GRAWE, OLIVER RUPERT; PHD
VANDERBILT UNIVERSITY, 1980
ECONOMICS, FINANCE (0508)
Fires annually kill nearly 12,000 Americans and injure hundreds of thousands
more. Fire-fighting ranked
first among hazardous U.S. occupations (1971). Annual (1972) property losses
and fire service
expenditures of nearly $10 billion underlines the fire problem. The relation
between fire service inputs
and reduced death and property loss rates is not well understood. Diffusion
studies cannot promise
markedly better performance. This study may improve our views about public line
agency operation,
independent of their public professions. This study may also throw the production
of fire protection into
sharper relief. Public life agencies are modelled to maximize either bureau
slack or output. This approach
conforms to recent behavioral models of the regulated firm. Line agencies face
incentives promoting
dynamically inefficient technology replacement, but not inefficient initial
adoption. The model shows
allocatively inefficient behavior. Extensions to include politically based hiring
or supply constraints and
technically inefficient operation are obvious. Standard biological diffusion
models are studied to find
ways of explicitly including individual, supplier and customer, economic maximizing
behavior while
retaining their capacity to yield empirically supported diffusion paths. Learning-by-doing
in production,
tied to an efficient markets supply-side assumption, suggests that well-informed
customers may rationally
choose old technology to replace worn out equipment. Thus early and late adopters
may appear quite
alike across variables usually considered economically relevant. Information
proxies should, therefore, be
most important. Social interaction, either direct or through supplier advertising,
is modelled as an
elementary Markov process. This removes normal homogeneity and mixing assumptions
from these
models. New information alters technology assessments via Bayesian techniques.
Last, the model is
transformed into a Brownian process of decision-making under uncertainty. Relative
return distributions
are learned over time, not given. Individuals delay decisions under uncertainty
in exchange for more
credible information. Therefore, replacement is modelled as a (myopic) adaptive
portfolio process. New
Information induces revisions in productive portfolio shares held in old and
new technologies. The
innovations studied form three groups: water handling, non-water handling, and
data processing. Group
one requires changes in fire tactics. Group two's members replace well-defined
process components
without imposing large retraining costs or degrading human capital. Computer
use, an administrative
innovation, may be an imposed decision from above. Empirically, agencies adopting
one innovation early
do not seem to adopt others early. Discriminating between early and late adopters
also proved difficult.
Both results do not contradict the efficient markets thesis. Four conclusions
emerge from the
inter-innovation analysis. Structural innovations diffuse much more slowly than
modular innovations.
Second, cost reduction speeds diffusion while reducing response time apparently
does not. Poorly
captured social benefits do not affect decisions. Third, supplier size weakly
contributes to diffusion
speed. Fourth, the extent of institutional support or opposition to an innovation
affected diffusion speed
with the wrong sign. This result may appear because the sample contains only
successful innovations.
Last, intra-agency diffusion speed depends upon perceived uncertainty. Government
form, revenue,
transfers, and proxies for supply and outside information worked poorly. After
adjusting budgetary data
to insure comparability across all cities, this variable contributed significantly
to replacement speed.
Social
Systems Simulation Group
P.O. Box 6904 San Diego, CA 92166-0904 Roland Werner, Principal Phone/FAX (619) 660-1603 |