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cator systems,. An indicator system must consider what comprises the capital stock, what comprises the
flow, and what quantity of the flow can be used sustainably (e.g., fishing as addressed by Rudd, 2004)
or is targeted (e.g., economic growth). When an indicator system is available, a threat to capital assets
or a pressure state can be represented in terms of a difference between the (expected) values of an indi-
cator and the desirable ones.
INSTITUTIONS AND ECONOMIC AGENTS
Institutions are 'rules-in-use' that influence actor (economic agent) incentives and behaviors. They in-
clude both norms and rules. The IAD framework distinguishes three main situations in which institu-
tions operate: operational (ecosystem operations) in which the focus is on the day-to-day impacts of
rules and norms; collective choice and constitutional. The focus in collective action situations is on the
types of rules that are chosen for the activity. Rules can be input- or output-oriented, production- or
conservation-oriented, or regulatory- or market-oriented. At the constitutional level, the focus is on
whom has the rights and power to set lower level rules regarding access to, and utilization of, re-
sources.
In response to the (emerging) pressure state, the relevant governing entities may perform ecosystem re-
design experiments. The effectiveness of various design options is compared and evaluated with re-
spect to the indicator systems. The factory and its workers exist in the ecosystem and rely on its capital
assets. In particular, the economic agent has to account for its use of capital assets using indicator sys-
tems that are also meaningful to the stakeholders in the ecosystem. For certain capital assets, such as
the financial assets, strict control procedures are enacted. For other assets, such as the decision objects
related to social and natural capital there is less need for control and more room for self-regulation.
DECISION OBJECTS AND THEIR HIERARCHIES
The main items influencing the decision-making are: (i) The decision objective or set of objectives a
decision has to meet. Objectives indicate which types of performances are targeted. Global objectives
refer to the entire production system and, according to the principle of coordination, are consistently
detailed to give local objectives to all (produc-tion) units; (ii) The decision variables are the items upon
which a decision-maker can make decisions that al-low him or her to reach the objectives. The decision
criteria guide the choice of the decision-making; (in) Constraints are the limitations on possible values
of variables. Decision constraints limit the freedom of a decision-maker to select any arbitrary value for
its decision variables; (iv) A performance indicator is an aggregated piece of information allowing the
comparison of the performance of the system to the system's objectives. Performance indicators should
be consistent with objectives because it is necessary to compare performances targeted (objectives) and
performances reached (indicators), and with decision variables because those variables will have an ef-
fect on the performance monitored (controllability).
David Cochran's Manufacturing System Design Decomposition (Cochran et al., 2001) offers a tool to
separate objectives from the means to achieve them, to relate low-level activities and decisions to high-
level goals and requirements, to understand the interrelationships among the different elements of a
system design, and to effectively communicate this information across the organization. Figure 1 (Part
A) illustrates the decision-object hierarchy for the top objective of maximal return on investment. In an
advanced factory governance system, also the decision-object hierarchies for other top objectives such
as safety, health, security, environment, and disaster reduction are defined. Safety and health objectives
are expressed with respect to human capital. Security- and disaster-reduction objectives are expressed
with respect to several kinds of capital, with action means in the realm of the social capital. Environ-
ment objectives are expressed with respect to natural capital stocks and flow.