Decoupling

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The abstract concept of coupling between two phenomena applies to so many different contexts that the cessation of coupling, or the absence of coupling between two phenomena where it would usually be expected, produces many circumstances where decoupling is a phenomenon of interest in itself.

Economics

Economic growth without environmental damage

Decoupling and re-coupling during financial crises

In 2007, the decoupling hypothesis held that Latin American and Asian economies, especially emerging ones, had broadened and deepened to the point that they no longer depended on the United States economy for growth, leaving them insulated from a slowdown there, even a fully fledged recession. Faith in the concept had generated strong outperformance for stocks outside the United States. However, over the course of 2008, as fears of recession mounted in the United States, world wide stock markets declined heavily. Contrary to the decoupling hypothesis, the losses were greater outside the United States, with the worst experienced in emerging markets and developed economies like Germany and Japan. Exports make up especially large portions of economic activity in those places, but that fact was not supposed to matter anymore in a decoupled world because domestic activity was thought to be so robust.^[1] On the other hand, after the slump the emerging countries experienced a strong recovery, much stronger than that in advanced economies.^[2]

The phenomenon of decoupling and re-coupling has been explained by observing that global demand for factors such as capital and raw material declines when one part of the world economy suffers a crisis, which benefits the remaining healthy parts of the world economy through lower interest rates and lower commodity prices. However, once the crisis reaches the stage where global lenders suffer significant losses, they will cut back on their loan supply and interest rates for everybody will rise.^[3]

Neuropsychopharmacology

In neuropsychopharmacology, uncoupling (or decoupling) is a term often used to describe when receptor or ligand binding sites/domains become separated or move alignments or become internalised as a result of drug tolerance to exposure over a period of time to a pharmacologically active psychoactive substance or toxin.

Electronics

Inventory management

Decoupling (in inventory management), holding a buffer of stock between machines to allow a smooth flow of work

Mathematics

In mathematics, decoupling has several meanings.

In linear algebra, decoupling refers to the rearrangement of systems of equations so that they are independent of each other.

In probability and statistics, decoupling refers to a reduction of a sample statistic to an average of the statistic evaluated on several independent sequences of the random variable. This sum, conditioned on all but one of the independent sequences becomes a sum of independent random variables. Decoupling is used in the study of U statistics, where decoupling should not be confused with Hoeffding's decomposition, however.^[4] This use of "decoupling" is unrelated to the use of "couplings" in the study of stochastic processes.

Utility regulation

In public utility regulation, decoupling refers to the disassociation of a utility's profits from its sales of the energy commodity. Instead, a rate of return is aligned with meeting revenue targets, and rates are trued up or down to meet the target at the end of the adjustment period. This makes the utility indifferent to selling less product and improves the ability of energy efficiency and distributed generation to operate within the utility environment.

Ideally, utilities should be rewarded based on how well they meet their customers' energy service needs. However, most current rate designs place the focus on commodity sales instead, tying a distribution company's recovery of fixed costs directly to its commodity sales.

In order to motivate utilities to consider all the options when planning and making resource decisions on how to meet their customers' needs, the sales-revenue link in current rate design must be broken. Breaking that link between the utility's commodity sales and revenues, removes both the incentive to increase electricity sales and the disincentive to run effective energy efficiency programs or invest in other activities that may reduce load. Decision-making then refocuses on making least-cost investments to deliver reliable energy services to customers even when such investments reduce throughput. The result is a better alignment of shareholder and customer interests to provide for more economically and environmentally efficient resource decisions.

As an added benefit, breaking the sales-revenue link streamlines the regulatory process for rate adjustments. Contention over sales forecasts consumes extensive time future test year jurisdictional rate cases; this is not an issue in historic test year jurisdictions. If the sales-revenue link is broken, these forecasts carry no economic weight, so the incentive to game forecasts of electricity sales is removed and rate cases become less adversarial.

For an in-depth discussion on decoupling see: Revenue Regulation and Decoupling, Lazar, et al., The Regulatory Assistance Project (2011) ^[5]

One major benefit of revenue regulation discussed by Lazar et al. is that utility net income is much less volatile, since it is no longer affected by sales variations caused by weather and other factors. As a result, utilities require lower equity capitalization ratios to achieve equivalent bond ratings. The lower equity capitalization ratio translates into a lower revenue requirement and lower prices for consumers. In Minnesota in 2008, the Regulatory Assistance Project estimated that about one-third of the cost of utility energy conservation programs could be provided by these cost of capital savings.^[6]

While many environmentalists and conservation advocates support decoupling and other forms of revenue regulation, many consumer advocates representing utility ratepayers have opposed decoupling as it attempts to guarantee revenue levels to utility companies. Decoupling mechanisms reduce a utility company's financial risk from reducing sales, due to conservation, weather and economic conditions. As a result, many consumer advocates have requested and state and federal regulators have required that utility companies profit levels (measured through a return on equity allowance) be reduced to reflect lower risk.

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Organizational studies

In organizational studies, and particularly new institutional theory, the term "decoupling" refers to the creation and maintenance of gaps between formal policies and actual organizational practices.^[7] Organizational researchers have documented decoupling in a variety of organizations, including schools,^[8][9] corporations,^[10] government agencies,^[11] and social movement organizations.^[12] Scholars have proposed a number of explanations for why organizations engage in decoupling. Some researchers have argued that decoupling enables organizations to gain legitimacy with their external members while simultaneously maintaining internal flexibility to address practical considerations.^[7] More recently, scholars have noted that decoupling may occur because it serves the interests of powerful organizational leaders,^[10] or because it allows organizational decision-makers to avoid implementing policies that conflict with their ideological beliefs.^[11] Recent research has directed attention to the related process of "recoupling," whereby previously decoupled policies and practices become coupled, leading to substantive, rather than symbolic, compliance.^[11][13][14]

See also

• Coupler (disambiguation)
• Coupling (disambiguation)
• Object-oriented programming

References

1. ↑ "Decoupling: Theory vs. reality." International Herald Tribune. January 27, 2008. http://www.iht.com/articles/2008/01/27/business/26delink.php
2. ↑ Krugman, Paul (2010-11-09). "We Are Not The World". The New York Times. 
3. ↑ Korinek, Anton; Agustin Roitman, Carlos Vegh (2010), "Decoupling and Recoupling", American Economic Review 100(2), pp. 393-397  Cite uses deprecated parameters (help)
4. ↑ Victor H. de la Peña and Evariste Giné (1999). Decoupling: From Dependence to Independence. Springer Verlag. 
5. ↑ Revenue Regulation and Decoupling, Lazar, et al, The Regulatory Assistance Project (2011)
6. ↑ http://www.raponline.org/docs/RAP_Shirley_DecouplingRevenueRpt_2008_06_30.pdf
7. ↑ 7.0 7.1 Meyer, John W., and Brian Rowan. 1977. "Institutionalized Organizations: Formal Structure as Myth and Ceremony," American Journal of Sociology, 83: 340-63.
8. ↑ Meyer, John W., and Brian Rowan. 1978. "The Structure of Educational Organizations." In M. W. Meyer (ed.), Environments and Organizations. San Francisco: Jossey-Bass
9. ↑ Delucchi, Michael. 2000. "Staking a Claim: The Decoupling of Liberal Arts Mission Statements from Baccalaureate Degrees Awarded in Higher Education. Sociological Inquiry. 70: 157-71.
10. ↑ 10.0 10.1 Westphal, James D., and Edward Zajac. 2001. "Explaining Institutional Decoupling: The Case of Stock Repurchase Programs." Administrative Science Quarterly, 46: 202-28.
11. ↑ 11.0 11.1 11.2 Tilcsik, Andras. "From Ritual to Reality: Demography, Ideology, and Decoupling in a Post-Communist Government Agency." 2010. Academy of Management Journal, 53: 6, 1474-1498. Abstract
12. ↑ Elsbach, Kimberly D., and Robert Sutton. 1992. "Acquiring Organizational Legitimacy through Illegitimate Actions: A Marriage of Institutional and Impression Management Theories." Academy of Management Journal, 35: 699-738.
13. ↑ Hallett, Tim. 2010. “The Myth Incarnate: Recoupling Processes, Turmoil, and Inhabited Institutions in an Urban Elementary School.” "American Sociological Review." 75, 1: 52-74.
14. ↑ Espeland, Wendy. 1998. "The Struggle for Water: Politics, Rationality, and Identity in the American Southwest." Chicago: The University of Chicago Press.