Underdevelopment

(Reading notes. One of the key books is available from Amazon as a Kindle e-book, but this won't help our blind classmate because the Kindle format doesn't seem to be compatible with screen readers. On a side note, I found this very cool Firefox plugin, Fangs to help sighted developers see (rather than hear) what their pages look like to blind people. If you try it, you have to read the FAQ because the installer has bugs.)

"Why are a few countries rich while many are poor?" You can ask William Easterly, Gundar Midal (?) ...

Some common explanations are: under-investment, lack of technological innovation, lack of education, geography, the resource curse, poor macroeconomic policies. Next we'll walk through data contradicting all of these explanations.

Easterly's book is the leading edge of non-institutional explanations. Harrod-Domar model: growth depends on labor and capital. But the data doesn't show a relationship between investment and growth.

The poorest three fifths of countries have had zero growth of income per person since 1980. Nigeria and Hong Kong both increased capital stock by 250% from 1960 to 1985, but Hong Kong is first-world and Nigeria is not. Similarly, Gambia and Japan both grew their capital stock 500%. In both cases only country's output per worker actually grew. My Q: foreign oil companies presumably own all of that Nigerian capital stock, so would it be more helpful to look at growth in domestically owned capital stock? Classmate response: not exactly who owns it, because these statistics may already take that into account, but who has access to it.

Growth in schooling doesn't correlate to GDP growth.

Geographic explanations. But why would Singapore succeed while Malacca or Bintan doesn't?

The prevalence of dangerous diseases. Also the effects of malnutrition, especially malnutrition, in making populations stupid. Australia is reaching water-based population limits, which may be as low as 12 million depending on how much they distort their economy with water-wasteful agricultural subsidies.

Argentina was one of the five richest OECD countries in the 1920s. The Philippines was second only to Japan in GDP growth rates in the 1950s.

Lee Kuan Yew said Singapore grew faster because it couldn't waste any time considering a closed economy, and because it had no wars or serious internal conflicts

Dependency theory: former colonies continue to have disadvantaged economic links with their ex-colonists, and this drags them down generally.

No single factor is a convincing, statistically strong explanation.

institutionalist explanation

Weak, missing, or perverse institutions are at the root of underdevelopment. Many theories of development come and go like fads or fashions: protestant vs catholic work ethic, post-colonialism, etc. The current fashion is institutions.

Joel's note: from the slide: "Which institutions are needed for development?" This relates to Non-State actors class, and the "Neo-Tocquevillean" view that healthy civil society is part of the underpinning of successful governance. Of course, governance != development. But civil society is very close to "social capital", which is a nice box on the current slide, "the Evolution of Development Thought."

Old joke: Suharto visited Marcos in the Philippines. They looked at a bridge, and Suharto said, the bridge isn't finished. It stops near the end. Marcos tapped his chest and said, ten percent. Later, Marcos went to visit Suharto. Suharto showed him a view and said, you see that bridge over there? Marcos said, I don't see any bridge. Suharto tapped his chest and said, one hundred percent. (more like this)

Chicken and egg: are you rich because you have strong institutions, or do you have strong institutions because you are rich? Dani Rodrik tries to address this with econometric analysis.

"In the US the constitution is a living document." Singapore inherited working British institutions, especially compared to Bintan and other potential rival cities, because it was the hub of the British empire in Southeast Asia.

Two kinds of institutions needed for development: First, those that encourage trade by promoting trust and lowering transaction costs. Contracts, enforcement, etc. To do business in Japan, first you socialize. In Chinese, you build guanxi. (Note in both cases the importance of taking drugs together in public as a trust-building exercise.) Second, property rights: separation of powers (which China doesn't have, so how do they protect property rights well enough to have a functioning economy? Note that private ownership of land is still illegal in China, so alternatives have been devised.), keeping the government helping instead of stealing.

Joel's note: side research prompted by discussion during break: I had no idea there were as many as 13 Jewish Senators in the US. Arlen Specter is a Jew? Was I supposed to know that?

Institution explanations for underdevelopment, based on research "not storytelling"

• colonial heritage. Spanish inheritance: a small number of rich families, powerful church. French: rigid bureaucracy. British: capitalism (but c.f. India). Classmate point: Greenspan argues that Fabian socialism influenced the first-generation leaders in India. British brought decentralized government to India. Common law heritage protects property rights and maintains independence better than civil law. What about Japan? It wasn't a colonizer long enough to really change institutions. Classmate: In Bangladesh we say "heritage" for positive things and "legacy" for negative things.
• colonial heritage plus. Colonizers designed institutions to exploit locals. The Eiffel tower was built with African iron. Extractive institutions. Philippines and Latin America: Catholic church historically used to keep the population controlled, not educated. By contrast, Methodist schools in Singapore are a primary source of the educated elite in Singapore. The French didn't have religion—they colonized for wealth, power, etc. Joel's note: that's why everybody colonized; some justified it with religious missions. The global sugar market still reflects colonial heritage. Slavery.
• Political conflict. Not enough political competition, so rulers were able to build institutions to serve selfish interests. Cold war led to support of bad leaders who otherwise might not have prevailed. CIA is associated with coups. Great quote: "The only mistake Solo did was to try and stage a coup while drunk. They started playing reggae on state radio and TV until soldiers loyal to the government regrouped and overran them."
• Beliefs and norms: culture is inhospitable to markets or trust. Rich Middle east countries may seem like a counter-factual, but that could be transient, based on oil money.

These explanations are not sufficient; they aren't adequately supported by data, by econometric experiments.

One school of thought: countries succeed when institutions constrain government to keep it honest. The Suharto myth is developing as, he did good things for Indonesia at first but after he'd been in charge for a while he got too corrupt. That's especially a feedback property of any political system where violence is required to take power: once you have power, you can't retire safely, so you have no incentive do anything but build military power and live it up.

Empirical studies of which institutions matter for development. The following are significant factors in regression studies:

• protection of property rights, contracts
• civil liberties
• political rights and democracy
• political instability
• cooperation-promoting institutions.

How can countries change their institutions?

Changes are usually small and incremental. (Except Thailand, where they do things like this: "young King Ananda Mahidol returned to Thailand for the first time in 7 years. ... A new constitution, Thailand’s most democratic to date, was drafted in his honor.")

Imported institutions often fail.

Institutions are embedded in peoples' minds, and so don't change easily. Forces resist changing institutions. Fundamental institutions are long-lived and path-dependent.

Aid doesn't change norms and beliefs; Aid agencies often promote Western best practices rather than local experimentation and adaption. Short projects, rapid turnover, staff rewarded for work, not outcome.

Aid does cause some changes: privatization, changes to laws and regulations. World Bank cuts and pastes contract and plan text between different projects in different countries.

Joel's note: apparently we won't be talking about the Schmid reading today.

Rodrik, D.2000. Development Lessons for Asia. Asian Development Review. Vol. 23. No. 1 p. 1-15 (PDF) (Browse, get the substance)

Schmid, A. 2004. Conflict and Cooperation: Institutional and Behavioral Economics. MA, Blackwell Publishing. Chap 1-4 and 6-7 (MUST READ)

• p 1: "A constraint on one person is an opportunity for another." Not necessarily. Maybe everybody is constrained.
• p 2: "This book intends to form a new synthesis and assembly of ideas from many writers who do not necessarily consider themselves institutionalists. It is time for institutional economics to emerge from its critical role." That sounds good to me. But I'm disappointed that author even feels the need to mention that he's plucking ideas from people who don't self-identify in a particular -ism.
• p 4: "Chapters 3 and 4 lay a foundation for the analysis rooted in cognitive science. Bounded rationality and the limited information capacity of the human brain are fundamental." Yay! A theory about how large groups of humans interact which uses humans, instead of rational actors, as its foundation.
• p 7: I like the shorter sentence lengths, which make the text less brutal to read than, say Finnemore. But this is a bit too short: "Language is the carrier of formal rights. Sharing a language facilitates the understanding of relative opportunities. The meaning we attach to words is vital."
• p 7: The proclivity to stand patiently in line instead of jumping the queue is a piece of social capital.
• p 12: impact analysis: if the institutional alternative was different, what would be changed in terms of who gets what.
• p 13: change analysis: if the institution was different, .... What's the difference between changing the institution and changing the institutional alternative? Changing the institution seems to mean changing the nature of the institution, not changing to a different institution; perhaps changing the institutional alternative means changing the decision the institution made?
• p 17: "One of the important impacts of institutions is how they affect how the costs and benefits of inevitable surprises are shared." bingo. imagine the institution to be a software development contract, and compare fixed-price to time and materials.

  People have administrative transactions (orders), bargained transactions, customary transactions, and threat transactions.

• p 20: the staccato tumble of sentences that each have a fairly deep meaning but are packed into too few words, and not strung together well or at all, is starting to get to me. "A view of behavioral regularities from behavioral science can be used in both impact and change analysis. Counterfactual assumptions work on as "as if" basis only in limited instances." This is English? This is madnessjargon.
• p 23: "Institutional economics is not concerned with changes at the margin, but rather instances where the change in a variable is large enough to feedback on other variables." 1) most economists seem to worship the very concept of the margin, so somebody is really wrong here. 2) feedback is a noun, not a verb.
• p 25: "It is a tragedy when individuals make their most advantageous choice and wind up where they do not want to be because of the emergent aggregate effect of others doing the same thing. This is not the tragedy of the commons but the tragedy of isolated individualism. " Huh? That's the tragedy of the commons.
• p 61: "The previous chapter focused on how the individual brain works. But, to understand behavior, we must examine systems of brains — the brain in a social setting."

  

• p 68: This guy is getting pretty frustrating, because he's clearly on the right track, but it's maddeningly hard to actually learn from his sequence of little pebbles of ideas. Here is a sample from the conclusion to the chapter about systems of brains:

  People's learning is shaped by institutions, and their learning shapes evolving institutions ... institutions, both informal and formal, are repositories of knowledge.

• p 91: "When most people think of property rights, they are thinking of these incompatible use goods (IUGs)." I suppose those are "rival" goods? Now we have three terrible terms for the same thing, "rival", "incompatible use good", and "IUG".
• p 92: "Pareto-worse changes in rights are essential for some varieties of economic development." Yay! The interests of the people who happen to be rich at this moment are not absolutely inviolate. (somebody tell the RIAA)
• p 92: instead of viewing air pollution as a by-product of steel production, view it as a necessary input. That simultaneously makes a lot of sense and seems silly.
• p 99: Eight ways to unseat the free rider. A few: Rules. Trust (e.g., play more than once and use tit-for-tat). Play tit-for-tat (I just said that!). Create environments in which people learn to care for each other (social capital). Okay, he's going through the two-by-two matrix for public goods. Do I have to read it all to find out if there are any new ideas?
• p 126: "Fundamental uncertainty means 'Choice is in the first place ... the creation of choosables'". That sounds about right. Let me suggest a sibling koan: Making decisions is in the first place recognizing decisions.

p 147: results of economics experiments in the lab. "hard-nosed game theory cannot explain the data. ... It is possible to provide an environment in which at least 90 percent of subjects will become selfish Nash players. It is possible to provide an environment in which at least 90 percent of subjects contribute toward the group interest. Why and how often this all works remains a mystery.

Ostrom, E. (2005). Doing Institutional Analysis: Digging Deeper than Markets and Hierarchies. Chap 30. In Menard and Shirley (Ed). Handbook of Institutional Economics. Netherlands. Springer. (browse, get substance)

A bit of side research triggered by a joke. Bush is somewhere between 5'9" and 5'11".

B. Guy Peters, The Politics of Bureaucracy, Ch. 3, "The Recruitment of Public Administrators"

Florence Heffron, Organization Theory and Public Organizations, Ch. 9 "Motivation"

D. A. Nadler and E. E. Lawler, "Motivation: A Diagnostic Approach", in J. R. Hackman, E. E. Lawler and L. W. Porter (Eds.), Perspectives on Behavior in Organizations, New York: McGraw Hill, 1977

A model of how people are motivated:

• Your perception of how much your effort affects your performance
• Your perception of how much your performance influences the outcome
• Your perception of how much different outcomes are worth to you

Key implications:

• Determine what behavior is desired
• Link desired outcomes to desired performance
• Analyze the total situation for conflicting expectancies

J Jabes and D. Zussman, Motivation, Rewards and Satisfaction in the Canadian Federal Public Service, Canadian Public Administration, Vol. 31, No 2, Summer 1988, pp 204‑224

A survey of Canadian civil service senior management. "We have found work satisfaction to be lower in the senior managers ... compared to their private sector counterparts."

Peter Self, Administrative Theories and Politics, 2nd Ed., London: George Allen and Unwin, 1977, Ch.7, "Administrative Motivation and Performance", pp. 224-246

• p 225: A senior Administrators has very elaborate accountability requirements—to her agency, to her agency's interested public, to other agencies, and to general political organs. She is remote from the final consequences of her decisions. And "political considerations ... inhibit a just evaluation of [senior officials]"
• p 228: the US has an "open" administration system and Europe a "closed" system.
• p 244: "We may be tempted to conclude that any society gets the bureaucracy it deserves, and that the virtues and vices of any system are inextricably mingled. This is too simple. Bureaucratic pathologies are capable of being reduced by corrective action." This seems like all of politics and public administration in a nutshell: yeah, it's pretty messed up, and it kind of has to be, but you can make it a little bit better if you try.

Lecture

Inner disequilibrium leads to goal-directed behavior leads to outcomes. If an outcome is blocked, frustration leads to ??? Traditionally, frustration leads to aggression. (Infants react to frustration with either anger or sadness. In rhesus monkeys, response to frustration depends on social status. I would like to state for the record that I have never thrown poop as a result of frustration.)

Two theories of motivation: need satisfaction, and process theory. Maslow's hierarchy. Alderfer's ERG theory: Existence, relatedness, growth. Herzberg's wwo factors: hygiene (if it's missing, you're unhappy) and motivators (if present, you're happy). McClellan's learned needs: the need to achieve (Protestants are much more achievement-oriented than Catholics), the need for power, the need for affiliation (which negatively correlates with the need for power). The data doesn't support any of these theories. The importance of salary as a motivator especially remains unclear. Self-actualization is hard to define and perhaps useless for our purposes. Artists made great achievements that are self-actualization if anything is, but they were broke and starving.

Joel's Research Side Note: what's the difference between safety and security? OED safety: "exemption from hurt or injury; freedom from danger". From the Latin for "sound" as in unharmed. Security: "being protected from or not exposed to danger". I tend to think of safety as more physical and short-term, and security as more social: I'm safe from a bridge collapse; I'm secure from getting fired. Sense 3 of "secure" seems better: Rightly free from apprehension.

Process theory assumptions. Behavior is a function of forces from both the environment and the person. People make decisions about their own behavior. Different people have different needs, desires, goals. People make decisions based on their perceptions of how their behavior will lead to outcomes.

Joel's research sidebar: I had no idea that Canada's tax rates are lower than the United States (which has a top marginal rate of 35%).

Equity. Rewards relative to other people.

(Reading notes for this week)

The case study

Management consulting approach to case studies.

• Understand the case
• Complications. What are the issues?
• Solution. what solutions are you putting forth?

(Joel's) Summary of the case: before apartheid, NGOs in South Africa had worked out routines for dealing with government abuse. After apartheid ended, NGOs got together to come up with self-governance plans. Meanwhile the new government attempted to rationalize the regulation of NGOs while also announced spending plans that obsoleted most of the NGOs. Their heavy-handed actions and dissociation with existing efforts lead to accusations of political partisanship.

Student Group for case study

Core problem is disagreement over the draft bill. Joel's note: no, the core issue is a lack of communication and trust between government and the NGO community. The fight over the draft bill is the symptom.

"The government needed to control NGOs which had misbehaved."

Stakeholder analysis. Champions of change vs champions of status-quo. So the existing NGOs are the status quo? "The government has a carrot approach, and secondarily a stick approach" That may be true in the context of the proposed law, but this misses the broader context. By announcing billions of spending and a new bill without coordinating with the existing NGOs, the government already wielded not just a stick but a huge club. The contents of the bill aren't the most important thing. Once everybody's pissed off, as they are at the end of the case, any bill will be viewed with extreme suspicion.

Alternatives: redefine the role of the commission. Create an accountability environment. Use a third party to mediate and to monitor.

Prof Q: Who is that third party? International or local, that can be trusted by both. If there's no mediator, there will be a long back and forth between NGOs and government and it will take a long time for the bill to pass. Or the government will pass the bill it wants and further alienate the NGOs. Does that set a good precedence for the government, that they can't deal with NGOs themselves? If funding is international, then it's politically neutral for the government to bring in international mediators/monitors. So you are advocating two sets of laws for disclosure?

Was this case really about the bill, or about how much power the NGOs will have? In many countries, NGOs are destabilizing; maybe the government saw them as a threat. Hmm, perhaps power issues underlie the government's tone-deaf approach. What about the role of the Ford Foundation's local representative, who initiated the NGO review process?

The act passed, but was overhauled in 2001. Public Benefit Organization was defined. In 2006 a Parliament bill changed the tax system even more, and formal declaration was made optional. In the end both parties got what they wanted, and mutual understanding was much improved.

Rules in students' countries

Angles I missed in my homework:

• Can donors get tax breaks?
• Are there different rules for foreign contributions?
• provisions to send retirement funds to non-profits

China: registration procedures are quite strict because of the nature of the Chinese regime, especially after the collapse of the socialist countries in Eastern Europe. Any organization must find a government sponsor. In China, they are called "social organizations", not NGOs. You have to submit an annual report and financial statement to your sponsor. You cannot register for some sensitive topics. You cannot operate outside your registered region. Laws are scattered. NGO income is taxed but income from technology transfer is not taxed. If an NGO for your topic in your region already exists, you cannot register. You must register to raise funds; the donations have tax benefits. The regulations are intended to constrain some kinds of NGOs but allow others.

Singapore. Provides constitutional rights. Article 9 allows the government to constrain any right that could affect security or relations with other countries. Public meetings of more than five people must have permits. Singapore wants to be a hub for NGOs in the region, but 80% of locally raised funds must be spent locally. The media is state-controlled— the "fifth Estate" (actually it's the fourth, after the clergy, the French nobility, and the public). Allegedly you can deduct twice your charitable contribution. A 2005 Rutgers poll rated Singapore's media freedom 140 out of 157. Perhaps Singapore wants the non-profit funds, but not the actual NGO activities. Both NGO money and casinos may be examples of Singapore seeking comparative advantage. Voluntary welfare organizations may be a better comparison.

US. Wide-open. Must register to get tax benefits. No tax benefits for political action. It occurs to me that some fraction of the NGO growth (1.6 million in 2006) could merely be tax shelters. I mean, plenty of them have always been motivated by tax savings, but now a lot of them could be private trusts etc which are really paper-thin tax shelters.

Philippines. Vibrant sector, very open, especially after 1987 People Power. Registration is not required, but you have to have a legal entity to open a bank account, etc. Two primary laws: Corporation Code, Tax Code. Do not have to register with the Securities Exchange except to receive funds. The law gives many tax exemptions to NGOs. Bureau of Internal Revenue issued a regulation that microfinance activities will be taxed. They are like any other corporation: can sue, be sued, own property, etc. Have to file an annual financial statement, activity statement, etc, which are public documents. (Somebody paid $200 last year to get what would have been a great answer to our homework. Wow, they're paying $200 per country for detailed research on NGO statistics, especially ICT (Information and Communication Technology?), for 88 countries and counting.) Some efforts to get NGOs to self-regulate. Still have an accountability deficit.

Most dictators tend to suppress civil society. What did Marcos do? Most were underground organizations; in fact, the NGO sector in the Philippines started as human rights organizations.

India. 1.5 to 2 million, possibly only including NGOs, not any kind of civil society.

Japan. Register with the prefecture. Exempt from taxes, but only up to a limited amount of money. Private donors still pay tax unless donating to one of 75 accredited NPOs. In general, NGOs are not promoted in Japan. "The government doesn't know what to do and the public doesn't know what they want."

Cambodia. No regulation or law. Some verbal instructions from the Ministry of Foreign Affairs, such as getting letters from home countries. No formal procedure; it seemed to be easier in 1979 than 2007.

Myanmar. Things are on the difficult side. There are "guidelines for implementing projects". Local NGOs have been operating for decades, doing social work. Government allows some foreign NGOs to import some cars at special rates, import fuel. Three months ago the ministry stopped this, and will look at each organization again to see if they have any political activity. Since them, some have had renewed permits. Geographical access is restricted; some areas still have insurgencies. The Global Fund stopped operation in Myanmar because of these restrictions.

Kazakhstan. Some similarity with China—territorial divisions. High registration fee, US$170, more than US$1000 for international. 2003 law applies to international NGOs. A huge flow of money from NGOs to affect parliamentary elections.

Mexico. Opening up a lot. Trusts regulated by federal law, other things by states.

The readings

What's civil society? Non-state arena of uncoerced collective action. My definition: any social (e.g., more than 1 person) activity that is not government and not for profit. Anglo-American: state, business, civil society (everything else) vs European, anything that's not government. Uncoerced collective action (a very good and terse definition if you take the profit motive as coercion). In pursuit of a legal purpose? That's a normative element.

Formality. Pick-up soccer games. Reading club. Mass march or street process. Alagappa: As a distinct space for non-state, non-market organization. A site for discourse. As a site of governance. Means to influence the state. Is this concept relevant to Asia, to your society? Yes, in every heterogeneous society, to protect identity, to preserve values. In Confucian or Islamic societies, there is no space for civil society, true or false? Certainly club goods. What about public discourse? It's incorporated into the Islamic religion itself. In Western culture, having a nanny state is a bad thing, but in Asia the state is expected to look after the citizens. Is the concept of cradle-to-grave government oversight Western? What about the iron rice bowl? Do people want a civil space only when the government does not provide services? In Singapore, where civil society is restricted, people seek alternate outlets, like the internet. A prof shout-out to David Brin's Earth, a prophetic 1990 novel about the internet and civil society in the face of impending crisis.

Colonialism as a common enemy stimulating civil society. Alagappa says that there is more civil society in weak states, where they fill in gaps, and also more civil society in strong states, where they are part of a healthy society. Unclear what's really cause and effect. Could there be more informal organizations in weak states and more formal ones in strong states? Now I'm wondering what civil society exists in North Korea?

Explanation of Tocquevillean and neo-Gramscianism. Tocqueville sees social society as contributing to a healthy working nation. Gramsci saw oppressed workers being fooled into supporting the system which exploits them, and views civil society as a battleground for defining how society should be.

Wolf R. Meier-Ewert from the WTO:

Disclaimer: Although this is a private setting [Joel's note: it's actually open and free to the public], anything I say is not to be attributed to the WTO or its member states.

630 staff, [US$160m] budget in 2006.

WTO is:

• Set of rules
• forum for negotiations, currently the most prominent function. There are many plurilateral agreements
• forum for monitoring implementation and resolving dispues

The negotiating process goes from a very general target to something more concrete to, ideally, results.

TRIPS: from Rome Convention, Paris Convention, Berne Convention, "Treaty on IP in Respect of Integrated Circuits". Has an enforcement chapter, is subject to WTO dispute settlement.

The Doha Work Programme created new bits of bureaucracy: Negotiating group on Market Access, Negotiating Group on Rules, Special Sessions of the TRIPS Council. Special Session deals solely with GI Register. ("GI protection means that products deriving their names from certain geographical locations, such as Parma ham, could not be produced under the same name by anyone from another location. The GI register has been controversial right from the beginning'"—IP Watch)

Four different TRIPS Articles relate to public health. "There is a whole discussion about 28(3)b and what it means and I don't want to go into that now ... we can go into it in the question and answer."

Joel's note: some side research on WIPO while he talks about the minutiae of Article 31 (which only has to do with poor countries getting affordable drugs). IP watch says that WIPO's boss is resigning a year early, because "WIPO Director General Kamil Idris was under attack from influential member governments seeking his early removal for the fallout of having allowed an incorrect birth date to remain on WIPO records for more than two decades". Oops. Without more information (maybe I'll ask!), it's hard to tell if this should be taken at face value, or if it's a pretense that powerful members used to force him out when he did something they didn't like, and if so, what? Interestingly, one name on the candidate list is Geoffrey Yu from Singapore.

Developing countries, who make up the majority of the WTO, only starting thinking about implementing TRIPS in 2001, because that's when their exemption ran out. ... Transition period was then extended 15 years for pharmaceutical patents, to 2016. (Joel's note: this seminar is hosted by the law department, and is shaped accordingly, as a detailed legal discussion about paragraphs and subsections and the lot.) If a country needs drugs it can't afford, it can license them under paragraph 6. If the country doesn't have the manufacturing capacity to make the drugs, another country can use paragraph 6 to make the drugs for it. However, article 31(f) prohibits "export of a predominant part of production", so if a country like Singapore or Switzerland wanted to make compulsorily licensed drugs for poor counties, they would have to take more drugs than they exported (woohoo!). The best hope may be thus be India, which has both manufacturing capacity and a great internal need for cheap drugs. The "Paragraph 6 decision" sets up conditions to waive 31(f) to solve this problem. Much negotiation: how to keep the cheap drugs from getting sold to people who aren't totally poor? proposal to restrict the exception to only drugs for certain diseases was rejected. Safeguards, such as special markings for these drugs, so they can be easily spotted if diverted. US remained the last objector, insisting on a voluntary opt-out provision before joining. All developed countries had to promise to the US not to use this provision.

Lori Forman, Microsoft PR for the Asian region, came to talk about her career path from the Kennedy School of Government to shilling for a monopolist Community Affairs Regional Director at Microsoft Asia Pacific. I couldn't quite hold back a grin at this line (almost a direct quote but I think I mangled it a bit): "Microsoft has been using its technology for over twenty years to bridge the digital divide."

Hah! Microsoft ignored poor markets until Linux became popular, at which point Microsoft hustled to find something that could compete with free. Attempts to create a Windows for rent have not yet taken off, and US$3/year Windows is the next thing.

She showed a video about Microsoft's efforts to help fight human trafficking. I'm certainly opposed to human trafficking, and I have no reason to doubt that participating Microsoft employees are equally sincere in opposing human trafficking. I think this press release is the same thing: "Microsoft Corp. has awarded over $US 1 million through its Unlimited Potential grants to non-governmental organisations (NGOs) across six Asian countries. The latest round of grants will deliver IT training courses ... in basic computing, office productivity, network administration and hardware repair". Microsoft isn't the default operating system on almost all computers in the world by accident. It takes a lot of hard work to maintain a monopoly.

"Being in a private company, we could put all this together in six weeks. In government it would have taken six years." This is startlingly relevant to the discussion about accountability from the class that ended thirty minutes ago. Nice to see real-world examples. It's certainly possible that the problem is a huge success for all stakeholders, but (aside from the monopoly marketing issue), what was done to ensure the people targetting by the program are getting what they want? What direct voice (not counting sound bites harvested for the corporate video we saw) did they have? What international mechanisms already existed to combat human trafficking? How does Microsoft's work fit into those mechanism?

My question: how do you reconcile social reponsibility with Microsoft's efforts to quash free software, including your CEO calling Linux a cancer? But this is a career advice talk, so maybe I should just keep a lid on it. From the career angle, the big issue with CSR is, given that it's almost certainly (given the imperatives of capitalism, and like most corporate charity) a marketing expense the company engages in to improve its image, how crippling are its constraints? I don't mean to argue that somebody helped by a CSR program wasn't really helped.

IO, IGO: formal, intergovernmental organizations. A subset of non-state actors.

Our nation-state global system is an accident of history, happening only because Europe happened to have nation-states at the moment that it took over the world. The scope of problems that states try to address has expanded tremendously over time. Open question: what should the responsibility of states be?

Many international agreements form simply because the relevant bureaucrats at several different countries get together and make a deal. Question: are these processes democratic? C.f. A New World Order, Ann-Marie Slaughter.

What's going on in Davos? The core membership is the world's largest 1000 corporationns. Invited guests ("faculty") are artists, professors, intellectuals, etc. Actual activity at Davos is lots of business deals. Lots of panel discussions, which all tend to cover the hot issue of the day. "It makes you understand, viscerally, that nobody is in charge."

Clinton Global Initiative: same people as Davos, but you can only go if you pledge millions of dollars to action.

Political theory steals tools from both economics and sociology. Economics has numerical, analytic tools and sociology is more realistic. Joel's notes: What if the real world is so complicated that neither approach is really working?

Principal-agent problem. Are the UN's principals the governments of the member states, or the people of the member states? Accountability chain in the IMF: non-democratic country is represented by (in the case of Africa) one twenty-sixth of the African representative.

Example of a German expert consultant coming to Mongolia and make prescriptions suitable for Mongolia. Joel's note: The problem isn't that the German doesn't know Mongolia, it's that the German only knows Germany. The important thing for the consultant to have experience in more than one environment. As a consultant classmate said, everybody claims their situation is completely unique, and they are usually about half right.

Global Administrative Law Project. Lots of decision-making has moved up to a global level, but the administrative safeguards have lagged behind. Freedom of information, bidding and procurement laws, notice and comment periods for proposed laws, right of judicial recourse, cost-benefit analysis. These rules aren't, and sometimes can't be, translated to a global level—there's not much of a global judiciary and there's no global parliament.

Examples of unappealable, unaccountable global administration: UNHCR has the power to define what "refuge" means. Basel banking capital ratio requirements. Extraordinary rendition.

These include formal international organizations (such as the WTO, the Security Council, World Bank, the Climate Change regime, etc), informal intergovernmental networks of domestic regulatory officials (such as the Basel Committee of national bank regulators), domestic authorities implementing global regulatory law, hybrid public-private and purely private transnational regulatory regimes.—The Emergence of Global Administrative Law

Muthiah Alagappa, Civil Society and Political Change In Asia: Expanding And Contracting Democratic Space, pp. 455-477

Summary: What's up with civil society in Asia? There are a lot more NGOs than before and economic growth brings more every day, but the state still dominates the public space. Many NGOs are rooted in anti-colonialism or in "totalizing" a religion or other vision for the state, but most of those have mellowed. Most states are semi- or non-democratic and lack basic legal guarantees; even the democracies with more hospitable laws are still iffy in practice.

• p 461: China in particular has "GONGOs", government-organized non-governmental organizations, which are fairly bogus.
• p 464 - 467: "An Arena of Power, Struggle, and Cooperation". Buddhist vs Tamil in Sri Lanka; Muslim vs secular in Indonesia; radical, democratic left vs conservative, authoritarian US allies in South Korea; class struggle in the Phillipines. But "zero-sum struggles give way to competition, cooperation, and compromise." Mostly.
• p 468: neo-Tocquevillean and neo-Gramscian frames. Better look those up.
  • "Neo-Tocquevillians such as Robert Putnam (1993a, 1995, 1996) argue that civil society is crucial to 'making democracy work'"
  • "With the Italian Marxist Antonio Gramsci it later became rephrased as a zone of contestation where hegemonic forces (classes) fought out struggles for societal domination including party politics. A neo-Gramscian position popular today sees it as that which is neither state nor market, nor party political ..." That quote comes from an interesting Danish paper¹ about global civil society, which argues that the popular criticisms of the concept are invalid because the critics are still stuck in a state-centric mindset.
• p 470: "Lag in institutionalism". At the performance by the Singapore Complaints Choir, as they explained their problems getting a performance permit, they mentioned in passing having to get the lyrics approved by the Media Development Authority. Yes, that MDA:

  

Case: Role of NGOs in Civil Society: South Africa & the Draft Bill Tempest, International Center for Non-profit Law

Homework: Two-page description of the regulations governing civil society in your country

I almost forgot that I co-founded an NGO. Which is less than it sounds: we filled out some forms and now we have a 501c(3), with which we have done very little in the last two years. Maybe that will help with the homework.

1. I would also like to mention that I continue to take great pleasure in pronouncing Danish names, a skill I credit to the KISS language school in Copenhagen. In this case the street address of the University of Copenhagen, "Ostre Farimagsgade", which I think comes out something like "ohs^(t-gargle) fahmahsgeh^(l). Like yodeling or bagpipes, there's a certain dirty thrill to this kind of sonic vandalism, although you pay immediately with a sore throat.

Expenditure Analysis

Expenditure on final goods and services vs transfer (redistribution). Joel's note: I question the basic premise of today's class. Or I guess I question the implied application. Today's class is about how government spending affects the economy. It uses a strict economic model in which robotic actors maximize utility of available resources. But nations are not bounded by resources, at least not physical resources. Singapore got wealthy without physical resources (it had a good location for shipping services, but it's certainly not the only land near the straits of Malacca. So people as resources are the real limiting factor, in particular their skills and training and motivation and "social capital" (willingness to trust others and do business with them, or even just to not try to kill them). While economics claims to include this within the letter A in economic equations, it's so crude as to be useless in explaining differences in development in China, Singapore, Nigeria, Malaysia, Korea, etc. I agree that we should learn the conventional economic explanation of government expenditures, but it seems like learning Newton's equations to fly to Mercury—if it's all you use, you'll probably miss.

Example from the lecture: building a road increases land prices near the road; this is a distributive effect, because it doesn't add or subtract from the economy. It just moves money to the people who used to live near the road but sold their property, and that money comes from the buyers, who are in the same society, so no net change. But building the road increased the total value of all of the property. Now I've confused myself: the value of the land has increased, but only if people are willing to spend more money for it, and that money has to come from somewhere, so it seems like wealth both was and wasn't created.

"Health care is income [in]elastic, so when you get richer you consume more." I really wish I had heard clearly if he said elastic or inelastic. On the one hand, my anecdotal knowledge tells me that rich people spend a lot more and poor people forgo even necessary health care, which sounds like income elasticity. But I also know that people spend what they have to spend in emergencies, and poor people who don't get preventative care end up paying (or at least costing society) more in the long run. A quick search suggests that "the income elasticity of health care [is] 0.817 to 0.844", which makes it a necessity good, not a luxury good. I guess that means it's slightly inelastic? But RAND finds an even less elastic number, 0 to 0.2. That's so different that I have to be suspicious of both numbers.

Paraphrase from lecture: Marx faltered when he treated labor as the only input; that's where Das Capital gets confused. You can't produce without including all of the factors.

Paraphrase from lecture: the Singaporean honors students get worked up when I tell them they are all walking bundles of subsidies. "no, no, Singapore doesn't have subsidies," they say.

It's impossible to subsidize a single good, because if you reduce its relative price, you change the overall balance of how much of that good people buy relative to all other goods. Joel's note: but the psychological effect of subsidizing something is probably also real.

When income tax exemptions are used to incent people, richer people (who pay more taxes) are being subsidized. Joel's note: but not by the poor, who don't pay taxes, right? Though the poor are still paying sales/VAT and presumably other taxes. Taxes in Singapore start at S$22,000 (US$15,460). See also this forum discussion.

The overall point the professor is making, which many students at break hadn't quite caught, is that if taxes are progressive, subsidies on the form of tax rebates are regressive. And we have a fresh example of this at hand.

Once again I am on call to provide facts about the US, and once again I'm close but wrong. I said that the cap for mortgage interest deduction was "in the millions, or maybe there is no limit". The truth is more complicated, which may not surprise you since we are talking about the US tax code. There's no limit for mortgages from before 1987; after 1987 the limit drops to (skipping over some details) $1 million. But there's a limit on how much you can deduct overall, and the Alternative Minimum Tax kicks in at some point. So (and I'm not going to research any further) I think that the tax break for mortgages must trail off after maybe $200,000 in annual income. I also said the top tax bracket was 38%, but it's actually 35%.

A side note: the co-author of some of our textbook readings, Edgar K. Browning, is also the author of Stealing From Each Other: How the Welfare State Robs Americans of Money and Spirit, which argues that

Almost all Americans would be better off if none of the federal welfare-state policies of the last century--including Social Security--had ever been enacted. ... Welfare-state policies have large hidden costs which all told have reduced the average income of Americans by about 25 percent. ... There is much less inequality and poverty than is commonly believed

Perhaps he's intended to balance out our Stiglitz?

Negative income tax. Comprises a flat tax plus a gradual rebate. It has to be a gradual rebate or else there would be no incentive to make money. Three variables: income guarantee, marginal benefit reduction rate, and breakeven income. Suppose the rate is tax rate is 10%, the income guarantee is $5000, and the reduction rate is 50%. If you make zero, you get $5000. If you make $2000 in income, your rebate is reduced by $1000, so you get a $4000 rebate to bring your total income to $6000. Once you are making $10,000, you get no rebate, and any additional income is taxed at 10%.

Here's an interesting argument for income guarantee (as opposed to get-a-job-based solutions). "The 1996 Welfare Reform Act ... says mothers must accept job training as a condition of their eligibility. Why should flipping burgers at McDonald’s be considered more important than raising one’s children?"

Barnett, Michael N., and Martha Finnemore, "The Politics, Power, and Pathologies of International Organizations," International Organization 53, 4 Autumn 1999, p. 699-732.

• p 699 - 702. International Organizations (meaning here inter-governmental, not NGOs) are, in theory, created to solve some economic problems like incomplete information and transaction costs. But to understand how they do and don't work, we have to examine how they actually function, which isn't always pretty. Neo-realists don't believe anything other than states matter, and neo-liberals give IOs a free pass; we'll use constructivism to bypass them both. "We argue that assumptions drawn from economics that undergird neoliberal and neorealist treatments of IOs do not always reflect the empirical situation..."
• p 702: Two theories of institutions: economistic (Coase et al) and sociological.
• p 703: "Environments can 'select' or favor organizations for reasons other than efficient or responsive behavior." Yeah; organizations that are better at fundraising are presumably selected for, regardless of what they actually do. And organizations tend to self-perpetuate.
• p 704 - 706: pointing out the vacuity of purely economic analyses of IOs.
• p 707: two sources of power for IOs: legitimacy derived from rational-legal authority, and control over technical expertise and information. (Joel's note: I guess ICANN has both and abuses both.)
• p 708: paradoxically (not ironically), IO bureaucracies gain political power by claiming to be politically neutral, rational experts.
• p 710: The UNHCR's expertise "has allowed the UNHCR to make life and death decisions about refugees without consulting the refugees, themselves"
• p 710: Three broad types of IO power: "classify the world ..., fix meanings in the social world; and articulate and diffuse new norms, principles, and actors around the globe ...." In other words, they get to make the rules.
• p 711: another example: the World Bank has rules differentiating farmers from peasants. Only farmers are recognized as having relevant knowledge, so peasants by definition don't have a voice."
• p 712: the fixing of meanings. IOs can extend their sphere of legitimacy by redefining meanings. One example (not from the text) is the awarding of a Nobel Peace Prize to global warming activists. "When security meant safety from invading national armies, it privileged state officials and invested power in military establishments. These alternative definitions ... shift attention ... toward the individuals who are frequently threatened by their own government ... a more immediate and daily danger."
• p 713: Norms. During decolonialization, the UN promoted the norm of sovereign territorial integrity, and in doing so helped maintain political boundaries that did not coincide with ethnic nations.
• p 715: some of this IO work happens despite, rather than at the bidding of, the strong states that according to neorealists and neoliberals are the source of power for IOs.
• p 718: "bureaucracies specialize and compartmentalize. They create a division of labor on the logic that ... specialization will allow the organization to emulate a rational decision-making process." Um, what's the difference between an organization emulating a rational decision-making process and an organization actually performing a rational decision-making process? Paging Dr Searle, red herring on line one.
• I'm a bit confused by how the paper lays out the pathologies. There are two lists. First:
  • Internal and material: bureaucratic politics, e.g. turf wars
  • Internal and cultural: bureaucratic culture
  • external and material: IOs are mere pawns in the real struggle between states
  • external and cultural: "world polity model"
  Then there's a second list, "five mechanisms by which bureaucratic culture can breed pathologies in IOs:"
  • the irrationality of rationalization, e.g. crazy red tape
  • universalism, e.g., what worked in Cambodia will work in Yugoslavio
  • normalization of deviance, e.g., SNAFU
  • organizational insulation, e.g., all of our equations are correct so your recession and rioting must mean you did it wrong
  • cultural contestation, e.g., the diplomats want the refugees sent home as soon as possible so the problem goes away, but the refugee workers think the refugees will just get shot if they go home. The great quote: "It is extremely difficult to make war and peace with the same people on the same territory at the same time."

  Ann Florini, The Coming Democracy: New Rules for Running a New World, Chapter 4, Brookings, 2003

  • p 67: There is a "consensus that the state should be a provider of a limited range of collective goods and services for the country and should not meddle in areas that the private sector can handle better."

    

    Well, that's probably true in a global context, when you include the massive transformations in China and India (and the looting of Russia, which isn't exactly the same thing). But I disagree, not only with the pejorative "meddle," but with the implication that it's even clear what the private sector can handle better. I don't have time to fully research the state of the arguments; a brief look into prison privatization finds that the right-wing think tanks Heritage and Reason cite studies finding that prison privatization is, on balance, good. This is consistent with this survey of prison privatization, which doesn't address the pros and cons of privatization, but instead focuses on the inconsistent trend to privatization. It finds that the "only clear explanatory variable for prison privatization was the rather unremarkable observation of the necessary condition of the election of a 'new right' movement—and even then this was not a sufficient condition." As an aside, this very interesting tidbit popped out for me:

    We also concluded that the case of the United States is in some sense unique, dominated as it is by the South, where the major private prison companies are headquartered and where the political and historical setting seems most conducive to the private exploitation of prison populations. Though we would not want to downplay the importance of race in the other cases we have examined, the scale of the incarceration boom and the degree to which it is a racial phenomenon clearly set the American case apart. To explain the concentration of private prisons in the southern US, and to explain their continued popularity, we must look at a regional dynamic that can be found in none of the other four countries we examine—nor indeed in the rest of the United States.

    Coming back to the consensus in the quote, a quick google search finds the assertion that "The privatization movement appears to have lost some momentum in the United States over the 1990s."

  • p 68: will technology make it impossible to tax? eCommerce in the US is generally un-taxed, although if you buy something from a company that does business in your state, you are required and very often do have to pay state tax (Amazon initially set up their warehouses in less populated states to reduce the scope of this issue). But it's untaxed because of political, not technical reasons. "If taxes get higher, capital may simply flow to jurisdictions with lower, or no, taxes." That's certainly an argument that people who were already ideologically opposed to taxes have adopted, but is it backed up by facts? People still buy an awful lot of physical goods and in-person services, and no amount of internet or capital flight will prevent those from being taxed.
  • p 69: Governments have some capacity to constrain levels of encryption technology, at least for a while..." No they don't. The encryption wars are over, and governments lost."Agreement on international regulation of encryption levels is itself a massive global governance problem." That's news to me, and I keep up on cryptography news. It's something that gets appropriate technical oversight from the same kinds of non-state actors we've been talking about, and it gets perhaps a bit more than its share of government attention, but regulation of encryption is not, or perhaps is no longer, a massive global problem. (Except in South Korea, where the government really screwed up regulating crypto.)

  John Ferejohn, "Accountability in a Global Context," International Law and Justice Working Paper 2007/5, Global Administrative Law Series

  • Legal vs political accountability. Global institutions are so haphazard that any accountability is legal even if political accountability would be better.
  • p 2: "what are the possibilities for establishing something like democratic accountability at the global level? My answer will be more or less optimistic: I think there are ways to improve things from a recognizably democratic perspective, even in the nonideal global context."
  • p 7: "impeachment which, it is claimed, subjects officials to a legal rather than political standard". In some cases impeachment appears to function as a legal mechanism, but in many others it's clearly just an exercise of power. If impeachment were a legal question alone, Bush and Cheney would be long gone simply for crimes they've admitted, much less the full litany of potentially legal complaints. (Allow me to plug my t-shirt on the subject.)
  • pp 7-9: By folk democratic theory, the people are the principal and need not give reasons for their actions. Elected officials are agents, and are subject to political accountability. Administrative agencies are second-tier agents, and are subject to both legal and political accountability. "Finally we reach the courts ... courts seem subject to much more strenuous reason giving requirements".
  • p 11: "Folk theory rests on the presumption that citizens are ... authoritative as to their genuine interests ... But is this actually a plausible guide to what democracy requires? Joseph Schumpeter argued some years ago that it was not. He thought the people were very likely to be incompetent in making public policy. Popular incompetence arises mostly from what we would now call collective action problems ..."
  • p 12: "We rarely see people agreeing to cut back on direct democracy once they have achieved it, or relinquishing transparency either." Yes, and it's amazing what can be accomplished with one tragedy, a bit of fearmongering, and a twisted soul.
  • p 14: Strong theories of democracy "see delegated authority as somehow defective in a certain way relative to authority directly exercised by the people ... The alternative approach goes something like this: a polity is democratic insofar as its policies reliably track the common interests of its residents"
  • p 15: Deliberativists " demand not deference to popular will but to the best policy i.e. to that policy which best reflects the real interests of the people." Which, for better or worse, is the next-door neighbor to paternalism. And it's somewhere around here that this whole ediface [sic] of theory founders on the problem that there's no convincing theory describing how to determine what people really want—what they are willing to pay for, what their actions indicate they want, what their future selves can be predicted to have wanted, etc etc.
  • p 18: " The nesting of accountability relations creates new possibilities for agency slack because the agency has the chance to go around its principal (the legislature) to the higher level principal (the electorate). Alternatively, and perhaps more likely, the legislature and the agency can collude against the voters." E.g., the military-industrial complex.
  • p 19: "Folk democrats insist that agencies be directly or indirectly accountable to the people and that this accountability is unconstrained by reason. Deliberative democrats want agencies to respond to reason: to gather, hear and act on the range of relevant reasons for action." I guess I fall on the reason side, but a balanced tension between both forces seems best, since we don't have access to perfect reason.
  • p 20: "From the deliberative viewpoint the progressive era reforms are less comprehensible. ... Was there some magic potion by which they could overcome the collective action barriers ...?"
  • p 22: Did the people who put the European Constitution up to national referendums (where it died) open a new and possibly dysfunctional channel of accountability which cannot easily be closed?
  • p 23: "Globally, because the background political processes are much sparser and more uneven, and are often unattractive, legal accountability floats in a kind of moral vacuum."
  • p 24: I like this paper but he sure takes his time getting to the point. The only practical option for holding global institutions accountable is the deliberative (indirect) mechanisms. But we've lost the ability for the people to arbitrarily intervene, which is bad because "folk democracy is the club behind the door that serves to encourage officials through fear and anxiety to try to pursue good policies and to explain to the people what they are doing.

  Here's some additional writing on the topic of democracy and the consent and will of the governed. "Does the grist choose the mill, the rabbit the hawk, ...? They do not, and neither do the Citizens choose their Leaders. ... Sadly, the man in the street becomes affronted whenever he feels his supposed dignity is being besmirched. Why is this? The man in the street is, for all his puffery, standing there in the God damned street!"

  Assignment due at the beginning of class: a two-page paper on bureaucratic pathologies you have witnessed.

Browning, E.K and Browning, J.M, Public Finance and the Price System, 4th edition, 1994. pp. 100-126.

• Public spending has both allocative and distributive effects. Allocative: how does it change "the pattern of goods and services produced by the economy"? Distributive: how does it move income between people? between classes or groups? For a timely debate on this very subject, see Krugman and Robert Greenstein on the US stimulus package. "... the two most targeted and economically effective measures under consideration — a temporary extension of unemployment benefits and a temporary boost in food stamp benefits — were zeroed out, apparently at the insistence of House Republican leaders." I would like to challenge my classmates to identify similar analysis on current events in other countries.
• Government spending cannot create jobs because it is financed by taking money from the private sector, where it could have been used to create jobs. Uh, yeah, but the point is that it wasn't being used to create jobs
• p 123: we've seen an awful lot of charts and graphs and theories telling us what should happen, but no actual research data.
• p 123: every dollar the government spends costs taxpayers more than one dollar, so there must be justification for the spending: either it solves a market failure (and so returns more than it costs) or it serves the collective will of the people to support the needy: welfare, social security, etc.

Inge Kaul, Isabelle Grunberg and Marc A. Stern (1999), "Global public goods: Concepts, policies and strategies", in Inge Kaul, Isabelle Grunberg and Marc A. Stern (eds), Global Public Goods, New York and Oxford; UNDP and Oxford University Press.

• p 450: Three gaps:
  • jurisdictional: global problems but national governments
  • participation: "international cooperation is still primarily intergovernmental". I think that's stated in a way that begs the question. Most international activity, measured by money, is surely happening through supply chains within and between MNCs, and through remittances (which are bigger than global aid payments).
  • incentive: there's no good reason not to screw your neighbors
  These problems are very familiar—it's easy to get this reading confused with the Global Issues class.
• p 453: "Based on the case studies, we now propose a typology of global public goods ..."
  • natural global commons
  • human-made global commons. " scientific and practical knowledge, principles and norms ... the internet. For these global public goods, the main challenge is underuse. ... If we take basic human rights as an example of a universally accepted norm, we see yet another type of underuse: repression." Joel's note: Is it really helpful to frame the problem of political repression in the economic language, underutilization of public goods? Is anybody looking at this poor fellow (warning: graphic violence) and saying, gee, it's too bad he wasn't able to consume more of the global public good of not getting shot and killed by the soldiers of a corrupt military junta? I guess (looking at the charts on pages 454 and 455) that I can see where this is intellectually going: trying to analyze these problems to determine economic reasons for their perpetuation. Okay, let's start down that path. Why does a brutal, repressive regime control Burma? Because its citizens cannot resist without getting massacred. Why not? Because the regime is well-funded and well-equipped and the citizens are not supported by the rest of the world? Why? Because the neighboring countries make deals with the regime for Burma's oil and gas resources and even provide medical treatment to the rulers without any suggestion of criminal charges. Why do Thailand, Singapore, and other countries cooperate with the dictators and not with the people? Because they have incentive to do, and no incentive not to do so. How can we fix that? I don't know. Do the actions of the neighboring countries' governments reflect the will of their people? (Note that Thailand is itself still under military rule, albeit with a thin veneer of civilian rule. How thin? The prime minister is Interim Prime Minister General Surayud Chulanont.) I don't know. At a minimum, criminal charges could presumably be brought against some members of the junta, so that they could not leave the country safely? Is it useful to think of that of increasing supply of the global good called justice?
  • global policy outcomes
• p 456: "several authors found it easier to describe the bad than the good. For example, Charles Wyplosz relies, for his analysis of global financial stability, on a systematic examination of global financial instability. Why? Because the bad is often present, while the good has yet to be realized."
• p 458: "when a public good or bad has nonexcludable or only partly excludable effects, it brings costs or benefits to innocent bystanders. So, nonexcludability is an extreme form of externality. ... transborder pollution ... ethnic strife"
• p 460: "Making a good more private will increase the chance that it will be provided, even in a decentralized setting. Two methods may be used: assigning property rights (Joel's note: c.f. Coase from Institutional Design class) or internalizing externalities."
• p 461: "If the concept of global public goods offers a useful lens for understanding current problems (Joel's note: we'll accept that as true for the purpose of finishing the reading and no further), does it also help point the way to new policy solutions and actions to manage them? Yes." Three important facts:
  • An emerging class of global public goods. freedom on the high seas. "behind-the-border" issues: poverty, health, banking standards. linking global problems to national actions: ozone and CFC reduction.
  • New realities: openness, systemic risk, and power shift from the state (Joel's note: which we debated in States, Markets, and International Governance last semester. Wow, this paper is really trying hard to repeat all of the lessons of all of my other classes, but in a less distinct, useful, or engaging way.)
  • policy deficits. "To turn intentions into policy actions, cooperation seems to move only hesitantly, if at all." Because of uncertainty, to be addressed by "epistemic communities" that provide empirical facts and figures and forward-looking policy research, and the free rider problem. But more fundamentally, the three gaps mentioned before.
• p 465: solutions. Close the three gaps.
• p 466: jurisdictional gap. You could strengthen supranational governance, or trim issues back to the size of nation-states, which could involve rebuilding protectionist barriers (and, presumably, border fences and giant sky domes to block the pollution). "We prefer to follow a third path: creating a jurisdictional loop that runs from the national to the international and back to the national—by way of several intermediate levels, regional and subregional." How? "establishing national externality profiles, internalizing cross-border spillovers, re-engineering national approcahes to international issues, linking national and global policy agendas, strengthening regional cooperation, bringing cooperation gains back to the national level." Joel's note: that doesn't strike me as a list of policy recommendations. It's a list of goals which are probably good, and you could use them to keep score on actual politics and policy, to have a better idea of which actions are better or worse. But you can't go out tomorrow and "link national and global policy agendas." You can only vote for and support candidates who act in that way.
• p 467 to 498. Many, many pages with many, many detailed policy prescriptions. For example, "establishing national externality profiles": For each country, make a list of good and bad things they are doing to their neighbors. Use this to start the bargaining.
• p 472: "But why would countries be willing to accept this principle of internalizing externalities if, as noted before, they are self-interested ...? ... If countries agree to avoid negative cross-border spillovers as much as possible, there is less need for international negotiations and special cooperative efforts that might prove more costly to countries than implementing necessary adjustments voluntarily." Joel's note: I think there was some sleight of hand there. How can we make countries cooperate if they have no incentive to do so? Countries will cooperate by cleaning up their own messes, since that's cheaper than cleaning up messes together, even though there's no reason for them to clean up messes together. Hmm.
• p 475: carrots. In order to join international regimes (WTO, EU) which bring benefits, countries must make internal changes to qualify.
• p 480: "... numerous examples of NGOs being the prime provider of a global public good and of governments joining in the effort only hesitantly."

Okay, there's a whole lot of ideas in there, and that's just the conclusion to a big book. What's missing in my reading is a sense of which ones are really possible, and which ones are stuck (UN Security Council reform is mentioned as if it were an option). But that next level of discussion would be astoundingly long. So I think this article is not as useless as it first seemed, but it's not realistic enough to "[start] tackling the growing agenda of common concerns".

Pictures are posted here.

The Complaint Choir fad has been spreading for a few years—I saw the Helsinki version on the internet last year. Efforts are underway to perform a Singapore version, but Mr Brown reports a rumor that the authorities have intervened. As he puts it,

Eh, you think you are singing it means you can come here and meddle-meddle our politics ah? Cannot unnerstand? Gahmen dun care you say it, write it, or sing it one.

Update: The rumors are true. "While we were given a license, this is a conditional one - no foreigners (i.e. a handful of the participants, the artists themselves and our conductor) are allowed to perform with the Choir". But the show will go on, in "private".

To obtain invites, interested audience members can email ... or call ...Alternatively, if you turn up at the venue prior to the show, please let one of us know ... We will issue private-event invitations for the special performances

I'm definitely going. I want to hear Singlish sung (Sunglish?), and I want to find out what they rhyme with CPF.

Ronald Coase sounds like he may be a big theoretical pillar for this class. Also Elinor Ostrom.

(note to self: look into Kelso.)

I don't know why, but all of my electives have around twenty or fewer people, compared to last semester when they were all thirty or more. This is much better.

Student introductions. My own interest: why people usually fail to function in groups. It's formally called the "collective action problem". Other classmates: what can we do with institutions to fight corruption in the Phillipines? Polish management consultant: Asian institutions. Bangladeshi: how to design more efficient institutions? (response: one idea is to look at multi-nationals doing business in Bangladesh as a source of (better) norms.) Second Bangladeshi: the judiciary has just been separated from the executive branch and so everything is changing. Improvement of institutions to deliver services. Institutions and development.

What is an institution?

6. a. An established law, custom, usage, practice, organization, or other element in the political or social life of a people; a regulative principle or convention subservient to the needs of an organized community or the general ends of civilization. —OED

Joel's note: OED definition 7 is "An establishment, organization, or association, instituted for the promotion of some object, esp. one of public or general utility, religious, charitable, educational" but I think that meaning is secondary for our purposes.

Humanly devised constraints that structure human interaction ...—Douglass North

Transaction costs. Joel's note: "A more recent study in the International Journal of Health Services found that in 2003, administration costs in the US health care system ate up about $400bn, or about 25% of total health care spending. (source)

Examples of institutions as constraints. Omertà. Singapore's official secrets act. Out-of-bounds markers. The Ten Commandments. What makes an institution formal? It's sanctioned by an authority. (Joel's note: and documented? but surely pre-literates could have formal institutions?) Institutions can increase or decrease transaction costs.

Ostrom's definition: "Shared concepts used by humans in repetitive situations ...". Rules: mutually understood and predictably enforced by agents. Norms: shared prescriptions enforced by actors. Strategies: regularized plans that individuals make within the structure of incentives produced by rules, norms, and expectations of others' behavior. Football is an example of a zero-sum game. Joel's note: but professional football (US or world) is actually a positive-sum economic activity; the teams cooperate to build a bigger business. Even in amateur sports, pleasure and safety are often more important than winning. I hope it will always be this easy to turn zero-sum activities into positive-sum.

J. R. Commons: bundles of rights, duties, liberties, and exposures. "...An institution is defined as collective action in control, liberation and expansion of individual action." Joel's note: The slide says 1968, but apparently he died in 1945. Which helps explain why he never won the (Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred) Nobel, which is only awarded to living people and was first awarded in 1969.

Game theory

classmate question: where is legitimacy in these definitions? Why is the context of legitimacy important in defining institutions? It's helpful in analysis, but I don't see that it's needed in the definition.

Driving patterns as national or local institutions.

Game theory: "institutions are equilibria in repeated games." Joel's note: the word "culture" is mentioned for the first time in class.

Sports analogy: institutions are de facto rules of game; law is formal rules backed by sanctions; organizations are players; governance is the actual play; public policies are outcomes. Joel's note: why aren't outcomes outcomes? I guess policies are outcomes, if we mean de facto policies, not nominal policies. Marijuana use in the US is a good example of broad and varied divergence between de jure and de facto policies.

Tragedy of the commons. Joel's note: A very tantalizing note in that paper (which defined the term): "However, given an infinite source of energy, population growth still produces an inescapable problem. The problem of the acquisition of energy is replaced by the problem of its dissipation, as J. H. Fremlin has so wittily shown. [4]" so I'm going to have track down that reference. Fortunately for J. R. Commons, the paper is from 1968, so he narrowly avoided a lifetime of terrible puns.

What is an organization?

• strategy
• structure
• systems
• skills
• style
• staff
• shared values

Joel's note: one of those things is not like the others. Organizations are collections of people. Everything else is dependent on that, different abstract concepts to better understand how these people are behaving.

Shared values: the job of the leader is to define and shape the shared values. All organizations have leaders. "You may call it first among equals but still he's first." Joel's note: how strong is the scientific consensus behind that statement? Do groups of humans inevitably have leaders?

The value of constitutions. Related concept: Stare decisis. A classmate provides an example from Bangladesh, where a general wanted to change the allocation of court benches in different districts, but the Supreme Court was able to prevent this violation of the constitution. Of course there's been a big constitutional crisis in Pakistan recently (though hardly for the first time), and in Turkey.

Informal institutions change more slowly than formal institutions. Examples of enduring informal institutions: suppressed religions, like Catholicism in China. Islamic rules in Saudi Arabia. Some of that has been formalized.

Classmate note: US constitution is stable because it's made very hard to change. Why? One reason could be that any change affects some vested interests. Joel's note: I hadn't thought of it from that angle before; I only thought about majority/minority issues. How does the government constrain itself? Actually, I guess the answer combines both issues: if you want to create a stable institution, design it so that self-interest keeps it stable. And also path-dependence: other countries could have the same rules in their constitution, but the US history has created a large, complex culture which adds its own inertia.

Role of institutions in markets

Example: standards. 16th century rice markets were dominated by big private traders, because only big players could absorb the high risks of shipping in feudal, pre-industrial Japan. New technology in the form of improved transport destabilized the market by allowing small traders to compete. This led to demand for standards, which in turn enabled more trade and new institutions (rice exchange notes, inventory credit, loan collateral, credit). (Joel's research note: Japan's first railroad opened in 1872)

Second example: bankruptcy rules. In the UK, bankruptcy rules evolved out of ad hoc arrangements between borrowers and lenders, leading to formal commercial laws to the point where a couseling company writes, "Bankruptcy in the UK is a humiliating and public experience, it is also a very primitive and grossly unfair means of dealing with a debt situation, it is a no-win situation for all involved. In the US, Congress intervened many times in the development of bankruptcy norms, leading to laws that are more debtor-friendly and have the primary goal of keeping bankrupt companies functioning.

Third example: international accounting rules. Evolved among international companies. Companies in developing countries can follow these rules and get better access to markets. But this can be very expensive, keeping poorer countries shut out of international credit. Chinese companies now have, by legend, four different sets of books: for the government, for the firm, for foreign partners, and actual accounts. (Joel's note: people respond to incentives.)

"What are institutions? What differentiates them from organizations, governance, law, regulations and public policy? Do institutions matter? How and why do they matter?"

World Development report 2002. Institutions and Markets. Chap 1

Summary: good institutions (everything from free press to working bankruptcy courts and easy, low-cost business registration) correlate closely with high GDP.

The four main lessons of this chapter are that for effective institution building policymakers need to complement what exists, innovate to suit local conditions, foster open trade and open information exchange, and foster competition among regions, firms, and individuals.

Douglass C. North (1993), Economic Performance Through Time, Nobel Prize lecture, 12/19/93.

It was a mistake to try reading this in a couch instead of an uncomfortable chair. A few quotes that are pleasing in that they suggest a sane understanding of how things work, and yet are uttered by a prize-winning economist:

It is necessary to dismantle the rationality assumption underlying economic theory in order to approach constructively the nature of human learning...

We cannot account for the rise and decline of the Soviet Union and world communism with the tools of neo-classical analysis, but we should with an institutional/cognitive approach to contemporary problems of development ... It is the admixture of formal rules, informal norms, and enforcement characteristics that shapes economic performance. ...

a. Political institutions will be stable only if undergirded by organizations with a stake in their perpetuation.

b. Both institutions and belief systems must change for successful reform since it is the mental models of the actors that will shape choices.

c. Developing norms of behavior that will support and legitimize new rules is a lengthy process and in the absence of such reinforcing mechanisms polities will tend to be unstable.

Lecture handout

"What causes underdevelopment? Which institutions are needed for development?"

Shirley, M. 2004. Institutions and Development: Presidential Lecture at the 2004 Meeting of the International Society for Institutional Economics

Chang, H. J. 2007. Kicking Away the Ladder. Chapter 3

How institutions matter to development: A stark reality

This is a page about how North Korea is dark at night. More interesting to me (because it relates to something I've talked about earlier, California's energy efficiency) is this slide on a related presentation. If you sketch in some best-fit lines, California is clearly emitting much less light at night than it should. Why? Energy-efficient fixtures that don't shed light into the sky? Do they simply need less lit area because Los Angeles is the densest city in the United States?

A few annoying setbacks this week. On Monday my Brain Bag, with my ThinkPad in its Brain Cell within, fell off the couch. This is about the fifth time I've dropped my laptop in this indirect fashion, so I didn't think anything of it, and proceeded on a mid-afternoon walk to school, during which, while fumbling with the water bottle that was dripping cold condensate on my ass, dropped my iPod shuffle to the cement, killing it. When I got to school, I discoved the backlight on the laptop was dead; the only thing even faintly visible was the ThinkPad logo shown during bootup.

So I'm shopping for Shuffle replacements and it's a sign of our futuristic living that even though I can find a SanDisk competitor product for half the price (US$40), I'm upset that it weighs a full ounce! Meanwhile the laptop will take two days and S$180 to get fixed at Sim Lim, a place I have grown to loath. So I'm computer-less for classes this week. It feels like being marooned in realtime. (Update 2 days later: went to pick it up. Long story short, the backlight works intermittently; no charge. Hopefully it will function well enough in class until the replacement arrives.)

Anyway, on to classes. I intended to go to all of the shopping classes last week whether I was initially interested or not, a plan which limped through Tuesday and finally expired Wednesday, when I set my schedule. Today I realized I had confused the shopping and permanent schedules and signed up for two classes at the same time. This problem was nearly solved when the two professors both showed up in the same classroom, but alas they sorted out the logistics. So I'm dropping Transit Policy, which was a for-fun pick, and adding Institutional Design and Analysis sight unseen, which may actually be the class closest to the problem that inspired me to get an MPA: why does group action so often have such horrible outcomes? Meanwhile I can claim two insights from having done the reading for Transit Policy: 1) pedestrian overpasses are for the benefit of people in cars, not people taking pedestrian overpasses, and 2) the Interstate Highway Act probably made the US and the world a much worse place, by promoting automobiles over all other forms of transportation to such a degree that anything other than single-occupant cars is by definition "alternative".

And with that all that said, here's a workup of my paper notes from Global Issues, minus the doodles.

Overall, this class discussion felt like it went on rails. We went from "do we need global governance" to "how do groups of people get governance" to "identity" to defining yourself against an enemy to the potential role of global warming as that enemy. When I said that the failure of the UN to function seemed like a close parallel to the failure of the early US to function, the prof said she'd been reading a lot on that time period. When I made a note to myself that the science-fiction writers' solution to global governance is usually alien invasion, it wasn't more than 20 minutes before the professor said that the running joke at the UN used to be that only a Martian invasion could get the UN member states to cooperate. Either we students are supremely predictable, the professor is sublimely manipulative, or there is a very obvious, very well-worn path through these ideas.

Side note: I came up with an idea for a game. You need at least four people, in pairs. Each pair has a timer. All timers start at the same time. Either person in a pair can take the timer at any time, at which point it stops counting (and nobody else can take it). At some random interval, anywhere from seconds to minutes, any timers left unclaimed stop and reset to zero. Whoever is holding the highest-valued timer after they all stop, wins. Regular changing of pairs and partners to introduce partnership and betrayal dynamics.

The last opportunity for UN reform was in 2005, with a global summit. Kofi Annan had previously commissioned a report (the second item in the week 2 reading) which came out really well and had very good recommendations. However, the committee that created the report didn't do a good job of selling it politically to their home countries before the summit. Which didn't matter because Bush sent John Bolton to blow up the whole thing. It must be convenient to have the mental flexibility to sabotage attempts to improve something while simultaneously blaming the thing for not working very well. The best concrete thing to result was the "Responsibility to Protect", formally introducing the idea that the UN can, under appropriate conditions, intervene in member states' affairs (see my notes re: the report where I wonder if this is being advocated or not).

Homework: two-page paper applying the contents of the reading to an institution you've been part of with pathologies. (That doesn't make too much sense; I hope it's repeated in the syllabus).

As a useful introduction to some of the issues in this module please take a look at an on-line educational video about urban transport problems in Asian cities (there are visuals from various places in the region). It can be viewed at: part 1, part 2, part 3

• part 1, 2:41: "sometimes it feels like the needs of pedestrians are completely ignored." Singapore clearly puts a lot of effort into accommodating pedestrians, and still falls well short. Does this reflect underlying, invisible prejudices, such that even policy-makers who view themselves as progressive and pro-pedestrian approve and implement policies like car-dominated right-of-ways? One example in Singapore: the street in front of LKYSPP campus, Bukit Timah Road, is actually two streets, one in each direction, with a canal in the middle. Pedestrians have to walk to, and then up, across, and down, an overpass; at streetlights, the pedestrian crossings are so poorly timed that it takes two full and lengthy light cycles to cross the road. Second example: crosswalks and right of way in Singapore.
• Many poor people spend hours per day in transportation. Women also face special problems. Disabled people have even fewer transportation choices and can be denied education and employment.
• "In downtown Sacramento, the top view (above-the-canopy) shows that vegetation covers 30% of the area, whereas roofs cover 23% and paved surfaces (roads, parking areas, and sidewalks) 41%" (source)
• part 2, 1:00: Transport Demand Management, TDM.
• part 2, 2:40: "footpaths should be as level as possible, with good ramps, and must avoid forcing pedestrians to go up or down too much ... must be well-maintained and well-lit at night ... shade ... pedestrian bridges are, in fact, not pedestrian-friendly—they are to get pedestrians out of the way so cars can go faster."

Cities on the Move, Executive Summary Page 3 of 5

Selected highlights:

1. Structural change
   1. stop incenting huge cities by providing free roads and undertaxed land
   2. plan within cities better, although planning to provide more road capacity may be self-defeating
   3. plan for a mix of private autos and other road users
2. improve efficiency
   1. better road management with technology
   2. road maintenance
3. non-motorized transport (walking, cycling)
   1. NMT is underrecognized
   2. A comprehensive vision and action plan. Joel's paraphrase/expansion: cyclists need a complete system, which includes a complete route network (it only takes one gap in a bike lane/path/safe-road trip to make a trip too unsafe or unpleasant to ride daily) plus connectivity to other modes, such as bike storage on buses and trains (bicycles are not allowed on Singapore's trains; they are banned during rush hour on LA's trains), and employer facilities. An investment in only a portion of this will be wasted, and will be taken as evidence that there is no demand. But if roads were built in one-mile segments with cliffs at each end, and no cars were seen on the roads, would that be proof that nobody wants to drive on roads?
   3. traffic management should focus on moving people, not vehicles
4. Public passenger transport
   1. Public transport is for all. Joel's note: Even in Los Angeles, I have seen well-dressed people take the freeway commuter bus from Santa Monica to downtown.
   2. most urban public transport is based on roads
   3. Pricing and financing are the key
   4. There are a lot of good pro-poor, pro-growth transit policies to use
   5. competition is pro-poor
   6. Cities should exploit the informal sector
5. Mass transit: rail for very large cities only
6. the private sector
   1. private financing is possible
   2. planning and regulatory arrangements are fundamental to private participation
7. Transport can be part of a social safety net
8. Road accidents are a global pandemic
9. separation of infrastructure from operations
   1. charging for road infrastructure is efficient and effective financing
   2. fuel taxes are a proxy for direct charging
   3. parking charges should be part of infrastructure pricing strategy
   4. direct charging for roads requires political preparation
   5. "However, the value of having an integrated urban transport fund does not depend on any specific tax source being earmarked for transport." Joel's note: the Seattle monorail project failed after its sole funding source, a car tax, underperformed.
10. "Decentralized democratic process must be complemented by high technical competence."

Vuchic, V.R. (1999) Transportation for Livable Cities, New Brunswick: Center for Urban Policy Research. (Chapter 2: The City-Transportation Relationship). pp. 23-39 are most relevant for this section.

Litman, Todd (2003) Measuring Transportation: Traffic, Mobility and Accessibility, ITE Journal, 73, 10, 28-32

Turton, B. and Knowles, R. (1998) Ch. 7. Urban Transport Problems and Solutions, in Hoyle, B. and Knowles, R. (eds.) (1998) Modern Transport Geography. Wiley, Chichester. (pp. 135-148 only)

Vasconcellos, E.A. (2001) Urban Transport, Environment and Equity: The case for developing countries, London and Sterling, VA: Earthscan. (Chapter 9. The Technical Issue: Traditional Transport Planning, pp. 96-110)