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Coordination Under Uncertain Conditions : An Analysis of the Fukushima Catastrophe

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  • Masahiko Aoki

    (Asian Development Bank Institute (ADBI))

  • Geoffrey Rothwell

Abstract

This paper analyzes the impacts of the 11 March 2011 earthquake and tsunami at the Fukushima nuclear power plant in Japan, which were amplified by a failure of coordination across the plant, corporate, industrial, and regulatory levels, resulting in a nuclear catastrophe, comparable in cost to Chernobyl. It derives generic lessons for industrial structure and regulatory frame of the electric power industry by identifying the two shortcomings of a horizontal coordination mechanism : instability under large shock and the lack of “defense in depth.†The suggested policy response is to harness the power of “open-interface-rule-based modularity†by creating an independent nuclear safety commission and an independent system operator owning the transmission grids in Japan. We propose a transitory price mechanism that can restrain price volatility while providing investment incentives.

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File URL: http://www.eaber.org/node/23220
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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Governance Working Papers with number 23220.

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Date of creation: Oct 2011
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Handle: RePEc:eab:govern:23220

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Keywords: Japan; coordination mechanism; horizontal coordination mechanism; Fukushima;

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  1. Ricardo Alonso & Wouter Dessein & Niko Matouschek, 2008. "When Does Coordination Require Centralization? Corrigendum," American Economic Review, American Economic Association, vol. 98(3), pages 1195-96, June.
  2. Bushnell, James & Hobbs, Benjamin & Wolak, Frank, 2009. "When It Comes to Demand Response, is FERC Its Own Worst Enemy?," Staff General Research Papers 13141, Iowa State University, Department of Economics.
  3. Aoki, Masahiko, 1986. "Horizontal vs. Vertical Information Structure of the Firm," American Economic Review, American Economic Association, vol. 76(5), pages 971-83, December.
  4. Rothwell, Geoffrey, 1996. "Organizational Structure and Expected Output at Nuclear Power Plants," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 482-88, August.
  5. Aoki, Masahiko & Takizawa, Hirokazu, 2002. "Information, Incentives, and Option Value: The Silicon Valley Model," Journal of Comparative Economics, Elsevier, vol. 30(4), pages 759-786, December.
  6. Aoki, Masahiko, 1990. "Toward an Economic Model of the Japanese Firm," Journal of Economic Literature, American Economic Association, vol. 28(1), pages 1-27, March.
  7. Ricardo Alonso & Wouter Dessein & Niko Matouschek, 2008. "When Does Coordination Require Centralization?," American Economic Review, American Economic Association, vol. 98(1), pages 145-79, March.
  8. n/a, 2003. "Book Reviews," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 151-159.
  9. Aoki, Masahiko, 2010. "Corporations in Evolving Diversity: Cognition, Governance, and Institutions," OUP Catalogue, Oxford University Press, number 9780199218530, July.
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