A general framework for good societal governance

Subtitle: How to induce constructive plus-sum play among political and economic actors


Fundamental tenets

1. Moral imperative I: play a plus-sum game!
The rules of the game should promote value-creating plus-sum games and discourage zero-sum play; destructive minus-sum play must be prohibited

2. Moral imperative II: play fair and square!
The fair distribution of gains maximizes social surplus: the market mechanism ought to deliver business profits in proportion to the contribution to society

3. Moral capital is the key resource of nations and organizations
Honesty, openness and fairness are the preconditions for successful plus-sum play ensuring trustful cooperation; fraudsters and free-riders should be squeezed out

4. The demand for moral capital increases with the size of the community
Growth increases complexity, conflict of interests, distrust, corruption and cost of control; without additional morality the outcome will be stagnation or breakdown

Practical guidelines

1. Beware of centralization which tends to destroy moral capital
Preserve individual freedom, and responsibility as well as creativity and flexibility

2. Minimize moral hazard ─ economize on scarce moral capital
The interests of the actors should be aligned with over-arching objectives

3. Put a price on the environment
Whenever feasible, market mechanisms should be preferred to government regulation

4. Above all, keep it simple
The rules of the game should be transparent, adaptable and as consistent as possible