ECONOMICS - Marginal Cost and Average Cost

  Question

      a)   Graphically show the relationship between average and marginal cost.

 

b)   Why do average and marginal cost cross at the minimum point of average cost?

 

Suggested answer

 

a)      a)  Figure 1 graphically shows the relationship between average cost and marginal cost.  

    

     

a)             b)     Firstly, marginal cost is less than average cost when average cost continues to fall and, secondly, marginal cost is higher than average cost when average cost is rising. It follows that at the point where average cost ceases to fall - and starts to rise - average cost and marginal cost must be equal. This is why the marginal cost curve         crosses the average cost curve at the minimum of the average cost curve.

BI   

ADMINISTRATION - Decision-making

  QUESTION:  What is decision-making? Contrast the comprehensive-rational Decision-making Model and the Bounded- rationality (satisficing) Decision-making Model. Which of the two models best explains decision-making processes in the Zambian public service? Give reasons for your answer. Word limit 2500 - 3000 words.

SUGGESTED ANSWER BELOW

ABSTRACT

Decision-making is the series of mental and physical steps taken in overcoming a challenge. The Comprehensive Rationality Decision Making Model and the Bounded Rationality Decision Making Model offer two possible logical ways of solving problems.

Comprehensive rational decision-making theory offers linear (successive) steps meant to lead to optimisation of benefits. The bounded rational decision-making model makes a modified rational process aiming at bringing realism into problem-solving. Its purpose is to arrive not at optimised benefits but simply a satisfactory outcome. The bounded rationality model in practice lessens the amount of information-evaluation proposed by comprehensive rationality theory.

The two decision-making models enriched the field of administration and in particular gave a better understanding of what may or may not work well in decision-making. Administrators who have studied the two models probably have to choose which to apply and to what degree.

 

KEY WORDS/PHRASES

Rationality – to be measured, examining available material before making conclusions.

Comprehensiverational decision-making – the decision-making in which decision-makers list and make full evaluation of facts and figures for and against.

Bounded rationality decision-making  model – a rational decision-making model in which there is less emphasis on full evaluation of available material.

 

INTRODUCTION

A decision is the choice made by the decision-maker, from a number of alternatives, to address some challenge in a specific situation. Decision-making is a problem-solving process which ends when an answer is found - normally from among a range of possible solutions. What is common in these two definitions is that decision-making involves selection of what to do.

 Decisions are made in public administration, politics, business, social situations and indeed in an endless list of other professions and circumstances.

The basic decision-making process has the four main stages of identification of goals, option generation, evaluation and choice, and follow-up and execution.

 

In this essay, we contrast the comprehensive-rational Decision-making Model and the Bounded Rationality (satisficing) Decision-making Model. We also attempt to explain which model is more in line with the decision-making process in Zambia.  

 

DEFINITIONS IN DECISION-MAKING:

1.      Rationality.

2.      Comprehensive-rational decision-making model.

3.      Bounded-rational decision-making model.

1.      Rationality

We start by explaining the word ‘rationality’. Rationality is reasoning that seeks to maximise the benefits, as dictated by the means available. Thus, the rational actor strives to avoid judgement based on emotion and arbitrariness. It may therefore be safely said that the rational actor attempts to make decisions and moves based on understanding why it is important to take one particular decision instead of another. For example, the rational actor will attempt to examine and understand facts and figures before deciding whether to buy a horse or a car as his/her daily means of transport. The principle of rationality has been used for a long time in economics in efforts to explain consumer choice.

 

1.      The Comprehensive Rational Decision-Making Model.  

Comprehensive rationality suggests that leaders seek to convert their vision to policy, supported by organisations which operate in a sensible and impartial manner. Accordingly, the Comprehensive Rational Decision-Making Process was conceived to have the following steps:

i.                    Identifying values and objectives/goals to be achieved.

ii.                  Listing and assessing all the different ways the objectives/goals can be achieved.

iii.                Determining how appropriate each of the listed objectives is.

iv.                Comparing the benefits of each option with its costs.

v.                  Picking the option that maximises achievement of values and objectives and goals. 

vi.                Execution.

vii.              Feedback.

  1.      The Bounded-rational decision-making model

 

The bounded rationality decision-making model seeks ‘sufficiency’ rather than ‘maximising’. Specifically, the model is based on:

·         The view that individuals and organisations cannot maximise their utility (degree of satisfaction); they instead are able to find a point that is ‘good enough’ or ‘satisfices’, and  

·         The reasoning that decision-makers do not have the means or the desire to consider absolutely all factors before deciding what course of action to take; they have to use the simple  'rule of thumb' (which is really a combination of rules and common sense) – focusing on the factors most relevant and making a decision.

To find decisions that satisfice, decision-makers should be free thinkers. They must be able to process information well and use the most appropriate rule of thumb to ensure they are most effective. 

Some organisations are large and complex. Decision-making that considers every relevant fact can be really time-consuming and tiresome. Decision-making could be impracticable. So, the rule of thumb is supposed to help a decision-maker decide with relative ease.

CONTRASTS BETWEEN THE COMPREHENSIVERATIONALDECISION-MAKING PROCESS AND THE BOUNDED RATIONALITY MODEL

1.      One difference is that the comprehensive rationality model assumes that the decision-making process is linear (moves from one clearly-defined stage to another) in a sequential fashion. The bounded rationality model recognises that decision-making may not always move that way, especially in very big organisations. 

However, it still goes to the credit of the comprehensive rationality model that there is, at least, some formal approach to decision-making.

 

2.      While the comprehensive rationality model is about examining all relevant available facts and figures, the bounded rationality model embraces the impracticality of evaluating vast amounts of data and proposes minimisation of material to examine. It proposes that it is necessary to start out with only some key facts to consider, unlike in the comprehensive rationality model. It can also not be presumed that an individual or organisation will be able to generate the many alternatives that may require discussing in some cases.

Indeed, even the bounded rationality model does not dismiss rationality - the examination of facts available. It only proposes minimising their examination.

 

3.      The comprehensive model seeks listing of values and objectives in order of importance. By not suggesting that approach, the bounded rationality model appears to recognise the fact that sometimes, the objectives can be difficult to list in order of importance.

 

4.      The two models are both rational, but with a difference. It is 'absolute rationality' that is not embraced by the bounded rationality model. Mere rationality itself is not a problem.

 

5.      The comprehensive rationality decision-making model assumes that all the information that will be needed will be there, accurate, reachable and not expensive.  In actual fact, information can be scarce, inaccurate, unreachable and too expensive. The bounded rationality model acknowledges that decision-making is limited by how much relevant information the decision-maker can get.

 

6.      Comprehensive rationality aims at decisions that ‘maximise’gains – the highest possible benefit out of the alternative chosen. Bounded rationality treats maximum benefit as impracticable, and therefore seeks to only ‘satisfice’. In bounded rationality, therefore, it is enough if a decision is ‘satisfactory’.

 

7.      The comprehensive model makes the assumption that decision-makers will have the capacity and resources to do evaluation of alternatives in a technical way. This is not so, in real life. For example, a decision-maker may not know the evaluation criteria. Decision-makers are likely to have only sufficient knowledge to have a fair idea of benefits and consequences. 

   Decision makers both on the streets and in the boardroom often have competence handicaps and choose what is good enough (whether in shops buying shoes or in the boardroom discussing who to promote to a vacant position). Bounded rationality recognises the fact that decision-makers are not always technically competent.

 

8.      There are times when it is necessary to act in advance when one has a mere idea of the dangers of not doing so. For example, many countries and regions went on lockdown after the breaking out of the Coronavirus. While some countries may certainly have done a comprehensive analysis of the various alternative courses of action, many appear to have simply used the ‘good enough’ idea they had of the effects of Covid-19 afflicting their communities and locked down. The contrast here is that bounded rationality – unlike comprehensive rationality - advises openness of mind and pragmatic practice.

 

9.      Another contrast is that there are factors (such as ethics, feelings, loyalty, respect) that cannot be measured but are still very important. There seems no room for them in the comprehensive rationality model which argues that relevant factors must be identified and measured against consequences. That is, if a factor cannot be measured, it may have to be left out, and not be considered (even if it is an important factor to consider). On the other hand, the openness of mind encouraged in the bounded rationality model suggests that there is room for non-quantifiable factors.

WHICH MODEL BETTER DESCRIBES THE ZAMBIAN DECISION-MAKING PROCESS?

Both the comprehensive rational decision-making approach and the bounded rationality philosophy are evident in Zambia. Which of the two models best describes the decision-making process in Zambian public service, however, seems to depend on the type of public sector entity being looked at. We expand this statement under two sub-headings:

The public sector

In the Zambian public sector, including the legislature and civil service institutions, decision-making appears to strongly be in the line of comprehensive rationality. The reasons are:    

-          Government procedure in decision-making is clearly spelt out in writing and must always be followed to the book. Decisions always have to follow the procedure of providing information for evaluation before approval is given. That is a characteristic of comprehensive rational decision-making.  

 

-          There is linearity in the way government ministries and departments make decisions. This is exhibited in the award process of contacts by the Zambia Public Procurement Authority ZPPA). Linearity is also shown in the way the national assembly operates. For example, laws start as bills which have to go through four sequential steps namely first reading, second reading, third reading and eventually being signed by the republican President before they become statutes.

-          It is possible to see assumptions associated with comprehensive rational decision-making. An example is the apparent assumption that there will be enough time for all the required procedure. There obviously is also the assumption that by being so procedural, the outcome will be the maximised utility.

In many ways, it is understandable using the comprehensive rational decision-making model in government institutions. They are normally very large and complex and if procedure were not rigid, it would increase the incidence of vices such as employing unqualified personnel and awarding undeserved business.

The parastatal sector

In quasi-government businesses (parastatals), there is some departure from the rigid system of procedure. For example, people can be dismissed more easily and at the local level than in the totally government sector. It is not so in the pure government sector. Firing a junior civil servant in remote Mbala (for instance) can require the involvement of very senior officers (normally the Permanent Secretary) in the capital city. Because of being slightly more autonomous and being in business, parastatal businesses enjoy a bit more flexibility in procedure. Overall, parastatal businesses suffer from many of the limitations (comprehensive rational decision-making burdens) as the pure government sector. This is because they operate within policy set by government and must achieve government objectives (not profit objectives) at the end of the day.

 

CONCLUSION

The formulation of the Comprehensive Rational Decision Making process, notwithstanding the weaknesses of the model, gave the world of administrators a crucial first step in how to go about solving problems. Being an initial step, it was bound to have imperfections. Other important theories such as Maslow’s Hierarchy of Needs, have also been found to have weaknesses (for example, it has been proven that one need does not have to be completely satisfied for a new, higher need to emerge).

When the Bounded Rational Decision Making process was proposed, it benefited from the existence of the comprehensive model evidenced by the fact that its proponents frequently refer to the comprehensive model in their writing. 

In fact, in many ways, the bounded rational theory was a strengthening of the comprehensive model out of appreciating the theory. If the comprehensive model had not been appreciated, the bounded rationality theory could have been made totally different.

And so, it could probably be stated that both the comprehensive and rational model of making decisions and the bounded and rational approach were attempts not to compete; they were attempts to solve a common enemy of mankind which was apparently insufficient decision-making tools. They each have validity.  

  

TRANSACTIONAL AND CONSTRUCTIVIST COMMUNICATION MODELS

 

QUESTION

With relevant examples, describe in detail any two communication models used in the business environment.

    Look at those red new leaves! Beautiful! The leaves are red when young, starting to turn green from about one to one-and-a-half weeks. 
 

SUGGESTED ANSWER

Communication is the exchange of meanings between individuals through a shared system of sounds, signs and other forms of message.

                       The Transactional Model of Communication

In the transactional model of communication, at one point party A is the sender and party B is the receiver; in the next moment, party B becomes the sender and party A becomes the receiver. That is, the sender/receiver status alternates between the two parties. In other words, when one party receives a message from the sender, they become the sender themselves when they give feedback. The original sender now becomes the receiver (the feedback is the message they receive).

As a result of the switching of status from sender to receiver and back, parties A and B are referred to as communicators rather than sender and receiver. This also explains why the model is said to be “transactional”, whichis a word normally associated with the commercial activities of buying andselling. Indeed, in business transactions, there is something to give and also something to receiver for each of the parties (who we call C and D). We give an example of a business transaction in the next paragraph.

C is selling a wrist watch and D is buying the wrist watch at $25. One set of actions involves C physically offering the watch to D and D taking possession of the watch (in which C could be called the sender and D the receiver). There is then a second set of actions in which D physically offers $25 to C and C accepts the money (this now makes D the sender and C the receiver). This is how transactional communication mirrors a commercial exchange.

            Transactional communication is two-way interaction. It is real-time exchange of messages. As a result, both parties are normally present, though not necessarily in the same place. Examples of transactional communication include face-to-face speaking, a skype talk and a message exchange in a chat room.

Diagram 1, below, illustrates transactional communication.

 

Criticism of the transactional model

·         A response is a necessity. Without a verbal response, it is not easy for the sender to be confident the message has been received as intended.

·         Since the message exchange is concomitant, interference is a big possibility.

 

The Constructivist Model of Communication

Constructivism was first used by Jean Piaget to describe the learning and cognitive processes of children. The constructivist model of communication is, in the general sense, much in line with that, as it is based on the principle that the real meaning of what has to be conveyed in messages comes out through the social process of communication.

The constructivist model focuses on the common ground or negotiated meaning reached as the communicators (sender and receiver) clarify the key components of the messages going in each direction.

Constructivist communication is exchange of meanings that develops through reaching a common understanding on different things. It is bout people getting to a stage where they start getting the same meaning from particular signals, sounds and other kinds of communication package. The way a child learns to communicate is indeed one example of a constructivist model of communication.

Constructivism learning is influenced by past experience of the learners/teachers which enables them to ascribe meaning to different motions, sounds, and other specific types of communication effort.

To further help one conceptualise constructivist communication, one could imagine two people who spoke completely different languages coming to live together and somehow finding ways to understand each other.

 

Figure 2 illustrates the concept of constructivist communication.

 Significance of the constructivist model of communication

Constructivism in communication provides the basis for mutual understanding. The constructivist model is a reminder that there may not be effective communication if the communicating parties do not ensure that what one word or phrase means to party X is what it also means to party Y.

A lot of communication requires that action be taken by the sender/receiver in accordance with the message sent/received. No action is likely to address the expectation if the sender/receiver do not have a common interpretation of the ideas exchanged in the communication.

Criticism of the constructivist approach

A constructivist approach to communication, among students, could mean an undirected, principle-less study system that eventually leaves learners frustrated and ending up nowhere (as they may not know exactly where they are supposed to go).

Conclusion

The transactional and the constructivist communication models are not the only models of communication identified by different researchers on the subject. However, they are among the most basic and, in that way, could help set the foundation that scholars of communication can build on to uncover or create new perspectives on the subject.  

CENTRALISED VS DECENTRALISED MANAGEMENT

 

QUESTION

Briefly analyse the merits and demerits of centralisation and decentralisation.

 

SUGGESTED ANSWER

Centralisation

Centralisation is a management approach in which the top level of an organisation makes all the material decisions.

Advantages of centralised management

·         The command framework is clear. There is little confusion as to who directs what activity.

·         In times of emergency, response can be quick owing to plainness of authority and responsibility structure.

·         Employees tend to concentrate on developing a smaller skill set, which they tend to polish up well. They do not have to master any real management skills, which could simply be a strain on their obviously scarce time.

·         It is more likely the firm will operate as a single unit with minimal pulling in different directions.

Disadvantages of centralised management

·         Where a situation needs detailed information from a specific locality, top management

may not fully understand the situation. As a result, any action taken may also not be good enough.

·         Workers may not have enough motivation to work if everything appears dictated down to them by top management.

·         Repetitive and limited scope of work can be a disadvantage to employees interested in grown by way of learning and management responsibilities, especially as the organization expands.  

·         Overall company performance may go down when workers feel they are simply carrying out someone else’s instructions and not what they are part of.

·         Total centralisation may deny the organisation valuable input from talented people in lower echelons.

 

Decentralisation

This is when top management and lower-levels share management authority and responsibilities.

Advantages of decentralisation

·         Overall organisational levels of knowledge and effectiveness are raised because of marrying central and local-level perspectives.

·         Workers are more motivated because they feel they have a say in the running of the firm.

·         It reduces the potential of top management being overloaded.

·         Lower level employees become more alert as they feel they could be partly responsible as well if anything went wrong.

 

Disadvantages of decentralisation

·         Reporting lines can cause uncertainty and frustration as to who is in charge of what domain.

·         Passing the buck. More managers means the blame-game is easier to play.

·         Complex processes. It takes long for decisions to move through the established stages: in business, it is said that time is money.

 

Conclusion

Centralised and decentralised management each have positives and negatives. The best situation is probably leaving it to managers to decide whether their unique business situation will work better with centralisation or with decentralisation.  This means looking at such factors as type of business, size of organisation and capacity of human resource.

POLITICAL SCIENCE - Constitution Amendments Zambia

 MAJOR CONSTITUTION AMENDMENTS IN ZAMBIA SINCE 1964 - IN BRIEF

QUESTION

Zambia has been undergoing constitutional reforms since independence. The current constitutional reforms involve the contentious BILL 10. Trace the origins of BILL 10, in so doing, discuss the advantages and disadvantages of this BILL.

ABSTRACT

BILL 10 is the sixth major post-independence constitutional change that could be made in Zambia. Proposals in the bill include bringing back the office of Deputy Minister and enabling government to contract debt independent of National Assembly. The main advantage of the bill is that it is a chance to address any weakness from previous constitution-amendment processes. However, some see the bill as promoting the interests of the current government, such as weakening the Presidential two-term limit clause. Overall, Bill 10 seems - so far - unable to attain universality of acceptance, just like the constitution reviews of the past.

 

INTRODUCTION

The Republic of Zambia has since 2019 been discussing the Constitution of Zambia Amendment Bill, 2019, known simply as Bill 10. The essay traces the roots of Bill 10 and also examine its advantages and disadvantages.

 

DEFINITIONS

A constitution is a collection of rules which aim at regulating the allocation of responsibilities, powers and functions among the various units and proxies of the government and explain the ties between these and the people at large.

An amendment is an addition, a deduction or other form of change made to an established  rule, law or agreement.

TRACING THE ORIGINS OF BILL 10

The road to Bill 10 appears to stretch all the way from the time of Zambia's independence. One effort to reform the constitution eventually led to another because of a weakness or weaknesses in it. This is what the next few passages attempt to show.

THE INDEPENDENCE CONSTITUTION

A glaring weakness of the Independence constitution, enacted in 1965, was that it stated that Kenneth Kaunda shall be the Republican President.  

 

THE CHONA CONSTITUTIONAL REVIEW COMMISSION

The Mainza Chona Constitution Review Commission was set up by then President Kenneth Kaunda in 1972. The terms of reference were to establish a one-party participatory democracy, seen by some as a stifling of real democracy.

 

THE MVUNGA CONSTITUTION REVIEW COMMISSION

The Mvunga constitution review commission, formed in 1990, included only the basic clauses required to conduct free and fair elections in 1991. In this way, the Mvunga Commission, like the others before, remained a work-in-progress.  

 

THE MWANAKATWE CONSTITUTION REVIEW COMMISSION

The Mwanakatwe Constitution Review Commission – 1996 - was about promoting the holding of free and fair elections, impartiality of the judiciary and the contentious Presidential parentage clause (candidate shall have both parents born in Zambia), seen as a targeting of Kenneth Kaunda by Frederick Chiluba.  

 

THE MUNGOMBA CONSTITUTION REVIEW COMMISSION

It was set up in 2003 by Levy Mwanawasa in the hope of addressing past inadequacies. One of its challenges was how the constitution was to be adopted. Another was that Mwanawasa was seen as a minority leader who had won elections with only 28.8% of valid votes cast.

 

THE CONSTITUTION AMENDMENT ACT NO. 2 OF 2016

One major change in this constitution was absence of the position of Deputy Minister. The Act introduced ambiguity regarding the Presidential two-term limit.

THE CONSTITUTION OF ZAMBIA (AMENDMENT) BILL, 2019 - BILL 10 This is the current proposed constitutional amendment.

 

Main advantages of Bill 10

                           i.            The period of 30 days (from 14 days) in which to hear a presidential petition gives ample time for the Constitutional Court to fully deliberate (Article 101-104).

                         ii.         Bill 10 proposes reviewing the composition of Cabinet. It could be a chance to legislate to make Cabinet more regionally-representative.

                       iii.            Bill 10 proposes inclusion of members of parliament into councils. This could make for better coordination of development programmes.

 

Main disadvantages of Bill 10

                           i.            The Bill could lengthen the rule of the current Patriotic Front (PF) government

                       ii.            Article 107 could create a life President as it proposes to bar National Assembly from inquiring into the well-being of the President.

                     iii.  Re-introducing the office of Deputy Minister would not be a cost-effective way to run government (Article 17).

             iv.   The National Assembly could lose powers of oversight on contracting debt (Article 114).

             v.  There is no guidance as to how a coalition government could be formed (Articles 101 - 104).

          vi.  The period of 7 days within which to submit a petition to the Constitutional Court is too short (Article 101 - 104).

CONCLUSION

The Constitution of Zambia (amendment) Bill, 2019 (Bill 10) could be a chance to strengthen the Zambian constitution. The problem, however, is that it appears to contain elements seen as promoting partisan rather than national interests.