Why did we do that?

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Part 2 of the 3 part series where Lasse Gerrits discusses the ins and outs of collective decision making.

One of the more puzzling hallmarks of contemporary society is that we sometimes decide to do things that do not quite work out as intended. Sometimes this is happens because Lady Luck strikes again. Sometimes, the failures are simply already designed in the decisions taken. One lovely example comes from the Netherlands. Although the country has a solid reputation for planning big projects, it didn’t do very well when it came to building and operating a high-speed railway connection from Amsterdam to Brussels. The operation, in particular, was quite a headache. The operator, Netherlands Railways, had just proudly presented their brand-new Fyra train sets for passenger service when it had started to snow. The snow brutally exposed the train’s many weaknesses. It collected in the air vents, tore off the steel casing that was supposed to protect the equipment under the carriages, and played havoc with the electronics. In a flashback to the British winter of 1991, management blamed the wrong type of snow, but in reality the trains were unfit even before the snow came.

The problem was not the type of snow or snow at all; the problem was with the poor design and manufacturing, which could be traced back to the very cheap offer made by the manufacturer. And that cheap offer had everything to do with Netherlands Railways paying through the nose for a tender it couldn’t afford. In the end, the Dutch government had to step in to rescue NS from going under completely. This created real financial troubles for both NS and the Ministry of Infrastructure and caused distrust among passengers who were left in the cold.

So how exactly did this problematic situation come about? We need to look into the past for answers. The Dutch government decided to jump the high-speed railway bandwagon somewhere in the late 1970s. It was obvious that this was going to cost a great deal of money. One way of dealing with these costs was by deploying financial schemes that were novel to the Netherlands. An important decision was to tender the concession to operate the network instead of granting it directly to the incumbent operator, Netherlands Railways, as was done traditionally. This decision put it into a new situation where, for the first time in its history, it had to compete with other market parties for the right to operate train services. The tender, which the Ministry expected to grant for approximately 100 million euros per year, attracted interest from other operators. After some back-and-forth between the Ministry and Netherlands Railways, it was clear that the latter could no longer rely on its position as the incumbent operator.

Close to the auction’s deadline, and in a bit of a panic, it submitted a new and substantially higher offer that would gain the Dutch state 160 million euros per year. In contrast, the competing offers all floated around 100 million euros per year. Acting quickly, the Ministry accepted this unexpectedly high offer and even persuaded Netherlands Railways to settle at 148 million euros because it sensed that the very high offer could spell financial trouble for the company. But even that lowered price was still almost 50 million euros higher than the Ministry had expected to extract from the concession, which made it look like a good deal for the government. As for Netherlands Railways, it had now become king of the hill. It had defeated its rivals, complied with the demands of the Minister and finally got the most coveted right to operate the high-speed railway link.

In theory, there were only winners. In reality, this was not the case. Netherlands Railways was forced to shop around for trains, finally being forced to go for the cheapest offer. Again, this seemed acceptable in theory, but the snowy reality of the Dutch winter proved otherwise. In the end, the government had to step in in order to avoid Netherlands Railways from going down. All winners? Not quite.

To be fair, it is easy to lambast all parties for what had happened with the knowledge we have now. However, at any given point in time, the decisions taken seemed entirely reasonable given the constraints of the situation. If we want to avoid the very expensive lessons such as the one learnt in the Netherlands, we should get a much better understanding of how sensible collective decisions can lead to rather unfortunate outcomes. Malign intent rarely is the best explanation of such situations, yet we often treat them as such. While that could be a useful way of getting rid of political opponents, it does little to advance society. It is time that we start to understand the intricate details of collective decision-making.

Lasse Gerrits, Department of Political Science, Otto-Friedrich University Bamberg, Germany

Gerrits Understanding

Understanding Collective Decision Making by Lasse Gerrits and Peter Marks is available now.

Read chapter one free on Elgaronline.

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