The NIST smart grid interoperability roadmap workshop I attended last week has gotten me thinking about the similarities between system architecture (as the computer systems folks call it) and institutional design (as we political economy social scientists call it). Of course there’s quite a bit of similarity, as the work of the GridWise Architecture Council (to which I’ve been honored to contribute) demonstrates. And I’ve always argued for institutional design that allows for adaptation to unknown and changing conditions, applying institutions to what I think of as an evolutionary test.
One of the concepts that fall logically out of this way of thinking about systems and institutions is resilience. This article from the forthcoming issue of Foreign Policy (thanks to Jesse Walker at Reason) focuses on resilience, in the context of thinking about the financial crisis of the past year:
Resilience, conversely, accepts that change is inevitable and in many cases out of our hands, focusing instead on the need to be able to withstand the unexpected.
The author contrasts this dynamic, adaptation-focused concept with sustainability, which he views as a more static, maintain-the-status-quo approach. I’m not sure I agree with that; I think it’s possible to have a dynamic concept of sustainability … but then it becomes resilient sustainability. Or at least that’s what I teach my MBA students, that true sustainability is in fact resilience.
One crucial aspect of resilience in a complex “system of systems”, whether it’s a network of computer systems or a network of individual economic agents interacting in a network of markets (or the intersection of the two!), is the extent to which the different parts of the systems are “coupled”. That’s what I’ve been mulling over for the past week — loosely-coupled systems. Loose coupling is a term of art in computer systems. Interestingly, its Wikipedia entry caught my eye for the precise reason I wanted to incorporate it into this post:
Loose coupling describes a resilient relationship between two or more systems or organizations with some kind of exchange relationship. Each end of the transaction makes its requirements explicit and makes few assumptions about the other end.
This definition highlights the aspects that are important, especially from a smart grid architecture perspective and an institutional design perspective: different systems or organizations with some kind of exchange relationship. Loose coupling means that entities that are engaged in exchange have to understand and exchange certain kinds of information to make those exchanges happen, but these requirements are explicit, and they are not exhaustive. When I buy milk at the grocery store, I don’t have to know the name of the cow whose milk I’m buying … but I do want to know some product features, such as its fat content, the sterility of its production environment (here, admittedly, aided by safety regulations), as well as its price. If my transaction relies on that specific cow, that’s a more tightly-coupled relationship, and if she dies and the transaction relies on it being her milk, then the transaction fails. A simple-minded example, but you get the idea.
Loose coupling is like having shock absorbers at the interfaces between different entities and different systems in a complex “system of systems”. Loose coupling can help prevent the negative consequences of unexpected actions from propagating through the network, and that’s how it contributes to resilience.
The electric power network today is very tightly coupled, both physically and economically, which reduces its resilience in the face of unknown and changing conditions. One of the most important arguments in favor of smart grid investments is that digital smart grid technology enables looser physical coupling and looser economic coupling, to the mutual benefit of both producers and consumers. At an architectural and institutional design level, that means developing architectural principles (including interoperability principles and standards) and legal and regulatory institutions that enable individual economic agents in the electric power network to create long-lasting, resilient value in these loosely-coupled systems.
I’m going to continue thinking about how these ideas relate; at this point I’m just thinking out loud, so please chime in to help me refine my ideas.