by the p o l i t y to avoid s o c i a l d i s r u p t i o n . I t has been pointed out that there are twp:types of p o t e n t i a l for d i s r u p t i o n ; and the type that concerns us here cannot be exercised d e l i b e r a t e l y , but may be r e a l i z e d i f helplessness can be established. The d i s t i n c t i o n between the p o t e n t i a l for d i s r u p t i o n and the p r o b a b i l i t y of r e a l i z a t i o n i s important. While the former varies with organizational si z e and interdependence, the l a t t e r i s a function of the i n a b i l i t y of the organization to survive without help from others. The greater the helplessness, the greater i s the l i k e l i h o o d that the organization can mobilize support from the community; or, i n other words, (B.13) the p o s s i b i l i t y of exercise of power increases with organizational helplessness. Emerson (1962) points out that ^dependence can be seen as the obverse of power" (Thompson, 1967: p. 30). That i s , the l e s s dependent an organization i s upon others i n i t s organization set, the more power i t enjoys r e l a t i v e to them. To express i t d i f f e r e n t l y , the l e s s dependent the organization, the greater i s the l i k e l i h o o d that i t can get the others to do what they would not do otherwise. This r e l a t i o n -16 To i l l u s t r a t e : ( i ) Consider the request for a glass of water i n the middle of the night by a s i c k spouse or a small child.. The greater the helplessness of the patient or the c h i l d to help themselves, the greater i s the l i k e l i h o o d that the partner or the parent w i l l respond to the need, ( i i ) The greater the p o s s i b i l i t y that a swimmer i s t r u l y drowning, rather than playing a prank, the greater i s the l i k e l i h o o d that the l i f e g u a r d w i l l come to h i s a i d . ( i i i ) It has been the experience of many Christians that the more dependent they are on God, the more "power" they enjoy over him, i . e . , the more responsive He i s to t h e i r prayer (see, e.g., Murray, 1965). -110-ship i s true of the f i r s t type of p o t e n t i a l for d i s r u p t i o n . Helplessness i n the face of environmental s c a r c i t y however implies that the organization i s now i n c r e a s i n g l y dependent upon the community and the p o l i t y for s u r v i v a l . Under normal circumstances exchange among members of the organization set i s based upon an ongoing quid pro quo. When f a i l u r e i s threatened however, they may respond i n manners they would not otherwise. But t h i s i s the d e f i n i t i o n of power: "A has power over B to the extent that he can get B to do something B would not do otherwise" (Dahl, 1957: pp. 202-3). Thus i n the case of the second type of p o t e n t i a l , given a c e r t a i n p o t e n t i a l f o r d i s r u p t i o n , (B.14) the more dependent the organization i s u p o n ^ others, the more power i t enjoys over them. I t i s necessary however to q u a l i f y the above observation. I t has been argued that when a p a r t i c u l a r organization i s experiencing s c a r c i t y , there i s increased l i k e l i h o o d of another member of i t s organi-zation set coming to i t s a i d . This " w i l l i n g n e s s " to aid must however be distinguished from the a b i l i t y to help. The t o t a l aid i s n e c e s s a r i l y l i m i t e d to less than or equal to organizational slack. If the "donor" organization i s i t s e l f experiencing s c a r c i t y , i t w i l l be unable to help. Power of the f o c a l organization over another i s therefore inversely r e l a t e d to the degree of s c a r c i t y experienced by the l a t t e r . I f a l l the "'While the above argument has been developed using the community as the member which comes to the aid of the distressed organization, others i n the organization set, e.g., suppliers may also help the f o c a l organization i n order to avoid the d i s r u p t i v e consequences of the l a t t e r ' s f a i l u r e . Grant's, for example, one of the b i g chains which market consumer goods i n the USA, i s currently experiencing a s c a r c i t y of resources. I t s c r e d i t o r s are cooper-ating by deferring loan payments. "Not only Grant's i s at stake: were the chain to collapse, many of the 8,000 or so firms that supply i t would topple as well"(Time, January 27, 1975: p.68). S i m i l a r l y suppliers to the auto industry are o f f e r i n g subsidies and sweeteners to employees who buy new cars (Time, February 3, 1975: p. 15B). I t i s emphasized however that such help i s less l i k e l y to m a t e r i a l i z e when there i s l i t t l e chance of the donee's f a i l u r e . - I l l -members of the organization set are experiencing s c a r c i t y , organizations have l i t t l e d i s r u p t i v e power over each other. (They continue to have di s r u p t i v e p o t e n t i a l however. The foregoing i s therefore another argument fo r the need to d i s t i n g u i s h between the p o t e n t i a l for d i s r u p t i o n and the a b i l i t y to exercise i t . ) Two types of p o t e n t i a l for d i s r u p t i o n have been i d e n t i f i e d : (i) a p o t e n t i a l which can be r e a l i z e d through purposive behaviour, and ( i i ) p o t e n t i a l which cannot be r e a l i z e d through e x p l o i t a t i v e a c t i o n . The former can be exercised both during abundance as well as under s c a r c i t y . As argued above the l a t t e r type, while relevant i n p r i n c i p l e across both abundance and s c a r c i t y , can be r e a l i z e d only i n the context of s c a r c i t y . I t follows that (B.15) an organization can exercise greater power over those with whom i t i s interdependent during s c a r c i t y than during abundance. Summary Let us summarize the foregoing discussion of power. The following d e f i n i t i o n was introduced: The greater the p o t e n t i a l for d i s r u p t i o n of the r o l e performance of a p a r t i c u l a r organization by another, the greater the p o t e n t i a l power of the l a t t e r over the former. Two types of p o t e n t i a l for d i s r u p t i o n were i d e n t i f i e d . 18 Power has been t r a d i t i o n a l l y equated i n OT with the a b i l i t y to cope with uncertainty. See, e.g., Hickson, et a l . ( i n Scott and Cummings, 1973: pp. 540-550) for treatment of i n t r a o r g a n i z a t i o n a l power, and Thompson (1967: p. 34) for i n t e r o r g a n i z a t i o n a l power. It i s believed (and the section on Power i s c i t e d as evidence for the b e l i e f ) that the c e r t a i n t y >power conceptuali-zation cannot do proper j u s t i c e to the ramifications of i n t e r o r g a n i z a t i o n a l power i n the context of s c a r c i t y . -112-(i) a p o t e n t i a l which can be r e a l i z e d through purposive behaviour, and ( i i ) a p o t e n t i a l which cannot be exercised i n a s i m i l a r fashion, i . e . , r e a l i z e d through deliberate e x p l o i t a t i v e action. The underlying concept and the implications of the second type of p o t e n t i a l were developed i n d e t a i l . I t was pointed out that t h i s p o t e n t i a l can be r e a l i z e d only when the f o c a l organization i s helpless i n the face of circumstances, and that the p o s s i b i l i t y of exercise of power increases with organizational helplessness. According to the t r a d i t i o n a l d e f i n i t i o n of power, i . e . , that based upon the f i r s t type of p o t e n t i a l , the l e s s dependent an organization i s upon others, the more power i t enjoys r e l a t i v e to them. Arguing from the second type of p o t e n t i a l however, i t was pointed out that the more dependent an organization i s upon others, the more power i t enjoys r e l a t i v e to them. I t was suggested that the l a t t e r p o t e n t i a l can be r e a l i z e d only during s c a r c i t y . I t follows that an organization can exercise greater power over those with whom i t i s interdependent during s c a r c i t y than during abundance. Size and Interdependence It was pointed out above that i n order to avoid experiencing r e l a t i v e s c a r c i t y , organizations w i l l ( i ) seek power over ( i i ) . d i s s i m i l a r -113-organizations. Other things being equal, power varies with s i z e and interdependence. In t h e i r attempt to insure long run s u r v i v a l therefore, organizations under norms of r a t i o n a l i t y w i l l seek (B.16) growth, and (B.17) greater interdependence with d i s s i m i l a r members of the organization set. In addition to the reason i d e n t i f i e d above, s c a r c i t y , rather paradoxically, contains several other drives for growth. I t has been noted, for instance, that large s i z e i s associated with ease of a c q u i s i t i o n of supplies, and may be either a cause or e f f e c t . Setting up s u b s i d i a r i e s , for example, reduces f l u c t u a t i o n s and u n p r e d i c t a b i l i t y of raw materials (Katz and Kahn, 1966: p. 92); the large purchaser exercises considerable power over the smaller supplier (Perrow, 1970: pp. 122-123); and the small f i r m experiences d i f f i c u l t y i n obtaining supplies (Burns and Stalker, 1961: p. 70). Starbuck (1965: pp. 463-4) discusses other reasons why larger organizations may better survive both a depression (low a v a i l a b i l i t y ) as w e l l as environmental f l u c t u a t i o n s ( i n supply). I t i s suggested that t h i s pressure for growth has major implications for the structure of the market: If the antecedents of s c a r c i t y cannot be reversed and cooperative strategies f a i l , the g e o - p o l i t i c a l system w i l l no longer be able to sustain the h i s t o r i c a l l e v e l of organizational a c t i v i t y . The t o t a l volume of business w i l l therefore be reduced. Other things being equal, i t i s expected that the smaller firms w i l l -114-19 be the f i r s t to f a i l under s c a r c i t y . P a r t l y due to the low s u r v i v a l p o t e n t i a l of the smaller firms, and p a r t l y due to the drive for growth among the survivors, (B.18) the market w i l l be characterized by a r e l a t i v e l y small number of large firms, which are highly interdependent with other d i s s i m i l a r elements within the g e o - p o l i t i c a l system. If the degree of a v a i l a b i l i t y of natural resources s t a b i l i z e s at a p a r t i c u l a r (low) l e v e l the various competing organizations w i l l c o n s titute an u l t r a - s t a b l e system (Ashby, 1960). A further increase i n s c a r c i t y w i l l however s t r a i n the oligopoly. The organizations then have the following options: ( i ) continue to compete t i l l one or more f a i l (allowing the others to then operate under r e l a t i v e abundance), or ( i i ) divest and merge. But the surviving organizations are r e l a t i v e l y large organizations, highly interdependent with the other elements i n the task environment. F a i l u r e of any of these giants i s therefore expected to have serious repurcussions on the r o l e performance of the other i n t e r l i n k e d d i s s i m i l a r elements, and i s expected to s e r i o u s l y disrupt the socio-economic system. Divestment and merger i s however not expected to produce shock waves of such i n t e n s i t y . In order to minimize the adverse consequences of worsening s c a r c i t y therefore, i t i s suggested that there w i l l be external pressure 19 Some of the many reasons for higher p r o b a b i l i t y of f a i l u r e of small organi-zations derived from the foregoing discussion are: ( i ) l e s s slack i n absolute terms and hence low capacity to absorb environmental contingencies, ( i i ) l e s s power and hence less l i k e l i h o o d of receiving any benefit from the slack of other organizations, and ( i i i ) low a b i l i t y to c o n t r o l the environment. For other reasons see Crum (1953), Mansfield (1962), Osborn (1951) , Starbuck (1965), and S t e i n d l (1945). -115-upon the o l i g o p o l i s t i c organizations to merge. Thus i n contrast to the negative s o c i a l values associated with monopoly during abundance, i t i s suggested that (B.19) under s c a r c i t y there w i l l be a s o c i a l preference for monopolistic rather than o l i g o p o l i s t i c markets. A Note on Interdependence Environmental abundance has i n the past resulted i n economic growth. Growth, i n turn, r e s u l t s both d i r e c t l y and i n d i r e c t l y i n increased complexity and interdependence: According to S t o g d i l l , f o r example "temperate lands provide anough food and materials to support large, complex and densely populated s o c i e t i e s " (1971: p. 41). Where materials were not a v a i l a b l e i n abundance there has been l i t t l e or no growth: "In A r c t i c lands (for example) only small, loosely organized bands have been able to f i n d the food, c l o t h i n g , and materials necessary for s u r v i v a l " — p . 41). Both Emery and T r i s t (1965) and Terreberry (1968) have noted the evolution of environments from a low degree of interdependence to turbulent f i e l d s , and have i d e n t i f i e d economic growth as a primary antecedent. Thus h i s t o r i c a l l y ( i . e . , during abundance) there has been a p o s i t i v e causal c o r r e l a t i o n between the degree of a v a i l a b i l i t y of material and i n t e r o r g a n i z a t i o n a l symbiosis. While growth and consequent interdependence were triggered by, among other things, environmental abundance, i t i s suggested that i n t e r - organizational symbiosis has now acquired a l i f e and momentum of i t s own. I t may be noted that the foregoing external pressure for merger i s i n -dependent of and d i f f e r e n t from the pressure for increased s i z e under norms of r a t i o n a l i t y referred to i n footnote 19 and discussed e a r l i e r i n t h i s s e c t i o n . -116-The phenomenon of interdependence has been d i s l i n k e d from material abundance, and there i s no reason to believe that as natural resources 21 diminish the turbulent f i e l d s w i l l revert to lower evolutionary stages. In f a c t , as argued i n the foregoing section, the imperatives of s u r v i v a l under s c a r c i t y w i l l r e s u l t i n (B.20) a negative causal c o r r e l a t i o n between the a v a i l a b i l i t y of material and i n t e r o r g a n i -z a t i o n a l symbiosis. That i s , the lower the degree of a v a i l a b i l i t y the higher w i l l be the degree of interdependence. Summary Various extraorganizational strategies have been described i n th i s chapter: I t was suggested that organizations w i l l respond to s c a r c i t y by attempting f i r s t to reverse i t s antecedents. F a i l i n g t h i s they w i l l , through cooperative s t r a t e g i e s , seek to avoid the consequences of s c a r c i t y . I t was pointed out however that such strategies are expected to succeed i n the short run only. In the long run therefore organizations w i l l seek to avoid, through competitive s t r a t e g i e s , the consequences of absolute s c a r c i t y . Avoidance of r e l a t i v e s c a r c i t y i s f a c i l i t a t e d ' b y increased power over d i s s i m i l a r organizations. Other things being equal, organizational power, i . e . , p o t e n t i a l f o r d i s r u p t i o n , varies with s i z e and the degree of interdependence with d i s s i m i l a r organizations. It was suggested therefore __ Only a nuclear holocaust or a Club of Rome type of doom (or a catastrophe of s i m i l a r proportions) i s expected to "wipe out" i n t e r o r g a n i z a t i o n a l i n t e r -dependence (along with most of s o c i e t y ) . Under these circumstances the economy w i l l have to s t a r t from square one—with minimal or no p o t e n t i a l for future growth. -117-that competitive s u r v i v a l s t r a t e g i e s contain a b u i l t - i n drive for greater s i z e and interdependence. Absolute s c a r c i t y w i l l r e s u l t i n reduction of the t o t a l l e v e l of a c t i v i t y i n the g e o - p o l i t i c a l system. I t was argued that, other things being equal, t h i s reduction w i l l r e s u l t i n e x t i n c t i o n of the smaller organizations. The pressures for interdependence and growth, along with the demise of the smaller organizations, w i l l r e s u l t i n an u l t r a -stable oligopoly. F a i l u r e of any of these surviving giants i s expected to s e r i o u s l y disrupt the s o c i a l f a b r i c . I t was suggested therefore that expectations of progressive s c a r c i t y w i l l r e s u l t i n a s o c i a l preference for monopolistic rather than o l i g o p o l i s t i c markets. In the process of developing and discussing the various r e v e r s a l and avoidance s t r a t e g i e s , i t was possible to i d e n t i f y c e r t a i n character-i s t i c s of s c a r c i t y which are d i s t i n c t from those under abundance. These are summarized i n Table II and are contrasted across s c a r c i t y on the one hand and abundance on the other. I f the strategies described i n t h i s chapter do not succeed the organization w i l l , by d e f i n i t i o n , experience r e l a t i v e s c a r c i t y . I n t r a -organizational responses to such s c a r c i t y w i l l be studied i n the next chapter. -118-TABLE II DIFFERENCES BETWEEN ABUNDANCE AND SCARCITY C h a r a c t e r i s t i c Abundance Sca r c i t y E q u i f i n a l i t y Amount of e q u i f i n a l i t y . Examples: More (organisations have a choice) Less ( l i t t l e or no choice) 1. Perception of the organizational environment as ( i . e . , problem defined as ) v commercial or p o l i t i c a l Commercial or (rarely) p o l i t i c a l Commercial and p o l i t i c a l 2. Extraorganizational s t r a t e g i e s Commercial or (rarely) p o l i t i c a l Commercial and p o l i t i c a l 3. Rank order of importance between commercial and p o l i t i c a l s t r ategies i . Commercial i i . P o l i t i c a l i . P o l i t i c a l i i . Commercial 4. Interorganizational posture Competitive or cooperative Short run: cooperative Long run: competitive Power Tr a d i t i o n a l / p r e f e r r e d d e f i n i t i o n i . Certainty ^ power i i . P o t e n t i a l for dis r u p t i o n » power P o t e n t i a l for disruption • p o t e n t i a l f o r power Amount of power Low: l i m i t e d to that which can be r e a l i s e d through purposive behavior only High: that which .. can be r e a l i s e d through purposive behavior plus that which cannot be r e a l i s e d through ...I:' -.. del i b e r a t e action P ower-d ependenc e association' Negative: power increases with :' . independence P o s i t i v e : power increases with depend-ence -119-TABLE II (cont'd.) C h a r a c t e r i s t i c Abundance S c a r c i t y Market Type of competition Nearer to the c l a s s i -c a l competitive ... . market O l i g o p o l i s t i c : r e l a t i v e l y small number of large organizations. In the extreme, monopolistic S o c i a l perception of monopolies Disfavoured Preferred Interdependence The degree of i n t e r -dependence subsumed in the drive f o r s u r v i v a l Less More D i r e c t i o n of causal c o r r e l a t i o n between '. . the a v a i l a b i l i t y of supplies and i n t e r -organisational i n t e r -dependence P o s i t i v e Negative Size External pressure Against growth For growth (monopoly) P r e d i l e c t i o n f o r growth subsumed i n the dr i v e f o r s u r v i v a l Low High Miscellaneous Leading subsystem Managerial I n s t i t u t i o n a l -120-CHAPTER 7 RELATIVE SCARCITY Organizational responses to absolute s c a r c i t y were described i n the previous chapter. That i s , s t r a t e g i e s aimed at r e v e r s a l of antecedents or avoidance of consequences of s c a r c i t y were examined. I t was suggested that i f an organization was unsuccessful i n t h i s endeavour i t would, by d e f i n i t i o n , experience r e l a t i v e s c a r c i t y . Relative s c a r c i t y has various consequences for organizational behaviour. Some of these w i l l be examined i n t h i s chapter. Relative s c a r c i t y has been defined (Ch. 3) as that which causes an organization to (i ) take up slack, or ( i i ) d i v e s t , and reduce i n s i z e , or ( i i i ) f a i l . I t w i l l be assumed that the organization i n question possesses slack. The f i r s t consequence of r e l a t i v e s c a r c i t y therefore w i l l be reduction i n t h i s slack. A study of the i n t r a o r g a n i z a t i o n a l consequences of s c a r c i t y should therefore properly begin with analysis of the ramifications of slack reduction. Slack I t i s important to d i s t i n g u i s h among the following phenomena i n the consumption of matter-energy type of goods: ( i ) the p r i c e paid, ( i i ) the amount bought, ( i i i ) the amount u t i l i z e d , and (iv) the i n s t a l l e d capacity f o r u t i l i z a t i o n . Organizational i n e f f i c i e n c i e s may a r i s e because: (a) The quantity u t i l i z e d i s less than that required to maximize returns on c a p i t a l invested. E.g., a processing plant may be run at h a l f capacity. -121-(b) The amount u t i l i z e d may be less than the quantity purchased. I.e., there may be wastage. And (c) the p r i c e paid may be i n f l a t e d due to e.g., imperfections i n the factor market. i Corresponding to the above i t i s possible to d i s t i n g u i s h among the following phenomena r e l a t i n g to membership of the organizational c o a l i t i o n : ( i ) the resources or p r i c e paid, ( i i ) the members' demands, ( i i i ) t h e i r contributions, and (iv) the i n s t a l l e d capacity for u t i l i z a t i o n of the members' contributions. Again, i n e f f i c i e n c i e s may a r i s e because: (a) The t o t a l contributions do not exhaust the p o t e n t i a l of the invested c a p i t a l , e.g., a h o s p i t a l manned by a skeleton s t a f f , (b) The demands may exceed t h e i r contributions, e.g., i n the case of feather-bedding by unions. And (c) the resources paid may be i n excess of demands, e.g., executives are provided with services and personal luxuries i n excess of those required to keep them. I n e f f i c i e n c i e s of the type (a) above w i l l ( i n both cases) be c a l l e d investment i n e f f i c i e n c i e s . S i m i l a r l y , those of types (b) and (c) w i l l be c a l l e d u t i l i z a t i o n and payment i n e f f i c i e n c i e s r e s p e c t i v e l y . Slack was defined i n the economic model of resource a l l o c a t i o n (p. 47) as expenditure on i n e s s e n t i a l goods. I t was suggested that even though such goods were not e s s e n t i a l for organizational continuity, they had a nonzero u t i l i t y of consumption for the r u l i n g c o a l i t i o n . Thus as long as the organization had resources i n excess of those required to insure complete investment e f f i c i e n c y , i t would enhance u t i l i t y by purchasing i n e s s e n t i a l s . i -122-The formal economic model permitted only one outlet for excess resources: consumption of i n e s s e n t i a l goods. I t i s now suggested that i n addition to a c q u i s i t i o n of i n e s s e n t i a l s , excess resources may be used to develop and sustain (though not always d e l i b e r a t e l y ) u t i l i z a t i o n and payment i n e f f i c i e n c i e s with respect to e s s e n t i a l goods. 1 Cyert and March (1963) present the following examples of payment i n e f f i c i e n c i e s : "stockholders are paid dividends i n excess of those required to keep stockholders (or b a n k s — s i c ) within the organization; prices are set lower than necessary to maintain adequate income from buyers; wages i n excess of those required to maintain labour are paid; executives are provided with services and personal' luxuries i n excess of those required to keep them; subunits are allowed to grow without r e a l concern for the r e l a t i o n between a d d i t i o n a l payments and a d d i t i o n a l revenue; (and) public services are provided i n excess of those required" (p. 37). Caught i n a resource squeeze an organization may discover a hitherto unknown u t i l i z a t i o n i n e f f i c i e n c y . Reder (1947) reports, f o r example, that a f t e r losses of about f i f t y m i l l i o n d o l l a r s for the f i r s t three quarters of 1946, the Ford Motor Company "announced that i t had found methods of reducing operating costs (for a given volume of output) by about twenty m i l l i o n d o l l a r s per year." Cyert and March (1963: p. 242, n. 18) report two other cases of u t i l i z a t i o n i n e f f i c i e n c y : While the organi-zations under reference were presumably aware of the existence of excess s t a f f the matter was ignored; u t i l i z a t i o n e f f i c i e n c y was improved ( s t a f f was f i r e d ) only when the organizations were forced to respond to s c a r c i t y . "'Members of the r u l i n g c o a l i t i o n contribute d i f f e r e n t types of expertise. In-asmuch as t h i s knowhow i s e s s e n t i a l for the s u r v i v a l of the firm, i t i s an e s s e n t i a l good. Since a p a r t i c u l a r member may be replaced by another (or a computer) with s i m i l a r expertise, the i n d i v i d u a l himself cannot be c l a s s i f i e d as e s s e n t i a l . -123-kBaumol (1959) documents an instance of deliberate a c q u i s i t i o n of u t i l i z a t i o n i n e f f i c i e n c y : The management of a p a r t i c u l a r f i r m r e a l i z e d that the p r o f i t which i t was going to show i n i t s forthcoming annual report would be unusually large. H a s t i l y , an o f f i c e modernization program was launched with the objective of "bringing the year's earnings into l i n e and avoid s p o i l i n g the stockholders" (p. 90). In order to f a c i l i t a t e study of the i n t r a o r g a n i z a t i o n a l consequences of s c a r c i t y therefore, the d e f i n i t i o n of slack w i l l be enlarged to include expenditure on sustenance of (i ) u t i l i z a t i o n i n e f f i c i e n c i e s with regard to e s s e n t i a l goods, and ( i i ) payment e f f i c i e n c i e s with regard to e s s e n t i a l goods, as we l l as expenditure on 2 ( i i i ) a c q u i s i t i o n of i n e s s e n t i a l goods. It has been observed that abundance i s conducive to a c q u i s i t i o n of slack. Average costs, f o r example, r i s e with organizational success (Cyert and March, 1963: pp. 3 8 , 9 0 ) — u t i l i z a t i o n i n e f f i c i e n c y ; s i m i l a r l y , when the rate of improvement i n the environment outruns the upward ad-justment of a s p i r a t i o n s , there i s increase i n organizational slack (Cyert and March, 1963: p. 37)—payment i n e f f i c i e n c y . Conversely, environmental s c a r c i t y w i l l r e s u l t i n taking up of slack. Organizational responses to s c a r c i t y however d i f f e r with differences i n expectations regarding the future a v a i l a b i l i t y of inputs: _2 It may be noted that the Cyert and March (1963) d e f i n i t i o n of slack i s li m i t e d to payment i n e f f i c i e n c i e s with respect to members of c o a l i t i o n s only: "slack consists i n payments to members of the c o a l i t i o n i n excess of what i s required to maintain the organization ( i . e . , meet t h e i r demands)" (p. 36). -124-Reduction i n the a v a i l a b i l i t y of the e s s e n t i a l good can take place along one of three basic modes: (i) The supply may be reduced and then a f t e r some time increase again to i t s pre-intervention l e v e l (or there about): ( i i ) i t may diminish and then s t a b i l i z e at a low l e v e l (but not so low as to cause f a i l u r e ) ; and ( i i i ) i t may continue to shrink t i l l the organization f a i l s . The organization w i l l experience r e l a t i v e s c a r c i t y (by d e f i n i t i o n ) under mode (i) as long as the supply i s under a p a r t i c u l a r threshold, and w i l l continue to do so under mode ( i i i ) as long as i t survives. While reduction i n supply w i l l cause the organization to take up slack—whether under mode ( i ) , ( i i ) , or ( i i i ) — i t i s suggested that expectations of the prevalence of the various modes w i l l have important implications for the organizational response to s c a r c i t y . Behaviour under each mode w i l l therefore be studied separately. MODE ( i ) (Temporary reduction i n supply) In Chapter 5 i t was pointed out that the various antecedents of s c a r c i t y could be divided into two groups: those which resulted i n a d e f i n i t e reduction of a v a i l a b i l i t y within the g e o - p o l i t i c a l system—Type I antecedents, and those where h i s t o r i c a l amounts could s t i l l be made av a i l a b l e at a higher c o s t — N a t u r a l and Type II antecedents. While at lea s t one (or more) organization(s) would be forced to reduce intake i n the former instance, there i s no p r i o r reason why a p a r t i c u l a r organization may not s t r i v e to maintain consumption as usual. Thus, i r r e s p e c t i v e of -125-th e type of antecedent, as long as i t can r a i s e enough funds, an organi-zation need not experience s c a r c i t y . Assuming that, at le a s t i n the present North American cul t u r e , an organization would rather "contain" ( i . e . , maintain h i s t o r i c l e v e l s of a c t i v i t y ) than shrink, the operational problem under mode (i ) i s : shortage of f i n a n c i a l resources. Because of the expectations associated with mode (i ) the various responses to s c a r c i t y are expected to be of a "temporary" nature. The organization w i l l , f o r example, attempt to borrow money to t i d e over a transient squeeze. I f i t i s not poss i b l e to r a i s e a d d i t i o n a l resources i n the short run however, i t w i l l attempt to reduce ( i ) u t i l i z a t i o n i n e f f i c i e n c i e s , ( i i ) payment i n e f f i c i e n c i e s , or ( i i i ) intake. As explained below, no attempt w i l l be made to reduce investment i n e f f i c i e n c i e s . Reduction of investment i n e f f i c i e n c i e s involves one of two things: (i ) increased intake of e s s e n t i a l goods, or ( i i ) divestment of excess capacity. The former a l t e r n a t i v e i s i n f e a s i b l e because of shortage of funds. Idle capacity does not represent an ongoing cash outflow, and hence does not contribute to the operational problem. Expectations of future abundance do not j u s t i f y divestment of machinery and plant (and the necessary concomitant reorganizational expenses). I t i s suggested therefore that under mode ( i ) ( C l ) organizations w i l l not attempt to reduce investment i n e f f i c i e n c i e s . As pointed out i n Chapter 6, footnote 3 , the l e t t e r s C l , C.2, ... w i l l be used tosnumber the propositions describing organizational behaviour under mode ( i ) s c a r c i t y . S i m i l a r l y , l e t t e r s D . l , D.2, ... w i l l be used to number propositions r e l a t i n g to str a t e g i e s i n response to mode ( i i ) s c a r c i t y ; l e t t e r s E . l , E.2, ... w i l l be used to number propositions which are relevant to s u r v i v a l under mode ( i i i ) s c a r c i t y . The sequence of l e t t e r s A.10, A.11, ... (continued from Chapter 6) w i l l i d e n t i f y l o g i c a l p r i m i t i v e s , i . e . , statements which stand unsupported i n the body of the paper but are used as foundational premises for some of the p r e s c r i p t i v e material. -126-The s t r a t e g i e s used to reduce u t i l i z a t i o n i n e f f i c i e n c i e s are discussed below. U t i l i z a t i o n I n e f f i c i e n c y A major reduction i n u t i l i z a t i o n i n e f f i c i e n c i e s requires, among other things, an increase i n i n d i v i d u a l p r o d u c t i v i t y . I t has been generally observed that u t i l i z a t i o n e f f i c i e n c y of personnel i s lowest i n the te c h n i c a l core (e.g., through feather-bedding, foot dragging, and other entrenched low productive labour practices) and i n the bureaucratic sections of an organization. Production norms i n the te c h n i c a l core are t y p i c a l l y established a f t e r d e t a i l e d i n v e s t i g a t i o n by i n d u s t r i a l engineers and pro-longed negotiation between labour and management. Any appreciable increase i n p r o d u c t i v i t y would thus require intensive renegotiation along with a d d i t i o n a l investment i n and reorganization of the plant. I t has been observed that production i n bureaucracies drops to and then continues at the minimum acceptable l e v e l (March and Simon, 1958: p. 44). An appreciable increase i n p r o d u c t i v i t y would therefore require conversion to a non-bureaucratic structure. Reduction of the u t i l i z a t i o n i n e f f i c i e n c y , whether of the technical core or i n the bureaucratic sections, w i l l therefore require r e s t r u c t u r i n g of the organization. But "a change of i n t e r n a l structure ( i s perceived) as a threat" (Katz and Kahn, 1966: pp. 92-93), and such action would not be j u s t i f i e d by the expectations of transience of the s c a r c i t y . I t i s suggested therefore that under mode ( i ) (C.2) concerted remedial action w i l l not be directed at the major bases of personnel u t i l i z a t i o n i n e f f i c i e n c y . -127-Assuming that p o t e n t i a l e x i s t s , an attempt at s u b s t a n t i a l reduction i n the u t i l i z a t i o n i n e f f i c i e n c y of material w i l l also require reorganization and s t r u c t u r a l change. But such changes w i l l be avoided. Thus under mode (i ) expectations (C.3) there w i l l be only marginal reduction i n the u t i l i z a t i o n i n e f f i c i e n c y of material goods within the organization. I t also follows that since any search which might r e s u l t i n a p r e s c r i p t i o n f o r reorganization w i l l be precluded under mode ( i ) , (C.4) search for s o l u t i o n of the u t i l i z a t i o n e f f i c i e n c y problem (for both men and material) w i l l tend to be l o c a l , routine, and nonintensive. Payment I n e f f i c i e n c y Goods Prices of goods are t y p i c a l l y determined by market forces. I f the f o c a l organization i s a monopoly, or i f i t i s part of an oligopoly which i s acting i n c o l l u s i o n , i t may be able to p r e v a i l upon i t s suppliers to obtain lower p r i c e s . But such cooperative s t r a t e g i e s have already been discussed i n Chapter 6. Also, i t has been assumed for the purpose of the present chapter that such strategies have f a i l e d . The organization may attempt t o use i t s interdependence with the supp l i e r as a leverage to obtain lower p r i c e s . I t i s suggested however that the expectations of transience w i l l be shared by the supplier also. Hence the l a t t e r w i l l not expect the p o t e n t i a l for d i s r u p t i o n caused by f a i l u r e of the former to be r e a l i z e d . Under mode ( i ) therefore, -128-(C.5) the f o c a l organization w i l l have l i t t l e or no power over i t s s u p p l i e r . Assuming that payment i n e f f i c i e n c i e s e x i s t , i t follows that (C.6) a s i n g l e organization (acting along) w i l l not be able to obtain a lower p r i c e for i t s material inputs. (It may at best succeed i n negotiating deferred payment or other s i m i l a r relaxations. But these are subsumed i n organizational attempts to "borrow money", e t c . — s e e beginning of the section.) Personnel Cyert and March (1963: p. 37) suggest that those i n a p o s i t i o n of power tend to accumulate more slack. The managerial subsystem i s the leading subsystem under abundance (Katz and Kahn, 1960: p. 63; Cyert and March, 1963: pp. 240-241). Because they c o n t r o l the " s t r a t e g i c contingencies" (Hickson, et a l . , 1971) the managers enjoy r e l a t i v e l y high power. I t follows that they possess most slack. Because they are powerful however, i t i s relativelysmore d i f f i c u l t to get them to surrender the excess. I t i s suggested therefore that under mode (i) (C.7) the organization w i l l l i m i t i t s e l f to negotiating concessions from the r e l a t i v e l y "weak" members, i . e . , the nonmanagerial personnel. For example, recession's f i r s t victims are always at the lower end of the labour pyramid: the b l u e - c o l l a r worker, o f f i c e - s t a f f , and sales help. (Time, February 17, 1975: p. 34). Reduction i n payment i n e f f i c i e n c i e s to nonmanagerial personnel may take two forms: ( i ) those with long range implications, and ( i i ) "one point i n time" action with no implications for the future. The former would involve, for example, reducing wage rates, while the l a t t e r would -129-be l i m i t e d to e.g., deferment of pay r a i s e s . I t i s suggested that (A.10) s c a r c i t y under mode ( i ) w i l l be associated with r e l a t i v e l y low l e v e l s of anxiety. Also, i f the phenomenon i s t r u l y temporary and l o c a l , there w i l l be r e l a t i v e l y l i t t l e pressure on the employees to lower a s p i r a t i o n l e v e l s . Consequently the personnel w i l l be r e s i s t a n t to any reduction which has long range implications. I t i s suggested therefore that under mode ( i ) (C.8) organizational attempts at improvement of payment e f f i c i e n c i e s w i l l be l i m i t e d to one point i n time actions, such as curtailment of yearly bonus or paid vacations, etc. When s c a r c i t y i s widespread ( i . e . , there i s a dearth of a l t e r n a t i v e employment opportunities) but i s expected to be temporary, employees may volunteer to go on shorter work-hours to avoid l a y o f f s . See, e.g., action by employees of the Star- News (Time, February 10, 1975: p. 55) and s i m i l a r (unsuccessful) attempts by workers of MacMillan Bloedel (Vancouver Sun, January 18, 1975: p. 4). The labour union at Kelsey-Hayes Canada Limited voted for a three-week month for s i m i l a r reasons (Vancouver Sun, January 18, 1975: p. 4). While helping the workers, such action i s not expected to r e s u l t i n any reduction of company cash outflows. I t i s suggested however, that where a climate such as the above p r e v a i l s , the organization i s i n a better p o s i t i o n to obtain one point i n time concessions from i t s employees than * otherwise. S l i c h t e r , Healy, and Livernash.(1960), i n a survey of employee behaviour under conditions of general abundance, observed that whenever s c a r c i t y resulted i n a p a r t i c u l a r organization having to reduce i t s p a y r o l l , -130-4 unions t y p i c a l l y preferred l a y - o f f s to reduced hours. The examples i n the foregoing paragraph drawn from an environment of r e l a t i v e l y widespread s c a r c i t y i n d i c a t e a r e v e r s a l of preference. I t i s suggested therefore that (C.9) union preference between l a y - o f f s and reduced hours i s an index of the degree of l o c a l i z a t i o n of s c a r c i t y . Local solutions to the problem of u t i l i z a t i o n i n e f f i c i e n c y of material, along with one point i n time action to reduce payment i n e f f i c i e n c i e s of personnel, may together s u f f i c e to a l l e v i a t e s c a r c i t y . I f these strategies are unsuccessful however, the organization w i l l have to reduce consumption. Reduced Consumption Under norms of r a t i o n a l i t y an organization experiencing s c a r c i t y w i l l dispense with expenditure on i n e s s e n t i a l goods. The d i s t i n c t i o n be-tween the two types of goods i s objective and i s based on organizational purpose. A majority of the expenses are either c l e a r l y e s s e n t i a l , e.g., purchase of s t e e l f o r an automobile factory, or c l e a r l y i n e s s e n t i a l , e.g., donations to ch a r i t y . Organizational resources are however expended on a v a r i e t y of goods, e.g., t r a i n i n g programs, where the d i s t i n c t i o n i s not obvious. I t has been observed that there i s t y p i c a l l y considerable variance between the personal goals of members and subunits on the one hand and the organizational purpose on the other hand (Cyert and March, 1963). The d i s t i n c t i o n between the organizational purpose and personal goals tends to be l o s t during abundance. The deviant goals, by d e f i n i t i o n , _ xCralg^Pinder brought t h i s to my notice. -131-involve consumption of i n e s s e n t i a l rather than e s s e n t i a l goods. I t follows that during abundance there i s a further loss of d i s t i n c t i o n between the nonobvious e s s e n t i a l and i n e s s e n t i a l goods. Because of the low l e v e l of anxiety associated with mode ( i ) s c a r c i t y , there i s l i t t l e pressure to o b j e c t i v e l y d i s t i n g u i s h among the nonobvious category of goods. I t i s suggested that instead of attempting to i d e n t i f y i n e s s e n t i a l goods and discontinuing consumption, organizations w i l l use the following decision rules to reduce expenditure under mode ( i ) : (C.10) organizations w i l l (i) discontinue consumption which r e s u l t s i n (obviously) lowsrather than high return; ( i i ) discontinue consumption which constitutes more rather than less of a drain on working c a p i t a l ; ( i i i ) discontinue consumption where the return i s d i f f i c u l t rather than easy to measure; (iv) discontinue consumption where resumption i s expected to cost less rather than more; (v) discontinue consumption which disturbs the e x i s t i n g structure less rather than more; and (vi) discontinue consumption which serves the nonorganizational goals of members with low rather than high power. Rules ( i ) and ( i i ) are rather obvious and w i l l not be commented upon. Rule ( i i i ) w i l l r e s u l t i n p r i o r i t y to, e.g., elimination of t r a i n i n g programs and curtailment of R & D types of a c t i v i t y . Under rul e (iv) preference w i l l be given to lay i n g o f f of u n s k i l l e d workers. S k i l l e d trades, e.g., welders, w i l l be retained however, even though they represent more of a drain on working c a p i t a l ; since they enjoy a high demand -132-elsewhere, they w i l l be d i f f i c u l t to r e - h i r e . The popularity of across the board budget slashes i s evidence of operation of ru l e (v). Such a reduction serves two purposes: (a) there i s minimal disturbance of the power structure: and (b) where the reduction i s not excessive, i t i s not necessary to restructure the flow of a c t i v i t i e s . A p p l i c a t i o n of ru l e (vi) r e s u l t s i n preference for elimination of a c t i v i t i e s l i k e the salesmen's convention rather than a "business" t r i p for the president. Resources obtained by reducing consumption/elimination of goods according to the above rules may then be diverted to purchase of the f o c a l good (or goods). I f adequate quantities of the l a t t e r good can now be acquired, the operational problem of i n s u f f i c i e n t resources i s resolved. The f o c a l good may now be consumed i n h i s t o r i c a l amounts, or at a s l i g h t l y reduced rate to correspond to other reductions i n intake. I t i s possible however that the organization i s s t i l l unable to purchase s u f f i c i e n t quantities of the p a r t i c u l a r good, r e s u l t i n g i n reduced output. I t i s suggested that because of expectations of transience of s c a r c i t y , the organization w i l l seek to r e t a i n i t s customers. Under mode (i) s c a r c i t y therefore ( C . l l ) the organization w i l l r a t i o n i t s output and a l l o c a t e i t among i t s several customers. Reduced output poses contingencies f o r the customers. Thus (C.12) the f o c a l organization w i l l enjoy a p o t e n t i a l for d i s r u p t i o n or p o t e n t i a l power r e l a t i v e to i t s customers. I t follows that under mode (i ) s c a r c i t y the organization w i l l be able to secure advantages from i t s customers, thus enabling i t to -133-resolve, i n part, the operational problem of shortage of f i n a n c i a l resources. I t i s suggested however that t h i s power i s expected to be s h o r t - l i v e d , and that abundance w i l l r e s u l t i n loss of power. I t i s believed that, i n order to avoid r e t a l i a t o r y action during abundance, the f o c a l organization w i l l not ex p l o i t i t s customers. Thus under mode ( i ) (C.13) the organization w i l l not r e a l i z e a l l of the p o t e n t i a l for d i s r u p t i o n or p o t e n t i a l power r e l a t i v e to i t s customers. Drastic Measures The s t r a t e g i e s of reduction of i n e f f i c i e n c y and consumption described above are r e l a t i v e l y mild. I f marginal reduction i n i n e f f i c i e n c y and consumption f a i l s to resolve the problem, the organization w i l l be forced into a major curtailment of a c t i v i t i e s . Extensive r e s t r u c t u r i n g w i l l be avoided however. In addition to posing a psychological threat, r e s t r u c t u r i n g requires a major cash outlay. Change i n structure i s thus expected to compound the cash problem. Also, since the s c a r c i t y i s expected to be only temporary, the organization w i l l have to incur another major expenditure to revert to the o r i g i n a l structure when the s i t u a t i o n i s normalized. I t i s submitted that the organization w i l l seek to avoid t h i s double penalty. To summarize, even i f marginal remedies f a i l to a l l e v i a t e s c a r c i t y ( i . e . , generate enough f i n a n c i a l resources) and i t i s necessary to resort to d r a s t i c measures,under mode ( i ) (C.14) organizations w i l l avoid extensive r e s t r u c t u r i n g to reduce consumption. -134-Rather than undertake extensive r e s t r u c t u r i n g to reduce consumption, i t i s suggested that under mode ( i ) (C.15) an organization w i l l temporarily close down one or more of i t s s t r u c t u r a l l y independent un i t s . Instead of reorganizing i n response to the present'scarcity, for example, Chrysler planned temporary closure of three of i t s s i x car plants and one of two truck plants (Vancouver Sun, January 11, 1975: p. 8). These units are, by d e f i n i t i o n , f u n c t i o n a l l y autonomous and are also t y p i c a l l y decentralized. Their closure i s thus not expected to disrupt the a c t i v i t y of the rest of the organization. Also there i s no s p e c i a l penalty associated with resumption of a c t i v i t y by these u n i t s . In case the above i s not successful, or the organization does not have any s t r u c t u r a l l y independent u n i t s , i t w i l l be forced to reorganize. A l t e r n a t i v e l y , i t w i l l a c t i v e l y seek to be acquired by another firm. While the preference between the two i s by no means c l e a r , i t i s suggested that the hope of a more v i a b l e future w i l l encourage the organization to r e t a i n i t s i d e n t i t y . In other words, other things being equal, under mode (i) (C.16) an organization w i l l prefer extensive re-organization to being taken over by another firm. If both s t r a t e g i e s f a i l however, the organization w i l l be forced to close down. Organizational responses to a s c a r c i t y that i s expected to be s h o r t - l i v e d have been discussed above. The various s t r a t e g i e s described tend to be coping s t r a t e g i e s seeking temporary s o l u t i o n s , and are only -135-marginally d i f f e r e n t from those used during periods of nonscarcity. These are summarized and contrasted with those used under mode ( i i ) i n Table I I I (pp. 153-5). MODE ( i i ) (Reduction i n supply permanent but not enough to cause f a i l u r e ) I t was mentioned e a r l i e r that under mode ( i i ) the organization expects the a v a i l a b i l i t y of the f o c a l good to diminish considerably and then s t a b i l i z e at a r e l a t i v e l y low l e v e l . I t i s believed that the expectation of permanent contingencies posed by the environment w i l l cause the organization to undertake a thorough reassessment of both i t s e l f and the environment. I t w i l l be assumed for the purpose of t h i s section that, as a r e s u l t of t h i s reassessment, the organization w i l l decide to re t a i n i t s o r i g i n a l mission i n i t s essence; and that i t s over a l l character and i d e n t i t y w i l l remain unchanged."' In other words, the f o c a l good w i l l continue to remain e s s e n t i a l . Given t h i s general constraint, some of the in t r a o r g a n i z a t i o n a l changes i n response to mode ( i i ) s c a r c i t y are described below. Under mode ( i i ) a v a i l a b i l i t y i s expected to s t a b i l i z e at a sub-historic l e v e l . In contrast to mode (i) therefore behaviour under mode ( i i ) i s expected to be adaptive and, i f necessary, r a d i c a l l y d i f f e r e n t from that i n the past. I t follows that under the l a t t e r mode (D.l) search behaviour w i l l be general or global rather than l o c a l , nonroutine rather than It i s also assumed that there i s no basic change i n the values of the organi-z a t i o n a l personnel—notwithstanding the various anxieties associated with operation under mode ( i i ) . In other words, employees w i l l continue to react to organizational demands f o r , e.g., cooperation and obedience, i n near h i s t o r i c a l ways. -136-routine, and intensive rather than nonintensive. While adaptive responses w i l l include reduction of both i n t e r n a l i n e f f i c i e n c i e s and consumption, i t i s suggested that these w i l l be d r a s t i c and w i l l involve change of structure. Thus while the operating problem i i i the case of mode (i ) was shortage of cash, i n t h i s case i t w i l l be: reorganization to function at a p a r t i c u l a r low l e v e l of a c t i v i t y . The i n i t i a l discussion focuses on reorganization for reduction of consumption. Reduce Consumption I t was noted under mode ( i ) that the organization w i l l tend to discontinue consumption of i n e s s e n t i a l goods—inasmuch as goods can be c l e a r l y i d e n t i f i e d as being i n e s s e n t i a l , and that t h i s can be done without s t r u c t u r a l change. Ine s s e n t i a l goods w i l l be discontinued under mode ( i i ) too. But there w i l l be a basic d i f f e r e n c e i n the s e l e c t i o n and weeding out process. Under mode (i ) i d e n t i f i c a t i o n tended to be based upon the nature of the good i t s e l f . In the l a t t e r mode, i n contrast, i d e n t i f i c a t i o n w i l l be based rather on the r e l a t i o n s h i p of the good with the goal i t i s intended to serve. Thus, for example, the subsidized canteens i n the t i r e as well as the accessories plants of an automobile factory may be d i s -continued during an au s t e r i t y drive under mode ( i ) . Under mode ( i i ) however the subsidized canteen i n the t i r e plant may be considered to be i n e s s e n t i a l along with the whole plant. The canteen i n the accessories plant may, on the other hand, be c l a s s i f i e d as e s s e n t i a l . -137-When the s c a r c i t y was expected to be s h o r t - l i v e d the c r i t e r i a used to determine discontinuation tended to be r e l a t i v e l y s u p e r f i c i a l and subjective. Expectations of a permanent s c a r c i t y w i l l however r e s u l t  i n use of more objective c r i t e r i a and the abandonment decision i s expected to be taken a f t e r an intensive and in-depth search involving organizational goals. Goals An organization may be conceptualized as a c o a l i t i o n of i n d i v i d u a l s and subgroups who may have s u b s t a n t i a l l y d i f f e r e n t preference orderings (Cyert and March, 1963: p. 27). Organizational goals are a subset of the t o t a l i t y of these i n d i v i d u a l goals, and are derived by bargaining among members of the c o a l i t i o n . Agreement over goals i s however t y p i c a l l y not complete. Some goals are recognized as " e x p l i c i t objectives" (March and Simon; 1958: p. 126) and are said to be " e s s e n t i a l , continuous, and operative" (Cyert and March, 1963: p. 117). There i s "considerable d i s -agreement and uncertainty" (Cyert and March, 1963: p. 28)about other goals however. These l a t t e r tend to r e f l e c t more the i d i o s y n c r a t i c preferences of i n d i v i d u a l s and subgroups and contribute only marginally to the organizational purpose. The organization thus i s "a c o a l i t i o n having a serie s of more or less independent goals imperfectly r a t i o n a l i z e d i n terms of more general goals" (Cyert and March, 1963: p. 78; emphases added). The goals that are not c e n t r a l to the organizational purpose w i l l be c a l l e d "nonessential" goals. I t has been observed that -138-"Organizations functioning i n a benign environment can s a t i s f y t h e i r e x p l i c i t objectives with l e s s than a complete expenditure of organizational 'energy'. As a r e s u l t , a s u b s t a n t i a l portion of the a c t i v i t i e s i n the organization i s directed towards s a t i s f y i n g i n d i v i d u a l or subgroup goals" (March and Simon, 1958: p. 126). In other words, surplus resources are used to se r v i c e the nonessential goals. "When resources are r e l a t i v e l y unlimited, organizations need not resolve the r e l a t i v e merits of subgroup claims. Thus, these claims and r a t i o n a l i z a t i o n s f o r them tend not to be challenged" (March and Simon, 1958: p. 126). This has two consequences: ( i ) A l l the members of the c o a l i t i o n are not aware of a l l the organizational goals, and ( i i ) objective c r i t e r i a are not used to choose among investment a l t e r n a t i v e s (see, e.g., Cyert and March, 1963: pp. 48-54). Thus the various subunits are not aware of each other's f i n a n c i a l commitments; and investment decisions, for example, are made on the basis of " s u i t a b l y powerful support within the organization" (Cyert and March, 1963: p. 79) rather than a f t e r , say, a cost-benefit a n a l y s i s . To summarize: during nonscarcity the organization t y p i c a l l y spends money on many a c t i v i t i e s which are (i ) not c e n t r a l to the organizational purpose and, since a l l p a r t i c i p a n t s are not aware of these a c t i v i t i e s , ( i i ) do not have the concurrence of a l l the members of the c o a l i t i o n , and ( i i i ) are not nec e s s a r i l y j u s t i f i e d even i n terms of opportunity foregone. -139-The following changes are expected to take place under mode ( i i ) s c a r c i t y : The proponents of various nonessential goals w i l l have to compete for resources on more objective grounds. In the process of defending them therefore, the goals w i l l become more sharply defined. Also, a greater proportion of the c o a l i t i o n w i l l become aware of the existence of such goals. Under mode ( i i ) the organization expects a reduced intake of the f o c a l good. Thus the output and resultant revenue i s also expected to be reduced. I t w i l l therefore no longer be possible to service the h i s t o r i c a l l e v e l of marginal or nonessential goals. Thus depending upon the expected l e v e l of e s s e n t i a l a c t i v i t y , some of the l a t t e r goals w i l l be discontinued. I t follows then that under mode ( i i ) s c a r c i t y (D.2) an organization w i l l have a narrower set of better defined and more i n t e r n a l l y consistent goals.^ Thus even though "organizational goals cannot normally ( i . e . , during abundance) be described i n terms of a j o i n t preference ordering" (Cyert and March, 1963: p. 28), i t i s suggested that under s c a r c i t y they w i l l more nearly resemble a Guttman-type s c a l e . I t has been noted e a r l i e r that some of these goals represent demands of p a r t i c u l a r members of the c o a l i t i o n . But "demands adjust to actual payments and al t e r n a t i v e s external to the organization" (Cyert and March, 1963: p. 36). Adjustment may take place e i t h e r by withdrawal of ind i v i d u a l s from the c o a l i t i o n or by r e t r a c t i o n of the demands. Since t h e i r demands are not expected to be met i n the future, and assuming that I t w i l l be argued l a t e r that s u r v i v a l under s c a r c i t y w i l l require t i g h t e r i n t e r n a l c o n t r o l . This "need for c o n t r o l and coordination (also) creates a s t r a i n toward greater goal consensus" (Downs, 1967: p. 263). -140-the environment presents other investment opportunities, i t i s suggested that some members w i l l withdraw from the c o a l i t i o n . Thus i t i s possible that under mode ( i i ) (D.3) the r u l i n g c o a l i t i o n w i l l be smaller. Also, because of withdrawal of nonessential demands, (D.4) the r u l i n g c o a l i t i o n w i l l be better i d e n t i f i e d with the r e s i d u a l set of goals. It follows that, as compared to operation under abundance, under mode ( i i ) s c a r c i t y (D.5) there w i l l be a higher p o t e n t i a l f o r exercise of referrent power. Demarketing Reduced consumption and elimination of c e r t a i n organizational goals w i l l be operationalized i n , among other things, ( i ) abandonment of ce r t a i n products and ( i i ) divestment of surplus machinery and plant. The second p o s s i b i l i t y w i l l be discussed i n a l a t e r s e c t i o n . It has been observed that during abundance organizations seek to market a complete product l i n e (Kotler, 1967). In contrast"one of the responses to the current shortage economy has been f or companies to prune t h e i r product l i n e s with the idea of maximizing p r o f i t s by making the most e f f i c i e n t use of materials and energy. The r e s u l t i s that lower-profit-margin products are dropped i n favour of those o f f e r i n g higher margins. General E l e c t r i c Co., for instance, has dropped blenders, fans, heaters, humidifiers and vacuum cleaners. S h e l l Chemical Co. has reported -141-dropping production of s.tyrene butadiene rubber, isoprene rubber and f e r t i l i z e r s . Due to t h i s product reduction drive, some marketing experts see American businesses moving away from f u l l - l i n e product concepts that emphasized sales rather than p r o f i t s " (McLean, 1974: p. 38). To express the foregoing i n formal terms: In order to reduce material consumption i n the long run, under mode ( i i ) (D.6) organizations w i l l produce h i s t o r i c quantities of the more p r o f i t a b l e goods rather than reduced quantities of i t s t o t a l product l i n e . Abandonment of products w i l l require, among other things, a reprogramming of consumer expectations, r e q u i r i n g them to be s a t i s f i e d with le s s than more. I t follows that under mode ( i i ) s c a r c i t y , instead of applying the marketing s t r a t e g i e s t r a d i t i o n a l to abundance, (D.7) organizations w i l l seek to "demarket" t h e i r products.^ Demarketing has been defined by K o t l e r and Levy (1971) as "that aspect of marketing that deals with discouraging customers i n general or a c e r t a i n class of customers i n p a r t i c u l a r on e i t h e r a temporary or permanent b a s i s . " (p.75) McGuire (1974) documents the experience of some u t i l i t i e s with demarketing. "From the standpoint of d i r e c t i n g , motivating and u t i l i z i n g t h e i r s a l e s -men, energy firms f i n d themselves i n an unusual bind. As one u t i l i t y company executive observes, 'It i s i n t e r e s t i n g sport to convert s a l e s -men of long standing from avid ' s e l l e r s ' of our product to avid 'dis-couragers' 6f the use of our products.' The vice-president of another u t i l i t y says, 'We've reached the ludicrous s i t u a t i o n where the more e f f e c t i v e ' s e l l i n g ' job we do, the lower our net revenues w i l l be.' O v e r a l l , u t i l i t i e s have undergone some r a d i c a l s h i f t s i n sales man-power and i t s deployment. A few report having made these and other changes long before the current c r i s i s h i t . One Western u t i l i t y executive explains: 'In a n t i c i p a t i o n of t h i s event [ i . e . , the current shortage], two and a h a l f years ago we began a complete r e v e r s a l of our marketing e f f o r t s . We ceased a l l promotional a c t i v i t i e s and began intensive conservation-of-energy campaigns. This e f f o r t has resulted i n halving our rate growth... We suspect that our growth rate w i l l be reduced to zero, or maybe even reversed.' This f i r m has now cut i t s sales force to one-third i t s previous s i z e and retrained the survivors to carry out missionary programs s t r e s s i n g the conservation of energy." (p. 7) -142-I t has been argued above that reduced consumption w i l l involve reassessment of organizational goals; and many a c t i v i t i e s i nvolving major outflows w i l l be eliminated. I t i s possible that discontinuation of these i n e s s e n t i a l or marginally relevant a c t i v i t i e s w i l l bring the r e s i d u a l a c t i v i t i e s to the desired l e v e l . Thus, the various penalties associated with reduction i n s i z e notwithstanding, i t may not be necessary for the organization to reduce payment and u t i l i z a t i o n i n e f f i c i e n c i e s . But since elimination of goals w i l l require reorganization anyhow, i t i s suggested that under norms of r a t i o n a l i t y (D.8) the firm w i l l take advantage of the re-organization and force a r e s t r u c t u r i n g g to reduce u t i l i z a t i o n and payment i n e f f i c i e n c i e s . The necessity of having to force the change may not be immediately apparent. I t i s suggested that even when i n e f f i c i e n c i e s are obvious organi-zations h e s i t a t e to take c o r r e c t i v e a c t i o n . For example: "In many cases firms do f i n a l l y perform the r a d i c a l surgery involved i n c u t t i n g out an unprofitable l i n e of t e r r i t o r y but t h i s u sually occurs a f t e r much heart-searching and delay" (Baumol, 1959: p?v 48). Continuing i n the same vein, L e v i t t (1974) suggests that the sales force i s more amenable to pruning of "yesterday's winners" during s c a r c i t y than otherwise. Also, "New things introduced into any organization require a c e r t a i n amount of i n t e r n a l s e l l . The d i s l o c a t i o n s created when the old norms are bypassed o f f e r an i d e a l opportunity for the introduction of new ideas and new a t t i t u d e s . That i s the time, for example, to get R &ED support for reeingineering products to achieve improved economy and perhaps reduced (though s t i l l acceptable) s p e c i f i c a t i o n s ; for a l t e r i n g manufacturing methods i n ways that i n other times might have been unacceptable eit h e r to the engineering department or the union; g L i k e r t (1967) notes however that organizations may sometimes overrespond i n t h e i r zeal for elimination and payment i n e f f i c i e n c i e s . (Gordon Walter brought t h i s to my notice.) -143-for new sales and reporting procedures that were other-wise anathema—indeed for trimming a v a r i e t y of c o s t l y operations and procedures which prosperity previously allowed to p r o l i f e r a t e " (p. 7: emphasis added). Payment I n e f f i c i e n c i e s Goods The various e s s e n t i a l inputs can be divided into two categories: (i ) the f o c a l input which i s scarce, and ( i i ) those which are not. Reorganization w i l l r e s u l t i n reducedcconsumption of both types of goods. The supplier of the scarce good enjoys a c e r t a i n power over the consuming organization, and the l a t t e r w i l l hot be able to negotiate a lower p r i c e . Thus i t w i l l not be possible to eliminate payment i n e f f i c i e n c i e s , of the f o c a l good. (This also follows from the d e f i n i t i o n of s c a r c i t y . ) Suppliers of the nonscarce goods w i l l themselves experience a "demand" s c a r c i t y as a r e s u l t of reduced sales. I f i t i s assumed that the mode ( i i ) s c a r c i t y i s widespread ( i . e . , not j u s t l o c a l i z e d to the f o c a l organization) then the demand s c a r c i t y experienced by the supplying organizations w i l l be compounded by s i m i l a r quantity cutbacks by other consuming organizations. Because of s c a r c i t y the suppliers are expected to possess l i t t l e slack. I t i s suggested therefore that under mode ( i i ) s c a r c i t y (D.9) the f o c a l organization w i l l be able to obtain only marginal ( i f any) p r i c e reductions on other e s s e n t i a l goods i f the s c a r c i t y i s widespread. Any advantages accrued w i l l be l i m i t e d to eit h e r a "one point i n time" sweetener, e.g., a s p e c i a l rebate on a p a r t i c u l a r order, or absorption -144-of i n c i d e n t a l s , e.g., insurance, by the sup p l i e r s . I t i s possible that mode ( i i ) s c a r c i t y may be l o c a l i z e d to a p a r t i c u l a r organization. Action by a con t r i v e r , e.g.j a monopolist, who seeks to penalize only the f o c a l organization may r e s u l t i n the l a t t e r experiencing l o c a l (but permanent) s c a r c i t y . Under such circumstances i t s suppliers of other e s s e n t i a l goods are not expected to experience r e l a t i v e s c a r c i t y . Other things being equal therefore, under mode ( i i ) (D.10) the organization w i l l be able to obtain some pr i c e concessions on other e s s e n t i a l goods i f the s c a r c i t y i s l o c a l . Personnel It i s possible that under mode ( i i ) s c a r c i t y (a) an organization may f a i l i f i t does not obtain s i g n i f i c a n t reductions i n i t s p a y r o l l . Also, (b) abandonment of c e r t a i n goals and reduced consumption w i l l r e s u l t i n some of the s t a f f being rendered surplus. The organization i s thus i n a p o s i t i o n to exercise both types of p o t e n t i a l for power through i t s p o t e n t i a l for d i s r u p t i o n of the l i v e s of i t s employees through l a y - o f f s : The p o s s i b i l i t y (a) above w i l l allow i t to r e a l i z e that p o t e n t i a l which cannot be exploited d e l i b e r a t e l y , while (b) w i l l allow i t to r e a l i z e that p o t e n t i a l which can be obtained through purposive behaviour. I t follows that (D.ll ) an organization enjoys more power over i t s employees during mode ( i i ) s c a r c i t y than during abundance. It was pointed out that under mode (i ) s c a r c i t y the organization w i l l l i m i t i t s e l f to negotiating concessions from the r e l a t i v e l y weaker -145-members of the organizational force, and that these members possess r e l a t i v e l y l i t t l e slack. Because of both i t s greater power and need for more concessions under mode ( i i ) , i t i s suggested that the organization w i l l be constrained to obtain remissions from the stronger but p o t e n t i a l l y more r i c h sources, i . e . , the management. Thus, under mode ( i i ) s c a r c i t y (D.12) the organization w i l l obtain concessions from a l l personnel. The following quotes are presented i n support of the above proposition as i t applies to managerial and nonmanagerial personnel re s p e c t i v e l y : "The current slump i s p a i n f u l l y h i t t i n g corporate managers and administrators, who i n the past were r e l a t i v e l y immune from l a y o f f s . In January unemploy-ment among managers h i t the highest point i n more than 15 years." (Time, February 17, 1975: p. 34; emphasis added) Since, for example, some managers w i l l be l a i d o f f , i t i s suggested that the organization w i l l have power r e l a t i v e to the remainder, and w i l l therefore renegotiate t h e i r s a l a r i e s . The Time a r t i c l e above documents the willingness of a p a r t i c u l a r manager "to take a 15% reduction i n s a l a r y . " "In Horse Shoe Bend, Idaho (pop. 700), Theodore Hoff J r . closed h i s Hoff Lumber Co. m i l l l a s t month because sales had f a l l e n through the f l o o r boards. In a l l , 325 workers were l a i d o f f , dev-astating the town's economy. Those workers— plus 80 more Hoff employees at a m i l l i n Rexburg, Idaho—got together and figured out a plan to return to work. They decided to take a 10% pay cut, put o f f a scheduled 9% cost of l i v i n g increase, and eliminate overtime pay." (Time, March 3, 1975: p. 22; emphasis added) -146-It has been pointed out above that mode ( i i ) s c a r c i t y i s expected to r e s u l t i n (a) l a y o f f s and (b) reduced wages. I t i s believed that under such circumstances (A.11) employees w i l l prefer reduced wages to being l a i d o f f . I t follows that under mode ( i i ) s c a r c i t y , (D.13) unions w i l l bargain f o r security of employment rather than wages. While discussing payment i n e f f i c i e n c i e s of goods i t was pointed out that when s c a r c i t y i s widespread the f o c a l organization w i l l have l i t t l e power r e l a t i v e to i t s s u p p l i e r s . In contrast i t w i l l enjoy more power i n r e l a t i o n to i t s employees. I t i s believed that (A.12) i n comparison to the supplying organizations, organizational personnel t y p i c a l l y possess more proportional slack. That i s , an average employee i s better able to survive, e.g., a 10% reduction i n wages; i n contrast, organizational s u r v i v a l may be rather s e r i o u s l y effected by a 10% reduction i n income. I t follows from both the power and slack d i f f e r e n t i a l s between suppliers of other e s s e n t i a l goods on the one hand and organizational employees on the other hand that under mode ( i i ) s c a r c i t y (D.14) there w i l l be greater p o t e n t i a l f o r reduction of payment i n e f f i c i e n c i e s with respect to personnel as compared to goods. (It also follows that attempts at a second pay r e v i s i o n w i l l have a low p r i o r p r o b a b i l i t y of success.) -147-U t i l i z a t i o n I n e f f i c i e n c i e s I t has been pointed out that s u r v i v a l under mode ( i i ) s c a r c i t y w i l l require reorganization. Also, the search for solutions to the material u t i l i z a t i o n problem i s expected to be intensive and nonroutine. I t i s suggested that intensive nonroutine search, along with the opportunity to restructure material flows and processing, w i l l r e s u l t i n elimination of u t i l i z a t i o n i n e f f i c i e n c y . Formally, under mode ( i i ) (D.15) organizations w i l l be able to eliminate u t i l i z a t i o n i n e f f i c i e n c y of materials. It may be noted however that i t i s not necessary that changes i n material u t i l i z a t i o n and consumption are recognized as past i n e f f i c i e n c i e s . The organization may merely s t r i v e to improve i t s rate of u t i l i z a t i o n ? f or example, "The Los Angeles Times has reduced page s i z e by a f r a c t i o n of an inch to conserve c o s t l y paper, and the Miami Herald w i l l follow s u i t next month. The• Herald and others are switching from an eight-column format, at l e a s t p a r t l y to save on wasted white space between columns. Papers l i k e the Minneapolis Tribune, Houston Chronicle and Boston Globe are now cramming ten columns onto t h e i r c l a s s i f i e d pages instead of the usual eight" (Time, February 10, 1975: p. 55). In the previous section i t was pointed out that under mode ( i i ) the organization exercises a r e l a t i v e l y large amount of power over i t s employees. I t i s suggested that because of t h i s power, and i n the process of laying o f f , r e s t r u c t u r i n g (see below), and reorganizing to adapt to s c a r c i t y , (D.16) the organization w i l l be able to eliminate a l l major sources of personnel u t i l i z a t i o n i n e f f i c i e n c y . -148-Investment I n e f f i c i e n c i e s I t has been pointed out that the organization w i l l take advantage of the need to reorganize and w i l l reduce payment and u t i l i z a t i o n i n e f f i c i e n c i e s . Organizational responses to investment i n e f f i c i e n c i e s are discussed below. In organizational design i t i s t y p i c a l l y assumed that "technology set(s) the constraints around which the organization manipulate(s) i t s v a r i a b l e s " (Thompson, 1967: p. 66). Blau and Scott (1962: p. 177) note that organizational "demands" o r i g i n a t e at the technological core, and that the rest of-the organization (and by i m p l i c a t i o n , the environment) i s then designed to cater to these demands. It i s suggested that the c e n t r a l i t y of the technological core i s c h a r a c t e r i s t i c of abundance. I t i s submitted (and argued below) that the t r a n s i t i o n from abundance to mode ( i i ) s c a r c i t y r e s u l t s i n a change i n the terms of reference used to design the technological core, and that the production subsystem i s subservient to environ-mental imperatives under s c a r c i t y . Let us examine the above suggestions: Supplies are expected to f l u c t u a t e around a p a r t i c u l a r mean, whether around the high l e v e l input during abundance or the low l e v e l inflows under mode ( i i ) . I t i s suggested that i n the former case the technology i s designed to handle only minor increases above the mean. There are two reasons for t h i s : (a) Given a p a r t i c u l a r market demand, the output i s expected to be at the optimal or near optimal l e v e l . Any increase i n output beyond t h i s l e v e l i s expected to provide low marginal u t i l i t y . (b) A d d i t i o n a l capacity c a r r i e s with i t -149-a f a i r l y high opportunity cost. I t i s suggested therefore that during abundance any short-term increase i n the a v a i l a b i l i t y of raw material i s 9 ignored. I f the market demand for the f i n i s h e d good does not shrink to correspond to reduction i n the a v a i l a b i l i t y of the f o c a l good however, any increase i n output above the low l e v e l mean under mode ( i i ) w i l l provide a high marginal u t i l i t y . Thus the organization w i l l design i t s t e c h n i c a l core to ex p l o i t any short-term increases i n a v a i l a b i l i t y of raw material. In other words, (D.17) the technology t y p i c a l of mode ( i i ) s c a r c i t y w i l l be more f l e x i b l e than that of abundance. U n i d i r e c t i o n a l f l e x i b i l i t y (geared to increases above the mean only) can be obtained i n two ways: (i ) By not d i v e s t i n g the o r i g i n a l equipment (or s e l l i n g o ff only parts of i t ) , and ( i i ) using an " i n f e r i o r " technology. The l a t t e r means w i l l be discussed f i r s t . I n f e r i o r Technology Woodward (1965) i d e n t i f i e s three types of production technology: unit and small-batch (made to order goods); large-batch, assembly, and mass production (e.g., mass produced c a r s ) ; and process production (e.g., o i l s , chemicals, and pharmaceuticals). These are ranked i n that order along several c h a r a c t e r i s t i c s . Unit technology, for example, i s most _ "When the environment outruns a s p i r a t i o n - l e v e l adjustment, the organization secures, or at l e a s t has the p o t e n t i a l of securing, resources i n excess of i t s demands. Some of these resources are simply not obtained—although they are a v a i l a b l e " (Cyert and March, 1963: p. 37j emphases added). -150-f l e x i b l e . Process technology requires the highest degree of ce r t a i n t y regarding a v a i l a b i l i t y of raw materials, r i g i d q u a l i t y c o n t r o l of inputs, and can process the largest volume per unit time. Because of i t s high throughput process technology r e s u l t s i n the lowest cost per u n i t , but also represents the highest outlay. I t i s suggested that i n order to obtain increased f l e x i b i l i t y the organization w i l l "down-grade" i t s technology from, e.g., process to mass, or from mass to uni t . In other words, under mode ( i i ) (D.18) the organization w i l l use a r e l a t i v e l y " i n f e r i o r " technology. Since the t o t a l throughput w i l l be reduced i t i s suggested that downgrading w i l l be required anyhow (the "superior" technology i s expected to be grossly i n e f f i c i e n t f o r low volume production). Also, the organization i s expected to be w i l l i n g to relax q u a l i t y c o n t r o l i n favour of obtaining a d d i t i o n a l quantities of low q u a l i t y material. Since the i n f e r i o r technology requires r e l a t i v e l y low c a p i t a l outlay i t i s suggested that the high returns expected to be obtained from short-term increases i n supply j u s t i f y the investment i n excess capacity. By i t s very nature however, the i n f e r i o r technology i s r e l a t i v e l y i n e f f i c i e n t . Thus, (D.19) the per unit cost of processing during mode ( i i ) w i l l be higher than that during abundance and mode ( i ) . Surplus Capacity It was noted above that an organization can e x p l o i t short-term increases i n raw material by not di v e s t i n g a l l of i t s equipment and thus r e t a i n i n g spare capacity. I f the . s c a r c i t y i s widespread, i . e . , other -151-organizations are also d i v e s t i n g , or the machinery and plant are s p e c i a l purpose, then divestment i s expected to bring r e l a t i v e l y low returns. Thus the opportunity cost of not di v e s t i n g w i l l be r e l a t i v e l y low ( i n contrast to that for excess capacity during abundance); and the penalty for retention w i l l not be severe. Increased f l e x i b i l i t y i s however only one of the reasons for not divesti n g . Mode ( i i ) assumes, among other things, that the organizations w i l l be able to survive on i t s own. Thus a merger i s not necessary for s u r v i v a l . Lack of necessity notwithstanding, i t i s suggested that the organization may r e t a i n surplus capacity and use that as a basis for merger. This may lead to several advantages: Sale of i d l e plant w i l l r e s u l t i n a one point i n time cash flow. Merger, i n contrast, w i l l secure continuous cash inflows. Also, the organization w i l l then enjoy various synergies, both of increased s i z e as well as those a r i s i n g out of complementary and/or supplementary c a p a c i t i e s . Because of (i) the need f o r greater f l e x i b i l i t y , ( i i ) low opportunity cost, and ( i i i ) possible leverage i n the case of a merger, i t i s suggested that under mode ( i i ) (D.20) an organization w i l l r e t a i n surplus production capacity. The imperatives of mode ( i i ) s c a r c i t y require an elimination of a l l u t i l i z a t i o n and payment i n e f f i c i e n c i e s . In contrast, i t follows from propositions D.18 and D.20 that under mode ( i i ) (D.21) the organization w i l l seek to r e t a i n ( p a r t i c u l a r types of) investment i n e f f i c i e n c i e s . -152-Adaptive responses which a n t i c i p a t e a considerable reduction i n , and subsequent l e v e l l i n g o f f of, material supplies were examined above. These are summarized i n Table III and compared with corresponding st r a t e g i e s under mode ( i ) . The foregoing strategies were designed to prepare the organi-zation f o r s u r v i v a l i n a m i l i e u of s c a r c i t y , and were generally d e s c r i p t i v e of the t r a n s i t i o n a l processes. The "new" organization w i l l be d i f f e r e n t i n many ways from the o r i g i n a l . Certain steady state c h a r a c t e r i s t i c s of the redesigned organization are discussed below. Their consequences for organizational processes and structures are examined l a t e r . Organizational C h a r a c t e r i s t i c s Without attempting to define environmental abundance, i t i s suggested that an organization can, i n a m i l i e u of abundance, take i t s inputs f o r granted. An organization may, for example, plan future growth without expecting a v a i l a b i l i t y of raw material to become an operating constraint. Under such circumstances i t can be said that the organization i s " c e r t a i n " about the future a v a i l a b i l i t y of matter-energy inflows. Thus while abundance and cert a i n t y are conceptually d i s t i n c t phenomena, i t i s suggested that there i s a necessary empirical c o r r e l a t i o n between the two: abundance of materiels i s associated with a high degree of c e r t a i n t y regarding t h e i r a v a i l a b i l i t y . Indeed, (D.22) cer t a i n t y of a v a i l a b i l i t y of material may be subsumed i n the d e f i n i t i o n of abundance. P a r a l l e l to the above r e l a t i o n s h i p , s c a r c i t y has been empirically -153-TABLE I II COMPARISON OF CERTAIN INTRAORGANIZATIONAL RESPONSE STRATEGIES UNDER MODE ( i i ) WITH THOSE UNDER MODE (i) SCARCITY Ch a r a c t e r i s t i c s Mode (i> (Temporary'reduction) Mode ( i i ) (Permanent reduction) Operational problem Shortage of f i n a n c i a l resources Reorganization f o r a low l e v e l of a c t i v i t y Level of anxiety associated with the reduction i n supply Low High Temporal perspective of organizational responses Temporary Permanent Type of strategy Coping Adaptive C h a r a c t e r i s t i c s of search behaviour Local, routine, and nonintensive General, nonroutine, and intensive Attitude towards change of structure Only as a l a s t resort An i n t e g r a l part of the adaptive strategy E f f e c t on organizational goals (i ) L i t t l e change. Temporary suspension of some a c t i v i t i e s (i) Reassessment of goals. Those which are not cen t r a l to the organi-z a t i o n a l purpose w i l l be discontinued. ( i i ) R e l a t i v e l y vaguely defined ( i i ) B e t t e r defined ( i i i ) M a y continue to a l l o c a t e resources to nonessential a c t i v i t i e s ( i i i ) T h e r e s i d u a l set of goals w i l l be i n t e r n a l l y consistent (iv)Larger set of goals (iv)Smaller set of goals (v) Larger c o a l i t i o n (v) Smaller organizational c o a l i t i o n -154-TABLE III (CONTINUED) Ch a r a c t e r i s t i c s Mode (i) (Temporary reduction) Mode ( i i ) (Permanent reduction) Response to Investment i n e f f i c i e n c i e s Ignored; no change Certain type of investment i n e f f i c i e n c i e s are d e l i b e r a t e l y incurred Response to u t i l i z a t i o n i n e f f i c i e n c i e s ( i ) material ( i i ) personnel W i l l obtain only a marginal reduction i n both cases W i l l obtain a s u b s t a n t i a l reduction i n both cases Response to payment i n e f f i c i e n c i e s ( i ) material W i l l have no power over suppliers Therefore w i l l not obtain any reduction i n the cost of goods W i l l have power over su p p l i e r s , but the l a t t e r w i l l have l i t t l e slack. Hence w i l l obtain minor concessions only ( i i ) personnel 1. W i l l obtain concess-ions (from personnel) which do not have any implications for the future 1. The concessions obtained w i l l have implications for the future 2. W i l l obtain concess-ions from nonmanager-i a l personnel only 2. W i l l obtain concessions from a l l organizational personnel Reduction of consump-t i o n 1. Mode of d i s t i n c t i o n between nonobvious e s s e n t i a l and iness-e n t i a l goods Subj ective Obj ective 2. C r i t e r i a used for discontinuation of consumption Discontinue consumption which (i) has obviously low rather than high returns ( i i ) r e s u l t s i n high rather than low drain on working c a p i t a l By reference to the organizational purpose, i . e . , the set of r e s i d u a l goals -155-TABLE III (CONTINUED) Ch a r a c t e r i s t i c s Mode (i) (Temporary Reduction) Mode ( i i ) (Permanent reduction) 2. (cont'd) ( i i i ) i s easy rather than d i f f i c u l t to measure (iv) i s easy rather than d i f f i c u l t to resume (v) disturbs the e x i s t i n g structure less rather than more (vi) i s supported by c o a l i t i o n members who have low rather than high power 3. E f f e c t on the product W i l l manufacture reduced W i l l manufacture l i n e quantities of the f u l l h i s t o r i c a l quantities range of products of the more p r o f i t a b l e products 4. Strategy used to Closure of s t r u c t u r a l l y Divestment obtain major reduct- independent units ions i n consumption Marketing strategy Rationing of output Demarketing Consequences for the No change W i l l obtain technical core (i) surplus capacity, with a technology which i s ( i i ) i n f e r i o r , ( i i i ) f l e x i b l e , and ( i v ) i n e f f i c i e n t -156-observed to be associated with a high degree of uncertainty. McGuire (1974) i n a Conference Board p o l l of senior marketing executives, for example, observes that "shortages tend to enshroud marketing planning with an impenetrable fogeof uncertainty...Management doesn't know from one week to another when the plant w i l l be shut down" (p. 5). S i m i l a r l y , McLean (1974) i n reporting reactions to material s c a r c i t y quotes a senior executive as confessing "I don't know what's going to happen next week" (p. 37). While we are not convinced that there i s a necessary p r i o r c o r r e l a t i o n between s c a r c i t y and uncertainty, i t i s believed that under mode ( i i ) (D.23) organizations w i l l experience a higher degree of uncertainty regarding a v a i l a b i l i t y of material as compared to that under abundance. ' I t has been mentioned e a r l i e r (Chapter 2, pp. 30-31) that the technical core t y p i c a l l y operates on a closed-system l o g i c , and that i t i s sealed o f f from input v a r i a t i o n s by, among other things, b u f f e r i n g , smoothing, or l e v e l i n g . These processes are however c h a r a c t e r i s t i c of abundance. Since there i s l i t t l e or no slack during s c a r c i t y , i t i s not possible to dampen input f l u c t u a t i o n s . 1 ^ I t was also pointed out that temporary environmental improvements during abundance are t y p i c a l l y ignored (Cyert and March, 1963: p. 37). I t was argued that under s c a r c i t y , i n contrast, the organization seeks to expl o i t any increases i n a v a i l a b i l i t y ; hence there i s no attempt to eliminate input f l u c t u a t i o n s (above the mean). It i s suggested therefore that because of (i ) increased environmental Uncertainty, and lack of ( i i ) a b i l i t y and ( i i i ) desire to smooth out "^"Slack operates to s t a b i l i z e the system i n two ways: (1) by absorbing excess resources... during r e l a t i v e l y good times; (2) by providing a pool of emergency resources... during r e l a t i v e l y bad times" (Cyert and March, 1963: p. 38). -157-environmental v a r i a t i o n s (D.24) the organization w i l l be designed to handle a higher degree of externally induced uncertainty under mode ( i i ) than under abundance. I t has been argued above that organizations cannot/will not attempt to reduce externally imposed uncertainty. I t i s believed that they have a l i m i t e d t o t a l capacity to absorb or respond to uncertainty. In order that they may f u l l y e x p l o i t environmental uncertainty, i t i s suggested that organizations must minimize i n t e r n a l l y generated uncertainty. "We would expect... that organizations facing many contingencies would exhibit quite rigorous c o n t r o l over those variables they do c o n t r o l " (Thompson, 1967: p. 78). Thus (D.25) under mode ( i i ) organizations w i l l be designed such that the l e v e l of i n t e r n a l l y induced uncertainty i s less than that during abundance. It was pointed out i n Chapter 2 that abundance i s characterized by, among other things, a c e r t a i n " l e i s u r e " , a high degree of optimism, and a low l e v e l of anxiety. In contrast, the f o c a l organization would have experienced the trauma of coming to terms with the environment, v i z . , enforced reduction of personal and organizational a s p i r a t i o n l e v e l s , acceptance of below a s p i r a t i o n - l e v e l payments, l a y o f f s , and reorganization. Also, s u r v i v a l under s c a r c i t y i s expected to be more of a continuing struggle than under abundance. Since the s c a r c i t y i s expected to endure there w i l l be no cause for optimism or lessening of anxiety. In b r i e f , (D.26) the organization w i l l operate i n a c r i s i s climate under mode ( i i ) . -158-Under abundance the work loads of the various subsystems were t y p i c a l l y predictable and reasonably balanced. Because of the immediacy of t h e i r contributions the sales and production functions were the largest and the most important (Perrow, 1970a). Under mode ( i i ) however, assuming that demand does not shrink to a corresponding l e v e l , sales i s expected to be a sinecure (see, e.g., Kotler and Levy, 1971: pp. 74-75); and the production subsystem w i l l be required to coordinate with purchasing rather than sa l e s . Production work loads w i l l vary depending upon the a v a i l a b i l i t y of material, and both sales and production w i l l be expected to experience "feast or famine" conditions. The procurement subsystem w i l l become important and w i l l always remain under pressure. Thus under s c a r c i t y i t i s expected that (D.27) the organization w i l l experience wide v a r i a t i o n s  i n the l e v e l of a c t i v i t y , both across subsystems at a given time, and within a subsystem over time. I t has been suggested e a r l i e r (Chapter 2, pp. 27-29)that an "abundant" environment i s r i c h i n the number of a l t e r n a t i v e solutions to a p a r t i c u l a r problem. A scarce environment, i n contrast, presents very few a l t e r n a t i v e s . Under mode ( i i ) therefore the various subsystems w i l l have l i m i t e d options. Also, as argued i n Chapter 6, reduced slack r e s u l t s i n increased i n t e r o r g a n i z a t i o n a l interdependence. Extrapolating from that argument i t i s suggested that elimination of slack w i l l also r e s u l t i n increased i n t r a o r g a n i z a t i o n a l interdependence. Formally, under mode ( i i ) s c a r c i t y (D.28) the various subsystems w i l l experience a low degree of manouverability, i . e . , the number of possible solutions to a p a r t i c u l a r problem w i l l diminish:; and -159-(D.29) the various subsystems w i l l be incr e a s i n g l y dependent upon others for t h e i r r o l e performance. Summary The various steady state c h a r a c t e r i s t i c s of mode ( i i ) s c a r c i t y are summarized i n Table IVand compared with those during abundance. Their consequences for organizational processes w i l l now be examined. Organizational Processes Coordination I t has been pointed out above that organizational subsystems w i l l have reduced action a l t e r n a t i v e s under s c a r c i t y . Also, the actions of each subsystem w i l l be incr e a s i n g l y constrained by those of i t s neighbours. Reduction i n both p r i o r options as we l l as freedom to exercise them at the subsystem l e v e l w i l l greatly l i m i t the t o t a l number of f e a s i b l e system or j o i n t s o l u t i o n s . I t follows that (D.30) attainment of a sa t i s f a c t o r y : .organizational strategy w i l l require more coordination under s c a r c i t y than i n abundance. According to Thompson (1967) coordination may be achieved by (i) standardization, ( i i ) planning, and ( i i i ) mutual adjustment. Co-ordination by standardization involves establishment of routines and r u l e s , and "requires that the s i t u a t i o n s to which they apply be r e l a t i v e l y stable (and) repetitive...enough to permit matching of s i t u a t i o n s with appropriate r u l e s " (p. 56). Because of increased uncertainty i t i s suggested that coordination by standardization w i l l not be v i a b l e under mode ( i i ) . -160- . TABLE IV COMPARISON OF CERTAIN ORGANISATIONAL CHARACTERISTICS ACROSS ABUNDANCE AND MODE ( i i ) SCARCITY C h a r a c t e r i s t i c Abundance Sca r c i t y Degree of ce r t a i n t y regarding a v a i l a b i l i t y of material High Low Consequences of the degree/certainty of a v a i l a b i l i t y of material for 1. Organisational design a. Designed to cope with a r e l a t i v e l y low degree of externally induced uncertainty b. R e l a t i v e l y low emphasis on reduction of i n t e r -n a l l y generated uncertainty a. Designed to absorb a high degree of extern-a l l y induced uncertainty b. Designed to minimise i n t e r n -a l l y generated uncertainty 2. Organisational climate R e l a t i v e l y "easy" " C r i s i s " climate 3. Level of subsystem' a c t i v i t y R e l a t i v e l y stable Wide v a r i a t i o n s i n the l e v e l of a c t i v i t y , both across subsystems at a given time, and within a sub-system over time 4. Number of response a l t e r n a t i v e s a v a i l -able to the subsystems (degree of equi-f i n a l i t y ) Many Few 5. Degree of subsystems interdependence Low High -161-S c a r c i t y t y p i c a l l y r e s u l t s i n delays i n receiving supplies. McLean (1974) i n h i s survey of the consequences of a shortage economy reports for example that "Perhaps the most common (consequence) i s the need for long lead times to get v i t a l supplies. James E. Dymond, president of Aquamatic, Inc., a valve manufacturer i n Rockford, 111., (e.g.) says the d e l i v e r y of gray i r o n castings for use i n valves has gone from a normal eight weeks to 45 weeks. An order for heavy, s p e c i a l i z e d equipment to dig c o a l , for instance, normally used to be f i l l e d i n three or four months, (another respondent) r e c a l l s . Now, waits from 18 to 24 months are commonplace. I t takes as long as eight months to get bearings, a shelf item, from s u p p l i e r s . " (p. 37) Thus planning under mode ( i i ) should encompass a longer time horizon as compared to that under abundance. 1 1 The uncertainty associated with s c a r c i t y however makes i t d i f f i c u l t to plan ahead. McGuire (1974) i n h i s a r t i c l e L i v i n g with S c a r c i t y , for example, reports that "several management say they're unable to see more than three or s i x months ahead because the uncertainty which accompanies shortages makes forecasting manpower, advertising or promotion needs a hazardous and sometimes f u t i l e task" (p. 5). But the i n a b i l i t y to see ahead i s a n t i t h e t i c a l to the requirement for a longer time horizon. Since planning w i l l be d i f f i c u l t , i t follows that coordination by planning w i l l  not be v i a b l e under mode ( i i ) . Since coordination by standardization and planning are both I t i s understandable that i n an environment of extreme abundance, as i n some t r o p i c a l i s l a n d s , where the natives a n t i c i p a t e complete f u l f i l l m e n t of f e l t needs ( i n general), there i s l i t t l e pressure to plan ahead and the population i s content to l i v e , as i t were, from one day to the next. -162-inappropriate, i t follows that under mode ( i i ) s c a r c i t y (D.31) organizations w i l l coordinate i n t e r n a l a c t i v i t y by mutual adjustment. There w i l l thus be a high l e v e l of feedback, both h o r i z o n t a l and v e r t i c a l , and increased decision a c t i v i t y . Thompson (1967) points out however that t h i s mode of coordination i s c o s t l i e r than the other two (p. 56). Thus (D.32) the cost of coordination of i n t e r n a l a c t i v i t y w i l l be higher during s c a r c i t y than under abundance. Even though coordination w i l l be by mutual adjustment i t w i l l s t i l l be necessary to prevent deviance from the various mutually agreed upon sets of behaviours. Control s t r a t e g i e s which seek to insure compliance are discussed below. Control Reduction of slack r e s u l t s i n a reduced margin for error; an error which i s not c r i t i c a l under normal circumstances may r e s u l t i n organizational f a i l u r e during s c a r c i t y (Starbuck, 1965: p. 464). I t follows from the arguments antecedent to proposition D.25 as we l l from as the need to minimize the p o s s i b i l i t y of error that (D.33) the organization w i l l exercise more control over i n t e r n a l a c t i v i t i e s during s c a r c i t y than under abundance. Control may be exerted through several categories or phases of a c t i v i t y . Tannenbaum (1968: p. 275-276) i d e n t i f i e s three phases: l e g i s l a t i v e or decision-making, which involves the process of deciding upon the r u l e s , p o l i c i e s , and general actions of the organization; administrative, i . e . , the day-to-day i n t e r p r e t i n g , expediting, and -163-carrying out of l e g i s l a t i v e decisions; and sanctions, which e n t a i l s the meting out or withholding of rewards and punishments i n the process of enforcing rules and standards. The impact of s c a r c i t y on decision#making w i l l be examined l a t e r . I t s influence on the l a t t e r two phases are discussed below. Administrative Control An organization can exercise top-down con t r o l i f i t s "resources are assured" (Thompson, 1967: p. 133). This i s not the case under mode ( i ) . It has been observed that "the all-powerful chief can maintain... ( u n i l a t e r a l ) control only to the extent that he i s not dependent on others within h i s organization" (p. 132). But as pointed out e a r l i e r , s c a r c i t y w i l l r e s u l t i n a high degree of i n t r a o r g a n i z a t i o n a l interdependence. Because of both shortage of resources and high interdependence i t follows that under mode ( i i ) (D.34) the organization w i l l not be able to use strategies of u n i l a t e r a l or autocratic c o n t r o l . I t also follows that, i n contrast to that under abundance, (D.35) there w i l l be low p o t e n t i a l f o r exercise of legitimate power under mode ( i i ) s c a r c i t y . It has been observed that when "superiors (are) i n some respects dependent on t h e i r subordinates, t h e i r dependence constrains them to r e f r a i n from using a u t h o r i t a r i a n or coercive measures i n performing t h e i r duties and to r e l y , instead, on more personal, nonbureaucratic means of motivating cooperative e f f o r t " (Blau and Scott, 1962: p. 232). Also, -164-"organizations operating i n ra p i d l y changing and highly uncertain environments tend to r e l y heavily on informal structures and procedures" (Downs, 1967: p. 266). The importance of being able to respond to environmental uncertainty has been noted e a r l i e r . I t follows from the above that (D.36) administrative controls under mode ( i i ) w i l l tend to be more informal than formal, or nonprogrammed rather than programmed. Control Through Sanctions Monetary rewards are one of the many means of increased motivation (Lawler, 1973). Increased motivation i s expected to, i n the f i n a l a n a l y s i s , r e s u l t i n increased p r o d u c t i v i t y . A system of i n d i v i d u a l rewards thus, among other things, encourages i n d i v i d u a l p r o d u c t i v i t y . Increased p r o d u c t i v i t y has two implications: I t w i l l r e s u l t i n increased output and w i l l therefore require increased inflows. Also, v a r i a t i o n s i n the output of d i f f e r e n t i n d i v i d u a l s w i l l r e s u l t i n co-ordination problems—which can be resolved only through development of intermediate inventories. But environmental s c a r c i t y w i l l make i t d i f f i c u l t to eit h e r increase intake or develop material b u f f e r s . Thus, under s c a r c i t y , increases i n i n d i v i d u a l p r o d u c t i v i t y are at best s e l f -defeating, or at worst dysfunctional. I t i s suggested therefore that (D.37) organizations under mode ( i i ) w i l l not use i n d i v i d u a l rewards as a c o n t r o l l i n g device. It follows that compared to that during abundance, (D.38) there w i l l be low p o t e n t i a l f o r exercise of reward power under s c a r c i t y . -165-Even though increases i n p r o d u c t i v i t y w i l l not be encouraged, i t w i l l be necessary for the employees to maintain production. In order to motivate them to t h i s end, i t i s suggested that (D.39) organizations under mode ( i i ) w i l l use system rewards as a c o n t r o l l i n g device. (E.g., the Scanlon P l a n — K a t z and Kahn, 1966: pp. 381-388.) Deviant behaviour i s one of the many sources of error i n an organization. I t has already been pointed out that an error which i s not c r i t i c a l under normal circumstances may however r e s u l t i n organi-z a t i o n a l f a i l u r e during s c a r c i t y . In order to minimize deviant behaviour therefore, i t i s suggested that (D.40) organizational sanctions w i l l be more severe under mode ( i i ) than i n abundance. A sentry who f a l l s asleep during a peacetime maneuver w i l l be d i s c i p l i n e d : during war he w i l l be subject to a court-martial. (But, because of the high degree of interdependence severe sanctions cannot be applied too frequently. I t follows therefore that there w i l l be an intermediate p o t e n t i a l for exercise or coercive power.) Decision Making I t has already been mentioned (Chs. 2, pp. 19-21) that during abundance, c o n f l i c t among nonessential goals i s resolved through bargaining. That i s , "disagreement over goals i s taken as f i x e d " (March and Simon, 1958: p. 130), and a l l o c a t i o n decisions are arri v e d at by processes which tend to be c h a r a c t e r i s t i c of "gamesmanship": "We can i d e n t i f y a bargaining process by i t s paraphernalia of acknowledged c o n f l i c t of i n t e r e s t s , threats, f a l s i f i c a t i o n of p o s i t i o n , and ( i n -166-g e n e r a l — s i c ) gamesmanship" (March and Simon, 1958: p. 130). Under s c a r c i t y however, the goals are no longer taken as f i x e d , but are rather tested f o r consistency with other objectives, and involve, among other things, information gathering and cost-benefit a n a l y s i s . But these l a t t e r are a n a l y t i c a l processes. I t i s suggested therefore that under mode ( i i ) (D.41) resource a l l o c a t i o n decisions w i l l involve a n a l y t i c a l rather than bargaining processes. I t has been suggested by Cyert and March (1963) that organizations resolve goal c o n f l i c t by, among other means, f a c t o r i n g i t s "decision problems into subproblems and assign(ing) the subproblems to subunits i n the organization" (p. 117). These units then deal with these problems i n terms of l o c a l r a t i o n a l i t y . That i s , l o c a l d ecision centres make l o c a l decisions s a t i s f i c i n g l o c a l conditions. This i s a v i a b l e mode of decision making because, according to the authors, these subunits use, i n t e r a l i a , " acceptable-level" r u l e s : Since "the demand constraints do not uniquely define a s o l u t i o n " (p. 118), the j o i n t s o l u t i o n obtained-: by "summing up" the l o c a l decisions s a t i s f i c e s the larger organizational demand. Cyert and March observe however that "acceptable-level decision rules "tend to underexploit the environment and thus leave excess resources (slack) to absorb p o t e n t i a l inconsistencies i n the l o c a l decisions" (p. 118). I t i s suggested that i n times of s c a r c i t y there w i l l be l i t t l e or no organizational slack to absorb inconsistencies among l o c a l decisions. Also, the organization cannot a f f o r d to under-expl o i t the environment. It was pointed out e a r l i e r that environmental s c a r c i t y may r e s u l t i n considerable reduction i n the a v a i l a b i l i t y of -167-s a t i s f a c t o r y a l t e r n a t i v e s . (Fewer needles i n the haystack.) The p r i o r p r o b a b i l i t y of obtaining a s a t i s f a c t o r y j o i n t s o l u t i o n through s a t i s f i c i n g l o c a l conditions i s therefore also reduced. I t follows from the foregoing then that acceptable-level decision rules w i l l not be used for decentralized decision making i n mode ( i i ) . I t i s possible however that the various decision centres may use optimizing strategies to solve l o c a l problems. But, given a c e r t a i n degree of interdependence, t h i s requires strong assumptions about an " i n v i s i b l e hand" i n enforcing proper decisions on a system of l o c a l r a t i o n a l i t y . "Consistency requires that l o c a l optimization by a serie s of independent decision centres r e s u l t i n o v e r a l l optimization" (p. 118). We are persuaded along with Cyert and March that such an i n v i s i b l e hand does not operate i n organizations; and optimization at l o c a l l e v e l s tends to r e s u l t i n suboptimal j o i n t s o l u t i o n s . Thus whether the subunits use acceptable-level rules or optimize, decentralized decision-making i s bound to be unsatisfactory. While the above argument was presented i n the context of c o n f l i c t - r e s o l u t i o n , i t can be generalized to the t o t a l i t y of organizational decision-making. I t follows from the foregoing argument that under mode ( i i ) (D.42) organizations w i l l be les s l i k e l y to fa c t o r t h e i r problems, and (D.43) organizations w i l l be less l i k e l y to r e l y on decentralized decision making. It has been noted that, i n addition to reduced a v a i l a b i l i t y , s c a r c i t y may also r e s u l t i n increased uncertainty. Reduced a v a i l a b i l i t y -168-of material inputs i s expected to r e s u l t i n reduction i n monetary.resources. A reduced budget i n turn w i l l lead to pressure on organizational subunits towards coordination and discussion, i . e . , a greater need for j o i n t d e c i s i o n making (Kornhauser, Dubin, and Ross, 1954). Increased uncertainty of inputs i s expected to r e s u l t i n scheduling problems. This i n turn w i l l lead to increased pressure on the p a r t i c i p a n t s to control the timing of a c t i v i t i e s that impinge upon t h e i r own r o l e s — a n o t h e r impetus to j o i n t decision-making (Sherif and S h e r i f , 1956). Also, "unlimited resources tend to decrease the demand for j o i n t decision-making" (March and Simon, 1958: p. 126). Thus i t i s suggested that because of reduced budgets and greater uncertainty, (D.44) s c a r c i t y w i l l r e s u l t i n greater need f or j o i n t decision-making within the organization. P a r t i c i p a n t s i n the organizational c o a l i t i o n make c e r t a i n agree-ments on entry, and develop some mutual control-systems, e.g., a budget or a l l o c a t i o n of functions, for enforcing them. These side payment agreements are however t y p i c a l l y incomplete, and do not a n t i c i p a t e e f f e c t i v e l y a l l possible future s i t u a t i o n s . The members accordingly indulge i n secondary bargaining to elaborate and rev i s e the o r i g i n a l c o a l i t i o n agreements. I t has been observed that under normal circumstance ( i . e . , during nonscarcity) such bargaining occurs under r e l a t i v e l y t i ght constraints. "Much of the structure (of the mutual control-systems) i s taken as given" (Cyert and March, 1963: p. 33). This i s true p r i m a r i l y because "organizations have memories i n the form of precedents, and in d i v i d u a l s i n the dominant c o a l i t i o n are strongly motivated to accept the precedents as binding" (p. 33). -169-I t has been pointed out above that under s c a r c i t y the set of organizational goals i s expected to shrink. The various mutual c o n t r o l -systems w i l l therefore have to be redesigned. Thus there w i l l be no precedents to guide the p a r t i c i p a n t s , and the organization w i l l operate, as i t were, without a memory. I t i s suggested therefore that not only w i l l s c a r c i t y r e s u l t i n renegotiating of primary agreements but that, during the f i r s t few years of t r a n s i t i o n , even secondary bargaining w i l l manifest a c e r t a i n lack of structure ( i . e . , less w i l l be taken f o r granted). To extrapolate from the foregoing: (D.45) While i n the case of abundance, adaptive behaviour required learning of new associations, s u r v i v a l under s c a r c i t y w i l l require d e l i b e r a t e  unlearning of old associations as well as learning of new associations. In summary then, under mode ( i i ) , c o n f l i c t s among the r e s i d u a l goals w i l l tend to be resolved through a n a l y t i c a l processes, and l e s s use w i l l be made of precedents and past structures. Decision problems w i l l not be factored. Organizational subunits w i l l lose t h e i r autonomy, and decisions w i l l be eit h e r coordinated across the subunits ( j o i n t decision-making) or handed down from the overarching l e v e l ( c e n t r a l i z e d decision-making). (Because of high organizational interdependence there w i l l be an increase i n the importance of decision-making, coordinating, and c o n f l i c t -r e s o l u t i o n s k i l l s . I t follows that there w i l l be a high p o t e n t i a l for exercise of expert power. The various bases f o r i n t r a o r g a n i z a t i o n a l power can thus be ranked as follows: expert and referrent power—high, coercive Lack of structure i s manifested i n organizations a f t e r some exceptionally d r a s t i c organizational upheaval (Simon, 1953). -170-13 power—intermediate, and reward and legitimate power—low p o t e n t i a l . ) C o n f l i c t The problem of i n t r a o r g a n i z a t i o n a l c o n f l i c t has been alluded to i n the foregoing section. I t i s discussed below i n greater d e t a i l . There are generally two types of i n t r a o r g a n i z a t i o n a l c o n f l i c t : (a) C o n f l i c t a r i s i n g out of the d i f f e r e n t i a l l o g i c of d i f f e r e n t subunits/ functions. E.g., the production function requires a long unbroken run, while the l o g i c of the sales function i n contrast demands several d i f f e r e n t short runs. (b) C o n f l i c t a r i s i n g out of a l l o c a t i o n of scarce resources. E.g., the c o n f l i c t over budgetary allotments. S c a r c i t y under mode ( i i ) contributes to both types of c o n f l i c t . Since there i s l e s s pf a cushion to absorb i n t e r n a l v a r i a t i o n s , the subunits become incr e a s i n g l y dependent upon each other for t h e i r r o l e performance. This r e s u l t s i n the need for j o i n t decision-making. But "the existence of a p o s i t i v e f e l t need for j o i n t decision-making...will generally have (a) p o s i t i v e e f f e c t on the amount of p o t e n t i a l c o n f l i c t " (March and Simon, 1958: p. 121). To repeat,"potential for c o n f l i c t . . . increases with interdependence" (Thompson, 1967: p. 138). I t has been noted that mode ( i i ) s c a r c i t y contains a pressure for a j o i n t preference ordering. This w i l l r e s u l t , among other things, i n higher i n t r a c o a l i t i o n a l c o n f l i c t of the second v a r i e t y : " P o t e n t i a l f o r c o n f l i c t within the dominant c o a l i t i o n increases as external forces require i n t e r n a l compromise on outcome preferences" (Thompson, 1967: p. 138). Organization with slack "...generate less i n t e r n a l f r i c t i o n concerning resource a l l o c a t i o n among t h e i r various sections" (Downs, 1967: _ Since the present study i s l i m i t e d to examination of the consequences of s c a r c i t y at the macro l e v e l of a n a l y s i s , no attempt has been made to examine i n d e t a i l i t s ramifications for i n t r a o r g a n i z a t i o n a l power. -171-p. 270). But, as resources decrease, i n t r a o r g a n i z a t i o n a l r e l a t i o n s become "more nearly a s t r i c t l y competitive game" (March and Simon, 1958: p. 126) and "intergroup c o n f l i c t tends to increase" (p. 126). I t has been observed that "growth tends to reduce i n t e r n a l c o n f l i c t s i n an organization" (Downs, 1967: p. 264). That i s , i t contains a tendency for c o n f l i c t to be confined within c e r t a i n l i m i t s . "...(G)rowth takes the edge o f f d i s t r i b u t i o n a l c o n f l i c t s — i f everyone's absolute share of income i s increasing there i s a tendency not to f i g h t over r e l a t i v e shares, e s p e c i a l l y since such f i g h t s may i n t e r f e r e with growth and even lead to a lower, absolute share for a l l " (Daly, 1971: pp. 239-240). In contrast, adaptation to mode ( i i ) w i l l require divestment and shrinkage instead of growth, and w i l l thus r e s u l t i n increased c o n f l i c t . The t r a d i t i o n a l strategy of c o n f l i c t r e s o l u t i o n : making concessions a l t e r n a t e l y to the c o n f l i c t i n g p a r t i e s (Katz and Kahn, 1966: p. 95) cannot be used to resolve interdepartmental differences because of lack of surplus. As an alternate device, Cyert and March (1963) suggest that organizations may resolve c o n f l i c t by using l o c a l r a t i o n a l i t y , acceptable-level decision r u l e s , and sequential attention to goals. I t was argued e a r l i e r that less use w i l l be made of problem f a c t o r i n g and acceptable-level decision rules under s c a r c i t y . Thus the f i r s t two procedures w i l l not be a v a i l a b l e for c o n f l i c t r e s o l u t i o n . Use of sequential attention assumes the existence of a "time buffer between goals (which) permits the organization to solve one problem at a time" (p. 118). I t also assumes that the various problems can be s a t i s f a c t o r i l y resolved, at least for c e r t a i n lengths of time. I t i s suggested that under modes ( i i ) and ( i i i ) the material input problem may -172-not be at a l l amenable to s a t i s f a c t o r y r e s o l u t i o n , i . e . , i t w i l l always pose an operating constraint. Since the assumption fundamental to the concept of sequential attention w i l l not hold under s c a r c i t y , i t follows that t h i s procedure too w i l l not be a v a i l a b l e for c o n f l i c t r e s o l u t i o n . It follows from the foregoing that p o t e n t i a l f o r i n t r a o r g a n i z a t i o n a l c o n f l i c t w i l l increase under mode ( i i ) because of (a) elimination of loose couplings, (b) s c a r c i t y of resources, and (c) reduced absolute shares for members of the c o a l i t i o n . Also the t r a d i t i o n a l procedures for c o n f l i c t r e s o l u t i o n w i l l no longer be v i a b l e ; , I t i s expected therefore that the organization w i l l be characterized by a higher l e v e l of c o n f l i c t . I t i s necessary however to q u a l i f y t h i s conclusion. It was mentioned e a r l i e r that mode ( i i ) s c a r c i t y w i l l r e s u l t i n a r e t r a c t i o n of some demands. Expectations of continued s c a r c i t y w i l l cause a downward adjustment of a s p i r a t i o n l e v e l s , and the organization w i l l be redesigned, as i t were, to correspond to the r e a l i t i e s of the future. Insofar as the residual' demands are r e a l i s t i c and the reorgani-zation i s appropriate, i t i s suggested that there w i l l be a reduction i n the p o t e n t i a l for c o n f l i c t . I t has also been observed that " i n the face of a threat from the outside, a human group, u n i t , or society subordinates i t s i n t e r n a l c o n f l i c t " (Berelson and Steiner, 1964: p. 622). I t has been pointed out that operation under mode ( i i ) i s i n a way s i m i l a r to l i v i n g under a threat. I t i s suggested therefore that the members of the c o a l i t i o n -173-w i l l themselves tend to keep c o n f l i c t under c o n t r o l . It has been argued that s c a r c i t y w i l l r e s u l t i n greater p o t e n t i a l for c o n f l i c t . Certain c o n f l i c t reduction/resolution mechanisms unique to the mode w i l l however become operative under mode ( i i ) . I t i s not possible therefore to make any predictions about the t o t a l l e v e l of 14 c o n f l i c t a f t e r the t r a n s i t i o n without further i n v e s t i g a t i o n . Summary The various processes c h a r a c t e r i s t i c of mode ( i i ) s c a r c i t y are summarized i n Table V and compared with those during abundance. The consequences of s c a r c i t y for organizational structures are discussed below. Structure Katz and Kahn (1966) observe that "An organization i n a r e l a t i v e l y stable environment with some assurance of inputs into the system w i l l require less attention to changes i n structure than an organi-zation i n a rapidly changing environment " (p. 331). I t follows that under s c a r c i t y more attention to changes i n structure w i l l be required. But organizational structure cannot be changed frequently. Thus, i n order that the organization can adequately ex p l o i t environmental changes and the consequent v a r i a t i o n s i n i n t e r n a l work loads, a "changeability" w i l l have to be b u i l t into the structure. Other things being equal therefore, _ I t i s believed however that c o a l i t i o n members w i l l not be able to make the t r a n s i t i o n from abundance to s c a r c i t y s u c c e s s f u l l y : they w i l l l i v e , i n part, on t h e i r memories of "better days" and w i l l hence always remain d i s s a t i s f i e d . (The March and Simon general model of adaptive motivated behaviour (see, pp. 16-181 t r u l y r e f l e c t s , i n our opinion, the North American culture.) -174-TABLE V COMPARISON OF INTRAORGANISATIONAL PROCESSES PARTICULAR TO MODE ( i i ) SCARCITY WITH THOSE CHARACTERISTIC OF ABUNDANCE Process Abundance Sc a r c i t y Coordination 1. Degree of coordination required Low High 2. Mode of coordination Coordination by % i ) standardisation, or ( i i ) planning, or ( i i i ) mutual adjustment* Coordination by mutual adj us tment 3. Cost of coordination Low High Control 1.. Amount of c o n t r o l exercised over i n t r a o r g a n i s a t i o n a l a c t i v i t i e s Low High 2. P o t e n t i a l f o r a p p l i c a t i o n of u n i l a t e r a l or auto-c r a t i c c o n t r o l High Low 3. Mode of administrative .control Formal or informal* / Informal (nonprogrammed) 4. Type of reward systems used as a c o n t r o l l i n g device .Individual and/or group rewards* Group rewards 5. P o t e n t i a l f o r use of i n d i v i d u a l rewards as a c o n t r o l l i n g device High Low 6. Severity of sanctions Low High -175-TABLE V (CONTINUED) Process Abundance Scarc i t y Bases of power 1. P o t e n t i a l for exercise of legitimate power High Low 2. P o t e n t i a l for exercise of reward power High Low Decisionmaking 1. . Amount of d e c i s i o n -making a c t i v i t y Low High 2. Processes used f o r resource a l l o c a t i o n decision-making Bargaining A n a l y t i c a l 3. Use of problem f a c t o r i n g as a d e c i s i o n -making strategy More Less u 4. Preference between ce n t r a l i s e d or decentralised decision-making Can use either strategy, i . e . , decisionSmaking may be e i t h e r c e n t r a l i s e d or decentralised* Centralised d e c i s i o n -making preferred 5. Preference between u n i l a t e r a l or j o i n t decision-making CSmii. use e i t h e r strategy i . e . , decision-making may be e i t h e r u n i l a t e r a l or j o i n t * J o i n t decision-making preferred 6. Degree of r e l i a n c e on past structures and precedents for . decision-making High Low Lej irlii-n:ga:bTe|iaVd!oaiirior S u r v i v a l f a c i l i t a t e d by . learning new associations S u r v i v a l f a c i l i t a t e d by ( i ) learning new associations as w e l l as ( i i ) unlearning old associations *These are instances of a high degree of e q u i f i n a l i t y under abundance -176-(D.46) the organization w i l l need a more f l e x i b l e structure under mode ( i i ) than during abundance. I t has already been pointed out that communication under s c a r c i t y w i l l tend to be informal rather than formal. The experimental work of Sherif and case studies of organizations show that the presence of a threat to the l i f e of an organization w i l l " r e s u l t i n an increase i n the congruence of the formal and informal communication structures" (Triandis, 1971: p. 70). Thut t h i s i s a n t i t h e t i c a l to mechanistic structures (Burns and Stalker, 1968: pp. 119-122). As argued i n Chapter 2 (pp. 29-30) some of the other assumptions underlying mechanistic organizations do not hold under s c a r c i t y . I t follows therefore that (D.47) management systems of organizations under mode ( i i ) w i l l tend to be nonmechanistic rather than mechanistic. 1^ Berelsen and Steiner (1964) i n t h e i r inventory of s c i e n t i f i c findings observe that "an organization i s more l i k e l y to be strongly c e n t r a l i z e d during external c r i s e s than during normal periods" (p. 370). It has been argued above that .operation under s c a r c i t y w i l l be character-i s t i c of that under a c r i s i s . I t has been observed that "authority... i s more decentralized" (p. 270) i n organizations with slack (Downs, 1967). Scarcity however r e s u l t s i n reduction of slack and requires a high degree of coordination of i n t r a o r g a n i z a t i o n a l a c t i v i t i e s . Operation under a c r i s i s climate together with a high need f or coordination w i l l have the following consequence: "''"'Burns and Stalker (1968) i d e n t i f i e d two mutually exclusive forms of manage-ment systems: mechanistic and organic. It i s suggested that these two descriptions do not exhaust the t o t a l i t y of the various forms of management systems. Thus nonmechanistic i s not necessar i l y organic, but covers instead a l l the r e s i d u a l forms. -177-(D.48) authority within an organization w i l l be more c e n t r a l i z e d under mode ( i i ) than i n abundance. (It may be noted however that c e n t r a l i z a t i o n of authority i s only one of the possible means of coordination.) Melman (1958) has defined control i n terms of the r a t i o of administrative to production personnel. I t follows from the need for increased control and coordination that (D.49) organizations w i l l have a higher r a t i o ? of managers to workers during s c a r c i t y than i n abundance."^ Leading Subsystem It has been pointed out that organizations are expected to have l i t t l e or no slack under s c a r c i t y . Thus they are highly interdependent upon other organizations and the community for t h e i r s u r v i v a l . (Note: under c e r t a i n circumstances slack can also be defined i n terms of independ-ence.) Also, they are expected to manipulate these l a t t e r elements to obtain c e r t a i n concessions and advantages. I t has been observed that, other things being equal, the f a c i l i t y with which such support i s obtained varies as the degree of " l e g i t i m i z a t i o n " of the organization or i t s s o c i a l image (Thompson, 1967: p. 88). But such l e g i t i m i z a t i o n i s the function of the i n s t i t u t i o n a l l e v e l (Parsons, 1951). It was suggested i n the previous chapter that organizations w i l l i n c reasingly use p o l i t i c a l s t r a t e g i e s to solve economic problems. But p o l i t i c a l strategies f a l l i n the domain of the i n s t i t u t i o n a l subsystem. Computerized information systems are not l i k e l y to replace human managers because the former are both r e l a t i v e l y more expensive and i n f l e x i b l e . -178-Thus, while the managerial subsystem i s t y p i c a l l y the leading subsystem during abundance (Katz and Kahn, 1966: p. 63; Cyert and March, 1963: pp. 240-241), i t i s suggested that, because of the foregoing reasons, (D.50) the i n s t i t u t i o n a l subsystem w i l l become the leading subsystem under mode ( i i ) . Continuing with the above argument, i t i s possible to make the following rather broad generalization: Environment Growing Steady-state Shrinking Focus upon Growth, innovation S t a b i l i z a t i o n Scrambling for s u r v i v a l Leading subsystem Managerial Supervisory (manage-ment by exception) I n s t i t u t i o n a l Purchasing Subsystem Ammer (1974) conducted a survey of 750 U.S. company managers to obtain t h e i r views of t h e i r purchasing departments. Not s u r p r i s i n g l y , h i s respondents maintained that l i t t l e a ttention was paid to the purchasing a c t i v i t y during normal times ( i . e . , abundance), and the procurement function did not/was not expected to exercise any degree of d i s c r e t i o n . "As long as material flows i n a reasonably smooth fashion from su p p l i e r s , management i s simply not interested i n what i s happening i n the purchasing department" (Ammer, 1974: p. 37). He also found that the procurement subsystem was t y p i c a l l y coupled to the technological core and "served", as i t were, the production subsystem. Since i t must be free to respond to environmental uncertainties during s c a r c i t y , i t i s suggested that the purchasing subsystem w i l l have -179-to be uncoupled from the production function. "When materials... are d i f f i c u l t to obtain, the stuctures responsible f or t h e i r procurement must face more completely toward the outside world and divorce themselves i n part from the production...function" (Katz and Kahn, 1966: p. 81). I t has been observed that i n the event of a c r i s i s , the purchase a c t i v i t y i s temporarily taken over by top management (lar g e l y because the former i s not designed to handle c r i t i c a l r e s p o n s i b i l i t i e s ) ^ When s c a r c i t y i s expected to be the prevalent mode however, i t i s suggested that under mode ( i i ) (D.51) the procurement function within the organization w i l l be restructured so that i t i s an outward-facing loosely coupled unit able to exercise high l e v e l s of d i s c r e t i o n . I t must be pointed out that the purchasing subsystem w i l l not be a boundary-spanning unit i n the sense i n which the. term-is used by Thompson (1967). According to Thompson a boundary spanning unit mediates between the environment and the closed-system core and i t s actions are determined l a r g e l y by the l o g i c of the l a t t e r . "(O)rganizations subject to r a t i o n a l i t y norms seek to i s o l a t e t h e i r t e c h n i c a l cores from environmental influences by e s t a b l i s h i n g boundary spanning u n i t s . . . " (p. 67). Thus while giving p r i o r i t y to the demands of the production subsystem, purchasing may, in the extreme, attempt to obtain a compromise between the cert a i n t y require-ments of the tec h n i c a l core and the environmental uncertainty. I t would thus trade-off the degree of a v a i l a b i l i t y with the ce r t a i n t y of a v a i l a b i l i t y . "^There i s a s t r i k i n g p a r a l l e l i n the personnel function: "The securing of personnel f o r given periods of time i n i n d u s t r i a l organizations through contacts with unions i s not handled through the personnel o f f i c e r but through a v i c e president i n charge of i n d u s t r i a l r e l a t i o n s . " (Katz and Kahn, 1966: p. 81) -180-Under s c a r c i t y , i n contrast, the purchasing unit w i l l not seek such trade-offs. I t i s suggested that under mode ( i i ) (A.13) an organization w i l l prefer (i ) high expected a v a i l a b i l i t y of material together with high uncertainty of a v a i l a b i l i t y over ( i i ) low expected a v a i l a b i l i t y of material together with high c e r t a i n t y of a v a i l a b i l i t y . I t follows that the procurement function w i l l be more part of the  environment, as i t were, leaving the tec h n i c a l core to absorb f l u c t u a t i o n s and uncertainty. Summary The consequences of mode ( i i ) s c a r c i t y for organizational structures are presented i n Table VI and compared with those under abundance. Net E f f i c i e n c y Abandonment of nonessential goals, withdrawal of some c o a l i t i o n members, and demarketing of c e r t a i n products w i l l r e s u l t i n a smaller sized organization. While organizational s u r v i v a l w i l l be insured by these changes, there are c e r t a i n p e n a l t i e s , e.g., loss of economies of scale and s p e c i a l i z a t i o n i n personnel and programs, associated with the shrinkage. Also, there w i l l be an increase i n cost due to use of i n e f f i c i e n t technology, increased decision-making and communication a c t i v i t y , and a larger managerial component. On the other hand, reorgani-zation i s expected to r e s u l t i n continuing benefits due to reduction i n payment and u t i l i z a t i o n i n e f f i c i e n c i e s as we l l as elimination of marginal::!, a c t i v i t i e s . Without further i n v e s t i g a t i o n however i t i s not possible to -181-TABLE VI COMPARISON OF CERTAIN ORGANISATIONAL STRUCTURES PARTICULAR TO MODE ( i i ) SCARCITY WITH THOSE UNDER ABUNDANCE Str u c t u r a l C h a r a c t e r i s t i c Abundance Sca r c i t y Degree of f l e x i b i l i t y as a requirement f o r s u r v i v a l Can be eit h e r high or low* Hirr. High V i a b i l i t y of the mechanistic forme of management structure Viable under c e r t a i n circumstances Not v i a b l e Locus of authority May be eit h e r c e n t r a l -ised or decentralised* Centralised Ratio of management personnel to workers R e l a t i v e l y low High Leading subsystem Managerial I n s t i t u t i o n a l C h a r a c t e r i s t i c s of the purchasing subsystem (i) "serves" the production and sales subsystems ( i ) independent of the production and sales sub-systems ( i i ) structured as a boundary spanning unit ( i i ) " c l o s e r " to the environment than under abundance Indicates a high degree of e q u i f i n a l i t y . -182-predict whether the post-adaptive organization i s more- or l e s s e f f i c i e n t than e i t h e r ( i ) a s i m i l a r organization of the same s i z e during abundance, or ( i i ) i t s e l f before reorganization. Adaptive s t r a t e g i e s under mode ( i i ) s c a r c i t y were discussed above. The implications of s u r v i v a l under reduced a v a i l a b i l i t y and increased un-c e r t a i n t y were examined, and t h e i r consequences for organizational processes and structures analyzed. Certain norms of r a t i o n a l i t y were developed. Organizational responses to expectations of continuing reduction i n e s s e n t i a l goods w i l l now be examined. MODE ( i i i ) (Continuous reduction i n a v a i l a b i l i t y of supplies) The assumptions underlying a mode ( i i ) s c a r c i t y included a high p r i o r p r o b a b i l i t y of s u r v i v a l (as a consequence of c e r t a i n adaptive responses). When there i s no expectation of the a v a i l a b i l i t y of supplies s t a b i l i z i n g however, the organization cannot survive as an independent e n t i t y . I t i s foredoomed to f a i l u r e . Assuming that the organization w i l l prefer continuity ( i n some form) to closure, i t i s suggested that the operational problem under mode ( i i i ) w i l l be: merger or consolidation. "A merger i s a combination of two corporations where only one survives. The merged corporation goes out of existence...(C)onsolidation ...involves the combination of two or more corporations whereby an e n t i r e l y new corporation i s formed" (Van Home, 1974: p. 605). A l t e r n a t i v e l y , one company can purchase e f f e c t i v e working co n t r o l of another company and act as a holding company. No d i s t i n c t i o n w i l l be made among these three a l t e r n a t i v e s however for the purpose of the present a n a l y s i s . The f o c a l -183-organization w i l l be c a l l e d the " s e l l e r " and the referent organization w i l l be termed the "buyer" i n a l l cases. It i s suggested that i n order to "survive" the f o c a l organic zation may seek ( i ) h o r i z o n t a l i n t e g r a t i o n , ( i i ) v e r t i c a l i n t e g r a t i o n , or ( i i i ) merger with.a t o t a l l y d i s s i m i l a r organization. The buyer seeks c e r t a i n advantages and synergies i n the a c q u i s i t i o n . Horizontal and v e r t i c a l i n t e g r a t i o n provide some synergies. I t w i l l be assumed for the purpose of the argument i n t h i s section that, because of these synergies, and other things being equal, the buyer w i l l prefer v e r t i c a l or h o r i z o n t a l i n t e g r a t i o n over consolidations of any other type. This preference w i l l however r e s u l t i n c e r t a i n power for the s e l l e r r e l a t i v e to the buyer. I t follows therefore that the f o c a l organization w i l l prefer v e r t i c a l or h o r i z o n t a l i n t e g r a t i o n over sale to any other buyer. Preference between h o r i z o n t a l and v e r t i c a l i n t e g r a t i o n i s examined below. Horizontal i n t e g r a t i o n was i d e n t i f i e d i n Chapter 6 as e s s e n t i a l l y a cooperative extraorganizational strategy. I t was also pointed out that such strategies have low p r i o r p r o b a b i l i t i e s of long run success: since the p r o t e n t i a l buyer i s s i m i l a r to the s e l l e r , the former w i l l also experience scarcity.'.' Thus, the buyer w i l l also be looking for merger opportunities under mode ( i i i ) . Consolidation with another " s t r i c k e n " organization w i l l not however s u b s t a n t i a l l y increase i t s chances of s u r v i v a l . ' I t i s suggested therefore that, other things being equal, -184-under mode ( i i i ) (E.l) organizations w i l l not seek to merge with other s i m i l a r organizations. There are two p o s s i b i l i t i e s of v e r t i c a l i n t e g r a t i o n : upward and downward. Downward i n t e g r a t i o n requires the buying organization to be a customer of the f o c a l organization. It may be noted that s c a r c i t y w i l l r e s u l t i n reduction of output of the l a t t e r . This output may be e i t h e r e s s e n t i a l or i n e s s e n t i a l for the p o t e n t i a l buyer. If i t i s e s s e n t i a l , then mode ( i i i ) s c a r c i t y for the s e l l e r implies s i m i l a r s c a r c i t y f or the buyer. That i s , the customer organization too expects to f a i l i n the long run due to continuing reduction i n the a v a i l a b i l i t y of i t s e s s e n t i a l good. Since the s e l l e r i s unable to f o r e s t a l l s c a r c i t y (for i t s e l f ) i t s a c q u i s i t i o n w i l l not resolve the material supply problem of the p o t e n t i a l buyer. Hence there i s l i t t l e incentive for the l a t t e r to merge with i t s s u p p l i e r . The f o c a l organization therefore has l i t t l e power with respect to i t s customer organization, and cannot obtain any s p e c i a l advantages from the l a t t e r . I f the output of the f o c a l organization i s not e s s e n t i a l for the p o t e n t i a l buyer, then s c a r c i t y f o r the former w i l l not n e c e s s a r i l y r e s u l t i n s c a r c i t y f or the l a t t e r . I.e., there i s no i n e v i t a b l e penalty associated with the merger. Thus given a choice among (i ) consolidation with a t o t a l l y d i s s i m i l a r organization, ( i i ) upward i n t e g r a t i o n with a company whose output i s e s s e n t i a l to i t ' f o r s u r v i v a l , and ( i i i ) upward int e g r a t i o n with an organization whose output i s not e s s e n t i a l for s u r v i v a l (and where a l l three are experiencing mode ( i i i ) s c a r c i t y ) , i t i s suggested that the p o t e n t i a l buyer w i l l prefer the l a s t -185-18 a l t e r n a t i v e . This preference w i l l r e s u l t i n power for the f o c a l organi-zation with respect to i t s customer organization, and i t w i l l be able to obtain some advantages i n the consolidation. I t follows that, under mode ( i i i ) , (E.2) the f o c a l organization w i l l prefer downward int e g r a t i o n with a buyer for whom i t s output i s not e s s e n t i a l over a customer organization for whom i t s output i s e s s e n t i a l . Three a l t e r n a t i v e s can be i d e n t i f i e d with respect to upward i n -tegration. The p a r t i c u l a r organization may seek to merge with ( i ) i t s supplier of the f o c a l e s s e n t i a l good, where the s c a r c i t y i s contrived by the l a t t e r ; ( i i ) s u pplier of the f o c a l e s s e n t i a l good, where the supplier has no co n t r o l over the a v a i l -a b i l i t y of the p a r t i c u l a r good; and ( i i i ) s u pplier of any of Ithe other e s s e n t i a l goods consumed by i t . ^ Each has d i f f e r e n t implications for the consolidation. I t i s possible that a p a r t i c u l a r supplier may force i t s customer-^organization into a merger (or l i q u i d a t i o n ) by refusing to supply goods t i l l the l a t t e r submits to the takeover. A f t e r the consolidation has been accomplished however, supplies may be resumed and the (now acquired) f o c a l organization may operate as i t did before s c a r c i t y . It may be noted that under mode ( i i i ) the s e l l e r i s , by d e f i n i t i o n , h e l p l e s s . —— Because of the assumption made i n the beginning of the secti o n , the buyer w i l l prefer i n t e g r a t i o n to merger with a d i s s i m i l a r organization. It may be noted that the preference for the supplier of i n e s s e n t i a l goods i s only r e l a t i v e to the other a l t e r n a t i v e s , and does not imply a strong preference i n absolute terms. 19 I t i s believed that upward i n t e g r a t i o n with a supplier of i n e s s e n t i a l goods w i l l not present any s p e c i a l synergies. Such mergers are therefore expected to be s i m i l a r to those with " t o t a l l y d i s s i m i l a r " organizations. -186-Thus , a l l possible buyers exercise equal power with respect to i t . The contriver of s c a r c i t y however has a d e f i n i t e p r i o r i n t e r e s t i n the a c q u i s i t i o n . This i n t e r e s t gives the s e l l e r some power i n r e l a t i o n to the buyer. I t i s expected therefore that, other things being equal, the f o c a l organization w i l l be able to obtain a better deal from the a r c h i t e c t of i t s demise than from any other organization. I t i s therefore suggested that under mode ( i i i ) , when the s c a r c i t y i s contrived by the s u p p l i e r , the f o c a l organization w i l l seek to merge with the l a t t e r . It may be noted that a l t e r n a t i v e ( i i ) above i s s i m i l a r to downward int e g r a t i o n where the output of the f o c a l organization i s e s s e n t i a l f o r the p o t e n t i a l buyer. For reasons discussed e a r l i e r , i t i s suggested that there i s l i t t l e incentive f o r upward in t e g r a t i o n with the supplier of the f o c a l good when the l a t t e r has no con t r o l over i t s inputs. The technology of an organization i s designed to process, by d e f i n i t i o n , i t s e s s e n t i a l goods. The organization may f a i l because of n o n a v a i l a b i l i t y of a p a r t i c u l a r good. I t may be revived (or f a i l u r e prevented) by redesigning i t , i . e . , by changing i t s goals and the technology, such that the f o c a l good i s no longer e s s e n t i a l . I f the change i s marginal then i t w i l l be possible to r e t a i n and use most of the e x i s t i n g technology. It i s suggested that the supplier of the nonscarce e s s e n t i a l good may acquire the f o c a l organization and, by making some changes, revive i t . Thus i t w i l l obtain a d e f i n i t e advantage from the merger. Expectations of t h i s advantage w i l l r e s u l t i n power for the s e l l e r r e l a t i v e to the buyer. I t may be noted however that t h i s power w i l l be l e s s when compared to that over the contri v e r of s c a r c i t y (because the l a t t e r does not have to make any changes — i n c u r c o s t s — t o revive the acquired organization.) -187-I t follows from the above that, under mode ( i i i ) , (E.3) the f o c a l organization w i l l prefer upward i n t e -gration i n the following order of p r i o r i t y (from high to low): (i) with the contriver of s c a r c i t y ; ( i i ) the supplier of nonscarce e s s e n t i a l goods; and ( i i i ) the supplier of the f o c a l good, where the supplier cannot increase i t s output at w i l l . Let us now compare preferences across upward in t e g r a t i o n p o s s i b i l i t i e s on the one hand and downward i n t e g r a t i o n p o s s i b i l i t i e s on the other hand. I t i s believed that contrivance of s c a r c i t y suggests the strongest possible p r i o r i n t e r e s t i n the merger. Because of the resultant power, i t i s suggested that consolidation with the contriver  of s c a r c i t y w i l l be given highest p r i o r i t y . The advantage accrued to the supplier of the nonscarce e s s e n t i a l good w i l l vary inversely as the amount of change necessary to revive the acquired organization. I f t h i s change i s not expected to be extensive, i t i s suggested that the f o c a l organization w i l l give preference to in t e g r a t i o n with the supplier of the nonscarce good over downward int e g r a t i o n . It i s d i f f i c u l t to predict merger preferences when the change i s expected to be extensive. The consolidations r e s u l t i n g either from upward in t e g r a t i o n with the "helpless" supplier of the f o c a l good ( i . e . , where the supplier cannot increase output at w i l l ) , or from downward i n t e g r a t i o n where the output of the f o c a l organization i s e s s e n t i a l for the customer organization, are -188-both foredoomed to f a i l u r e under mode ( i i i ) . I t i s suggested therefore that under mode ( i i i ) (E.4) the f o c a l organization w i l l prefer merger with t o t a l l y d i s s i m i l a r organizations over either ( i ) the sup p l i e r of the f o c a l good when the l a t t e r i s not the contriver of s c a r c i t y , or ( i i ) the customer organization where the output of the f o c a l organization i s e s s e n t i a l to the l a t t e r . Summary It was assumed that when supplies of the e s s e n t i a l good are expected to continue to diminish, a f f l i c t e d organizations w i l l seek to merge or consolidate with other organizations. Arguing on the basis of buyer i n t e r e s t and resultant power for the s e l l e r v ; c e r t a i n p r e s c r i p t i o n s for preferences among merger a l t e r n a t i v e s were made. This section concludes the study of organizational responses to r e l a t i v e s c a r c i t y . The v i a b l e organization, i . e . , the organization l i k e l y to survive during s c a r c i t y , w i l l be b r i e f l y described i n the next (and concluding) chapter. -189-CHAPTER 8 SCARCITY AND THE ORGANIZATION The concluding chapter w i l l begin with a b r i e f reference to the work done i n the previous chapters. Summary Organizations enjoy considerable e q u i f i n a l i t y under abundance. They are free to choose from among several alternate structures or s t r a t e g i e s , and the choice i s i n a very r e a l sense " a r b i t r a r y " . Under s c a r c i t y however lack of a v a i l a b i l i t y of raw materials becomes the operating constraint. This r e s u l t s i n shrinkage of the set of organi-z a t i o n a l a l t e r n a t i v e s . In the l i m i t , the organization has no freedom and, i n order to insure s u r v i v a l , must operate i n c e r t a i n s p e c i f i c ways. These patterns of behaviour follow from the imperatives of s c a r c i t y a n d are not i n any way a r b i t r a r i l y determined. I t was suggested that so f a r there i s no knowledge i n OT of s c a r c i t y r e l a t e d s u r v i v a l behaviour. Evidence to t h i s e f f e c t was presented i n Chapter 2. An attempt was made i n the present thesis to develop such an understanding. The concept of s c a r c i t y was defined, developed, and operationalized i n Chapters 3 and 4. The f o c a l problem: consequences of reduction i n a v a i l a b i l i t y of matter-energy inputs for organizational behaviour, was defined i n Chapter 5. Certain p r e s c r i p t i o n s for i n t e r o r g a n i z a t i o n a l behaviour were developed i n Chapter 6. The p a r t i c u l a r s t r a t e g i e s to be used under norms of r a t i o n a l i t y , i . e . , to insure s u r v i v a l under s c a r c i t y , -190-were described i n some d e t a i l . D i f f e r e n t modes of s c a r c i t y were i d e n t i f i e d i n Chapter 7: I t was noted that s c a r c i t y may be ( i ) temporary, ( i i ) permanent, but not so severe as to cause f a i l u r e i n the long run, and ( i i i ) gradually worsening s c a r c i t y such that the organization expects to f a i l i n the long run. Organizational responses to the three modes of s c a r c i t y were discussed. (It may be noted that by observing i n t r a o r g a n i z a t i o n a l strategies i t i s possible to i d e n t i f y organizational expectations of the mode of s c a r c i t y . ) P r e s c r i p t i o n s f o r behaviour under norms of r a t i o n a l i t y were developed. The various p r e s c r i p t i o n s i n Chapters 6 and 7 were presented i n p r o p o s i t i o n a l forms. Most of these are d i r e c t l y testable. I t i s suggested that these propositions may be used as bases to obtain empirical data p a r t i c u l a r to s c a r c i t y , and to contrast i t with behaviour character-i s t i c of abundance. The " S c a r c i t y " Organization It i s believed that an understanding of behaviour appropriate to mode ( i i ) i s c r u c i a l to an appreciation of the d i f f e r e n c e between abundance and s c a r c i t y . Qy,er; 50 propositions which describe various organizational c h a r a c t e r i s t i c s and s t r a t e g i e s under mode ( i i ) s c a r c i t y were presented. The more c r i t i c a l of these propositions are summarized "'"Some of the strategies described i n Chapter 6 are p o l i t i c a l i n nature. They are not taught i n conventional schools of business and are learned only through experience. It i s believed that the current environmental s c a r c i t y , together with the relevance of p o l i t i c a l s t r a t e g i e s to s u r v i v a l under such conditions, constitute adequate j u s t i f i c a t i o n f o r formalized teaching of such strategies to managerial personnel. I t i s recommended that courses which address themselves to organizational p o l i t i c s be developed and taught in schools of business. -191-i n Figure 16 as a diagrammatic d e s c r i p t i o n . These describe an organi-zation which i s expected to be v i a b l e under conditions of permanent s c a r c i t y . I t may be noted that the organization as described i n Figure 16 contains an inherent inconsistency. I t was pointed out i n Chapter 7 that authority tends to be c e n t r a l i z e d during a c r i s i s (proposition D )A8). Centralized authority i s t y p i c a l l y associated with u n i l a t e r a l or auto-c r a t i c c o n t r o l . But because resources are not assured the top echelon cannot exercise u n i l a t e r a l c o n t r o l (proposition D.34). The two imperatives are thus mutually contradictory. This anomaly i s resolved below. 2 Complete Certainty I t i s possible to i d e n t i f y three types of uncertainty regarding a v a i l a b i l i t y of material: ( i ) complete c e r t a i n t y , ( i i ) medium uncertainty, and ( i i i ) high uncertainty. When there i s complete (or a very high degree of) c e r t a i n t y regarding supplies, the organization can plan i t s s i z e , structure, and l e v e l of a c t i v i t i e s to correspond to the a v a i l a b i l i t y of inputs. The l e v e l of inputs w i l l be reduced under mode ( i i ) s c a r c i t y . But i f the organization can make the t r a n s i t i o n from a high to low l e v e l of a c t i v i t y s u c c e s s f u l l y — a n d the various c o a l i t i o n members can lower t h e i r a s p i r a t i o n l e v e l s to s u i t — t h e now smaller organization w i l l operate under conditions of r e l a t i v e abundance. The low l e v e l of inflows w i l l be adequate for the organizational purpose, and w i l l not pose an operating constraint (unless _ Discussion with Peter Frost was h e l p f u l i n a r r i v i n g at the conclusions stated i n t h i s and the next two sections. FIGURE 16 APPARENT INCONSISTENCY WITHIN THE ORGANIZATION SCARCITY Reduced slack Decision problem not factored Decis ion-making (i) Joint or ( i i ) Centralized High inter-dependence High need for coordination Coordination by (i ) Mutual adjustment or ( i i ) Centralized authority C r i s i s climate Resources not assured Authority Centralized Low tolerance for i n t e r n a l l y induced un-certainty S t r i c t controls Informal controls-M u l t i l a t e r a l controls INCONSISTENCY High degree of extern a l l y i n -duced uncertainty Wide v a r i a t i o n s i i—i i n the l e v e l of <D organizational i a c t i v i t y Organization must be f l e x i b l e -193-of course, the organization seeks to grow again). The structure of the new organization may be s i m i l a r to any of the v i a b l e structures under abundance, e.g., bureaucratic. Medium Uncertainty A medium l e v e l of uncertainty coupled with s c a r c i t y of supplies w i l l r e s u l t i n a c e r t a i n degree of anxiety. This w i l l r e s u l t i n some (but not high) pressure f o r c e n t r a l i z a t i o n of authority. The i n t e r s dependence posed by the uncertainty as well as s c a r c i t y however subsume a need for coordination by mutual adjustment and j o i n t decision-making. It i s believed that the l a t t e r pressure w i l l be strong enough to override the tendency towards c e n t r a l i z a t i o n . These dominant i n t e r a c t i v e processes w i l l be compatible with the need f o r m u l t i l a t e r a l c o n t r o l s , and thus there w i l l be no i n t e r n a l inconsistency. The various c h a r a c t e r i s t i c s p e c u l i a r to operation under s c a r c i t y accompanied by a medium l e v e l of uncertainty are presented i n Figure 17 as a^diagrammatic d e s c r i p t i o n . I t i s submitted that the organization described i n Figure 17 i s i d e a l l y suited to operation under s c a r c i t y when the uncertainty regarding a v a i l a b i l i t y of material i s of a medium l e v e l . This i d e a l type w i l l be l a b e l l e d the medium uncertainty s c a r c i t y organi-zation. High Uncertainty S c a r c i t y of organizational inputs may sometimes be associated with a high degree of uncertainty regarding t h e i r a v a i l a b i l i t y . I t i s submitted that under such circumstances the organization w i l l be character-FIGURE 17 THE MEDIUM UNCERTAINTY SCARCITY ORGANIZATION SCARCITY ( r e l a t i v e l y low l e v e l of anxiety) Reduced slack Resources not assured * Decision problem not factored * High interdependence High need f or coordination * Joint decision making * Coordination by mutual adjustment * Key descriptors Low tolerance for i n t e r n a l l y induced uncertainty * S t r i c t controls * Informal or non-programmed controls * M u l t i l a t e r a l controls High degree of extern a l l y i n -duced uncertainty Wide v a r i a t i o n s ^ i n the l e v e l of organizational a c t i v i t y I * Organization must be f l e x i b l e . I.e., r e l a t i v e l y loose job d e s c r i p t i o n s , varying spans of co n t r o l , greater heterogeneity within the subunits high speed of response to non routine s t i m u l i , l e s s r e l i a n c e on SOPs, and f l e x i b l e technology, etc. -195-ized by a high degree of anxiety and w i l l t r u l y operate i n a c r i s i s climate. A high l e v e l of anxiety however t r i g g e r s regressive forces i n i n d i v i d u a l s and causes them to indulge i n immature patterns of behaviour (Maslow, 1965; 1970). I t i s suggested that as the l e v e l of anxiety mounts, the employees at the lower h i e r a r c h i c a l l e v e l s w i l l abrogate t h e i r decision-making and control r e s p o n s i b i l i t i e s . Also, they w i l l cease to exercise authority, and the locus of authority w i l l , r e v e r t to those more used to exercise of d i s c r e t i o n . In other words the locus of authority w i l l be c e n t r a l i z e d by default. I t follows that i n the highly s t r e s s f u l s i t u a t i o n s the top echelon w i l l exercise u n i l a t e r a l c o n t r o l . A high degree of uncertainty subsumes a pressure for speedy response to environmental changes. The cost of j o i n t decision-making under extreme uncertainty w i l l be p r o h i b i t i v e l y h i g h — b o t h i n terms of the coordinative e f f o r t required and the time taken. Consequently, both decision-making and coordination w i l l be c e n t r a l i z e d . This change w i l l be i n harmony with the pressure for c e n t r a l i z a t i o n of authority because of the high l e v e l of anxiety. Thus there w i l l be no i n t e r n a l inconsistencies during operation under s c a r c i t y associated with high uncertainty of a v a i l a b i l i t y . ' The various c h a r a c t e r i s t i c s p e c u l i a r to operation under s c a r c i t y accompanied by high uncertainty are presented i n Figure 18 as a diagrammatic . d e s c r i p t i o n . i t i s submitted that the organization described i n Figure 18 i s i d e a l l y suited to operation under s c a r c i t y when the uncertainty regarding a v a i l a b i l i t y of material i s high. FIGURE 18 THE HIGH UNCERTAINTY SCARCITY ORGANIZATION Reduced slack SCARCITY (high l e v e l of anxiety) I * C r i s i s climate *Decision problem not factored *High i n t e r -dependence High need for coordination *Centralized decision-making C o o r d i n a t i o n . by c e n t r a l i z e d authority *Authority j_ ce n t r a l i z e d Resources not assured High degree of externally imposed uncertainty INCONSISTENCY resolved ':.ar-o through abro-gation of r e s p o n s i b i l i t y by the lower h i e r a r c h i c a l l e v e l s Low tolerance for i n t e r n a l l y induced uncertainty * S t r i c t controls as I *Informal or non-programmed controls ^ . * U n i l a t e r a l controls Key descriptors Wide v a r i a t i o n i n the l e v e l of organizational a c t i v i t y *Organization must be f l e x i b l e . I.e., r e l a t i v e l y loose job des c r i p t i o n s , varying spans of c o n t r o l , greater heterogeneity within subunits, high speed of response to nonroutine s t i m u l i , l e s s r e l i a n c e on SOPs and f l e x i b l e tech-nology, etc. -197-This i d e a l type w i l l be l a b e l l e d a high uncertainty s c a r c i t y organization. OT: S c a r c i t y and Abundance It may be noted that neither of the two i d e a l types above correspond to any of the t r a d i t i o n a l descriptions of organizations, e.g., bureaucratic, mechanistic, or organic. While they have c e r t a i n character-i s t i c s i n common with each of the organizational descriptions found i n t r a d i t i o n a l OT, as a composite they are unique. Also, while any one or a l l of the various t r a d i t i o n a l types of organizations may be equally v i a b l e under abundance, i t i s suggested that the organizations described above have the highest p r o b a b i l i t y of s u r v i v a l under s c a r c i t y . I t i s pointed out that the descriptions of the two s c a r c i t y organizations r e f l e c t a r e v e r s a l of some of the conventional wisdom i n OT. Under abundance i t i s customary to associate c e n t r a l i z e d and autocratic structures with low uncertainty, and a high l e v e l of i n t r a o r g a n i z a t i o n a l i n t e r a c t i o n i s recommended for operation under high uncertainty. In the case of s c a r c i t y however the reverse i s true. As argued above, when the uncertainty i s low there i s a high l e v e l of i n t e r a c t i o n , with the various elements p a r t i c i p a t i n g i n decision-making and exercising m u l t i l a t e r a l c o n t r o l . In the case of high uncertainty (under s c a r c i t y ) however authority i s c e n t r a l i z e d with the top echelon exercising u n i l a t e r a l c o n t r o l . Concluding Remarks Descriptions of two types of organizations which are appropriate to s c a r c i t y were presented above. It i s suggested that under norms of -198-r a t i o n a l i t y , and given a p a r t i c u l a r degree of environmental uncertainty, the p r e s c r i p t i o n s underlying one or the other i d e a l type w i l l be used to design an organization. I t i s believed that such an organization w i l l be v i a b l e . It must be pointed out however that the study encroaches upon a yet unexplored t e r r i t o r y . I t i s not possible to a n t i c i p a t e the t o t a l i t y of the consequences of depletion of natural resources. Malthusian s c a r c i t y may perhaps r e s u l t i n d i s r u p t i o n of i n d i v i d u a l values as w e l l as the s o c i a l f a b r i c . 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I n d u s t r i a l Organisation: Theory and P r a c t i c e . London: Oxford U n i v e r s i t y Press, 1965. Yuchtman E., and Seashore, S.E., A system resource approach to organiza-t i o n a l effectiveness. American S o c i o l o g i c a l Review, V o l . 32, 1967, pp. 891-903. -207-APPENDIX 1 AN ALTERNATIVE DEFINITION OF SCARCITY In the i n t e r e s t of g e n e r a l i z a b i l i t y an attempt was made to develop a d e f i n i t i o n of s c a r c i t y which could be applied to a l l l e v e l s of a n a l y sis. Such a d e f i n i t i o n was developed using some of the concepts of u t i l i t y theory. I t was found however that, i n addition to being l i m i t e d i n i t s scope, the d e f i n i t i o n did not provide many f r u i t f u l leads i n the study of s c a r c i t y related behaviour. Consequently t h i s d e f i n i t i o n was set aside and another d e f i n i t i o n more appropriate to the context was developed. The u t i l i t y based d e f i n i t i o n i s presented below as a matter of i n t e r e s t . The following behavioural proposition and law of economics both use the notion of u t i l i t y : ( i ) "Human beings seek to maximize s a t i s f a c t i o n (or u t i l i t y ) " (Ferguson, 1972: p. 1), and ( i i ) U t i l i t y i s maximized when an i n d i v i d u a l arranges his consumption such that "every s i n g l e good i s bringing him marginal u t i l i t y j u s t exactly pro- p o r t i o n a l (sic) to i t s p r i c e " (Samuelson, 1973: p. 433). It must be remembered that before an analysis of s c a r c i t y can have any meaning i t i s necessary to po s i t a h i s t o r i c a l period of non-s c a r c i t y . Let us assume therefore that there i s a system which does not experience s c a r c i t y i n the steady s t a t e , and that i t has a l l o c a t e d resources such that i t s u t i l i t y i s maximized. Assume now that there i s a r e l a t i v e change i n the u t i l i t i e s of consumption of the various goods, -208-such that the demand or u t i l i t y per unit consumption of a p a r t i c u l a r good increases. In order to maximize t o t a l u t i l i t y the system w i l l attempt to consume more of the f o c a l good (by r e a l l o c a t i n g resources from the other goods and reducing t h e i r consumption) such that the marginal u t i l i t y of consumption of the l a s t u nit consumed per unit p r i c e of each good i s again equal. In order to acquire a d d i t i o n a l quantities of the p a r t i c u l a r good however i t w i l l be necessary to enter into an exchange transaction with a supplying system. (It may be noted that the system i s already involved i n an ongoing transaction for the quantity of the good consumed before the change i n demand.) The exchange transaction f o r the a d d i t i o n a l quantity of the good may r e s u l t i n the following outcomes for the supplying system: I t may r e s u l t i n an increase i n i t s t o t a l u t i l i t y , no change i n u t i l i t y , or a decrease i n t o t a l u t i l i t y . I f the l a t t e r , i t i s expected that i t w i l l not w i l l i n g l y enter into the transaction. Under such conditions, i . e . , when the transaction cannot be completed because of the unwillingness of the supplying system, the demanding system i s said to experience s c a r c i t y , and the f o c a l good i s scarce. S c a r c i t y can now be defined: A p a r t i c u l a r good i s scarce with respect to a p a r t i c u l a r system i f the marginal u t i l i t y of consumption of the l a s t unit per unit p r i c e of that good i s , for reasons beyond the c o n t r o l of the system, higher than the corresponding u t i l i t y f o r other goods. It may be argued that coercion or threat has d i s u t i l i t y , and i f the supplying system were to take t h i s into account i t may "increase" t o t a l u t i l i t y by submitting to the exchange. Use of force i s however inadmissible: i t i s assumed that when a system i s constrained i n any way from acting i n i t s perceived best i n t e r e s t the calculus of u t i l i t y -209-i s disrupted. The d i s u t i l i t y of a threat i s not, i n t h i s context, "a d d i t i v e " . The foregoing argument leads to another d e f i n i t i o n of s c a r c i t y : If a p a r t i c u l a r system has to resort to threat or violence to obtain a p a r t i c u l a r good, then that p a r t i c u l a r good i s scarce. Advantages and Shortcomings As mentioned e a r l i e r the above d e f i n i t i o n s have the advantage of being applicable to systems at a l l l e v e l s of analysis as long as they can be shown to act as integrated u n i t s . The d e f i n i t i o n can thus be used to explain the s c a r c i t y of c e r t a i n commodities, e.g., food, as a consequence of increased demand by a g e o - p o l i t i c a l system, e.g., India. Another advantage of the above d e f i n i t i o n s i s that one of them s p e c i f i c a l l y takes note of and covers the p o s s i b i l i t y of use of force i n the context of s c a r c i t y . The d e f i n i t i o n used i n the d i s s e r t a t i o n lacks these advantages. The u t i l i t y based d e f i n i t i o n s of s c a r c i t y have two major short-comings which more than o f f s e t the advantages discussed above: No d i s t i n c t i o n i s made between e s s e n t i a l and i n e s s e n t i a l goods; and there i s no p r o v i s i o n to cover the consequence of a change i n the r e l a t i v e u t i l i t i e s of the supplying system, v i z . , reduction i n supply. r I t has been shown i n the d i s s e r t a t i o n that, because of t h e i r d i f f e r e n t behavioral implications, i t i s important to d i s t i n g u i s h between e s s e n t i a l and i n e s s e n t i a l goods i n an analysis of s c a r c i t y . There i s also a q u a l i t a t i v e d i f f e r e n c e between the behaviour of organizations with respect to e s s e n t i a l goods on the one hand and i n d i v i d u a l s with respect -210-to e s s e n t i a l goods on the other hand. Thus because of i t s i n a b i l i t y to d i s t i n g u i s h between e s s e n t i a l and i n e s s e n t i a l goods, the u t i l i t y based d e f i n i t i o n i s severely l i m i t e d i n i t s study of s c a r c i t y motivated behaviour. An increase i n the u t i l i t y of consumption of a p a r t i c u l a r good, either due to a change i n tastes or a reduction i n a v a i l a b i l i t y , may cause the supplying system to charge a higher p r i c e . Given a fixed l e v e l of resources, the demanding system w i l l have to r e a l l o c a t e resources such that the marginal u t i l i t y of consumption of the l a s t unit of each good i s proportional to i t s new p r i c e . Since t h i s adjustment w i l l r e s u l t i n a reduction i n the intake of each good without any change i n the respective u t i l i t y schedules, the t o t a l u t i l i t y of the demanding system w i l l be reduced. As long as the marginal u t i l i t y of consumption of the l a s t unit per unit p r i c e f o r each good i s equal however, none of the goods consumed can be said to be scarce. I t may thus be noted that, while depletion of natural resources i s one of the primary antecedents of s c a r c i t y , reduced supply can, according to the above d e f i n i t i o n , never r e s u l t i n s c a r c i t y . Two of the major shortcomings of the u t i l i t y based d e f i n i t i o n of s c a r c i t y have been discussed above. Since these more than o f f s e t the advantages i t possesses, i t was decided not to develop the d e f i n i t i o n any further. An alternate d e f i n i t i o n was developed and has been discussed i n the body of the d i s s e r t a t i o n . -211-APPENDIX 2 LIMITATION TO THE APPLICABILITY OF THE FIRST LEVEL DEFINITION According to the f i r s t l e v e l d e f i n i t i o n of r e l a t i v e s c a r c i t y a good can be said to be scarce with respect to a p a r t i c u l a r system i f for want of the good the system perishes over time. This d e f i n i t i o n , as mentioned e a r l i e r , cannot be generalized to the s o c i e t a l l e v e l of analysis. The reasons for t h i s l i m i t a t i o n are discussed below. 1 The d e f i n i t i o n of r e l a t i v e s c a r c i t y can be analyzed to i d e n t i f y , among others, the following c h a r a c t e r i s t i c s : (i ) In order to survive the system must receive inputs from outside sources. ( i i ) The f o c a l input must be e s s e n t i a l to the system's s u r v i v a l . ( i i i ) I t must be possible to i d e n t i f y the demise of the system. As shown below none of these requirements are f u l f i l l e d i n the case of a society. In order for i n d i v i d u a l s and organizations to survive i t i s necessary that they receive inputs from outside the system. A society may, i n contrast, not require any inflows from outside; the " i s l a n d economy" society may be e n t i r e l y s e l f - s u f f i c i e n t . While a society does not receive inputs from outside the system i n the manner of i n d i v i d u a l s and organizations, i t does however consume "'"Comments by Craig Pinder have helped tighten the argument i n t h i s appendix. -212-c e r t a i n goods generated from within the system. These can be c l a s s i f i e d as s o c i a l or public goods, i * e . , purchased by the p o l i t y , i n contrast to p r i v a t e goods purchased d i r e c t l y by the i n d i v i d u a l or the organization. Concrete for construction of dams and highways, s t e e l f or r a i l r o a d s , and armaments for the m i l i t a r y are possible examples of s o c i a l goods. While a l l of these, along with some others, may together be e s s e n t i a l for the s u r v i v a l of the society, i t i s suggested that i f any one of these were to be removed, the society would not c o l l a p s e . Thus none of these are  i n d i v i d u a l l y e s s e n t i a l i n the sense that some pr i v a t e goods are e s s e n t i a l for i n d i v i d u a l s and organizations. The death of an i n d i v i d u a l i s an unambiguous phenomenon, and the t r a n s i t i o n from l i f e to death i s t y p i c a l l y w ell marked and abrupt. S i m i l a r l y the f a i l u r e of an organization i s r e l a t i v e l y w ell defined, and i t i s possible to accurately pinpoint the event. In the case of a society however, the t r a n s i t i o n from a society on the one hand to a t o t a l l y d i s -organized mass of human beings on the other hand i s gradual. I t i s not possible to i d e n t i f y , i n a manner s i m i l a r to the above, the point i n time when a society cases to be a society. Because of the various shortcomings pointed out above, the f i r s t l e v e l d e f i n i t i o n of r e l a t i v e s c a r c i t y cannot be applied to the s o c i e t a l 2 l e v e l of a n alysis. 2 I t may be noted that a i r , water, and sunshine, the free goods of t r a d i t i o n a l economics, constitute exceptions to the above argument. These are received from outside the system and each one of them i s i n d i v i d u a l l y e s s e n t i a l for s u r v i v a l . I f these become scarce then, for the purpose of analysis of be-haviour with respect to these goods, the society can be treated as a s i n g l e u n i t ; and i t i s also then r e l a t i v e l y easy to i d e n t i f y i t s demise. Thus only i n the case of a i r , water, and sunshine can the d e f i n i t i o n of r e l a t i v e s c a r c i t y be generalized to the s o c i e t a l l e v e l of a n a l y s i s . It may also be noted that the p o s s i b i l i t y of water, sunshine and -213-a i r becoming scarce i s quite r e a l (see, e.g., Beeton (1965) for a study of the eutrophication of the St. Lawrence Great Lakes; Harte and Socolow (1971) for reduction of the receipt of r a d i a t i o n from the sun due to the albedo e f f e c t of p a r t i c u l a t e s ; and Lave and Seskin (1970) for the e f f e c t of a i r p o l l u t i o n on health); and any v i a b l e model for analysis of s c a r c i t y at the s o c i e t a l l e v e l must be able to handle these v a r i a b l e s . -214-APPEND1X 3 DEVELOPMENT OF THE CONCEPT OF SCARCITY: HUMAN BEINGS AND THEIR AGGREGATIONS The f i r s t l e v e l concepts of r e l a t i v e and absolute s c a r c i t y were introduced i n Chapter 3, and were subsequently developed i n the context of organizations and t h e i r aggregations. In t h i s appendix i n d i v i d u a l human beings and t h e i r aggregations w i l l be used as the f o c a l systems to develop these concepts. I t was mentioned e a r l i e r that, wherever possib l e , work should proceed towards an integrated body of knowledge. Sc a r c i t y of c e r t a i n inputs r e s u l t i n lack of s a t i s f a c t i o n of c e r t a i n needs. Analysis of s c a r c i t y or deficiency motivated behaviour of human beings can therefore be appropriately grounded i n need theory. The theory of human needs i s used as a s t a r t i n g point i n the exposition of the concept of s c a r c i t y i n t h i s appendix. The basic postulates of need theory are used to j u s t i f y choice of c e r t a i n tools of microeconomic analysis. Goods or need s a t i s f i e r s which are e s s e n t i a l to s u r v i v a l are then distinguished from those which are not e s s e n t i a l . Demand and Engel curves for both types of goods are developed. Consumption behaviour of the aggregation i s then studied i n r e l a t i o n to v a r i a t i o n s i n the a v a i l a b i l i t y of these goods on the one hand and the l e v e l of resources on the other hand. -215-Need Theory and Micro-economic Analysis In need theory i n psychology a l l human beings are said to have c e r t a i n basic needs which constitute a hierarchy of prepotency (e.g., A l d e r f e r , 1969; Maslow, 1970). An imperative of these needs i s that they require f u l f i l l m e n t , and cause the i n d i v i d u a l to seek and consume need s a t i s f i e r s . As long as a p a r t i c u l a r need i s u n f u l f i l l e d i t motivates behaviour and the relevant s a t i s f i e r i s perceived to be important. Aft e r enough of the s a t i s f i e r has been consumed however, i . e . , when the need has been f u l f i l l e d , the p a r t i c u l a r good i s no longer perceived to be important. The i n d i v i d u a l i s then motivated by the less prepotent need i n the hierarchy. Other need s a t i s f i e r s then become the source of s a t i s -f a c t i o n . These are sought i n t h e i r turn and the process of consumption of goods towards the s a t i s f a c t i o n of needs continues i n d e f i n i t e l y . The imperative of human needs on the one hand, and the inverse r e l a t i o n s h i p between the amount of consumption and the importance of the good on the other hand, are r e f l e c t e d i n the two fundamental propositions of human behaviour i n economics: 1. "Human beings seek to maximize s a t i s f a c t i o n (or u t i l i t y ) " (Ferguson, 1972; p. 1), and 2. "As the amount consumed of a good increases, the marginal u t i l i t y of the good tends to decrease" (Samuelson, 1973: p. 431). The i n d i f f e r e n c e curve, a basic t o o l of microeconomic a n a l y s i s , subsumes the notion of diminishing marginal u t i l i t y : the more there i s of a p a r t i c u l a r good, the les s the value of the l a s t u n i t . Demand and Engel curves, the second order t o o l s , subsume both of the above assumptions. -216-The i n d i f f e r e n c e , demand, and Engel curves are used to present the concept of Malthusian s c a r c i t y f o r i n d i v i d u a l human beings and t h e i r aggregations. Let us consider f i r s t the d i s t i n c t i o n between e s s e n t i a l and i n e s s e n t i a l goods. E s s e n t i a l and Inessential Goods A l l human beings have c e r t a i n i n s t i n c t o i d needs, e.g., the p h y s i o l o g i c a l needs and the need for s e l f - a c t u a l i z a t i o n (Maslow, 1970). The needs are s a t i s f i e d by consumption of p a r t i c u l a r need s a t i s f i e r s . The hunger need i s s a t i s f i e d , for example, by eating food, and the need for s e l f - a c t u a l i z a t i o n by the freedom to create and innovate. Some of these need s a t i s f i e r s or goods are e s s e n t i a l to s u r v i v a l , others are not. S a t i s f i e r s of the p h y s i o l o g i c a l needs, e.g., a i r , food, and water are c r i t i c a l for existence; s a t i s f i e r s of any of the other needs, e.g., freedom, are however not essential-. Indifference Curves Human beings t y p i c a l l y consume a large v a r i e t y of need s a t i s f i e r s leading to varying degrees of need s a t i s f a c t i o n . T o t a l s a t i s f a c t i o n (which can also be c a l l e d u t i l i t y of consumption) depends upon the rate of consumption of the respective goods. An increase i n consumption, within l i m i t s , leads to an increase i n t o t a l s a t i s f a c t i o n or u t i l i t y . I t may be noted however that i t i s possible to substitute varying quantities of one good for another without any change i n the l e v e l of s a t i s f a c t i o n or u t i l i t y . An i n d i v i d u a l may derive, f o r example, the same l e v e l of s a t i s f a c t i o n from one unit of food and s i x units of clo t h i n g on the one hand as from two -217-units of food-and three units of c l o t h i n g on the other hand.''' In other words, he i s i n d i f f e r e n t between the two combinations. The above and other food-clothing combinations that y i e l d equal s a t i s f a c t i o n can be plotted as an " i n d i f f e r e n c e curve". Two such curves are presented i n Figure 19. The curve nearer the o r i g i n represents a lower l e v e l of t o t a l u t i l i t y of consumption of the two need s a t i s f i e r s . The curves are drawn concave when viewed from the top because they i l l u s t r a t e a property which seems most often to hold true i n r e a l l i f e and i s c a l l e d the law of s u b s t i t u t i o n (Samuelson, 1973): "the scarcer a good, the greater i t s r e l a t i v e sub-s t i t u t i o n value; i t s marginal u t i l i t y r i s e s r e l a t i v e to the marginal u t i l i t y of a good that has become p l e n t i f u l " (p. 441). In other words, the le s s there i s of a p a r t i c u l a r good the less i s an i n d i v i d u a l i n c l i n e d to substitute i t for another; and the more there i s of a p a r t i c u l a r s a t i s f i e r the greater the tendency to replace parts of i t with another. Indifference Curves: E s s e n t i a l and I n e s s e n t i a l Goods It was noted e a r l i e r that a l l goods can be categorized as ei t h e r e s s e n t i a l or i n e s s e n t i a l . Let us now assume that a l l e s s e n t i a l goods can be represented by a hypothetical good E; which serves as a proxy, as i t were, for the universe of e s s e n t i a l goods. S i m i l a r l y , l e t us assume that a l l the i n e s s e n t i a l goods can be represented by another hypothetical good I. An i n d i v i d u a l thus consumes only two goods E and I. I t follows that he needs a c e r t a i n minimum amount of E for s u r v i v a l : i f he consumes "'"This example i s taken from Samuelson (1973: p. 441). -218-FIGURE 19 INDIFFERENCE CURVES Clothing higher t o t a l u t i l i t y lower t o t a l u t i l i t y Food -219-l e s s than t h i s amount over any length of time he w i l l die. He may however consume varying amounts of I without endangering s u r v i v a l . When the i n d i v i d u a l has more than the c r i t i c a l amount of the e s s e n t i a l good he may be i n c l i n e d to exchange some of i t for the i n e s s e n t i a l commodity. When he i s operating at the margin however, i . e . , he has barely enough E for s u r v i v a l , he w i l l generally be unwilling to substitute any portion of i t for I. This varying propensity for exchange i s presented i n the form of i n d i f f e r e n c e curves i n Figure 20. The v e r t i c a l l i n e at Q represents the minimum quantity necessary for s u r v i v a l . (It may be noted that there i s no corresponding l i n e for the i n e s s e n t i a l good.) The i n d i f f e r e n c e curves are therefore asymptotic to t h i s l i n e and l i e s o l e l y i n the region to the r i g h t of the c r i t i c a l l i n e . There are no curves i n the area to the l e f t of the l i n e . Resource A l l o c a t i o n Individuals seek to maximize u t i l i t y . Consumption of d i f f e r e n t need s a t i s f i e r s generally r e s u l t i n d i f f e r e n t rates of increase i n s a t i s -f a c t i o n or u t i l i t y . The rate of increase of u t i l i t y of consumption of a p a r t i c u l a r good also decreases with an increase i n the quantity consumed. Thus, assuming l i m i t e d resources, i n order to maximize u t i l i t y the i n d i v i d u a l must consume d i f f e r e n t goods at d i f f e r e n t rates. It i s reasonable to assume that human beings t y p i c a l l y have l i m i t e d resources. There i s a d e f i n i t e l i m i t , for example, to one's strength, salary, or property. I f resources were unlimited the i n d i v i d u a l would consume increasing amounts of each good as long as the t o t a l u t i l i t y of consumption kept on increasing, and would stop when u t i l i t y began to -220-FIGURE 20 INDIFFERENCE CURVES; THE ESSENTIAL AND THE INESSENTIAL GOOD—INDIVIDUALS Quantity of i n e s s e n t i a l goodl] Quantity of e s s e n t i a l good E OQ: Minimum quantity of the e s s e n t i a l good necessary f o r s u r v i v a l -221-decline. Limited resources however require that, i n order to maximize u t i l i t y , he should a l l o c a t e them "wisely" across d i f f e r e n t goods. For convenience of analysis l e t us assume that a l l the d i f f e r e n t types of resources can be represented by one hypothetical resource R. The optimal a l l o c a t i o n of R across E and I i s depicted i n Figure 21. Depending upon the current prices of the two goods, a budget l i n e can be obtained. Let EI be the budget l i n e : the i n d i v i d u a l w i l l consume OE amount of the e s s e n t i a l good i f he expends a l l the resources on i t ; and w i l l consume 01 amount of the i n e s s e n t i a l good i f he a l l o c a t e s a l l h i s resources to the l a t t e r . The tangent of the budget l i n e with the highest i n d i f f e r e n c e curve w i l l determine expenditure on the two goods. The l i n e EI i s tangential to i n d i f f e r e n c e curve 1 at L. At t h i s point the marginal rate of s u b s t i t u t i o n of I for E equals the r a t i o of the price' of I to the p r i c e of E. The u t i l i t y of consumption i s maximized under equilibrium i f 2 the i n d i v i d u a l consumes OA units of E and 01 units of I. A l l o c a t i o n leading to any other rate of consumption w i l l be suboptimal. Reduction i n Supply of E and I Let us now assume that the equilibrium i s disturbed and that one or more of the following changes occur: there i s either an increase i n the need or desire, a reduction i n the a v a i l a b i l i t y of the p a r t i c u l a r s a t i s f i e r , or a reduction i n the l e v e l of resources. An increase i n need w i l l r e s u l t i n an increase i n the demand f o r the p a r t i c u l a r good and i t s p r i c e w i l l be bid up. S i m i l a r l y a decrease i n a v a i l a b i l i t y w i l l r e s u l t See Ferguson (1972) Chapter 2 for d e t a i l e d discussion and proof of optimality. -222-FIGURE 21 OPTIMAL ALLOCATION OF LIMITED RESOURCES ACROSS THE ESSENTIAL AND INESSENTIAL GOODS OQ: Minimum quantity of e s s e n t i a l goods necessary f o r s u r v i v a l . -223-i n increased p r i c e s . Let us assume that e i t h e r because of increased demand or decreased supply prices go up. The consequences of t h i s change are explored with the help of the budget l i n e and i n d i f f e r e n c e map presented i n Figure 22. Let us assume that the p r i c e of I goes up without any change i n the nominal p r i c e of E. The budget l i n e w i l l then s h i f t from EI to EI^, and w i l l be tangential to i n d i f f e r e n c e curve 2 at M. The quantity of I consumed w i l l reduce from OB to OB^. A further increase i n p r i c e w i l l r e s u l t i n a further counterclockwise s h i f t i n the l i n e , t i l l i n the l i m i t the l i n e coincides with the X-axis. This has been shown by l i n e E ^ -The quantity of the i n e s s e n t i a l ^ood consumed i n t h i s instance w i l l be zero; and the i n d i v i d u a l w i l l consume OE units of E. If the p r i c e of I i s p l o t t e d against the amount of I consumed, the resultant demand curve w i l l be asymptotic to the Y-axis. In other words as the p r i c e per unit of the good increases to i n f i n i t y , the quantity consumed w i l l tend to zero. The demand curve for the i n e s s e n t i a l good i s presented i n Figure 23. Let us now assume instead that there i s an increase i n the p r i c e of E with the nominal p r i c e of I remaining constant. The budget l i n e EI w i l l therefore turn clockwise to E^I i n Figure 22, and w i l l be tangential to i n d i f f e r e n c e curve 3 at N. The i n d i v i d u a l w i l l now consume OA^ units of E instead of OA. Let us assume that i n d i f f e r e n c e curve 4 represents the minimum t o t a l u t i l i t y necessary for s u r v i v a l . A further increase i n p r i c e w i l l r e s u l t i n the budget l i n e turning clockwise t i l l i t i s tangential to curve 4. The i n d i v i d u a l w i l l now consume OQ units of E and zero units of I. Any further increase i n p r i c e of the e s s e n t i a l good w i l l -224-FIGURE 22 THE EFFECT OF PRICE CHANGES ON THE CONSUMPTION OF ESSENTIAL AND INESSENTIAL GOODS OQ: Minimum quantity of e s s e n t i a l goods necessary f o r s u r v i v a l -225-'FIGURE 23 DEMAND CURVE FOR THE INESSENTIAL GOOD Pri c e per unit of I X Quantity of I consumed -226-r e s u l t i n h i s being unable to consume the minimum amount of the e s s e n t i a l good necessary for s u r v i v a l , and w i l l perish. Thus at prices higher than the c r i t i c a l l e v e l there w i l l be zero consumption of both E and I. I f the p r i c e of E i s plotted against the amount of E consumed, the resultant demand curve w i l l terminate abruptly at a point where the quantity of E consumed i s equal to the c r i t i c a l amount necessary for s u r v i v a l . The . demand curve for the e s s e n t i a l good i s presented i n Figure 24. Reduction i n the Level of Resources Assuming that there i s no change i n the prices of E and I l e t us investigate the e f f e c t of a reduction i n the l e v e l of resources. A reduction i n R w i l l r e s u l t i n the budget l i n e s h i f t i n g towards the o r i g i n p a r a l l e l to the o r i g i n a l budget l i n e . This change i s depicted i n Figure 25. Let us assume that the l i n e has s h i f t e d from EI to E ^ I 1 , and i s tangential to i n d i f f e r e n c e curves l a at P. The consumption of E and I w i l l reduce from OA and OB to OA^ and OB2 r e s p e c t i v e l y . (It may be noted that the rate of decrease i n consumption of I i s more than that of E.) If R i s reduced s t i l l more the l i n e w i l l s h i f t t i l l i t i s tangential to i n d i f f e r e n c e curve 4. At t h i s point the quantity of the e s s e n t i a l good consumed i s OQ, and the amount of the i n e s s e n t i a l good consumed i s zero. Any further reduction i n income w i l l r e s u l t i n the i n d i v i d u a l being able to procure enough of the e s s e n t i a l good to survive, and w i l l p e r i s h , r e s u l t i n g i n zero consumption of E. If the l e v e l of resources i s plotted against the quantity of E and I consumed, the r e s u l t i n g Engel curves w i l l be of the shape presented i n Figure 26. -227-FIGURE 24 . DEMAND CURVE FOE, THE ESSENTIAL GOOD FOR AN INDIVIDUAL Price, per unit of E X Quantity of E consumed OQ: Minimum quantity of the e s s e n t i a l good necessary f o r s u r v i v a l -228-F1GURE .25 EFFECT OF REDUCTION IN INCOME ON CONSUMPTION OF ESSENTIAL AND INESSENTIAL GOODS I Quantity of I I 1 B L \ P V4 0 Q A-A T,1 E Quantity of E 2. si. OQ: Minimum quantity of e s s e n t i a l goods necessary f or s u r v i v a l . -229-PIGURE. 26 CONSUMPTION AS A FUNCTION OF THE EEVEL OF RESOURCES: ESSENTIAL AND INESSENTIAL GOODS—INDIVIDUALS OQ: The amount of the e s s e n t i a l good necessary . for s u r v i v a l OR: The l e v e l of resources necessary f or s u r v i v a l -230-Aggregate Behaviour Development of demand and Engel curves for e s s e n t i a l and i n -e s s e n t i a l need s a t i s f i e r s for a s i n g l e i n d i v i d u a l have been discussed above. Let us assume that there are several i n d i v i d u a l s , a l l of them i d e n t i c a l i n t h e i r l e v e l s of resources and t h e i r patterns of consumption. The aggregate demand and Engel curves for the two goods w i l l therefore be s i m i l a r to the i n d i v i d u a l curves presented i n Figures 23 and 24. The demand curve for I w i l l be asymptotic to the Y-axis, while that f or E w i l l terminate at a point corresponding to the minimum amount necessary for s u r v i v a l of a l l the i n d i v i d u a l s i n the aggregation. The Engel curves for the aggregate w i l l terminate at a point corresponding to the c r i t i c a l l e v e l of resources for the aggregation; at t h i s point the consumption of I w i l l be zero and that of E w i l l be equal to the minimum necessary for s u r v i v a l . The curves are s i m i l a r to those presented i n Figure 26. Changes i n Supply of the E s s e n t i a l Good Let us now study the aggregate consumption behaviour consequent upon changes i n the a v a i l a b i l i t y of the e s s e n t i a l good. Assume that demand does not increase. As the supply of E decreases i t s p r i c e w i l l r i s e and consumption f a l l t i l l i t reaches the c r i t i c a l l e v e l . As the supply de-creases s t i l l further however, the t o t a l amount of E a v a i l a b l e w i l l be less than that required for s u r v i v a l of a l l the i n d i v i d u a l s . Thus at the margin at least one person w i l l die. This c r i t i c a l point i s represented by J i n Figure 27. A reduction i n the s i z e of the aggregation w i l l r e s u l t i n the demand curve s h i f t i n g l e f t , i n t e r s e c t i n g the supply curve at a further -231-• FIGURE 27 LOCUS OF INTERSECTION OF THE AGGREGATE SUPPLY AND DEMAND CURVES FOR THE ESSENTIAL GOOD FOR INDIVIDUALS Price per unit . of E 0 Q - X Quantity of E OQ: The amount of the essential good necessary for. survival of one individual OQ^ : The amount of the essential good necessary for survival of a l l the individuals in the aggregation -232-reduction i n supply w i l l cause the supply curve to move upwards, t i l l at the quantity of E consumed i s the minimum for the s u r v i v a l of the r e s i d u a l aggregation. Reduction i n the a v a i l a b i l i t y of the e s s e n t i a l good beyond t h i s point w i l l cause another death, and the supply and (residual) demand curves w i l l now i n t e r s e c t at l ^ . The curves KJ, K^J^, K„J„, K J represent the locus of i n t e r s e c t i o n of the supply and 2 2 n n demand curves of the e s s e n t i a l good. If the aggregation i s large enough, i . e . , the points J , J ^ , . are close enough to each other, the locus of i n t e r s e c t i o n to the l e f t of J can be approximated by the s t r a i g h t l i n e J ^ J i n Figure 28. The point corresponds to the minimum amount of E necessary for the s u r v i v a l of the l a s t i n d i v i d u a l . I t may be noted that the p r i c e of E does not r i s e beyond the c r i t i c a l point. Also, when the supply curve moves to the r i g h t (because of increased a v a i l a b i l i t y ) from, say, C i n the c r i t i c a l region, the locus of i n t e r s e c t i o n w i l l not move r i g h t along the h o r i z o n t a l l i n e ; i t w i l l instead move southeast along the r e s i d u a l demand curve CD to the l e f t of the o r i g i n a l demand curve. 3 Changes i n the l e v e l of Resources Let us now analyze v a r i a t i o n s i n aggregate consumption associated with changes i n the l e v e l of resources. Let us assume that there i s no change i n e i t h e r supply or demand. As aggregate resources decrease, consumption of both E and I w i l l reduce; t i l l at the c r i t i c a l l e v e l the amount of the i n e s s e n t i a l good consumed i s zero, and only the minimum amount of the e s s e n t i a l good necessary for s u r v i v a l i s consumed. The aggregate Engel curves corresponding to the foregoing reduction i n resources 3 Comments by Vance M i t c h e l l were h e l p f u l i n the development of the argument i n t h i s section. -233-FIGURE 28 LOCUS OF INTERSECTION OF THE AGGREGATE SUPPLY AND DEMAND CURVES FOR THE ESSENTIAL GOOD FOR INDIVIDUALS: .APPROXIMATE REPRESENTATION Price per unit of E Quantity of E OQ: The amount of the e s s e n t i a l good necessary f o r s u r v i v a l of one i n d i v i d u a l OQ^: The amount of the e s s e n t i a l good necessary f o r s u r v i v a l pf a l l the i n d i v i d u a l s i n the aggregation. -234-are presented i n Figure 29. I f the l e v e l of resources i s decreased s t i l l more the aggregation w i l l be unable to acquire the minimum E necessary for s u r v i v a l . At the margin at l e a s t one person w i l l die. I f i t i s assumed that c e r t a i n material resources survive him, i . e . , he has some resources, e.g., property, i n addi t i o n to strength, s k i l l s , and information, then the t o t a l l e v e l of the r e s i d u a l resources may be s u f f i c i e n t for the s u r v i v a l of the rest of the aggregation. If aggregate resources continue to dwindle beyond i n Figure then the Engel curve f o r the r e s i d u a l population w i l l be of the shape FF^; being the minimum E required for t h e i r s u r v i v a l . I f resources f a l l below R2 then a second person w i l l d i e , and the Engel curve of the r e s i d u a l w i l l be of the shape ^2^2' ^ s r e s o u r c e s continue to diminish more and more people w i l l die, t i l l at l e v e l R there i s only one survivor who w i l l consume OQ units of E. GF^ i s the Engel curve for the l a s t i n d i v i d u a l . I f the l e v e l of resources increases from any point, say, R^ below the c r i t i c a l l e v e l , the consumption of E and I w i l l be determined by Engel curves of the r e s i d u a l aggregation; and curve for I, Rgl^j w i l l begin at R^, and that f o r E, F^F^* w i l l be a continuation of the curve F , ^ . It may be noted that i f the points F and G are joined by a str a i g h t l i n e then the various points F2, F^, F^ w i l l a l l l i e along t h i s l i n e . I f the number of i n d i v i d u a l s i n the aggregationr.is large such that the points F2, F^, etc., are close to each other, then the various Engel curves below F w i l l l i e close to the st r a i g h t l i n e FG. The portion of the Engel curve below F i s accordingly approximated by a s t r a i g h t l i n e i n Figure 30. Resource Level -235-FIGURE 29 CHANGES IN AGGREGATE CONSUMPTION CORRESPONDING TO VARIATIONS IN THE LEVEL OF RESOURCES: INDIVIDUALS R. R Ines s e n t i a l good E s s e n t i a l good Q 2 Q-^  Quantity of goods consumed OQ : The amount of the e s s e n t i a l good necessary.for s u r v i v a l of one i n d i v i d u a l 00^:-OR : The amount of the e s s e n t i a l good necessary f o r s u r v i v a l of a l l the i n d i v i d u a l s i n the aggregation The l e v e l of resources necessary f o r s u r v i v a l of one i n d i v i d u a l 0R^: The l e v e l of. resources necessary f o r s u r v i v a l of a l l the i n d i v i d u a l s i n the aggregation -236-PIGURE 30 CHANGES IN AGGREGATE CONSUMPTION CORRESPONDING TO VARIATIONS IN THE LEVEL OF RESOURCES: INDIVIDUALS'— APPROXIMATE REPRESENTATION OQ : The amount of the e s s e n t i a l good necessary f o r the s u r v i v a l of one i n d i v i d u a l OQ^: The amount of the e s s e n t i a l good necessary f o r s u r v i v a l of a l l the i n d i v i d u a l s i n the aggregation OR : The.level of resources necessary f o r s u r v i v a l of one i n d i v i d u a l OR^: The l e v e l of resources necessary f o r s u r v i v a l of . a l l the i n d i v i d u a l s i n the aggregation -237-Changes i n Supply of the I n e s s e n t i a l Good Let us now study the aggregate consumption behaviour of the i n e s s e n t i a l good. Let us assume that demand does not increase. The rate of consumption of I w i l l then depend upon one or more of the following f a c t o r s : ( i ) the supply of I, ( i i ) the l e v e l of resources, and ( i i i ) the supply of E. If the a v a i l a b i l i t y of the i n e s s e n t i a l good reduces and tends to zero, i t s p r i c e w i l l r i s e and tend to i n f i n i t y , and consumption w i l l f a l l and tend to zero. I f the l e v e l of resources f a l l s the rate of consumption w i l l f a l l , t i l l at the c r i t i c a l l e v e l the consumption of I i s zero. I f there i s a reduction i n the a v a i l a b i l i t y of the e s s e n t i a l good (with no corresponding reduction i n i t s demand) i t s p r i c e w i l l increase. This w i l l r e s u l t i n a transfer of resources from I to E with a drop i n the consumption of the former. As supply of E continues to diminish, less and les s of I w i l l be consumed, t i l l when E i s at the c r i t i c a l l i m i t the 4 consumption of I w i l l be zero. Relative and Absolute Sc a r c i t y Absolute s c a r c i t y has been defined e a r l i e r as that which leads to the e x t i n c t i o n of at l e a s t one unit i n the system. I t follows from the arguments i n t h i s chapter that aggregations may experience absolute s c a r c i t y for one or more of the following reasons: While reduced a v a i l a b i l i t y of I r e s u l t s i n some reduction i n the consumption of E, the e f f e c t i s marginal when operating near the c r i t i c a l l i m i t . Since we are interested i n behaviour at or near the c r i t i c a l l i m i t only,, t h i s e f f e c t has been ignored i n the analysis of the aggregate consumption behaviour of the e s s e n t i a l good. -238-(i) An increase i n demand for e s s e n t i a l goods, ( i i ) A decrease i n the a v a i l a b i l i t y of these goods, and ( i i i ) A reduction i n the l e v e l of resources or the a b i l i t y to acquire the goods. Holding the l e v e l of resources constant, ei t h e r of the f i r s t two reasons may lead to the t o t a l demand exceeding the t o t a l supply at the c r i t i c a l p r i c e . With supply and demand constant the t h i r d might r e s u l t i n the aggregation being unable to procure enough of the good at the p r e v a i l i n g market p r i c e . In formal terms therefore a good can be said to be scarce i n the absolute sense i f : (i) The locus of i n t e r s e c t i o n of the supply and demand curves i s a h o r i z o n t a l s t r a i g h t l i n e (Figure 28); or ( i i ) The Engel curve i s a sloping s t r a i g h t l i n e to the l e f t of the c r i t i c a l point (Figure 30). It was assumed so f a r that the aggregation was comprised of in d i v i d u a l s with i d e n t i c a l demands and resources. I t i f i s assumed however that one p a r t i c u l a r person needs more of E than the rest i n order to survive but has the same R, or needs the same amount of E but has les s R than the r e s t , then he w i l l be the f i r s t to die as a consequence of the changes described above. Such a person w i l l experience r e l a t i v e s c a r c i t y . "'it can be argued that the a b i l i t y to pay, or the power to acquire, i s sub-sumed under the demand function. This i s generally true i n the long run i n the case of i n e s s e n t i a l goods l i k e cars and stereos; the demand curve s h i f t s to the l e f t i n response to a decrease i n income, and v i c e versa. In the short run however (which i n the case of larger systems, e.g., countries, may be several years) demand i s independent of the l e v e l of resources. The demand curve for goods that are e s s e n t i a l f o r s u r v i v a l , e.g., food, i s r e l a t i v e l y independent of the l e v e l of income; an i n d i v i d u a l ' s demand curve does not move l e f t beyond a c e r t a i n point even i n the long run i n response to reductions i n purchasing power. -239-Differences Between Individuals and Organizations The foregoing exposition i s p a r a l l e l to (though more de t a i l e d than) that i n Chapter 3 of the d i s s e r t a t i o n . While development of the concepts of absolute and r e l a t i v e s c a r c i t y have revealed many s i m i l a r i t i e s at the f i r s t l e v e l of abstraction, there are some differences between in d i v i d u a l s and organizations. These are discussed below: I t may be noted that the l o c i i of i n t e r s e c t i o n of the aggregate supply and demand curves for goods consumed by human beings are d i f f e r e n t from those f o r organizations. (See Figures 28 and 9 respectively.) This i s because of the d i f f e r e n t r e l a t i o n s h i p between the goods and i n d i v i d u a l s on the one hand and goods and organizations on the other hand: In the former case the property of being e s s e n t i a l or i n e s s e n t i a l i s i n t r i n s i c to the good; and an i n e s s e n t i a l (essential) good w i l l always remain i n -e s s e n t i a l (essential) to human s u r v i v a l . I f , f o r example, the hypothetical i n e s s e n t i a l good I were to vanish overnight, the s u r v i v a l p o t e n t i a l of i t s consumers w i l l not be affected i n the l e a s t . I f however, the e s s e n t i a l good E were to disappear, a l l the human beings would die. In contrast to human beings, the goods consumed by organizations derive t h e i r property of being e s s e n t i a l or i n e s s e n t i a l from the organizations themselves. Thus i f good A, for example, were to be withdrawn only some of the organizations would perish; a l l A*s would f a i l , but none of the B*s would be affected. Again, i f the p r i c e of the e s s e n t i a l good E was fi x e d ( i n an impossible scenario) above the c r i t i c a l p r i c e , two things would happen: no E would be consumed, and everybody would die. In the case of organi-zations however, i f the p r i c e of, say, A was fi x e d above the c r i t i c a l -240-L l e v e l , some A would s t i l l be consumed, and only some organizations would peri s h . The aggregate Engel curves f o r goods consumed by humans are also d i f f e r e n t from those f o r goods consumed by organizations. (See Figures 30 and 11 r e s p e c t i v e l y ) . Here again the dif f e r e n c e arises from the nature of the r e l a t i o n s h i p of the good to the consuming u n i t . In the case of human beings, the Engel curves f o r e s s e n t i a l goods are q u a l i t a t i v e l y d i f f e r e n t from those f o r i n e s s e n t i a l goods. In the case of organizations however the goods cannot be c l a s s i f i e d a p r i o r i as e s s e n t i a l or i n e s s e n t i a l . Because of the d i v e r s i t y of organizations i n r e a l l i f e , a large v a r i e t y of goods can be categorized as e s s e n t i a l i n one or the other context. They can, for s i m i l a r reasons, be c l a s s i f i e d as i n e s s e n t i a l i n other contexts. Thus each good i s p a r t l y e s s e n t i a l and p a r t l y i n e s s e n t i a l . The Engel curves f o r any two goods consumed by organizations are thus not as d i s -s i m i l a r to each other as the Engel curves f o r e s s e n t i a l and i n e s s e n t i a l goods are for human beings. Thus even i f A*s and B*s were not i d e n t i c a l , the aggregate Engel curves for A and B would be more s i m i l a r to each other, than the corresponding curve for E i s to I. Second Level D e f i n i t i o n s The f i r s t l e v e l d e f i n i t i o n of r e l a t i v e s c a r c i t y was useful for a formal development of the concept of s c a r c i t y . I t was noted however that the d e f i n i t i o n was not applicable to most of the areas of i n t e r e s t i n a study of s c a r c i t y r e l a t e d behaviour i n organizations. In order to increase i t s relevance therefore the d e f i n i t i o n was expanded to a second l e v e l i n the context of organizations. -241-The f i r s t l e v e l d e f i n i t i o n i s s i m i l a r l y l i m i t e d i n i t s coverage of s c a r c i t y motivated behaviour of i n d i v i d u a l human beings. According to t h i s d e f i n i t i o n a good can be said to be scarce with respect to an i n d i v i d u a l i f i t s lack r e s u l t s i n h i s death. A dead human being i s however of l i m i t e d i n t e r e s t to the student of behaviour; and as long as the subject i s a l i v e , no material can by d e f i n i t i o n be scarce. In order to include further areas of i n t e r e s t i n the case of s c a r c i t y r e l a t e d human behaviour therefore, i t i s necessary to modify the d e f i n i t i o n of r e l a t i v e s c a r c i t y . According to need theory i n psychology, human behaviour .is motivated by u n f u l f i l l e d needs: I f a p a r t i c u l a r need i s not s a t i s f i e d , i . e . , an i n d i v i d u a l i s unable to consume adequate quantities of c e r t a i n need s a t i s f i e r s , then h i s behaviour i s determined i n part by the p a r t i c u l a r need. According to Maslow's (1970) h i e r a r c h i c a l theory of needs i f a p a r t i c u l a r need i s s a t i s f i e d , the next higher need then governs behaviour. I f i t i s only p a r t l y s a t i s f i e d however, the i n d i v i d u a l remains f i x a t e d at that l e v e l , and the higher need does not emerge. I f on the other hand, the need i s not s a t i s f i e d at a l l , i . e . , the p a r t i c u l a r need s a t i s f i e r s are not a v a i l a b l e at a l l (or a v a i l a b l e i n quantities below a ce r t a i n threshold), then the i n d i v i d u a l regresses to the next lower need. According to the Third Force psychologists (see, e.g., Goble, 1972) both the needs and the h i e r a r c h i c a l progression are i n s t i n c t o i d phenomena. I t i s i n the "nature of things" that man progresses from the lower to the higher needs; and an i n d i v i d u a l who i s unable to reach the top of the hierarchy may be l a b e l l e d " s i c k " . I t has been noted above that progression along the hierarchy depends upon the degree of a v a i l -a b i l i t y of c e r t a i n need s a t i s f i e r s . I f enough of c e r t a i n goods are not -242-a v a i l a b l e progress i s arrested. The i n d i v i d u a l i s then f i x a t e d at a p a r t i c u l a r need l e v e l , and h i s behaviour may consequently be c l a s s i f i e d as p a t h o l o g i c a l . In the extreme case lack of c e r t a i n inputs may cause him to regress; inducing a d e f i n i t e (undesirable) q u a l i t a t i v e change i n behaviour. The implication of s c a r c i t y for human behaviour have been pointed out above. Lack of need s a t i s f a c t i o n r e s u l t s i n changes which are important i n the extra- and the in t r a - o r g a n i z a t i o n a l contexts. Maslow (1970) has argued for the importance of the s e l f - a c t u a l i z e d person to society. Both content and process psychology t h e o r i s t s of motivation (e.g., Miner and Dachler, 1973) recognize the i l l e f f e c t s of lack of a v a i l a b i l i t y of c e r t a i n need s a t i s f i e r s i n the organizational context. Because of i t s importance to the student of human behaviour i t i s only proper that the antecedents of such undesirable behaviour are included i n a second l e v e l working d e f i n i t i o n of s c a r c i t y . In the case of organizations, the d e f i n i t i o n of r e l a t i v e s c a r c i t y had been enlarged to incorporate the following consequences of lack of a p a r t i c u l a r good: ( i ) taking up of slack and- reduction i n s i z e , and ( i i ) under c e r t a i n circumstances, prevention of further growth. The d e f i n i t i o n of r e l a t i v e s c a r c i t y for human beings i s enlarged below to p a r a l l e l t h i s modification: A p a r t i c u l a r need s a t i s f i e r can be said to be scarce with respect to a p a r t i c u l a r human being i f the quantity of the good a v a i l a b l e to him i s such that i t causes the i n d i v i d u a l to (I) regress to the next lower l e v e l need, or (II) remain f i x a t e d at that p a r t i c u l a r need l e v e l . -243-S i m i l a r i t i e s and Differences The second l e v e l d e f i n i t i o n s of s c a r c i t y for i n d i v i d u a l s and organizations were both developed from the same f i r s t l e v e l d e f i n i t i o n . Because of t h e i r common o r i g i n the two are s i m i l a r i n c e r t a i n respects. Since they deal with d i f f e r e n t types of subjects however, there are some differences between them. These s i m i l a r i t i e s and differences are examined below. Both organizations and i n d i v i d u a l s consume matter-energy-information. In the case of organizations each input serves a p a r t i c u l a r purpose which i s r e l a t i v e l y i n v a r i a n t . Steel and information on stocks, for example, are acquired for d e f i n i t e purposes; and the needs they serve do not change very much over time. In the case of human beings, i n contrast, one p a r t i c u l a r input may serve several needs at the same time; or i t may s a t i s f y d i f f e r e n t needs at d i f f e r e n t times. Again, the information needs of an organization are l a r g e l y of the "cognitive" type. In contrast the information inputs i n the case of the i n d i v i d u a l have a s u b s t a n t i a l conative content; and i t i s t h i s l a t t e r which i s responsible f o r movement across the need hierarchy. / In the case of organizations, any reduction i n consumption of matter-energy would necess a r i l y r e s u l t i n a corresponding reduction i n slack or s i z e . I f the reduction i s only marginal however, there would be no q u a l i t a t i v e change i n the organization. A r e l a t i v e l y large reduction on the other hand would r e s u l t i n a s t r u c t u r a l change. In the context of psychological v a r i a b l e s there i s no p a r a l l e l to "slack" or " s i z e " . (Although lack of c e r t a i n items, e.g., food, may r e s u l t i n loss of weight, the primary e f f e c t i s l i m i t e d to lowering of the l e v e l of -244-a c t i v i t y , i . e . , decreased "organizational e f f i c i e n c y " . ) But, l i k e the organization, a small reduction i n input would not r e s u l t i n a q u a l i t a t i v e change; i t would require a r e l a t i v e l y large reduction to r e s u l t i n f i x a t i o n and then regression. In the case of organizations an e s s e n t i a l good i s always relevant to the functioning of the organization; there i s no change i n i t s importance for the continuation of the organization. In the case of i n d i v i d u a l s however, once the person has regressed to a lower need, the higher need does not by d e f i n i t i o n motivate behaviour. The s a t i s f i e r of the higher need i s then no longer relevant: i t i s no longer " e s s e n t i a l " i n the sense that the corresponding good i s always e s s e n t i a l f or an organization. Thus while the r o l e of a p a r t i c u l a r good does not change with a reduction i n the s i z e of the organization, i t s importance for the i n d i v i d u a l varies with regression i n the need hierarchy. I t has been noted that reduction i n inputs may r e s u l t i n q u a l i t a t i v e changes i n human behaviour: a safety motivated person i s quite d i f f e r e n t from, for example, another who i s motivated by the love needs. They r e s u l t i n e f f e c t i n a change i n the nature of the i n d i v i d u a l . While reduced inputs may lead to s t r u c t u r a l changes i n the case of an organization, they w i l l not, unless there i s a change i n organizational goals, r e s u l t i n a change i n the "nature" of the organization i n a manner s i m i l a r to that for an i n d i v i d u a l . Thus while s c a r c i t y may r e s u l t i n a change i n "kind" for i n d i v i d u a l s i t can be argued that i t only r e s u l t s i n a change i n "degree" for organizations. F i r s t and second l e v e l d e f i n i t i o n s of s c a r c i t y i n the context -245-of i n d i v i d u a l s have been developed i n t h i s appendix. Certain s i m i l a r i t i e s and differences have been pointed out between i n d i v i d u a l s on the one hand and organizations on the other hand. At the f i r s t l e v e l the d e f i n i t i o n of s c a r c i t y was common to both i n d i v i d u a l s and organizations. Because of reduced abstraction however, the two second l e v e l d e f i n i t i o n s r e f l e c t the p e c u l i a r i t i e s of i n d i v i d u a l human behaviour on the one hand and organizations on the other hand. Thus, while s i m i l a r i n many respects, the two d e f i n i t i o n s are not interchangeable. The second l e v e l d e f i n i t i o n s of s c a r c i t y f o r human beings can be applied to the study of behaviour outside the organization as we l l as micro l e v e l organizational behaviour. Because of our present i n t e r e s t i n macro theory however these d e f i n i t i o n s have not been developed further. It i s hoped that these w i l l be used at a l a t e r date towards a theory of micro behaviour i n a context of Malthusian s c a r c i t y . For the present we are content with merely e s t a b l i s h i n g these d e f i n i t i o n s as a foundation for a future integrated theory of s c a r c i t y r e l a t e d organizational behaviour that w i l l encompass both macro and micro l e v e l s of an a l y s i s , and w i l l also have relevance to s c a r c i t y motivated behaviour outside the organizational context. 

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