[1306] Of discretionary and rule-based policies

What is the difference between calvinball and a game of chess?

The centrality of a ball in the former and the absence of such sphere in the latter is one of the differences. The main difference however is not so obvious; it is the ever-changing rules of calvinball. Whatever Calvin changes his mind, so do the rules. In fact, with such discretionary-based game, there is nothing that could prevent calvinball from becoming a game of chess. In contrast, it is a faux pas for one to change the rules of chess.

Policymaking could be observed within a spectrum of consistencies or rather, a gradual duality of flexibility and consistency; at one end, it is fully rule-based while the other is fully discretionary. Any successful society, organization or entity, even individual, would find the best policy fit for its situation. As I gain greater experience from my employment and life in general, I have come to especially appreciate the need to strike a balance within the consistency spectrum.

Discretionary policies are best whenever flexibility is valued highly. It frees an entity from whatever constraints associated with rules, save exogenous laws such as physics and economics. It provides a policymaker the freest of hands to wrestle any situation.

If consistency is desired instead, then rule-based policy is the option. While it may limit choices given a situation, it helps in building reputation. Such reputation is important for any law, rule or regulation to be respected. Furthermore, such policies make auditing processes possible. On top of that, consistent policies manage expectation and thus, making planning possible.

In contrast, discretionary policies will change every factor a plan depends on and ruin expectation. When the only expectation is no expectation, planning is an useless exercise.

Perhaps, the current and the last Malaysian administrations — Mahathir and Abdullah administration — illustrate the consistency spectrum within local context. Mahathir administration as far as I can remember was decisive, that whatever was said was done, except, maybe during the Asian Financial Crisis when Malaysia reneged from its payment commitment. Under Abdullah administration (or perhaps more popularly, the Badawi administration), there is too much second guessing being done. Few examples are the “scenic bridge“, the double tracking project and, arguably, matters concerning liberty. This liberal use of discretionary policies might contribute to the declining reputation of the current administration among certain quarters, if not the Malaysian society in general; that words mean increasingly little.

In the realm of politics, compared to rule-based, I am inclined to say that discretionary policies as a set is the favorite tool of any populist. Like As Heraclitus the Greek philosopher once wrote, the only constant is change; a populist has no opinion of his own but instead, rely on the mob.

This may not need an acute observation and I may not be the first to notice this but I have discovered that an established organization usually is guided with procedures that it takes an expert to know every nook and cranny of the company to maneuver. The atmosphere is far simpler in an entrepreneurial setup. Anything could be done here and now and all that is required is willpower.

As a young participant in the labor market, rule-based policies could be excessively suffocating. At each juncture, rules have to be observed and sometimes, one is not at liberty to choose. An organization that is based purely on discretionary policies on the other hand could be intimidating. There is little guidance in a discretionary-dominated entity while ruled-based entity offers one a manual to navigate through corporate maze.

Due to the nature of each policy type, rules encourage stability while discretionary policies encourage creativity, tolerate or accommodative of change. Both policies have a myriad of other effects but at the moment, I am convinced that the two are the most important characteristics of the policies.

Rules themselves come through exploration of ideas. Rules themselves are symptoms of knowledge. When a society has a certain set of knowledge, it no longer becomes worthwhile to explore the same idea all over again, discounting pedagogic purposes. To clearly express this idea, an example is in order. Take classical mechanics for instance. Usually, it is cheaper to simply accept the assertions made by the relevant laws rather than trying to discover the same laws over and over again through trial and error or simply extrapolation. After all, it took hundred of years for the field to be where it is now and alas, we as mortals do not have hundred of years to make the same discovery; having an apple falling down on one’s head everyday of every year might be a painful experience.

Some rules however are based on false, or limited explored ideas or assumptions which might include superstition and religion. Certain ideas become obsolete as new knowledge offer new better methods to deal with old problems. This is where freedom unfettered by rules — rules that suffer from status quo bias — has a large role to play. Alas, identifying such rules is hard.

Reiterating my words, a successful society has a certain mix of rule and discretionary-based policies. The right mix conserve true knowledge while weeding out false ones as well as adding new knowledge to our knowledge tank.

How does one get to that perfect fit?

Now, that is a more interesting question but harder to answer.