Manipulative Tactics in Budgetary Games: The Art and Craft of Getting the MoneyYou Don't Deserve IAL.Martin de ]ong Evolutionary t h e o r y is expanding its sphere of influence in the explanation of p h e n o m e n a such as the dynamics of social and conceptual change. This is promising in the case of organization theory and theories on financial budgeting in particular. Theory on budgetary processes has b e e n d o m i n a t e d by two academic disciplines. O n the one hand, there are abstract e c o n o m i c theories that use utility maximization by administrative actors (Downs 1957, 1967, N i s k a n e n 1971, Jensen and Meckling 1976, Mueller 1989, Eggertson 1990). O n the other, there are political scientists w h o give fascinating but strictly empirical (non-theoretical) descriptions of actual events and reallife manipulations (Wildavsky 1984, 1991, Schick 2000). Both strands emphasize the manipulative game context in which funding and f u n d e d actors do their work, but they pay no h e e d to h o w concepts are used by these actors in order to justify proposals. As a result, they clearly see the interactive aspects of the process, but miss an u n d e r s t a n d i n g of h o w the conceptual replication occurs (Hull 1988). It is on this that evolutionary theory, and particularly its (qualitative) game theory perspective can shed some useful light. From various sources in biology we k n o w that creatures use manipulative techniques to fool enemies in their environment. Mimicry and camouflage are a m o n g the best k n o w n . Dawkins (1982) m e n t i o n s a p h e n o m e n o n called the rare enemy syndrome. Some imitations or m a n i p u l a tions are so rare that in the course of time it does not pay off for predators to evolve resistance to them. A m o n g the millions of normative w o r m s the ruse b e h i n d the incidental h u m a n use of real or artificial bait escapes all lineages of worms. The same h a p p e n s to project proposals cleverly put tog e t h e r asking for f u n d i n g w h e n i m p l e m e n t a t i o n p r o s p e c t s are in fact gloomier than sketched. Since Maynard Smith (1982), it is k n o w n that cheating and lying in both biology and economics can be illustrated with the aid Dr. W.Martin de Jong is an assistant professor of public management at Delft University of Technology. He teaches international decision-making, globalisation and intercultural management and regularly consults for the Dutch Ministries of Transport and Physical Planning. He is also co-editor of the Journal of Memetics. He may be reached at
[email protected]. Knowledge, Technology, & Policy, Spring 2001,Vol. 14, No. 1, pp. 50-66.
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of game theory, but that this field of theory needs to be worked out more. And finally Ruse (1998, 1999) claims that human and other beings only develop ethical norms and stick to them if this increases their fitness in some way. In this paper, my first claim is that similar processes in which agents outwit the selective forces in their environment by ruse do not only happen in the world of biology, but also in the social world, more specifically when it comes to budgetary processes in and around organizations. This has important consequences for the actual products delivered by organizations. After all, money in the modern social world is the food of organizations. My second claim is that the various now relatively dispersed fields of theory on manipulation techniques, evolutionary biology, game theory, institutional economics and the politics of budgeting have much to offer each other in terms of theory, methodology, concepts and empirical evidence.
Lacunae in the theory of budgeting and the evolutionary a n s w e r Since the 1980s the evolutionary framework seems to be making rapid inroads in social and cultural theory, helping it to u n d e r s t a n d and explain p h e n o m e n a such as social, organizational and conceptual change and dynamics without automatically assuming progress (Hannan and Freeman 1978, Boyd and Richerson 1985, Witt et al. 1991, H o d g s o n 1993, Price and Shaw 1997). This development has until n o w skipped the subject of conceptual manipulation in the theory of budgeting, however. Apart from some computer simulations on agent behavior in stock markets (Frank 1999) and memetic evolution reflected in the w i n n i n g of combinations of 0s and ls, I am not aware of any empirical evidence on h o w actual conceptual evolution occurs in budgetary processes. So far, theory on budgetary processes has been d o m i n a t e d by two academic disciplines. On the one hand, there are abstract mathematically inclined economic theories that use utility maximization by administrative actors as a starting-point. Bargaining a m o n g actors is seen as an unequal relation between two or more actors (political, economic or other), w h e r e information asymmetry in various forms translates to socially sub-optimal allocation o u t c o m e s (Downs 1957, 1967, N i s k a n e n 1971, J e n s e n and Meckling 1976, Mueller 1989). A second groups of theorists on budgeting consists of political scientists with fascinating descriptions of actual reallife events, bluff and manipulations, but these descriptions remain strictly empirical (non-theoretical) or give static overviews of institutional structures and organizations involved with budgeting (Wildavsky 1984, 1996, Schick 2000). Both strands emphasize the manipulative game context in which funding actors and funded actors do their work, but they pay no h e e d to h o w concepts are used by these actors in order to justify proposals. As a result, they clearly see the interactive aspects of the process, but miss an u n d e r s t a n d i n g of h o w the conceptual replication occurs (Hull 1988). It is this process of conceptual replication u n d e r the influence of manipulative actor strategies that most people call"learning.'To put it differently, negotiations on budgets in the public and private sectors have serious con-
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sequences for actual"substantial"outcomes. This link b e t w e e n interaction and replication has hardly been studied, however. It is on this link that evolutionary theory, and particularly its (qualitative) game theoretical perspective can shed some useful light. It is k n o w n from various sources in biology that creatures use various deceptive techniques to fool enemies in their environment. Mimicry and camouflage are a m o n g the best-known ones, but they are only a subset of a richer collection. From a h u m a n point of view it is sometimes surprising to see that some manipulative strategies have been in use for ages without having been u n m a s k e d as such. Some imitations or manipulations are so rare that in the course of time it does not pay off for fooled predators or preys to evolve resistance to them. A m o n g the millions of real worms fish feed t h e m selves with, the incidental harmful h u m a n bait remains u n d e t e c t e d as a tactic of mimicry and does not find its way into the information repertoire of the fish's genetic lineage. Dawkins (1982) refers to this remarkable phen o m e n o n as the rare enemy syndrome. Apparently the e n e m y imitation or manipulation is too rare to be justify evolutionarily developing an effective counter-poison.Very similar processes h a p p e n to public or private project proposals, which are used to ask for funding. These projects or programs generally require monies from central budget offices and have to be framed in a particular format before they can be taken into consideration. Organizations asking for this funding tend to systematically follow this format or "memetic filter" to increase their chances for success (de Jong 1999). In addition, they regularly present their case and the implementation prospects of their program more favorably than is justified. In reality, chances of success may be gloomier or shakier than sketched, but as long as the risk that the funding organization finds this out is minimized for lack of information, they will go on using that cover-up strategy. Since Maynard Smith (1982), it is k n o w n that cheating and lying in both biology and economics can be illustrated with the aid of game theory, but that this field of theory needs to be worked out more and is highly complex to m a t h e m a t i cally model. And finally Ruse (1998, 1999) claims that h u m a n and other beings only develop and stick to ethical norms if this increases their fitness in some way, which definitely leave some leeway for lying and cheating behavior in budget negotiations a m o n g various departments. In this paper, my first claim is that similar processes in which agents outwit the selective forces in their environment by ruse do not only happen in the world of biology, but also in the social world, more specifically w h e n it comes to budgetary processes in and around organizations. This has important consequences for the actual products delivered by organizations. After all, m o n e y in the m o d e r n social world is the food of organizations. My second claim is that the various n o w relatively dispersed fields of theory on manipulation techniques, evolutionary biology, game theory, institutional economics and the politics of budgeting have a lot to offer each other in terms of theory, methodology, concepts and empirical evidence. The rest of this article is constructed as follows. The next section takes the ideas on strategies of perceptual manipulation further and applies t h e m
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to the world of biology. More particularly, the operation of principles such as mimicry, camouflage and other tactics a m o n g preys and predators (birds to be more precise) are studied. Also, the concepts of search image and rare enemy syndrome are introduced. The third section applies the very same line of reasoning to the world of h u m a n interactions. It is s h o w n h o w m i m icry, camouflage, search images and rare e n e m y syndromes are used w h e n some organizations try to get projects funded and other actors have to allocate funds choosing a m o n g the various claimants and loads of spending alternatives.Various examples derived from real-life events are presented. These stories and experiences aim to give the reader a clearer view of w h a t forms of manipulation can actually be found in American budgeting practice. The next section presents frameworks from institutional economics, game theory and related fields and states that, no matter h o w refined and interesting they are, they have so far failed to deal with tactics within game dynamics. The final section concludes the paper by drawing some conclusions on future prospects of theoretical, conceptual, methodological and empirical synthesis a m o n g the various perspectives in this article.
Birds" search i m a g e s and the rare e n e m y s y n d r o m e Some animals use manipulative techniques to fool enemies in their natural environment. By looking like other, poisonous animals or taking the color, form or attitude of objects in their environment they evade the attention or evoke the fear or "memories" of bad taste of their natural enemies. Biologists have for a long time studied various examples of the manipulative behavior by some animals to escape their predators or catch their preys. These manipulations occur in m a n y variations, from relatively innocent, to rather mean, to lethal. But two specific variants stand out because of their beauty or visibility: mimicry and camouflage. Mimicry has been defined as a physical similarity of one animal (the mimic) to another animal (the model) strong e n o u g h to ward off predators from both because the model's unpleasant characteristics (bad taste, toxicity etc.). Some small brightly colored snakes, such as coral snakes, are poisonous while specimens from other non-poisonous species look very m u c h alike (Greene 1997). In this m a n n e r both are sheltered relatively well from selective pressures in their environment. The same p h e n o m e n o n we can find a m o n g certain flies whose backs are hardly distinguishable from those of wasps that are distasteful or can sting. In some cases mimicry is also used in a wider context w h e n animals resemble s o m e t h i n g inedible in the environm e n t or by giving confusing stimuli. Butterflies are k n o w n to use eye-dots on their wings to fool birds w h e n their camouflage does not seem to work. Mantis species (although usually predators) are k n o w n to look like the twigs they sit in, and some larger insects (stick-insects, walking leaves) are also k n o w n to look exactly like a part of the plant the animal sits on. But more often this version of sly animal self-protection is called camouflage. Camouflage refers to a general color, pattern and attitude resemblance to the environment, resulting in the avoidance of being spotted by other
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animals, w h e t h e r they be prey or predators. Obvious examples are white rabbits, foxes and bears in polar regions. Interruptions in the body forms by a pattern of contrasting dots and stripes (coral fishes, zebras) have similar effects. Many other animals lift the s h a d o w effects on the bottom of their bodies with brighter colors, a p h e n o m e n o n known as"counter shading."Sometimes, one can find a light and shade pattern on the animals themselves (tigers, bitterns). Finall~ some animals can adapt their own colors and patterns to those around them (plaice, chameleons and some lizard species). Some insects use the opposite strategy of camouflage; they scare predators off by spraying black ink, feigning injury or with very conspicuous and colorful designs. One bug even has a false head and false a n t e n n a at its rear end, while the real head is tucked d o w n and the eyes are small and inconspicuous. W h e n disturbed, the bug appears to move backwards suddenly. All of the preceding species have found ways to increase their survival chances by adapting purely physical aspects of their being, c o m p l e m e n t e d by behavioral patterns. The animals that are involved in mimicry and camouflage have organized a masquerade to evade dangers posed by other organisms in their selective environment, defined as all aspects in the ecology of an individual, populations or species that w e e d out exemplars (Brandon 1988, Speel 1997). We can say that mimicry and c a m o u f l a g e are fascinating ways by which living beings cover up their weaknesses, impose unwarranted fear on persecutors and mislead the perceptual abilities of predators and prey. In all cases, the consequences of these refined masquerades are the same: a deactivation of selective forces in the environm e n t pointing at a species and an increase of the manipulator's fitness. The criteria on which the manipulated creatures judge the edibility of their potential prey or the cues that are used to point to the presence of their potential predator (form, color, scent) are manipulated and this leads t h e m to misjudge the situation. Mimicry, camouflage and other strategies of manipulation are strongly d e p e n d e n t on search images in use by the victim. Ways to forage for food and perceptual qualities, which are usually effective for the victim, fail in this specific case, because they are not detailed or specific enough. To understand h o w this delusion occurs, O w e n (1982) has introduced the concept search image. In his view, despite the fact that h u m a n s are mammals, there is one important thing that likens t h e m to birds instead of to other mammals: their excellent color vision and poorly developed sense of smell. He describes the functioning of search images as follows: If you watch birds seeking food in the garden it is easy to form the impression that they are constantly on the move and that they are after something quite specific. It is rather like our own behavior when blackberry picking: there may be blackberry close at hand but there always seem to be better ones a bit further on. Experiments show that birds seek out items, which they know are edible and ignore other food items until all such familiar ones are exhausted. Birds form a"search image" of the particular food items. It is easy enough to understand for we ourselves form search images. Indeed once you have been black-
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berry picking for a while you become oblivious to anything except blackberries and they become much more noticeable. After a couple of hours you can see blackberries even when you close your eyes (Owen 1982: 10). Search images are generally extremely useful for those that have t h e m , but they have one great disadvantage: they are highly focused on the specific object or aspect they are looking out for. As a result, a lot of sidei n f o r m a t i o n that m a y be relevant for m a k i n g choices and selections is left out. O n e could also say that the search image comprises a set of criteria on the basis of w h i c h it is d e t e r m i n e d w h e t h e r s o m e t h i n g fits into it a n d is useful or not, but that these criteria can never be detailed a n d specific e n o u g h to catch all thinkable food. In that respect, they rather resemble m e m e t i c filters (Dennett 1996, de Jong 1999), real or artificial search programs, which browse t h r o u g h h u g e a m o u n t s of data or concepts to filter out those m e m e s which are relevant to the user. It is this lack of detail a n d specificity of search images that mimickers and camouflagers turn to their o w n advantage. In the course of evolution, they have a d a p t e d their physique to fall inside or outside particular search images. In itself, this abuse of the limited scope of the search i m a g e s of o t h e r living beings is not that surprising. W h a t is apparently m u c h m o r e striking is the consistent effectiveness of this deception. W h y do n o t m a n i p u l a t e d creatures in the course of time develop a kind of c o u n t e r strategy enabling t h e m to recognize their e n e m y ? For example, cuckoo adults lay their eggs in the nest of the m u c h smaller reed warblers, but the eggs look m u c h the same on the outside a n d are only very slightly bigger t h a n the warbler eggs. As the cuckoo baby c o m e s out first it throws out the other eggs or otherwise eclipses the warbler pare n t s ' a t t e n t i o n for their genetic offspring. A n d in order to k e e p t h e m w o r k ing and s p e n d i n g energy o n " t h e i r o w n " p a r a s i t e , it o p e n s up its deep red m o u t h , which seems to work as a supernatural stimulus on the warblers' nervous system. As it is difficult to believe that the adult birds could n o t recognize the baby bird as a m a n i p u l a t o r a n d parasite, we are inclined to believe "its huge gape and loud begging" s o m e h o w paralyze or h y p n o t i z e the warblers' defense. The stimulus is too strong to resist despite its n e g a tive effect on the reed warbler's fitness. Dawkins (1982) from w h o m this example is taken gives the following explanation: It may be that the"winner"is such a rare species that it constitutes a relatively negligible risk to individuals of the loser' species. The winner only wins in the sense that its adaptations against the loser are not effectively countered. This is good for individuals of the loser lineage who after all, are running other races simultaneously against other lineages, possibly very successfully. This"rare enemy effect" is an important example of an asymmetry in selection pressures acting on the two sides of an arms race (Dawkins 1982: 65). This rare enemy syndrome derives from a c o m b i n a t i o n of i n f o r m a t i o n a s y m m e t r y a n d a shortage of energy invested in counter-strategies from
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the part of victims, which may be rational considering the limited energy available and other more threatening evolutionary battles that must be won. It is a p h e n o m e n o n also k n o w n in h u m a n selection processes, which we will encounter in section 3. Once again, O w e n draws an accurate picture of the bird psychology behind the rare e n e m y syndrome. He describes birds, especially insect feeders, as"conservative o p p o r t u n i s t s . ' T h e y learn by experience and consistently seek more of a kind with which they have already had some success. Food items that have not been tried do not exist, are frightening or should be ignored. Consider a bird hunting for periwinkles on a seaweed covered rocky shore. Because of previous experience, it forms an image of what it is looking for and goes on searching for the same items, poking among seaweed and trying anything that resembles suitable food. As it feeds it takes proportionately more of the periwinkles with the shell color that it has already eaten, often ignoring or overlooking those of contrasting color. This means that periwinkles with a contrasting shell color are at an advantage provided, of course, they are not too common; if they were too many, they would soon become part of the bird's search image. Now imagine a great many birds feeding in the same way over a long period of time. Each feeds selectively, search images formed by different individuals change from day to day; and different colored periwinkles are eaten or missed, depending on the previous experience of the predators. Some shell colors of the predators match the color of the seaweed, other may not; what is important is that there are a lot of colors and that they contrast with one another.The chance of survival of each form depends on its frequency in the population: in other words there are advantages to being relatively rare and disadvantages to being too common. In time a state of balance is achieved, the frequency of each form being determined by the combined effects of predators (Owen 1982: 72-73). Owen's equivalent to the rare e n e m y s y n d r o m e is f r e q u e n c y - d e p e n d e n t selection. The less frequent the physical appearance of a creature, the greater its chances are to escape the search image of a prey or predator a n d the greater its survival chances are. In the next section, it will be s h o w n h o w the social world of budgeting consists of essentially the same selection principles. F u n d i n g o r g a n i z a t i o n s " s e a r c h i m a g e s and the rare e n e m y s y n d r o m e Manipulative strategies such as mimicry and camouflage are no strangers to the world of h u m a n interaction either. O n e only n e e d s to think of strategies of dealing with supervisors to show off or hide personal performance at work or to boost attractiveness to potential mating-partners. Or think of h o w companies advertise in newspapers or on the internet for personnel and h o w potential employees show their best during interviews. Or to h o w applicants for a health insurance fill in the form and systematically avoid m e n t i o n i n g certain diseases and smoking habits, w h e r e a s in-
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surance companies react by calculating extra cost margins to anticipate and compensate for this strategic behavior. Emulating successful people to increase chances of personal success, scaring or impressing other with bluffing and boasting or covering up and h i d i n g w e a k spots are selective strategies utilized more than incidentally. Spies have even turned manipulation into their daily business and can practice both mimicry and camouflage, d e p e n d i n g on their mission: t h e y can dress up to a p p e a r like somebody else or they can make themselves as unobtrusive as possible and fulfil their mission in that manner. Organizations allocating or receiving funding are also aware of manipulation strategies. All universities or research institutes submitting proposals for research monies or presenting their numbers of publications to the D e p a r t m e n t of Education, research funding institutes or private funders show their most positive face w h e n it comes to the regular quality control sessions. They are all too eager to take selection criteria as much into consideration as possible and refer regularly to publications written by the people they think will be on the selection board. They will also adapt their submission approaches w h e n the selection criteria for proposals have been changed. Though rarely phrased in these terms, professionals immediately recognize mimicry and camouflage w h e n confronted with it and are able to give ample evidence to indicate that their use is widespread. They may also refer to it a s " w i n d o w dressing" or"advertisement.'qb avoid a project from being w e e d e d out, it is crucial to take the expected selection criteria used by the funding organizations into consideration. Sometimes it is just not e n o u g h to plainly m e e t them, but exceeding or turning them to one's own advantage gives better results. In such an environment, mimicry would be to present generally satisfactory results of a project in an overly positive way or to imitate a successful model but that, in reality, is way out of reach. To downplay or hide its negative aspects is also an important part of the deal of manipulation. Camouflage would become more propitious if results fall short of expectation. In that case, attracting no attention to it, changing the context of the project and explaining failures away are often tactics used to deal with such a situation. 'Face the stuff you didn't do in the background' or 'Focus the view on something else' would be a worthwhile advice in such situations. In still other cases, imposing unwarranted fear and misleading perceptual abilities are used to scare the evaluator away from coming to negative judgement on the budget. A good way to defend proposed budgets is to portray the sinister consequences if the funding doesn't happen. Discussions may then be diverted to the level of funding instead of to its desirability as such. Aaron Wildavsky, a political scientist and seminal author on the politics of the budgetary process is a rich source of empirical inspiration on manipulation strategies in the United States and elsewhere. We have seen that appearance counts for a great deal and that a program viewed and calculated in one light may be more attractive than when viewed in another. The form of the budget, therefore, may become crucial in determining the
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Knowledge, Technology, & Policy / Spring 2001 budgetary outcomes. Suppose that an agency has strong clientele backing for individual projects. It is likely to gain by presenting them separately so that any cut may be readily identified and support may be easily mobilized. Lumping a large number of items together may facilitate cuts on an across-the-board basis. Items lacking support, on the other hand, may do better by placing them in large categories. A program budget may help raise appropriations by focusing on favored aspects of an agency's activities while burying others. The opposite result is also possible and an agency may object to presenting its budget in categories that do not show it off to best advantage (Wildavsky 1984: 104).
In fact, agencies do i n d e e d e m p l o y a host of strategies to have their b u d gets a n d their representatives look g o o d to b u d g e t offices. They can use impressive statistics to substantiate their b u d g e t claims. Budget officers t h e n feel obliged to unravel all this b a c k g r o u n d i n f o r m a t i o n if they w a n t to deny the financial claim. Agencies can give the p a p e r w o r k of their proposal a h a n d s o m e or serious layout or they can give their project a glamorous or dramatic n a m e to m a k e it look m o r e important. Wildavsky m e n t i o n s the examples of Mission 66 (a ten year p r o g r a m to improve facilities in national parks in 1966), Polaris or Titan. In other cases, attractive a n d pron o u n c e a b l e acronyms are u s e d such a s " I D A S ' o r " T R A N S I M S . ' A l l previous approaches to increase one's b u d g e t can, d e p e n d i n g on the context, work quite effectively as mimicry strategies. It m a y be d a n g e r o u s h o w e v e r to m a k e bold claims that can easily be tested. H i g h e r administrative levels can generally get away with p r o m i s i n g too m u c h a n d do that to increase the marketability of their products or services, but technicians or project m e m b e r s often avoid doing it because, in their case, the success of the e n d product is more clearly visible. A n o t h e r generally useful advice given to negotiators to deal successfully with other negotiators is"Be w h a t they think they are,'which rather belongs to the category of camouflage. Speaking, dressing and acting like them, as well as using the paper work layout they will take most seriously. A respondent gave the following story on h o w his office, the American General Accounting Office, goes about checking projections a n d cutting budgets: GAO's strategy was generally one of bluffing and boasting, not in only in words, but also in dress and non-verbal communication.They hired a lot of young people and sent them out in the field. These people knew virtually nothing, but they pretended to know. They would dress up older, wear suits and grow beards. Women had a harder time, because they couldn't cover up and they got more rejections.The main strategy was to get people to tell and give things they didn't want to tell or give. GAO has a certain amount of power, because they send recommendations to Congress."This organization sucks or is unreliable.'And then the agency's counter would be"She didn't ask/tell me the right things" (personal communication). Otherwise, b u d g e t items m a y be transferred from one category to another so that no particular one stands out as being too far out of line. S o m e
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agencies may even include administrative expenses u n d e r each program instead of u n d e r the administrative category. Concerning the budget it may be advantageous to present programs as small and financially relatively insignificant in the beginning and t h e n let t h e m grow to huge proportions because otherwise they cannot be completed or completed on time (the so-called'camel nose'). A n o t h e r example would be the opposite w h e r e the costs of a project are grossly overestim a t e d after which the m o n e y is used for security or other purposes. Mimickers or camouflagers are free to make budgetary constructions simpler or more complex, d e p e n d i n g on the e n v i r o n m e n t and their estimation of appropriateness. As a result, mimicry, camouflage and other intricate manipulation techniques m a k e 'actual' organization p e r f o r m a n c e not very transparent and lead to high uncertainty. Most discussions were on mainframe compute purchases, PC with gigabyte memories, which were something new at the time. It was a time full of changes. The struggle between the agencies and the budget offices was about who knew more on the computers. They were "throwing computer jargon at each other, outwitting the other with bullshit."'You can't do that operation with our system? Oh why not, what's so different about that operation then?'But in fact, computers were nobody's speciality. If bluffing didn't help, GAO would ask them to prove that they needed it. The navy prepared their budget negotiations extremely well."The navy treated budgeting as war, for lack of a real war. When GAO prepared a budget report on the Navy, their budget officer didn't provide the right information. All GAO could do was threaten to harm their reputation by reporting this to the responsible representatives and senators.The supervisor would come to the Naval Officer, pick up the paper and loudly say'This is not what I n e e d / t h r o w i n g the paper back and acting as if he were furious.'I will report this to Congress!'The next day, he would come back and get the same pack plus the undeleted spread sheet with budget projections for the next year. At the day the report was due, they'd finally give al the material, i.e. nine 3-inch binders full of paper, 90% of which had nothing to do with it. But GAO secretly had a two-week extension after the deadline, so they did go through all the material after all and decided the Navy didn't need it. They recommended a $26.1 million cut, which Congress accepted. It went to the Committee and the Committee cut the money." There the Navy still managed to be granted another program and took money from there, which in the eyes of GAO was a front porch program (personal communication). Agencies create"front porch items'or"sacrificial lambs,'inessential items that are allowed to be cut during negotiations and then be presented as an important concession. They ask for s o m e t h i n g they don't really want and then defend it strongly, hoping budget officers would leave it at cutting only that. In such "dishonest" environments in m a y be beneficial to just operate in a professional way or even to play it straight or consistently act reliably as long as that doesn't pass unnoticed and is valued a m o n g the evaluators.
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Knowledge, Technology, & Policy / Spring 2001 A former program manager at the U.S. Department of Transport (DOT) recalls preferring openly expressing his information and dilemmas to his supervisor, because that was a good and well-informed"shark.'q~hey best way to deal with such people was to present alternatives."As you never know the exact selection criteria at that particular moment in time, you just present alternatives in order to maximize the chances to be selected'(personal communication).
But t h e n again, examples can be given w h e r e h o n e s t y a n d m o d e s t y w o r k against you. An agency felt it had a good case for supplemental appropriation to meet the emergency situation.The agency was told that it would be unwise to ask for too much and that a small request of $25,000 would stand a better chance than one that would really be sufficient to do the job. He later discovered the President liked the idea but felt that the sum was too small to justify asking for a"supplemental."Fhe following year the top official (an"innovator") overrode objections from a more cautious colleague (an"adjuster') and came in with a supplemental for $2 million, which was granted (Wildavsky 1984: 21). A final strategy m e n t i o n e d h e r e is to p r e s e n t the c o n s e q u e n c e s of t u r n ing d o w n a proposal as very risky for the b u d g e t office."If y o u t u r n this d o w n , t h e n y o u will have to face the (nasty) c o n s e q u e n c e s . " I f the clientele of a policy s h o u l d rear its ugly h e a d a n d t h e r e b y u p s e t t h e r e s p o n s i b l e politicians, t h e y m i g h t hold the b u d g e t officers responsible for the scandal a n d b l a m e t h e m for not h o n o r i n g t h e proposal. H a v i n g appreciative constituencies for y o u r policies is quite an a d v a n t a g e a n d m a k e s y o u r select i o n e n v i r o n m e n t l e a n p o s i t i v e l y to y o u , as t h e T R A N S I M S p r o g r a m m a n a g e r f o u n d out. ForTRANSIMS, which is supposed to provide tools for environmentally friendly transport planning in the future, representatives of all relevant agencies were taken on board of the steering committee (FHA, FTA, TRB, MPOs and states and EPA) and all provided support."When the project staff went out looking for new ideas to have TRANSIMS respond to the new, more dynamic and complicated planning requirement, it found Los Alamos National Laboratory (a big and famous technological research institute in New Mexico) coming up with some far reaching ideas, which were written down."Fradeoffs were made in how it was worked out (not all novelties could be approved of) and then it was accepted by his direct superiors and later on all relevant actors. Ever since, TRANSIMS has found in New Mexico's senators vocal supporters (personal communication). Those submitting proposals a n d draft budgets continuously face dilemmas of honesty, trustworthiness and consistency if they wish to be successful: In budgeting, as in other aspect of social life, appearances are tremendously important. Under the historical flame of reference created by the incremental,
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base fair share types of calculation, agency officials are faced with a series of related problems. How can they keep their base intact so as to have an advantageous starting point next time around? How can they increase their appropriations income without giving the appearance of increasing them drastically? How can they make new programs look like old ones? How can they assure funds for new programs that are presented just as what they are? Another way of putting it is to ask how they can do what they believe is required in the public interest as they define it within the context of the budgetary system? The answer to all these questions appears to be: by following strategies that take into account fundamental facts about human perception. It is not an event but its interpretation in comparison to other events that counts. Strategies involving calculations, therefore, revolve around the crucial question of what kind of flame of reference, inviting what kind of comparisons, will be used (Wildavsky 1984: 102). If those w h o submit proposals face dilemmas, the positions of those w h o have to evaluate t h e m with a necessarily limited f r a m e w o r k of selection criteria is no easier. In a sense, it can be said that the evaluation f r a m e w o r k of b u d g e t officers corresponds to the bird's search image. They have a set of implicit and explicit criteria in their heads, which help t h e m to reach a defendable j u d g e m e n t on w h a t proposals are a n d w h a t proposals are n o t worthwhile receiving funds. In the A m e r i c a n context, for instance, their superiors have particular party-political h a n g - u p s they w a n t to see reflected in policies. Rationality a n d consistency in the substantiation of the n e e d for a b u d g e t or the appearance of it are also part of the evaluator's inform a t i o n filter. Only b u d g e t estimates tied to m e m e s that c o m p l y with this rationality ethos usually m a k e it t h r o u g h this filter. B u d g e t i n g a n d b u d g e t ary arithmetic are an a m a l g a m of procedures a n d politics, w h e r e entries are d e t e r m i n e d to a large extent by technical rules, but w h e r e the n u m b e r s are also m a n i p u l a t e d to serve political interests. W h e r e the n u m b e r s represent actual transactions, technical rules p r e d o m i n a t e ; w h e r e they represent assumptions about future conditions, there is greater scope for political influence (Schick 2000). In addition, b u d g e t officers m a y also read the quality of project proposals from various perceptual aspects, s o m e t i m e s even unconsciously. Their m e m e t i c i n f o r m a t i o n filters are just as imperfect as the search images used by birds, however. A n d for this, exactly the s a m e reason can be given: lack of time a n d conservative o p p o r t u n i s m . Budget officers e m p l o y relatively straightforward aids to calculations consisting of basic and simplified rules that apply m o s t of the time, but n o t always.There is no framework of selection criteria fitting all cases all of the time. After all, b u d g e t i n g is an experiential and i n c r e m e n t a l activity. Officers also lack the time and energy to systematically go t h r o u g h all the b a c k g r o u n d inform a t i o n of all the proposals. C h e c k i n g all accounts a n d all reports is c o m plicated, a n n o y i n g and t i m e - c o n s u m i n g . They have to"satisfice'and c o n t e n t themselves with checking specific samples, studying o u t s t a n d i n g a n d peculiar cases and m a k i n g sense of appearances. In the m e a n time they are well aware that they may still get fooled.
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Knowledge, Technology, & Policy / Spring 2001 In this system fairness is not rewarded, it rewards cutting more than GAO officers themselves feel is fair. They feel this cutting to be their duty or job or role. 'You're defending your position. You tally up how much you save the government. One regional office wasn't very good at this and was closed down. Outcomes are still mostly biased to the agency's side, because they have more resources, so GAO is fighting an uneven battle. Making good changes requires a scalpel, but we only have a big knife with which we can only hack. We hope that by hacking the bad budget parts will fall out. There is a bonus for making people hate you and hurt them as much as possible. It's a difficult job. It has become a game of attacking and defending instead of a way to figure things out' (personal communication).
Statics and dynamics in economics and political science The p h e n o m e n o n a described above bear a strong resemblance to w h a t institutional economists k n o w as the"principal agent t h e o r e m " a n d its connected"information a s y m m e t r y ' ( J e n s e n & Meckling 1976, Eggertson 1990). O n e actor, the principal, has a particular task that it wishes to see realized a n d e n g a g e s a n o t h e r actor, the agent, to do this for him. The principal charges the agent with the i m p l e m e n t a t i o n of the task a n d allocates the financial resources to this agent. The agent, however, has his o w n selfish objectives and purposively furnishes i n c o m p l e t e or even w r o n g information to the principal as to its precise activities, cost accounts, benefits etc. Instead of d o i n g w h a t is'socially optimal', the agent receives the funds, but s p e n d s at least part of those resources on the realization of its o w n interests, which not necessarily comply with those of the principal. The result is a socially and/or economically s u b - o p t i m a l outcome, w h i c h active m o n i toring can only partly eliminate. This line of a r g u m e n t is also used by public choice theorists, such D o w n s (1957, 1967), N i s k a n e n (1971), Mueller (1989) a n d Dunleavy (1991), w h o claim that democratic political systems work such that citizens ask for particular policies at particular prices but the various public organizations m a n a g e to divert part of these funds to different channels tax-payers never asked for. These theorists part c o m pany w h e n it comes to the question of w h e t h e r the public sector is too big (because agencies a n d bureaucrats d e m a n d too m u c h m o n e y a n d e m p l o y ees) or too small (because citizens b e c o m e so diffident that they stop asking for necessary public services), but they all agree on the existence of a situation of serious information asymmetry. Now, one could w o n d e r h o w it is possible that principals do not develop proper counter strategies and create sets of m o r e a d e q u a t e criteria, indicators and m o n i t o r i n g approaches to prevent agents from displaying such unproductive behavior. O n e could w o n d e r w h y they have no m e a n s to comp e n s a t e for agency selfishness a n d recognize a n d anticipate i n f o r m a t i o n m a n i p u l a t i o n with a m o r e refined format. Here, e c o n o m i s t s w o u l d c o m e up with s o m e t h i n g remarkably similar to the'rare e n e m y ' a r g u m e n t Dawkins a n d O w e n suggested in the previous paragraph. They w o u l d claim it is n o t cost-effective to s p e n d lots of resources on a c o u n t e r strategy in the form of an expensive and t i m e - c o n s u m i n g information machinery if there is such
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a great variety of deformation tactics and so little time to u n m a s k t h e m all. It would also make the format of selection criteria too elaborate. Instead it might be best to focus on the best k n o w n and more frequently used patterns. This, at least, guarantees some luck. Here the conservative opportunist comes into play.The expenses on figuring out new tactics may simply be too high and resources are limited. On the other hand, if certain tactics of mimicry and camouflage start spreading and b e c o m e more popular a m o n g agents because they start to see t h e m as more successful, the rule of frequency-dependent selection might lead the principal to end up adopting this new tactic into its evaluation repertoire. Portraying or modeling f r e q u e n c y - d e p e n d e n t selection in budgetary and many other social science events in the course of time, requires a view of dynamics. Unfortunately, neither public choice theorists, nor principal agent theorists nor institutional economists, however intriguing and illuminating their ideas may be, deal with this. They have a static view of the world and this allows t h e m to model and calculate more easily in the good old economic tradition. There is no space for evolution in their models. For instance, Williamson (1975, 1985), another institutional economics figurehead, has developed attractive ideas on b o u n d e d rationality and opportunism in organizations, but like all the others he does not picture the consequences of change or transformation. The closest economic or political science gets to the dynamics of mutual manipulation is some qualitative interpretations of game theory. Most game theorists have become highly quantitative in recent decades, but there is also a group of analysts m e d dling with the wicked world of incalculable idiosyncracies (Scharpf 1997, Dixit & Nalebuff 1991). They usually re-analyze past or current strategic real life events, introduce institutions, perceptions, preferences, options with their various costs and benefits and uncertainties derived from d o c u m e n t s and interviews and try to explain why certain decisions and acts were taken at that particular stage. What these approaches have in c o m m o n is that actors are assumed to have utility functions of some kind that they can (or should) maximize, but how these needs or preferences can be assuaged depends on their limited cognitive capacities, their often doubtful trustworthiness and on actions undertaken by actors with other intentions.These analyses are often of limited predictive value, but they do introduce an aspect of'strategic behavior'that administration and business analysts are more interested in. In fact, patterns of strategic behavior in the real world of politics and business can be characterized as games in which either the rules of the game are ambiguous or the actors make and interpret the meaning of the rules themselves. It is in this zone of incertitude that manipulative tactics as described above are usually employed and have a high chance of being successful. We should however not confuse'rational behavior'as it is defined by most economists with"strategic"or"tactical"behavior. Strategic behavior usually comes d o w n to very practical, daily-life manipulations characteristic of both animals and h u m a n beings. It is using some form of deceit to realize one's objectives, so that there is a difference b e t w e e n w h a t is said or shown and what is actually i n t e n d e d and done.
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Strategic behavior has to do with o p p o r t u n i s m , u s i n g time to one's o w n advantage, k e e p i n g h i d d e n agendas, providing selective, limited or even false i n f o r m a t i o n on p u r p o s e (information impactedness), bluffing, cheating a n d exaggerating or d o w n p l a y i n g your o w n capacities a n d possibilities to solve problems a n d getting c o n n e c t e d with the powerful a n d successful to improve chances of one's o w n success (de Jong 1999, de Jong a n d Stout forthcoming). H o w dynamics, rational behavior a n d strategic behavior are interconn e c t e d in the social sciences in general and in b u d g e t a r y processes in particular is a question still b e g g i n g for a satisfactory theoretical answer. S u r p l u s v a l u e of the presented theoretical framework In 1982, John Maynard Smith started the task of reframing g a m e theory as d e v e l o p e d in the economics of bargaining to m a k e it applicable to biology. O n e of his chapters was even o n " H o n e s t y , bargaining a n d c o m m i t m e n t " ( c h a p t e r 12). M o r e specifically he i n d i c a t e d t h e i m p o r t a n c e of signaling and the evolution of i n f o r m a t i o n transfer. He s u g g e s t e d two aspects s h o u l d be taken into account: 9 9
Information about resource holding power (RHP); i.e. about size, weapons etc. which might influence the outcome of an escalated fight. Information about motivation; i.e. about what an animal will do next.
W h e n studying the theoretical and empirical literature in biology on strategy, m a n i p u l a t i o n and bluff ( t h o u g h w i t h o u t m e n t i o n i n g the t e c h n i q u e s referred to in the p r e c e d i n g sections), he also s t u m b l e d on the explanatory value of f r e q u e n c y - d e p e n d e n t selection. As Anderson points out, however, it does not follow that intention movements will evolve as signals in the first place, but only that they will not last indefinitely as reliable signals, In fact, one of two things can happen. First, a number of different threat displays may be maintained by frequency-dependent selection.This could happen because the more commonly a particular signal is used as a bluff the less effective it becomes. Alternately, different threat displays might succeed one another in evolutionary time, as each signal went through the sequence of intention movement to honest signal to bluff to ineffective signal. If this cyclical pattern of evolution is common, we would expect to find that the threat displays of related species differ from one another more than do, for example, alarm notes, which are not used in contest situations (Maynard Smith 1982: 151). It is thinkable that these start-up ideas for a f r a m e w o r k on the evolutionary theory of games will be refined with the help of concepts from ins t i t u t i o n a l e c o n o m i c s ( p r i n c i p a l a g e n t t h e o r e m , i n s t i t u t i o n a l bias, information asymmetry), political science (bluffing, camel nose, overestim a t i n g and several other strategies as noticed by empirical researchers)
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and biological evolutionary theory (mutation, variation, frequency-dependent selection, selective environment, m e m e s and memetic filters). Joining these frameworks together may give rise to a theoretical framework closer to what we see happening in practice than current work on economic games, which relies on the existence of preference functions that have never been identified in reality. Real budget games are complex, which makes modeling and simulating an almost impossible job. In my view, the best way to start doing this is by building it on concepts that correspond closely to negotiator's daily practice. After this, better structured analysis of actual practice, more adequate experiments and possibly even more realistic simulations can be developed. These simulations can then be used as supportive instruction tools for practitioners. Until then, studying the actual practice of manipulation and counter-strategy is fascinating enough. References Brandon, R.N. (1988): The levels of selection; a hierarchy of interactors. In: Plotkin, H.C. (ed.): The role of behavior in evolution, Cambridge Massachusetts, MIT Press. Dawkins, Richard (1976): The selfish gene. Oxford, Oxford University Press. Dawkins, Richard (1982): The extended phenotype, Oxford, Oxford University press. Dennett, D.C. (1996): Darwin's dangerous idea: evolution and the meanings of life. Simon and Schuster, New York. Downs, Anthony (1957): An economic theory of democracy, Harper and Row, New York. Downs, Anthony (1967): Inside bureaucracy, Little Brown and Co, Boston. Dixit, Avinash K. and Barry J. Nalebuff (1991): Thinking strategically; the competitive edge in business, politics, and everyday life, W. W. Norton & Company, NewYork/London. Dunleavy, Patrick (1991): Democracy, bureaucracy and public choice; economic explanations in political science, Harvester Wheatsheaf, London. Eggertson, T. (1990): Economic behavior and institutions, Cambridge University Press. Frank, Joshua (1999): Applying Memetics to Financial Markets: do markets evolve towards efficiencyL in: Journal of Memetics - Evolutionary Models of Information Transmission, vol. 3, . Greene, H. W. (1997): Snakes; the evolution of mystery in nature. University of California Press, Berkeley. Hodgson, Geoffrey M. (1993): Economics and evolution; bringing life back into economics, Polity Press. Hannan, Michael T. And John Freeman (1989): Organizational ecology, Harvard University press, Cambridge Massachusetts/London England. Hull, David L. (1988): Science as a process; an evolutionary account of the social and conceptual development of science, University of Chicago Press. Jensen, M.C. and W. H. Meckling (1976): Theory of the firm: managerial behavior, agency costs and ownership structure, in: Journal of Financial Economics, pp 309-311. Jong, Martin de (1999): Survival of the institutionally fittest concepts, in: Journal of Memetics - - E v o l u t i o n a r y Models of I n f o r m a t i o n Transmission, vo[. 3, . Jong, W. Martin de and Helen D. Stout (2001): Strategic behavior and the law; how legal authorities deal with factual strategic behavior of former monopolists, forthcoming in Public Management. Maynard Smith, John (1982): Evolution and the theory of games, Cambridge University Press. Mueller, Dennis C. (1989): Public Choice IL Cambridge University Press. Niskanen, William A. (1971): Bureaucracy and representative government, Aldine Publishing Company, Chicago.
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North, D.C. (1990): Institutions, institutional change and economic performance, Cambridge University Press. Owen, Denis F. (1982): Camouflage and mimicry, University of Chicago Press. Ruse, Michael and Jane Maienschein (eds) (1999): Biology and the foundation of ethics, Cambridge University Press. Ruse, Michael (1998): Taking Darwin seriously; a naturalistic approach to philosophy, Cambridge University Press. Scharpf, Fritz W. (1997): Games real actors play; actor-centered institutionalism in policy research, Westview Press, Oxford. Schick, Allen (2000): The Federal Budget; politics, policy, process, Brookings Institute, Washington. Sober, Elliott (1984): The nature of selection; evolutionary theory in philosophical focus, University of Chicago Press. Speel, H.C. (1997): A Memetic analysis of policy-making. Journal of Memetics - Evolutionary Models of information Transmission, vol. 1, . Wickler, W. (1968): Mimicry in plants and animals, Weinfeld & Nicholson, London. Wildavsky, Aaron (1984): The politics of the budgetary process, Fourth Edition, Little Brown and Company, Boston/Toronto. Wildavsky, Aaron and Naomi Camden (1996): The new politics of the budgetary process, Little Brown and Company, Boston/Toronto. Williamson, O.E. (1975): Markets and hierarchies, a study in the economics of internal organization, Free Press, NewYork. Williamson, O.E. (1985): The economic institutions of capitalism, Free Press, NewYork.
