William W. Cooper’s (July 23, 1914 – June 20, 2012) centennial is an appropriate occasion to recall his achievements, recognize his contributions to operations research, and reconsider the powerful potential of data envelopment analysis (DEA). The present volume demonstrates how this technique can serve to underpin transparent governance aiming at sustainable development goals in an age of globalization.
Bill passed away on June 20, 2012, in Texas. On the same day world leaders gathered in Rio de Janeiro for the Rio +20 conference, accompanied by a crowd of both peaceful citizens and militants, all in their own way affirming their commitment to sustainable development goals.
The outcome document, The Future We Want, laid the foundation for a new era of partnership based on development cooperation. Global deliberations on post-2015 development agenda call for forging a political consensus to fight poverty, inequality, and hunger—along with attaining other global sustainable development goals.
Good strategies for sustainable development integrate and balance many goals where possible, and provide trade-offs between them where necessary. Past strategies have not always succeeded in this respect, even when sustainable development and poverty reduction were the objectives. There is a new consensus among major development partners to move away from input-oriented impact monitoring to output-based approaches that help shift the emphasis of development programs to development priorities and results.
An integrated analysis of policy goal trade-offs involves a multipleinput and -output framework. Traditional analysis fails to adequately capture the multidimensional character of the problem. Fortunately, data envelopment analysis is ideally suited for the purpose, delivering a 124 Diagnostics for a Globalized World metric that ranks the performance of nations or regions according to their ability to marshal economic and social policy to attain a spectrum of desired goals.
For their work in developing Data Envelopment Analysis (DEA), IC² Institute Fellow W. W. Cooper (1914 – 2012) and his colleague Abe Charnes (1917 – 1992) received many awards, including the John von Neumann Theory Prize (1982). DEA serves as a versatile mathematical tool to process multiple and variable data inputs, and split all observations into two classes: either “efficient” (Pareto-optimal) or “subefficient” (in disequilibrium). New applications of DEA as an analytical tool have recently appeared within the spectrum of research being conducted by IC² Institute Fellows and Visiting Scholars.
IC2 Institute Fellow Sten Thore, a colleague and co-author of W. W. Cooper, has recently co-authored a book with Ruzanna Tarverdyan that leads the reader beyond measuring national policies’ intended results, and illustrates using DEA to measure the actual results of national policies. This book, Diagnostics for a Globalized World, features a foreword by David Gibson and is dedicated to the memory of W. W. Cooper.
While Part 1 of the book provides the mathematical specifics to use DEA to measure policy effectiveness, the formulae are presented in a narrative that firmly places humanitarian goals as the focus. (In other words, one does not need to be a mathemetician to enjoy the read.) Thore and Tarverdyan begin with the multidimensional millennial goals of the United Nations:
- Eradicate extreme poverty and hunger
- Achieve universal primary education
- Promote gender equality and empower women
- Reduce child mortality
- improve maternal health
- Combat HIV/AIDS, malaria, and other diseases
- Ensure environmental sustainability
- Create a global partnership for development
They quantify these goals across various metrics for poverty reduction, sustainable development, fair globalization, decent work, and gender equality (“which makes the others possible”). The data envelopment analyses against these metrics provide efficiency rankings for nations, while they also present diagnostic results, by calculating the improvement in a nation’s goal performance that should have been possible, compared to the achievements of its peers. For example, in the measure of competitiveness, the nation of Malawi is revealed as a positive role model for Senegal and several other African countries; and in balancing measures of decent work with a fair globalization, Denmark emerges as a role model “for half the world.”
Part 2 of the book, “Beyond the Geneva Consensus” (by Tarverdyan), discusses the search for meaningful metrics by which to analyze advances against the millennial goals and similar policy aims.
Part 3, “Remembering Times Past and Honoring Four Great Scholars” (by Thore), presents memoires of working with Jan Tinbergen, Abe Charnes, W. W. Cooper, and Ilya Prigogine (also an IC2 Institute Fellow), and provides glimpses of the early years of the IC2 Institute.
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UPDATE FALL/WINTER 2014
In a sense our work picks up the theory of economic policy where Tinbergen left it. Following him, we form a socialeconomic preference function of the policy goals of each nation. We determine that preference function empirically, using data like the Millennium Development Goals. But we do not assume that each nation necessarily follows the neoclassical maxims of equilibrium. Since Tinbergen´s days, economics has discovered phenomena like irrational behavior, disequilibrium, and even chaos. There may exist a gap between the idealized optimum solution and actual performance.
Our work is a case of frontier economics. Frontier nations are able to coordinate available policy tools to achieve an optimal mix of social and economic goals. Nations behind the frontier are outperformed by those at the frontier. In frontier economics the true dichotomy is between order and excellence on the one hand, and disorder and disequilibrium on the other. But remember that order can also be found in poor countries, just as chaos may reign among the ranks of the mighty. The “frontier” nations define the frontier of the doable. The others are sub-frontier, falling short of the doable. To improve, a sub-frontier nation might find instructive advice looking at its nearest frontier neighbors.
Frontier economics recognizes the presence of oldfashion idealized equilibrium economics and the presence of sub-frontier decision-making. The task of distinguishing between the two is an empirical one: order is not postulated but is a matter of testing, of examining the data. Employing methods of operations research, it is possible to determine numerically the envelope to a given set of data points. The envelope is the frontier. In modern hi tech lingo, the expression “pushing the envelope” means going beyond what is technically possible today. More strictly, envelope is a geometrical term, referring to the locus of tightest closure around a given collection of points.
Processing data on the achievements (or lack of achievements) of the UN millennium goals, we have in our book have split more than one hundred nations into two groups: those located at the envelope, and those that are falling behind. For each sub-envelope nation we have determined its closest “role models” located on the envelope. The envelope is a surface in many dimensions (one dimension for each policy goal and each policy instrument). The envelope spells out all the desired aspects of the performance of a nation explicitly. For a sub-frontier or sub-envelope nation, we calculated the posssible improvement of its performance. The role models or peers turned out to be drawn from all continents, representing both rich and poor countries. The identification of a nation´s peers should be both equitable and helpful. The peers are not necessarily the masters of the world, but they feature goal achievements that can suggest to others a possible potential for improvement.