Trade versus the Environment:
Strategic Settlement from a
Systems Engineering Perspective
KEITH W. HIPEL
University Professor, PhD, PEng, FIEEE, FCAE, FINCOSE, FEIC, FRSC, FAWRA
Department of Systems Design Engineering
University of Waterloo
Waterloo, Ontario, Canada N2L 3G1
Telephone (519) 888-4567, ext. 32830
Fax (519) 746-4791
Email: kwhipel@uwaterloo.ca
Home Page: www.systems.uwaterloo.ca/Faculty/Hipel/
Conflict Analysis Group: http://www.systems.uwaterloo.ca/Research/CAG/
ABSTRACT
The key goal of this research is to employ a Systems Engineering approach to conflict
resolution to clearly identify the ubiquitous conflict taking place at the local, national and
global levels between the basic values underlying trading agreements and those
principles providing the foundations for environmental stewardship, and to suggest
solutions as to how this most basic of disputes can be responsibly resolved. Subsequent
to outlining the current situation involving free trade among nations and associated
environmental problems, the positions of both sides in this chronic dispute between trade
and the environment are summarized. Supporting the stance of free trade is the
fundamental driving forces of profit maximization, while in direct opposition to this
market-driven value system are the principles of maintaining a healthy environment and
related social welfare objectives. Accordingly, this global clash of values is systematically
studied as a game in which the values of the Global Market-Driven Economy (GMDE)
are in confrontation with those of a Sustainable Ecosystem (SES) philosophy. A Systems
Engineering tool for strategic analysis, called the Graph Model for Conflict, is utilized for
realistically capturing the key characteristics of this type of complex conflict and for
providing strategic insights regarding its potential resolution. In particular, a systematic
Graph Model investigation reveals that the environment and social standards will
continue to deteriorate if the entrenched positions and related value systems of both
camps persist. However, based on the strategic understanding gained from this formal
conflict study, a number of positive proposals are put forward for resolving this conflict
from a win/win perspective, at least in the long run. To highlight inherent advantages of
employing a formal Systems Engineering tool for addressing strategic conflict problems,
the application is used for illustrating how the Graph Model can be conveniently applied
to a specific dispute and comments regarding the capabilities and benefits of the conflict
methodology are provided at each step in the modeling and analysis procedure.
REFERENCES



Hipel, K.W. and Obeidi, A., “Trade versus the
Environment: Strategic Settlement from a Systems
Engineering Perspective”, Systems Engineering,
Vol. 8, No. 3, pp. 211-233, 2005.
See the web page of the Conflict Analysis Group at
the University of Waterloo to obtain an extensive list
of references.
Conflict Analysis Group:
http://www.systems.uwaterloo.ca/Research/CAG/
OBJECTIVES



Model the conflict of values between the proponents of
the Global Market-Driven Economy (GMDE) and those
supporting a sustainable Ecosystem (SES).
Analyze this global conflict using the Graph Model for
Conflict Resolution and its associated decision support
system GMCR II to gain strategic insights.
Suggest what can be done politically to promote
sustainable development, including responsible and
equitable utilization of water.
RECOMMENDATIONS

Extensive educational and lobbying efforts are required
for encouraging market-place proponents to change
their value system by putting a higher priority on
sustainable development.

International trade agreements such as those of the
World Trade Organization (WTO) and North American
Free Trade Agreement (NAFTA) must be reformed or
replaced to reflect these values.
CONTENTS

TRADE AND THE ENVIRONMENT

CONCEPTUALIZING THE CONFLICT: A CLASH OF
VALUES

CONFLICT MODEL

ANALYTICAL RESULTS AND INSIGHTS

SENSITIVITY ANALYSIS: MODERATE PREFERENCE
CHANGE

ACHIEVING GLOBAL SUSTAINABLE DEVELOPMENT

REFORMING GLOBALIZATION
WORLD CRISIS



Consumption
Energy
Population growth
Encouraged by international
trade agreements
•
•
•
•
Widening gap between rich and poor
Pollution
Extinction of species
Water shortages
INNER CONFLICT OF VALUES
Basic drive to survive and prosper
Versus
Desire to pressure environment in a pristine state
SOCIETAL LEVEL
Cumulative intense economic activities
Versus
Environmental preservation
SUSTAINABLE DEVELOPMENT
Economic needs of humanity
are balanced against
Preserving nature for future generations
AWARENESS AND RESPONSIBILITY
Society
Versus
The Environment
Humans must come to terms with this chronic conflict of
values existing within and among themselves and take
responsible actions to resolve it.
TRADE AGREEMENTS

BRETTON WOODS AGREEMENTS:
• World Bank
• International Monetary Fund (IMF)
• General Agreement on Tariffs and Trade (GATT)
(1947)

OTHER AGREEMENTS
• WTO (1995)
• NAFTA (1994)
• FTAA (Free Trade Area of the Americas will replace
NAFTA)
• Canada/US Auto Pact (socially responsible)
• European Community (EC, integrated agreements)
TRANSNATIONAL ENVIRONMENTAL TREATIES


No comprehensive international environmental treaty is
in place.
Some treaties exist in specific areas:
 Law of the Sea
 Montreal Protocol on Substances that Deplete the
Ozone Layer
 Basel Convention on banning trade in hazardous
wastes
 Kyoto Protocol for reducing greenhouse gases
ENVIRONMENTAL IMPACTS OF TRADE
Trade rules are globally operational
And
No encompassing environmental treaty exists.
Many specific cases in which trade-based decisions
harmed the environment and human health.
CONCEPTUALIZING THE CONFLICT: A CLASH
OF VALUES
Sustainable Ecosystem
(SES)
Values
GLOBAL MARKET-DRIVEN ECONOMY
(GMDE)
Values
POSITIONS AND VALUE SYSTEMS
Global Market-Driven Economy (GMDE)
Sustainable Ecosystem (SES)
Background information for carrying out a formal
conflict study
GMDE VALUE SYSTEM
Prioritizes free trade and globalization based on
the principle of a market driven economy.
Many benefits will follow.
SES VALUE SYSTEM


Prioritizes environmental stewardship, biodiversity,
sustainable development, human rights, democratic
principles, and other related issues that are important to
societal well-being.
Highly critical of current free trade agreements, such as
WTO agreements and NAFTA which are founded on
market economics.
CONFLICT OF VALUES
Trade
Versus
The Environment
Carry out strategic analyses to find ethical and just
resolutions.
CONFLICT RESOLUTION

Use a formal systems engineering approach called the
Graph Model for Conflict Resolution to model and
analyze the Conflict of Values: Trade versus the
Environment.

This flexible methodology is implemented using the
decision support system GMCR II.
DECISION MAKERS AND OPTIONS
Global Market-Driven Economy
(GMDE)
·
·
·
Influence states to adopt market-driven
economic policies.
Promote ideals of efficiency and
prosperity.
Reform its mandate to accommodate
societal and environmental
responsibilities.
Sustainable Ecosystem
(SES)
·
·
·
Public education
Lobby governments to accommodate
environmental and ecosystem concerns
into free trade agreements.
Pressure trade negotiators to consider
societal concerns through demonstrations.
CONFLICT OF VALUES
Reflects a generic conflict taking place around the
globe.
Systematically studying this ubiquitous conflict
can provide understanding and wisdom for
solving similar, but more complicated realworld
disputes over trade and the environment.
First time that this generic conflict has been
strategically analyzed.
CARRYING OUT A CONFLICT STUDY
Real World Conflict
Options
States
Modeling
Decision Makers
Preferences
Equilibria
Sensitivity Analyses
Resolution
Analysis
Individual Stabilities
GRAPH MODEL FOR CONFLICT RESOLUTION

Theory is founded upon a rigorous mathematical
framework, utilizing concepts from graph theory, set
theory and logic—the mathematics of relationships.

Design is mathematically based but completely
nonquantitative in nature.
Can handle any finite number of decision makers and
options.
Utilizes relative preferences.
Can handle irreversible and common moves.



DESIGN FEATURES OF THE DECISION
SUPPORT SYSTEM GMCR II



GMCR II is programmed in C++, possesses a carefully
designed data structure, and can handle small, medium
and large models.
A 32-bit doubleword represents a specific selection of
options wherein each digit or bit equals 1 or 0 to
indicate whether or not the option it represents is taken
or not.
This design can accommodate up to 32 options, which
is more than enough for all realworld applications
considered to date.
GMCR II STRUCTURE
INPUT DATA
SUBSYSTEM
Decision Makers
Options
Feasible States
State Transitions
Preferences
ANALYSIS ENGINE
USER
INTERFACE
GMCR I
Coalition Analysis
OUTPUT DATA
SUBSYSTEM
Individual Stabilities
Equilibria
Coalition Stability
CONFLICT MODEL
Table 1: Decision Makers and Options in the Conflict of Values
Decision Makers
GMDE
Options
Status Quo State
1.
2.
3.
Influence
Promote
Reform
Y
Y
N
GMDE’s Strategy
4.
5.
6.
Educate
Lobby
Pressure
Y
Y
Y
SES’s Strategy
SES
INFEASIBLE STATES



Each option can be selected or not taken.
Hence, there exist 26  64 states.
Remove states that cannot occur in real world.
• Reform and influence are mutually exclusive.
• Reform and promote are mutually exclusive.
• Reform and pressure are mutually exclusive.

36 feasible states remain after removing the infeasible ones.
FEASIBLE STATES
Table 2: Feasible States in the Conflict of Values
DMs
GMDE
1.
2.
3.
SES
4.
5.
6.
Options
1
Influence N
Promote N
Reform
N
2
Y
N
N
3
N
Y
N
4
Y
Y
N
5
N
N
Y
6
N
N
N
7
Y
N
N
8
N
Y
N
Educate
Lobby
Pressure
N
N
N
N
N
N
N
N
N
N
N
N
Y
N
N
Y
N
N
Y
N
N
N
N
N
States
9 10
Y N
Y N
N Y
Y Y
N N
N N
States
19 20 21 22 23 24 25 26 27 28
GMDE
1. Influence Y N N Y N Y N Y N Y
2. Promote Y N N N Y Y N N Y Y
3. Reform
N Y N N N N N N N N
SES
4. Educate
Y Y N N N N Y Y Y Y
5. Lobby
Y Y N N N N N N N N
6. Pressure N N Y Y Y Y Y Y Y Y
11
N
N
N
12
Y
N
N
13
N
Y
N
14
Y
Y
N
15
N
N
Y
16
N
N
N
17
Y
N
N
18
N
Y
N
N
Y
N
N
Y
N
N
Y
N
N
Y
N
N
Y
N
Y
Y
N
Y
Y
N
Y
Y
N
29
N
N
N
30
Y
N
N
31
N
Y
N
32
Y
Y
N
33
N
N
N
34
Y
N
N
35
N
Y
N
36
Y
Y
N
N
Y
Y
N
Y
Y
N
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
EXECUTING A CONFLICT STUDY
Real World Conflict
Options
States
Modeling
Decision Makers
Preferences
Equilibria
Sensitivity Analyses
Resolution
Analysis
Individual Stabilities
PREFERENCES



Rank states from most to least preferred for each
decision maker (DM) where ties are allowed.
In option prioritization, preferences of a DM are
expressed using preference statements about options
that are listed in a hierarchical fashion from most
important at the top to least important at the bottom.
The preference statements follow the rules of first order
logic.
PREFERENCES

Assuming transitivity, an algorithm uses the preference
statements to rank the states for the DM.

States can be subsequently sorted manually using
direct ranking.
REFERENCE STATEMENTS
Table 3: Preference Statements for the DMs in the Conflict of Values
GMDE
-3|1
-6
2 IF 4
2
-4
-5
SES
3
-1
4
5 IF -3|1
6 IF -3|1
GMDE PREFERENCE STATEMENTS
Preference
Statements
-3|1
Explanation
GMDE most prefers not to reform the WTO (-3) or to continue
influencing countries (1)
-6
Next, GMDE prefers that SES not pressure negotiators through
demonstrations.
2 IF 4
Then, GMDE prefers to promote its ideals (2) if SES chooses to
rebut WTO principles through educating the general public (4).
2
GMDE next prefers to promote its ideas.
-4
GMDE then would like SES not to carry out public education
about environmental stewardship and societal well-being.
-5
Finally, the least important preference statement for GMDE is
that SES not lobby governments to incorporate environmental
and ecosystem protection into free trade agreements.
SES PREFERENCE STATEMENTS
Preference
Statements
Explanation
3
The most important preference statement for SES is that GMDE
reforms its mandate in order to accommodate environmental
and societal responsibilities.
-1
Next, most important for SES is that GMDE not influence states
to adopt market-driven economic policies.
4
SES then prefers to educate the public about environmental
stewardship.
5 IF -3|1
6 IF -3|1
SES then prefers lobbying governments (5) if GMDE does not
reform (-3) or continues influencing states (1).
Finally, SES prefers pressuring trade negotiators (6) if GMDE
does not reform (-3) or continues to influence states (-1).
RANKING OF STATES
Less preferred
GMDE
(3,4)
(13,14)
(8,9)
(18,19)
(1,2)
(11,12)
(6,7)
(16,17)
(23,24)
(31,32)
(27,28)
(35,36)
(21,22)
(29,30)
(25,26)
(33,34)
(5,10,15,20)
More preferred
Table 4: Preference Ranking of States in the Conflict of Values
SES
(10,20)
(5,15)
(16,18)
(33,35)
(6,8)
(25,27)
(11,13)
(29,31)
(1,3)
(21,23)
(17,19,34,36)
(7,9,26,28)
(12,14,30,32)
(2,4,22,24)
COMMENTS ON PREFERENCE ELICITATION

GMCR II only requires relative preferences for each
decision maker.

The problem of obtaining cardinal preference
information, such as utility values, is avoided.

GMCR II develops an ordinal ranking of states from
most to least preferred and allows for ties.

The graph theory methodology can handle intransitive
preferences.
TYPES OF VALUES

Held or protected value: an enduring, moral principle
 Example: Protecting the environment from
unwarranted economic activity.
 A held value should not be traded off with other
values.

Assigned value: worth of something to an individual or
organization within a given context
 Illustration: aesthetics may be valued less if it
becomes too expensive.
CONFLICT, ETHICS AND VALUE SYSTEMS



Conflicts arise because of differences of objectives or value
systems among participants.
Each participant or decision maker has his or her criteria for
deciding upon its preferences among states or possible scenarios.
An ethical or moral environmentalist would prioritize criteria or
objectives such as minimizing environmental impacts, as well as
maximizing fairness and societal well being.
However, ethics is measured relative to a specific value system.
A participant's ethics is reflected in the choices he or she make in a
given situation.
PREFERENCE ELICITATION IN GMCR II
Feasible States
Option
Weighting
Option
Prioritizing
Fine Tuning ?
State Ranking
Final Preferences
EXECUTING A CONFLICT STUDY
Real World Conflict
Options
States
Modeling
Decision Makers
Preferences
Equilibria
Sensitivity Analyses
Resolution
Analysis
Individual Stabilities
INPUT INTERFACE





Decision Makers
Options
Feasible States
State Transitions
Preferences
OUTPUT






Input information
Individual stability results
Equilibria
Coalition analysis
Sensitivity analysis
Tracing the evolution of the conflict
STABILITY ANALYSIS




A state is stable for a DM if it is not advantageous for
the DM to unilaterally move away from it.
Because people may behave differently under conflict,
stability can brought about in a variety of ways.
A solution concept is a mathematical description of how
a DM may behave in a dispute.
Table 5 lists a range of solution concepts.
SOLUTION CONCEPTS
Table 5: Solution Concepts and Human Behavior
Solution
Concepts
Nash Stability
General
Metrationality
Symmetric
Metarationality
Sequential
Stability
Limited-move
Stability (Lh)
Non-myopic
Stability
Characteristics
Stability Descriptions
Focal DM cannot unilaterally move
to a more preferred state.
All of the focal DM’s unilateral
improvements are sanctioned by
subsequent unilateral moves by
others.
All focal DM’s unilateral
improvements are still sanctioned
even after possible responses by the
focal DM.
All of the focal DM’s unilateral
improvements are sanctioned by
subsequent unilateral improvements
by others.
All DMs are assumed to act
optimally and a maximum number of
state transitions (h) is specified.
Limiting case of limited move
stability as the maximum number of
state transitions increases to infinity.
Foresight
Disimprovement
Knowledge of
Preferences
Strategic
Risk
Low
Never
Own
Ignores risk.
Medium
By Opponent
Own
Avoids risk;
conservative
Medium
By Opponent
Own
Avoids risks;
conservative.
Medium
Never
All
Takes some
risks;
strategizes.
Variable
Strategic
All
Accepts risk;
strategizes.
High
Strategic
All
Accepts risk;
strategizes.
COMMENTS ON REALISTICALLY DESCRIBING
HUMAN BEHAVIOUR IN CONFLICT
SITUATIONS




People can behave in different ways under conditions of
conflict.
A range of solution concepts mathematically define
different types of human behaviour.
Solution concepts are precisely stated using set theory,
logic and graph theory-the mathematics of relationships.
Directed graphs or reachable lists keep track of
movements when decision makers dynamically interact.
The graph model methodology is entirely
nonquantitative yet completely mathematical and
axiomatic.
ANALYTICAL INSIGHTS




Predict possible compromise resolutions.
Determine how a given DM may wish to respond in an
optimal fashion within the social constraints of the
conflict.
Ascertain if and when it is advantageous to cooperate
with others in order to jointly reach a more preferred
outcome.
Find out how the conflict could dynamically evolve from
a status quo state to an eventual resolution.
STABILITY ANALYSIS


GMCR II analyzes each state for stability for each DM
according to each solution concept.
An equilibrium is stable for all DMs with respect to a
given solution concept.
An equilibrium constitutes a possible compromise
resolution since the conflict will stop when it reaches an
equilibrium during the evolution of the dispute.
EQUILIBRIA
Table 6: Equilibria List for the Conflict of Values
Equilibria
States
1 3 6 8 11 13 16 17 18

Nash Stability
        
General Metarationality
Symmetric Metarationality         




Sequential Stability

Limit-move Stability (L2)

Non-myopic Stability
19 23 27 31 35


    
    






36






DECISION MAKERS AND OPTIONS
Global Market-Driven Economy
(GMDE)
·
·
·
Influence states to adopt market-driven
economic policies.
Promote ideals of efficiency and
prosperity.
Reform its mandate to accommodate
societal and environmental
responsibilities.
Sustainable Ecosystem
(SES)
·
·
·
Public education
Lobby governments to accommodate
environmental and ecosystem concerns
into free trade agreements.
Pressure trade negotiators to consider
societal concerns through demonstrations.
CONFLICT EVOLUTION
Table 7: State Transitions from the Status Quo State to the Final Outcome in the Conflict of Values
State Numbers 36
GMDE
1. Influence
2. Promote
3. Reform
SES
4. Educate
5. Lobby
6. Pressure
Y
Y
N
Y
Y
Y

35
18
N
Y
N
N
Y
N
Y
Y
Y
Y
Y
N

SENSITIVITY ANALYSIS


Determine how meaningful changes in the model
parameters can influence the stability results.
The specific types of sensitivity analyses to carry out
are dictated by the particular characteristics of the
problem being studied.
TYPES OF SENSITIVITY ANALYSES








Preference changes
Option modification or expansion
Side payments
Bring other decision makers into the dispute
Consideration of other kinds of human behaviour
(solution concepts)
Coalitions
Misunderstandings (called hypergames)
Entertainment of other modes to bargaining and
negotiation
SENSITIVITY ANALYSIS: MODERATE
PREFERENCE CHANGE

Make meaningful changes in the ranking of states for
both GMDE and SES (see Section 5).
Determine how the equilibrium results change.
The findings are similar to the equilibria predicted by the
original model.
Equilibrium results are fairly robust with respect to the
preference changes
INSIGHTS




None of the strong equilibria in Tables 6 and 10 include
GMDE’s reform option.
To obtain reform, GMDE must have a positive attitude
towards environmental stewardship.
SES must understand that unless GMDE changes its
value system reform is not possible.
SES could better educate the general public and GMDE
about the advantages of being environmentally
responsible and obtaining a win/win resolution.
ACHIEVING GLOBAL SUSTAINABLE
DEVELOPMENT
Another form of sensitivity analysis is performed by
assuming that GMDE substantially revises its relative
preferences.
Demonstrations in Seattle, Quebec, Cancun and
elsewhere against global trade are a chronic annoyance
for GMDE.
GMDE may reform its agenda as long as these
demonstrations are not perceived as a source of
intimidation.
ENLIGHTENED PREFERENCES FOR GMDE


A revised preference structure is proposed based on
the premise that GMDE intends to reform its agenda.
An enlightened preference structure for GMDE is
proposed such that the most preferred states are those
that contain reform or not influence if SES does not
pressure trade negotiators (3|-1 IF -6). The second
most important preference for GMDE is SES not
pressure (-6).
REFORMED PREFERENCE STRUCTURE
Table 11: Modified Preference Statements for the DMs in the Conflict of Values
GMDE
3|-1 IF-6
-6
2 IF 4
2
-4
-5
SES
3
-1
4
5 IF -3|1
6 IF -3|1
ORIGINAL PREFERENCE STATEMENTS
Table 3: Preference Statements for the DMs in the Conflict of Values
GMDE
-3|1
-6
2 IF 4
2
-4
-5
SES
3
-1
4
5 IF -3|1
6 IF -3|1
ENLIGHTENED PREFERENCES FOR GMDE



The modified preference statements for GMDE are
shown on the left in Table 11 while the unchanged
preferences for SES are listed on the right.
Table 3 shows the preference statements used in the
original conflict analysis.
Notice that the only change in GMDE’s preferences is
that its most important statement given in the top left of
Table 3 as -3|1 is replaced by the conditional
preference statement in the top left of Table 11 written
as 3|-1 IF -6.
BREAKTHROUGH WITH GMDE’S
ENLIGHTENED ATTITUDE

GMDE’s preference changes are not very dramatic.
Hence, they are credible and politically feasible
Equilibria are obtained that contain the reform option being
taken (states 5, 10, 15, and 20)
State 20 is a strong equilibrium
DESIRABLE CONFLICT EVOLUTION
Table 13: Effect of Revised Value Systems for GMDE on the Evolution of the Conflict
State Numbers
GMDE
1. Influence
2. Promote
3. Reform
SES
4. Educate
5. Lobby
6. Pressure
36
19
Y
Y
N
Y
Y
N
Y
Y
Y
Y
Y
N

20



N
N
Y
Y
Y
N
BREAKTHROUGH




The chronic Conflict of Values dispute is an example of
what Burton (1987) calls a deep-rooted conflict.
Given a set of entrenched preferences or deep-rooted
value systems, GMCR II can predict the possible
resolutions and associated insights.
GMCR II shows that a reasonable change in GMDE’s
preferences (see Tables 8 and 11) can result in reform
taking place (Table 13).
Facilitation, mediation and other procedures can help
participants in a conflict to better understand one
another so positions can shift and thereby produce
enhanced strategic results such as state 20.
REFORMING GLOBALIZATION


Strategic analyses reveal that a sustainable resolution
to the conflict of trade versus the environment is
possible.
Specific suggestions are put forward in this section as
to how reform can be implemented.
1909 BOUNDARY WATERS TREATY BETWEEN
CANADA AND THE USA




Example of a successful bilateral treaty that espouses
integrative water resources management.
Deals with water quality, water quantity, air quality and
other environmental issues between Canada and the
USA.
Based on the principle of equity between the citizens of
Canada and the USA and environmental integrity
principles.
Is a good model for helping to design Multilateral
Environmental Agreements.
INTERNATIONAL JOINT COMMISSION (IJC)




International mediator for boundary water disputes
between Canada and the USA.
Composed of three members from Canada and three
from the USA.
IJC’s mandate is dictated by the Boundary Waters
Treaty of 1909.
Can make recommendations on a water or
environmental dispute put forward by either country.
INTERNATIONAL JOINT COMMISSION (IJC)
(Cont’d)



ICJ uses the best experts from both countries to carry
out its background studies when it comes up with an
impartial recommendation for settling the dispute.
In some cases, the ICJ can make a binding judgment.
The Boundary Water Treaty has worked extremely well
over the years and is an ideal model for framing similar
international treaties.
POLICY DESIGN

Design policies, laws, treaties and other agreements
based upon ethical principles concerning the
environment and people’s well-being.

These types of principles must be an integral part of any
economic or trading agreement.

Take stakeholders’ viewpoints into account.
POLICY DESIGN (Cont’d)

Use both “carrot” (economic incentives) and “stick”
(severe fines) approaches to ensure compliance.

Multiple Criteria Decision Analysis (MCDA) can be
useful in policy design when evaluating policy
alternatives using both nonquantitative and qualitative
criteria where held principles are given higher priority.

Include an effective dispute resolution mechanism
within which formal conflict techniques could be
employed.
RELIABLE INFRASTRUCTURE FOR SOCIETAL
SYSTEMS
Strong, equitable and reliable infrastructure is required to meet the
basic needs of citizens.
Society needs properly designed electrical systems, reliable water
distribution systems, and other policies and programs for societal
well-being and safety.
Solid infrastructure provides a high-level playing field upon which
people and organizations can compete or cooperate to
economically produce high quality products and services that are
sustainable.
Society requires policies and rules that encourage ethical behavior to
produce overall results which are beneficial to society and do not
harm the environment.
PARTICULAR RESEARCH IN ETHICAL
SYSTEMS DESIGN ENGINEERING

Reform or replace trade agreements such as the WTO
agreements and NAFTA, which only take into account
the one-dimensional goal of economic gain.
Society can prosper under policies that directly consider
multiple objective needs that hold proper ethical values
of both individuals and society at a higher level than
profit maximization.

Only design intelligent and integrated systems that are
ethical and effective.
ETHICAL TRADE AGREEMENTS


Follow principles of sustainable development.
Environmental standards and controls as well as other
issues related to societal well-being must be
incorporated into any trade agreement as binding
clauses.
Monetary fines and other sanctions can be used to
punish violators using “stick” approaches.

Financial and reputational “carrots” can be used to
reward conformers.
This provides a level playing field for true competition to
take place.
WATER CORPORATIONS DESIRE
Certainty
Permits sound economic planning
Performance-based regulations
Provides a level playing field within each type of industry.
THE GLOBAL PLAYING FIELD

Design a level global economic playing field resting on
the foundations of environmental stewardship, key
societal values, and reliable infrastructure.

Corporations and economic entities can openly
compete according to their basic design and value
systems of pursuing profit maximization.

The playing field would be entirely located within the
realm of sustainable development so all economic
competitors can claim they behave ethically according
to their value systems.
WIN/WIN RESOLUTION

Strategic analyses show that environmental and social
education are required to encourage proponents of the
Global Market-Driven Economy to become
environmentally and socially aware.
• Environmental and social concerns should be held at a
higher priority than economic values in international
agreements.
• WTO and NAFTA must be radically restructured or else
replaced.
• Agreements should empower individuals and not large
corporations and special interest groups.
THE LOBBYING DILEMMA



Citizens in both the USA and Canada have been
essentially disenfranchised due to lobbying by large
corporations and other interest groups.
Campaign donations by lobby groups win the loyalty of
politicians.
Hence, electoral reform is urgently needed and only
small campaign donations should be permitted by
individuals.
END OF THE COLD WAR
Anatol Rapoport predicted that an enlightened Soviet
Leader would end the Cold War.
(1983 presentation at the University of Waterloo)
The US Government was incapable of instituting real
change because of its suffocating lobbying system.
Soviet Premier Gorbachev stopped the ridiculous Clod
War in 1990.
Likewise, China has a unique historical opportunity to lead
the world in green house gas reduction.
ADAPTIVE SYSTEM OF SYSTEMS DESIGN TO
ENSURE ROBUSTNESS
Deng Xiao Ping’s economic system design of the late
1970’s was highly successful in modernizing China.
Global warming was not perceived as a serious physical
systems problem at that time.
If China does not update or replace its economic model to
substantially reduce greenhouse gas emissions, the
current economic system will dramatically fail.
Require an integrative systems model that adapts to
changing environmental and societal conditions.
ENHANCED DECISION MAKING
Engineering is all about design.
Design is creative problem solving.
Informed decision making to benefit stakeholders within a
sustainable, integrative and adaptive system of systems
perspective.
SYSTEMS THINKING
Systems Engineering
Operational Research
Management Science
Decision Analysis
……
Provide formal tools for addressing challenging large scale
system of systems problems from a complex adaptive
systems viewpoint.
STRATEGIC OPPORTUNITIES IN SYSTEMS
ENGINEERING
Expand the theory of system of systems engineering
including complex adaptive system of systems theory.
Tackle pressing global complex system of systems
problems.
Reference: Hipel K.W., Jamshidi, M.M., Tien, J.M., and White III, C.C.
“The Future of Systems, Man, and Cybernetics: Application Domains
and Research Methods”, IEEE Transactions on Systems, Man, and
Cybernetics – Part C: Applications and Reviews, Vol. 37, No. 5.,
pages 726-743, 2007.
GLOBAL SYSTEM OF SYSTEMS CHALLENGES
Extreme Overpopulation
Climate change
Water
Pollution
Deforestation
Energy
Widening gap between rich and poor
Security
War
……
Food
Infrastructure
Services
Finances
Industry
Nuclear weapons
Unknown unknowns
AMERICAN FINANCIAL SYSTEM
Value system is in reverse.
Society serves the system.
Financial system should serve society.
Unethical and unfair to individual citizens.
84
AMERICAN FINANCIAL SYSTEM
Removal of regulations protecting society.
Market “fox” is guarding the chicken coop.
System collapses from greed and indigestion.
Robustness removed.
85
AMERICAN FINANCIAL SYSTEM
Subprime mortgages traded globally
Mortgages lenders disconnected from the mortgage
buyers.
Unbounded uncertainty in this complex system of
systems.
86
GLOBAL WARMING
Distorted value system.
Economics is held at a much higher priority than humans’
life support system of systems.
Atmospheric systems is highly unstable.
Irreversible change may gradually or unexpectedly occur.
87
END OF THE COLD WAR
Anatol Rapoport predicted that an enlightened Soviet
Leader would end the Cold War.
(1983 presentation at the University of Waterloo)
The US Government was incapable of instituting real
change because of its suffocating lobbying system.
Soviet Premier Gorbachev stopped the ridiculous Clod
War in 1990.
Likewise, China has a unique historical opportunity to lead
the world in green house gas reduction.
US MEDICAL SYSTEM
Distorted value system.
Profit maximization.
The sicker you are, the more you pay.
Unfair society.
89
CANADIAN, GERMAN AND FRENCH MEDICAL
SYSTEM
Ethical value system.
Universal coverage.
Equal risk sharing.
Everyone pays the same.
Robust society.
90
INSIGHT
An equal risk sharing, universal coverage, medical system
can be designed using a:
public,
private or
mixed system
Design a system that can deliver in practice
according to the underlying values of equal risk
sharing and universal coverage.
91
EFFECTIVE MEDICAL SYSTEM
Decide upon underlying values.
Design a system that works in practice according to
culture, tradition, and other factors.
Compare the various implementation designs according to
criteria that reflect the underlying values.
Improve system according to performance criteria.
92
OPPORTUNITY FOR THE GLOBE AND US
LEADERSHIP
US President Barak Obama could use the financial crisis
to meaningfully address climate change as well as other
environmental and social issues.
Institute an integrative and adaptive global governance
system.
A unique historical opportunity for the USA.
93
CHINA
Bright highly educated leaders.
An enlightened leader has the power to implement
dramatic changes (ex. Deng Xiao Ping’s economic
reforms of the late 1970’s).
Increasing gaps between the rich and poor.
Massive environmental problems.
Huge investments in education and infrastructure.
94
USA
Legacy of neo-conservative incompetence.
Financial crisis gives chance of real reform by Obama.
Smothering lobbying system stifles needed political
initiatives.
Setbacks in social and environmental reforms.
Increasing gap between the rich and poor.
A spirit of innovation and entrepreneurship.
95
EUROPEAN UNION
Informed, highly trained leaders.
Cooperatively implemented real free trade over many
years.
Socially and environmentally responsible.
Fairness in wealth sharing.
Huge investment in research and development.
A race to the top.
96
MODELING PHILOSOPHY OF THE GRAPH
MODEL FOR CONFLICT RESOLUTION

Determine the best a decision maker can do on his
or her own.

Check if the decision maker can do even better by
cooperating with others through coalition formation.
Competition and Cooperation
Noncooperative
Behaviour
Cooperative
Behaviour
Nash
General Metarationality
Coalitions
Coalitional versions
Symmetric
Metarationality
of the
Sequential Stability
noncooperative
Limited Move Stability
Nonmyopic
solution concepts
Competition and Cooperation in Conflict Resolution
Conflict Resolution
Competition
Cooperation
(Coalitions, Group
Decision Making)
Graph Model for
Conflict Resolution
Multiple Criteria
Decision Analysis
Noncooperative
Behaviour
Coalition
Analysis
Implementation Algorithms
Decision Support Systems
Fair Resource
Allocation
Research in the Graph Model for Conflict Resolution
Graph Model for Conflict
Resolution
Competition
Cooperation
Human Behaviour
Solution Concepts
Human Behaviour
Coalition Formation,
Solution Concepts
Metarational Tree
Coalition
Metarational Tree
Preferences
Strength,
Uncertain
(non-probabilistic,
info-gap, fuzzy)
Psychological Factors
Emotions, attitudes,
misunderstanding
(hypergames)
Generalizations
Cooperative versions
of competition
developments
Conflict Dynamics
Evolution of a
conflict
(status quo analysis)
Integration
Matrix and other algorithms
Decision Support System: Next Generation
Input, Engine, Output, Interface
Applications: Testing and Refinement
Brownfield redevelopment, water resources,
governance, environmental management,
military science, policy analysis
Multiple Criteria Decision Analysis (MCDA)








Consideration of both quantitative and qualitative criteria
when comparing alternative solutions to a problem
Screening out inferior solutions from further analyses
Modelling interdependencies among alternatives when
considering combinations of alternatives as possible final
choices
Handling uncertainty using fuzzy set theory and rough
sets
Classification of alternatives according to nominal
categories
MCDA-based bargaining and negotiation
Sorting according to case-based reasoning
Decision support systems in MCDA
a2
a1
Most preferred
alternative
a|A|
●●●
Alternatives
Criteria Set
C= { c1,…,cj ,…,c|C|}
A= { a1,…,ai ,…,a|A|}
a2
●●●
c1
Crit eria
Alternative Set
a1
Decision
Protocols
c2
●
●
●
a|A|
Data
c|C|
Least preferred
alternative
Group 1
a2; a1; a6
More preferred
group
Group 2
Sorting
a5; a4; a7; a3
●●●
Decision
Maker
Ra
nk
ing
a3
C
ho
ic
e
●●●
Less preferred
group
a2
1. Problem construction
2. Preference elicitation and aggregation
3. Implementation and outcome
Overall Procedure of Multiple Criteria Decision Analysis
Using A Benchmark in
Case-Based Mult iple
Crit eria Ranking
Case-based Dist ance
Approach t o Ranking
Mult iple Crit eria
Nominal Classificat ion:
Analysis Procedure and
Applicat ion
Mult iple Crit eria
Nominal Classificat ion:
Overview and Modelling
Mult iple Crit eria
Sequent ial Sort ing
M ULTI PLE CRI TERI A
SORTI NG
Case-based Dist ance
Approach t o Bilat eral
Negot iat ion
Case-based Dist ance
Approach t o Mult iple
Crit eria ABC Analysis
CASE-BASED
DI STANCE APPROACH
Rough Set Approach t o
Mult iple Crit eria ABC
Analysis
Sort ing T echniques in
MCDA
Screening in Subset
Select ion
Screening T echniques
and Applicat ions
M ULTI PLE CRI TERI A
SCREENI NG
Index Aggregat ion
Approach t o Count ry
Comparison
Case-based Dist ance
Approach t o Sort ing
Case-based Dist ance
Approach t o Screening
Sequent ial Screening
M ULTI PLE CRI TERI A CLASSI FI CATI ON DECI SI ON ANALYSI S
M ULTI PLE CRI TERI A
NOM I NAL CLASSI FI CATI ON
APPLI CATI ONS AND EXTENSI ONS
Applications




Case studies to assess and demonstrate the validity of
new methodologies and their implementation
Studies in bargaining and negotiation in water resources
management, environmental engineering, labourmanagement relationships, international trade,
privatization of public infrastructure, sustainable
development, brownfield redevelopment, and other
fields
Practical policies for improving environmental
enforcement
Multiple criteria decision analysis in water supply,
pollution clean-up, waste disposal, infrastructure
privatization, and other alternative-choice problems