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Nonprofits are in trouble. Could more sensitive chatbots be the answer?

Jennifer Anzaldi — Tue, 18 Mar 2025 14:48:25 +0000

Nonprofits are in trouble. Could more sensitive chatbots be the answer? Jennifer Anzaldi Tue, 03/18/2025 - 10:48

In today’s attention economy, impact-driven organizations are arguably at a disadvantage. Since they have no tangible product to sell, the core of their appeal is emotional rather than practical—the “warm glow” of contributing to a cause you care about. But emotional appeals call for more delicacy and precision than standardized marketing tools, such as mass email campaigns, can sustain. Emotional states vary from person to person—even from moment to moment within the same person.

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Siddharth Bhattacharya and Pallab Sanyal, professors of information systems and operations management at the Donald G. Costello College of Business at �鶹��Ƶ, believe that artificial intelligence (AI) can help solve this problem. A well-designed chatbot could be programmed to calibrate persuasive appeals in real time, delivering messaging more likely to motivate someone to take a desired next step, whether that’s donating money, volunteering time or simply pledging support. Automated solutions, such as chatbots, can be especially rewarding for nonprofits, which tend to be cash-conscious and resource-constrained.

“We completed a project in Minneapolis and are working with other organizations, in Boston, New Jersey and elsewhere, but the focus is always the same,” Sanyal says. “How can we leverage AI to enhance efficiency, reduce costs, and improve service quality in nonprofit organizations?”

Siddarth Bhattacharya. Photo provided

Sanyal and Bhattacharya’s working paper (coauthored by Scott Schanke of University of Wisconsin Milwaukee) describes their recent randomized field experiment with a Minneapolis-based women’s health organization. The researchers designed a custom chatbot to interact with prospective patrons through the organization’s Facebook Messenger app. The bot was programmed to adjust, at random, its responses to be more or less emotional, as well as more or less anthropomorphic (human-like).

“For the anthropomorphic condition, we introduced visual cues such as typing bubbles and slightly delayed response to mimic the experience of messaging with another human,” Sanyal says.

The chatbot’s “emotional” mode featured more subjective, generalizing statements with liberal use of provocative words such as “unfair,” “discrimination” and “unjust.” The “informational” modes leaned more heavily on facts and statistics.

Over the course of hundreds of real Facebook interactions, the moderately emotional chatbot achieved deepest user engagement, as defined by a completed conversation. (Completion rate was critical because after the last interaction, users were redirected to a contact/donation form.) But when the emotional level went from moderate to extreme, more users bailed out on the interaction.

The takeaway may be that “there is a sweet spot where some emotion is important, but beyond that emotions can be bad,” as Bhattacharya explains.

Pallab Sanyal. Photo provided

When human-like features were layered on top of emotionalism, that sweet spot got even smaller. Anthropomorphism lowered completion rates and reduced the organization’s ability to use emotional engagement as a motivational tool.

“In the retail space, studies have shown anthropomorphism to be useful,” Bhattacharya says. “But in a nonprofit context, it’s totally empathy-driven and less transactional. If that is the case, maybe these human cues coming from a bot make people feel creepy, and they back off.”

Sanyal and Bhattacharya say that more customized-chatbot experiments with other nonprofits are in the works. They are taking into careful consideration the success metrics and unique needs of each partner organization.

“Most of the time, we researchers sit in our offices and work on these problems,” Sanyal says. “But one aspect of these projects that I really like is that we are learning so much from talking to these people.”

In collaboration with the organizations concerned, they are designing chatbots that can cater their persuasive appeals more closely to each context and individual interlocutor. If successful, this method would prove that chatbots could become more than a second-best substitute for a salaried human being. They could serve as interactive workshops for crafting and refining an organization’s messaging to a much more granular level than previously possible.

And this would improve the effectiveness of organizational outreach across the board—a consummate example of AI enhancing, rather than displacing, human labor. “This AI is augmenting human functions,” says Sanyal. “It’s not replacing. Sometimes it’s complementing, sometimes it’s supplementing. But at the end of the day, it is just augmenting.”

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George �鶹��Ƶ professor furthers impact of telemedicine in Ukraine

Jennifer Anzaldi — Tue, 14 Jan 2025 22:39:16 +0000

George �鶹��Ƶ professor furthers impact of telemedicine in Ukraine Jennifer Anzaldi Tue, 01/14/2025 - 17:39

Ukraine’s health care system has been hit hard amid the ongoing war. Power outages, staffing shortages, and the destruction of hospitals have added up to a drastic reduction in available care for the already-vulnerable population. In a desperate attempt to bridge the gap, Ukraine’s Ministry of Health opened the country to telehealth solutions from overseas. But will these prove to be a successful substitute for at least some necessary services, or turn out to be no better than a tech Band-Aid?

Answering that question is where Mariia Petryk, assistant professor of information systems and operations management at the Costello College of Business at �鶹��Ƶ, comes in. In her spare time, she works as volunteer director of analytics for TeleHelp Ukraine (THU).

Mariia Petryk

Founded by a cross-disciplinary group of Stanford students shortly after the war’s inception, THU was designed to succeed where other telemedicine initiatives in crisis-affected areas have failed. The founders worked tirelessly to assemble an international volunteer network comprising medical professionals, translators, interpreters and administrative “health navigators.” Aware that medical consultations were only part of the patient journey, THU’s founders sought to address the entire continuum of care.

Petryk stresses that while the project originated at Stanford, the technical team included “people from Chicago, Boston, other California schools…some very active volunteers were in Australia, South Korea, Canada and other countries.”

Petryk, herself of Ukrainian descent, was honored to lend her data science expertise to this worthy project. As analytics director, she manages a dozen or so number-crunching volunteers who measured and documented THU’s impact upon Ukraine’s displaced population during the initiative’s first full year.

As Petryk explains, “The Russian invasion created a humanitarian crisis where a lot of people were internally displaced. And when people relocate to a new place, they don’t know where to go for health care. They also are at higher risk for many issues, including mental health problems. And they don’t know where to turn to treat chronic diseases they may have.”

THU’s primary focus during its first year was delivering much-needed services to this population of war-ravaged internal exiles.

Petryk’s analytical work gave rise to a recent case study of THU published in Journal of Global Health. The paper’s other lead author was Aditya Narayan, a Stanford medical student and THU’s director of implementation and evaluation.

Their findings describe some impressive early successes. THU facilitated more than 1,200 virtual patient appointments from May 2022 to May 2023 alone. Despite often-chaotic conditions, patient attendance rates were above 70 percent for nine of the 13 months studied. As the first year wore on, the THU team found ways to prevent no-shows—for example, employing the popular texting platform Viber to communicate with patients and assigning an individual health navigator to each patient.

Even more impressively, 96 percent of patients reported that their health complaints were at least partially resolved during their visit.

The paper argues that aspects of THU’s model could be adapted for use in other humanitarian contexts. In its initial growth phase, THU had access to advanced technological infrastructure and a wide network of medical providers, by dint of its academic origins. This implies that partnerships with academia could be critical to replicating THU’s success outside Ukraine.

Petryk remains proud of THU’s impact and her role in helping define it. “Based on actual appointments and how much that amount of care would cost at a hospital, THU delivered an estimated $1 million worth of services in its first 13 months,” she says.

Looking ahead to THU’s future, she says, “I can only wish to see this ‘start-up,’ as it were, go for the IPO.”

For more information and to explore volunteering opportunities, visit THU’s website.

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Are U.S. ‘news deserts’ hothouses of corruption?

Jennifer Anzaldi — Tue, 19 Nov 2024 16:35:27 +0000

Are U.S. ‘news deserts’ hothouses of corruption? Jennifer Anzaldi Tue, 11/19/2024 - 11:35

The March 24, 2021 edition of neighborhood newspaper Northeast News, out of Kansas City, Missouri, contained a surprise for its 9,000 subscribers. Where the front-page news should have been, there was a big, blank white space. This was no printer’s error, but a last-ditch cry for help. After 89 years in operation, Northeast News had found itself on the brink of insolvency due to the loss of key advertisers amid the COVID pandemic. The empty front page was designed to remind the community of what it would lose if its only local paper went under.

The gambit went viral, prompting a flood of online donations that is keeping the paper afloat, for now. Ironically, Northeast News owes its existence to the very force that has fueled the more general decline of local journalism in America—the internet.

Brad Greenwood

As advertiser dollars migrated to Facebook and Google, the business model that supported local newspapers for generations came to the edge of collapse. Since 2004, more than 2,500 American newspapers have ceased publication—around one-quarter of the total. Overall newspaper circulation has declined by more than half since 1990.

To be sure, digital alternatives have rushed in to fill the gap, such as citizen-journalist websites, nonprofit news organs, partisan blogs, etc. So, the question represented by the blank front page of Northeast News resonates: What do communities lose when newspapers fold that online journalism startups haven’t (so far, at least) been able to replace?

In the past, industry observers and researchers have linked community newspaper closure to diminished civic trust and political participation, among other negative effects. New research from Brad Greenwood, the Maximus Corporate Partner Professor of Business at the Costello College of Business at �鶹��Ƶ, builds on this discourse, finding evidence that when local papers topple, political corruption springs up in their wake.

Greenwood’s paper, coauthored by Ted Matherly of Tulane University, was published in MIS Quarterly.

The researchers focused on U.S. federal districts that lost a major daily newspaper during the years 1996 to 2019. They compared the number of corruption charges (bribery, embezzlement, fraud, etc.), defendants, and cases filed in district court before and after the newspaper closure. The results were striking: Overall, the disappearance of a newspaper delivered a 6.9% increase in charges, a 6.8% increase in the number of indicted defendants and a 7.4% increase in cases filed.

“We looked at federal charges for three reasons. First, the overwhelming amount of statutory enforcement occurs federally. Second, it gives us a uniform definition of what constitutes corruption across every domestic jurisdiction. Finally, and most importantly, federal conviction rates are over 90%,” Greenwood says. “They don’t charge people unless they have a good-faith belief they will prevail at trial.”

Moreover, post-newspaper corruption cases were more likely to go to trial as opposed to resolving in a plea deal, thus incurring greater public costs.

“In an age of misinformation, the solution is not rejecting the professional press, it is embracing it, and ensuring that well-trained and hard-working men and women have both the ability and venue to hold those in power to account."

Greenwood and Matherly also examined whether digital-era upstarts were adequate substitutes for newspapers, in terms of curtailing corruption. They tracked 352 such websites, and found they had no impact on the number of charges, defendants or cases in the districts concerned.

“While it’s hard to say precisely why we don’t see an effect from online news, there are several candidate explanations. Not only do citizen journalists lack the standing and training to tackle questions of public corruption and elevate discourse in the public square, but many of these sites aren’t even legitimate news vendors,” says Greenwood, referencing what are commonly referred to as “pink slime websites.”

Greenwood goes on to suggest that the corruption-preventing power of the defunct papers came not necessarily from journalistic acumen, but rather from the ability to elevate the actions bad actors had taken in public discourse, a process journalism researchers refer to as agenda setting.

Whatever the cause, the ramifications for society are very real. In the Northern District of Illinois alone, corruption-related cases involving more than 1,700 officials cost taxpayers a staggering $550 million per year from 1976 to 2012. The coffers of communities that lose newspapers may suffer more than most, since these cases tend to end up in expensive courtroom proceedings rather than plea deals.

Further, the study only looks at corrupt officials who got caught. Presumably, there are many more whose corruption went unpunished.

All told, these findings suggest that community newspapers should not be regarded as just another business model ill-adapted to digital disruption that should be allowed to fail. Their demise comes at significant public cost, financial and otherwise. “In an age of misinformation, the solution is not rejecting the professional press, it is embracing it, and ensuring that well-trained and hard-working men and women have both the ability and venue to hold those in power to account,” Greenwood says.

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How this summer’s heat waves may impact the economy

Greg Johnson — Tue, 06 Aug 2024 13:39:44 +0000

How this summer’s heat waves may impact the economy Greg Johnson Tue, 08/06/2024 - 09:39

This sweltering summer has brought record-breaking high temperatures to 63 countries, all but cementing 2024’s status as the world’s hottest year on record (even though we’re barely past the halfway point). Such extreme weather trends are bound to have serious implications for the environment, public health, and the economy.

Joseph (Han) Stice

Why, then, aren’t economic indicators flashing bright red? Joseph (Han) Stice, assistant professor of accounting at the Donald G. Costello College of Business at �鶹��Ƶ, has run the numbers on business and climate change. His recent working paper, co-authored by Marcus Kirk of University of Florida and Derrald Stice of University of Hong Kong, paints a picture of profound climate-related disruption underneath the placid-seeming surface of the economy.

For the years 1990 to 2020, the researchers compared quarterly sales performance from a large sample of U.S. firms to the temperature data at their base of operations. In this way, they constructed a measure of weather sensitivity, which they termed “weather beta,” for each company in the initial sample. Specifically, they were looking at whether sales either benefited or suffered when local temperatures were higher or lower than the “ideal” of 65 degrees Fahrenheit.

“What they—they being the people who examine temperature—say is that if it’s above 65, you turn on your air conditioning. If it’s below 65, you turn on your heater,” says Stice.

After restricting the sample to only those firms with discernible weather beta, they ended up with a data-set comprising 66,795 firm-quarters.

Across the sample as a whole, the results were a misleading nonstarter. Weather fluctuations did not seem to have an impact on economy-wide sales, one way or the other.

This was no surprise to Stice. Citing past research, he points out that “the overall economic effect is that colder weather is, on average, better. But that’s not true in every single instance. Some industries (i.e., agriculture) benefit from hot weather. And it also depends on what region you’re in, what time of year it is, etc.”

“We need to have a national discussion and a global discussion,” Stice says. “But the people who really matter are the local leaders, as far as climate is concerned. The people you elect on the local level are going to have a much greater impact on how you respond and how your companies can adjust, than whether or not your candidate is in the White House.”

To gauge actual impact, the researchers split the sample by size and geographic concentration, presuming that larger firms with a wider geographic footprint would be less affected by temperature changes at home base. These differences between firms proved to be critical. For the smallest, most localized firms, a swing from the 75th to the 25th percentile in terms of nonideal temperature meant 8.8-15.9% lower sales. The biggest and most sprawling firms saw sales declines of just 4.3-5.6% from an equivalent shift.

Stice clarifies that “we are talking about very small deviations, like percentages of degrees on average per day over an entire quarter. If it were one degree hotter than 65 degrees every day, that would come up in our measure as a 90. The biggest number we have is like a 25 or a 30.”

Also, sales impact tells only part of the story. The sheer size of the data-set allowed Stice and his co-authors to predict quarterly sales performance for individual firms, based on the weather and firm characteristics. On average, actual sales declines were about half as severe as predicted. The researchers speculate that firms were able to soften the blow of immoderate temperatures by adjusting their business practices. The time and resources spent on these adaptations are part of the hidden economic costs of climate volatility.

If firm managers can anticipate how the weather can impact business outcomes, you would expect financial analysts to be at least as attentive to climate effects. However, the researchers found that sales forecasts made shortly before earnings announcements were thrown off by abnormal temperatures in the previous quarter, with 7.4% inaccuracy in the mean. Similarly, the researchers found that weather impact was positively correlated with announcement-period stock market returns. Apparently, even professional investors are being caught off guard by the subtle but costly interactions between climate and economic activity.

For more accurate appraisals, Stice suggests we should turn to the local level. He notes that his measures of firm-specific weather sensitivity happen to line up fairly neatly with municipal self-assessments made by local governments as part of the Carbon Disclosure Project.

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The NYPD gave officers iPhones. Here’s what we learned about race and policing

Jennifer Anzaldi — Tue, 04 Jun 2024 16:50:43 +0000

The NYPD gave officers iPhones. Here’s what we learned about race and policing Jennifer Anzaldi Tue, 06/04/2024 - 12:50

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The controversy about biased policing seems to draw endless fuel from race-based differences in public perception. Simply put, the vast majority of White citizens in the United States believe the police are doing a good job, including on issues of racial equality, while a similar percentage of Black citizens hold the opposite opinion. And while a growing number of studies have indicated persistent patterns of racial discrimination in policing, an emergent concern among scholars is that the data these papers rely on are also subject to baked-in biases, since they often derive from officers’ self-reports of their own behavior.

Brad Greenwood

Enter Brad Greenwood, professor of information systems and operations management at the Donald G. Costello College of Business at �鶹��Ƶ. One of his research interests lies in how digital technologies are bringing unprecedented transparency to police practices. For example, Greenwood’s 2022 paper documented how the introduction of body-worn cameras for the New York Police Department (NYPD) resulted in a significant reduction in abuse-of-authority complaints.

His latest work on policing is forthcoming in Proceedings of the National Academy of Sciences. Along with Gordon Burtch from Boston University and Jeremy Watson from the University of Minnesota, Greenwood examined the recent rollout of iPhones across the NYPD, which included a series of digital tools designed to replace the handwritten memo books officers previously relied on. Instead of scribbling in the physical books, which NYPD officers were required to hang onto even into retirement, officers could log their activities directly into a centralized database maintained by the NYPD. These detailed digital records shed fresh light on how cops spend their time—and attention—on the beat.

The researchers tracked data on NYPD stops and complaints in 2017 and 2018, the period when iPhones were being rolled out across precincts in New York City. A curious pattern emerged. There was an 18% increase in reported stops after a precinct received iPhones, which would be consistent with the digital tools making it easier for officers to report a citizen interaction. Further, the researchers discovered that this increase resulted in neither more arrests nor more complaints from the public. It wasn’t, therefore, that the phones were somehow causing the police to stop people more often, but rather that so-called “unproductive stops”—those leading to no further action—were being reported more often.

However, when breaking the results down across White and non-White citizens, the researchers found that unproductive stops involving non-White citizens were entirely responsible for the increase. In other words, the observed changes were based on police encounters with non-White members of the public, that would likely have gone unreported in the days of pen and paper. More specifically, after switching to the smartphone system, officers logged 22% more stops involving non-White citizens, while the number of reported stops of White citizens remained unchanged. These are statistical averages—the pattern was more marked in high-crime neighborhoods and those with a greater proportion of non-White residents.

Greenwood offered an interpretation of the finding: “The concern here is that we have an underreporting, which is concentrated in certain groups and means that we need to be cautious when interpreting prior work. On the one hand, it opens the door to bias in police interactions with civilians being worse than initially anticipated, at least based on the frequency of stops. On the other hand, it could mean that older data doesn’t accurately reflect the likelihood of an arrest once a stop occurs. And we need to be doubly cautious, because we don’t know if officers are reporting stops more frequently just because it is easier, or for some other reason.”

Greenwood cautions against making sweeping conclusions based on the study. “The only thing we know for sure is that more and deeper work is needed by scholars and policy makers to ensure transparency between law enforcement and the people they are charged to protect,” he said.

On the whole, however, the study raises the possibility that race-based disparities in policing are not only very real, but may have been underestimated thus far because of reporting gaps.

As police officers are not obligated to document all civilian interactions, their decisions regarding what—and what not—to report can be biased. The introduction of new technology, as in the case of the NYPD, can help counter such biases, but is not the only avenue worth pursuing. The researchers recommend that police departments “investigate the appropriate organizational complements (i.e., policies and procedures) necessary to uncover and eliminate such biases.”

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Two �鶹��Ƶ professors receive NSF grant to study wearables and inclusive workplaces

Marianne Klinker — Wed, 11 Oct 2023 14:35:55 +0000

Two �鶹��Ƶ professors receive NSF grant to study wearables and inclusive workplaces Marianne Klinker Wed, 10/11/2023 - 10:35

Can wearable tech resolve the crisis of underemployment among neurodiverse individuals? A multidisciplinary �鶹��Ƶ research team is about to embark on a major study to find out.

Two �鶹��Ƶ professors have been awarded a $1.87 million grant from the National Science Foundation (NSF) to develop wearable technology designed to help neurodiverse individuals succeed in the workforce.

Sarah Wittman

Sarah Wittman, assistant professor of management at the School of Business, and Vivian Genaro Motti, associate professor of information sciences and technology at the College of Engineering and Computing, will carry out a series of laboratory studies as well as a field study seeking to “support job tasks with a personalized wearable design to make the future of work more inclusive and equitable for neurodiverse adults.”

Wittman and Motti’s research began with the recognition that while many neurodiverse people are eager for employment and fully capable of performing well at work, the routines, expectations, and atmosphere of the contemporary workplace do not always accommodate their needs. Business environments can present all sorts of stressors—sensory, social, organizational—that can affect the productivity and mental health of neurodiverse individuals. Therefore, the extremely high rate of unemployment (up to 85%) among neurodiverse adults should be seen as an equity issue, rather than a reflection of ability or fitness to work. Wearables can contribute to resolving these inequities, helping users adjust to difficulties in their environment by, for example, reminding them to take a short break or do breathing exercises at moments of peak stress (indicated by an increase in their heart rates).

Vivian Genaro Motti

The concept behind the grant originated in 2017, with Motti’s contribution to developing WELI, a smartwatch application designed to assist students in �鶹��Ƶ LIFE, a four-year program for neurodiverse young adults combining postsecondary coursework and employment opportunities in a supportive environment. The WELI project was funded as part of a three-year grant from the National Institute on Disability, Independent Living, and Rehabilitation Research (NIDILRR).

After WELI showed impressive results in a field study spanning the entire 2017-18 academic year, and following NIDILRR recommendations, the research team expanded the scope of the project beyond the college campus. Motti started to investigate how such technology could be adapted for the workforce. She joined forces with Wittman, a widely published management scholar specializing in work/life transitions.

The pair set out to better understand the pain points neurodiverse individuals face at work. Supported by seed funding from the Institute for Digital Innovation (IDIA) and the work of PhD student Niloofar Kalantari, who scoured Reddit and other online forums where neurodiverse people were posting about their workplace travails. Their data analysis revealed a wide range of challenges, with a high degree of variation correlated to different types of neurodiversity (ADHD, autism spectrum, Down syndrome, etc.). This confirmed their hypothesis that a one-size-fits-all wearable solution is not viable; instead, they began to pursue interventions tailored to individual user needs and specific segments of the neurodiverse population.

The four-year NSF project begins in January 2024. In the research studies planned, the PIs will recruit a large sample of adults with ADHD and those on the autism spectrum, working, for example, as stockers and order-fillers in the retail industry (or whose work might see them doing tasks with similar hand movements). Through a series of laboratory experiments, Motti and Wittman will refine the wearable technology and assess its positive impact upon both task-based performance and user well-being. Finally, they will launch a three-week field study intended to “test real-world efficacy and build guidelines around work times, tasks, and spaces for this technology”.

Beyond making life easier for neurodiverse individuals in the workplace, Motti and Wittman believe that their interventions will generate useful data for fuelling the ongoing push for more inclusive working environments. If successful, their wearable application will conclusively demonstrate the immense value that neurodiverse individuals bring to the labor force, while educating future researchers and employers on how best to foster inclusive work environments that can unlock that value for the benefit of all.

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How large is the U.S. “green economy”?

Marianne Klinker — Wed, 10 May 2023 14:45:01 +0000

How large is the U.S. “green economy”? Marianne Klinker Wed, 05/10/2023 - 10:45

A �鶹��Ƶ professor is the sole academic working with the U.S. government in an unprecedented effort to measure environmental-economic activity.

One way to gauge a country’s attention to the environment may be measuring how much of its economy is devoted to protecting, rehabilitating, and preserving the natural environment. While the U.S. has made prior attempts at tracking “green jobs” and “green goods and services,” the U.S. government does not currently account for this sector.

Kelly Wentland

Kelly Wentland, an assistant professor of accounting at �鶹��Ƶ School of Business, is helping to fill this data gap. She is the sole academic working with the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) to develop a pilot account tracking the environmental, goods and services (EGSS) sector of the U.S. economy. (The UN defines ESGG as “compris[ing]…the economic activities that result in products for environmental protection and resource management”.)

Wentland and the BEA team have produced a pilot EGSS account, along with preliminary results that formed the basis of a recent working paper, presented at the March 2023 NBER-CRIW conference.

“What we’re doing is, we’re developing a national account based on the supply side of our economy,” Wentland explains.

Ninety countries have introduced their own environmental-economic accounts based on frameworks from the UN Statistical Commission. The challenge for Wentland and the BEA team was to design their pilot account so that it would be comparable to those of other countries while aligning with established approaches from the U.S. federal government. This involved making a huge number of close comparisons between European and American product and industry classification standards to identify shared data points that mapped to UN guidelines.

After carefully selecting for relevant economic activity during the years 2015 and 2019, the team used the BEA’s supply-use tables–extremely detailed compilations of economic inputs and outputs for more than 5,300 product categories–to build their estimates.

So far, the reaction to Wentland’s work from government-affiliated economists has been markedly positive.

They found that EGSS accounted for $620.6 billion in 2015, and $724.5 billion in 2019. The top four categories were responsible for about 70 percent of the total. These were: waste management (far and away the top category, comprising one-quarter of the entire sector), management of water, wastewater management and protection of biodiversity and landscapes. This roughly matches up with equivalent studies in the EU, which also have waste management as the largest environmental-economic category, with 26-27 percent of the total.

Wentland and her collaborators also divided EGSS activity into private- and public-sector output. In 2015, the government portion of environmental output stood at 28.3 percent, and the private-sector contribution at 71.7 percent. By 2019, the balance had shifted slightly, with 27.2 percent attributed to government spending, and 72.8 percent to commerce.

Wentland stresses that the account is very much a work in progress. “It’s very important to point out that it is not an official BEA national account. It is purely a pilot effort to see how far we can get with the data the U.S. already has.” Part of the purpose of the pilot is to identify gaps in the current data available as future avenues to improve estimates. Environmental research and development (R&D) is one potentially significant area where data were inaccessible.

“A lot of companies are putting out sustainability reports, but when you get down to what percentage of them actually include an annual dollar value attached to their activity, it’s very low,” Wentland says. She notes that the SEC’s proposals for mandated environmental reporting–which may be scaled down amid strong corporate pushback–could help fill this void. “The alternative is likely adding questions to other lengthy surveys the BEA collects from these companies.”

So far, the reaction to Wentland’s work from government-affiliated economists has been markedly positive. “The main critique had to do with the international guidelines for product classifications themselves, rather than our methodology,” Wentland reports.

As of this writing, further development of the EGSS pilot account hinges upon the progress of President Biden’s budget for 2024. “It’s formally listed in the budget that they have an increase allocated to this as part of the increase in the BEA’s budget. Obviously, we’ll have to see how things pan out in terms of whether the budget moves forward.”

As Wentland sees it, calculating the dollars and cents that go into the “green economy” would enable granular, impact-focused policy debate on climate issues. “You could think about research or policy that wants to say, ‘When we spend more on EGSS, do we see emissions change or which types of investment have more impact than others?’ You have to be able to measure both the effort and the outcome, in order to be able to say something about its effectiveness.”

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Envisioning a sustainability-oriented future for corporate governance

Jennifer Anzaldi — Thu, 01 Dec 2022 14:19:59 +0000

Envisioning a sustainability-oriented future for corporate governance Jennifer Anzaldi Thu, 12/01/2022 - 09:19

The “G” in “ESG”, which stands for governance, comes last, but not least. In fact, corporate governance may become the most important member of the trio, as mounting ESG awareness continues to enlarge the current conception of risk management. Soon, directors of publicly traded companies may be held increasingly responsible for heading off business risks related to the “E” and the “S”, such as the societal ramifications of carbon emissions and human capital flight due to less-than-living wages.

Cases in point: Boards of directors of Facebook and other high-profile companies have been sued by shareholders for breach of DEI pledges. The Securities and Exchange Commission (SEC) has broadened its regulatory agenda to include climate change, cyber risk governance, board diversity and human capital.

Given this context of change, it was an appropriate moment for the Business for a Better World Center (B4BW) to convene an in-person Stakeholder Roundtable on the subject of Corporate Governance. The half-day event took place at Point of View International Retreat & Research Center at �鶹��Ƶ Neck in Lorton, VA on October 21.

Previous Stakeholder Roundtable events were held virtually with the stated mission of “engag[ing] tri-sector leadership, our faculty and students to ensure forward progress is made on business meeting the values and expectations of society as well as its various stakeholders and to drive stakeholder capitalism further into the mainstream.”

After encouraging opening remarks from Dean Ajay Vinzé, a keynote speech was given by Michael Sion, a partner at Bain & Company who also sits on B4BW’s Advisory Board. In his talk, Sion laid out four main stumbling blocks preventing corporate boards from pivoting from the doctrine of shareholder primacy to a more stakeholder-oriented view. Lack of information means that directors are often ill-equipped to understand trade-offs between stakeholder and business outcomes. Lack of representation results in board composition that is misaligned with the demographics – and thus the concerns – of the broader society. Lack of incentives lessens the motivation for directors to rethink how they make decisions, unless they are pressured to do so for core business reasons. Lack of transparency hinders corporate accountability for decisions incurring environmental and/or social risks.

B4BW Executive-in-Residence Rashed Hasan then described a solution that would address the aforementioned challenges. Currently in development, the Stakeholder Value Index uses a wealth of corporate data to quantify the value firms bring to their employees, communities, customer and suppliers as well as the planet, shareholders and the company itself.

Narrowing the focus to one key stakeholder – employees – Tannia Talento, regional director from the office of U.S. Senator Mark Warner (D-VA), spoke of the Senator’s efforts to advance legislation that would incentivize corporations to invest in worker training by offering a business-related tax credit. Warner also co-authored a letter to the SEC urging the agency to require labour-related corporate disclosures, including the percentage of workers classified as “independent contractors” and thus exempted from many protections.

The following speaker was Cambria Allen-Ratzlaff, managing director and head of investor strategies for JUST Capital, an independent non-profit whose rankings and indices are designed to “drive capital toward good corporate citizens.” Allen-Ratzlaff explained that JUST Capital derives its priorities by polling the American public on their priorities. Consistently, paying a fair and living wage and job creation in the U.S. come in first and second in the polls. In addition, she presented a data-driven case that fair and equitable human capital management was completely in line with business objectives. Better corporate citizens, she argued, are also better managers and can deliver higher shareholder returns on average.

Usman Ahmed, head of global public affairs and strategic research for PayPal, described how the digital-payments giant launched the Worker Financial Wellness Initiative. The purpose of the initiative was to increase workers’ Net Disposable Income (i.e. the amount left over after taxes and necessary expenses) from as low as four percent in some regions to 20 percent across the board. To achieve this, PayPal extended equity eligibility to all employees, reduced healthcare costs, reviewed and raised wages, and provided financial consulting services. Consequently, the minimum global NDI for PayPal employees reached an estimated 16 percent in 2021.

However, corporations must balance the feel-good factor and social mission of stakeholder capitalism against potential legal limitations, especially in our age of rising shareholder activism. Donald Kochan, a professor at �鶹��Ƶ’s Scalia School of Law and deputy executive director of the Law & Economics Center, cautioned the group that shareholder value maximization has been enshrined in the U.S. legal framework for corporate oversight. He zeroed in on the distinction between a “corporation”, which is owned by shareholders and holds a unique legal status, and a “business”, an entity with no prescribed ownership structure that has wider decision-making latitude. For corporations, shareholder value is the sole legally acknowledged criterion for measuring managerial performance. Adding other decision-making criteria – beneficial as they may be for society – would give shareholders actionable cause for complaint. Therefore, Kochan argued, boards of directors need to develop ways of driving business growth (and, by extension, shareholder returns) that also, as a secondary effect, benefit other stakeholders.

Other than the above-named speakers, attendees at the Roundtable included B4BW staff, �鶹��Ƶ School of Business faculty, MBA students and law students. Rounding out the proceedings, participants engaged in breakout sessions on corporate information transparency and how boards can advocate on behalf of employees.

Rashed Hasan, who leads the Stakeholder Roundtable Series, observed at the end of the day, “This is very exciting to see everyone is opening up to meet in person and now we are able to convene a small group of tri-sector leaders, our faculty and our students to engage in open and frank discussion on some of the challenging issues facing business and society.” The next Roundtable is being planned for the later part of spring 2023.

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Four stop signs at intersections are one too many, suggests �鶹��Ƶ researcher

Jennifer Anzaldi — Wed, 19 Oct 2022 14:18:05 +0000

Four stop signs at intersections are one too many, suggests �鶹��Ƶ researcher Jennifer Anzaldi Wed, 10/19/2022 - 10:18

In This Story

Jiasun Li

For most drivers in the United States, obeying a stop sign upon approaching an intersection is an unavoidable annoyance. But for �鶹��Ƶ Finance Professor Jiasun Li, it’s a problem waiting to be solved.

His recent working paper proposes a simple and economical improvement: removing one stop sign from every four-way intersection. According to his calculations, this would boost not only driver safety, but environmental sustainability as well.

Li specializes in game theory, which models strategic interactions where rational agents seek – as humans generally do–to optimize outcomes for themselves. As he drove around Fairfax, Virginia, Li could not help but view four-way intersections through this academic lens.

He was struck by the suspicion that having four stop signs at an intersection was a flawed way of preventing traffic accidents. In effect, they lowered the potential cost of not stopping at the intersection, because drivers could assume that motorists from other directions, should there be any, would come to a stop. Drivers turning right, a shallower maneuver with less exposure to oncoming traffic, have the least risk to begin with and would have the greatest incentive to ignore the sign.

Li surmised that the outcome of all drivers obeying the sign fell short of a Nash equilibrium–game theory’s term for a stable set of norms that all parties are incentivized to follow.

His working paper presents mathematical models that support his intuition. Comparing the risks of collision against the gains from ignoring the sign (i.e. a smooth driving experience or conserving gasoline), he finds that a symmetric equilibrium under the current four-sign mechanism to be one in which left-turners and straight-line travellers honor the stop sign but right-turners do not.

In real life, of course, fear of getting slapped with a moving violation increases the likelihood of compliance with stop signs. But the need for law enforcement is less than ideal, Li says. If the four-way stop system were self-enforcing, expensive police resources could be directed toward serious crimes and away from preventive punishment for traffic violators.

Li’s working paper first considers what would happen if traffic laws were changed to allow right-turners to run the stop sign legally. In an intersection with four stop signs, this would indeed prevent accidents. However, many U.S. intersections have only two signs, which would place right-turners at risk of colliding with traffic coming from the left. In addition, Li argues that old habits die hard, including behind the wheel.

“If you need people to change their behavior, that’s going to be difficult,” he says.

Instead, Li recommends removing one sign–any sign–from among the four. In that case, drivers would know that running a stop sign could send them straight into the path of an oncoming car that has not been directed to stop. The universal fear would incentivize compliance without relying on the threat of police punishment. “Importantly, although the safety and incentive analysis rely on game theoretical reasoning, once implemented, a three-sign mechanism does not require any changes in behaviors for law-abiding drivers,” Li says.

Further, Li’s back-of-the-envelope math suggests that his relatively mundane change could be surprisingly impactful. Based on official statistics from various U.S. authorities, he estimates there are about one million four-way intersections with stop signs in the U.S., each one being traversed by more than 760,000 vehicles per year. That amounts to more than 760 billion (760,000 x one million) stops and starts in a year, one-fourth of which (190 billion) would be avoided in a three-sign setup.

According to Li’s calculations, assuming it takes 124.9 kilojoules of work to bring a car of average weight to a full stop, and the same amount to resume the previous level of speed, adopting a three-sign system would save a total of 118.65 trillion kJ in the U.S. per year. That equates to one billion gallons of gasoline, or about 2.7 days’ worth of national gas consumption.

Looking farther out on the technological horizon, Li speculates in the paper that “when self-driving cars finally become real, our new simpler mechanism may also economize AI computational costs.”

Li has no illusions about the resistance his recommendation may provoke. “You’re challenging people’s conventional wisdom. If there’s criticism, that’s to be expected. For example, some cops might not like this idea, because I’m taking away one of their income sources, even though there could be an overall gain to the whole society.”

This paper is only one manifestation of what Li sees as a scholarly mission to apply novel perspectives – in this case, an economics viewpoint derived from game theory – to real-world problems, especially those that have been taken for granted for so long that they are not even recognized as problems.

“Economics thinking should be applicable to a lot of different fields and improve our daily lives,” Li explains.

What seems totally natural in one context, after all, may be foreign in another. Many countries–including China, where Li was born–don’t use four-way stop intersections. “If I grew up with these stop signs, I probably wouldn’t think about it,” he says. This is an example, Li suggests, of how diverse experiences and ideas imported via immigration can enrich host nations. Far from wanting the last word on the issue, Li is hoping to inspire wide-ranging conversation about how to change environments and communities for the better.

“I would rather have the discussion ongoing and people give me ideas,” he says. “Only through debate will people understand it better.”

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