Adam Przeworski; Fernando Limongi, Political Regimes and Economic Growth, The Journal of Economic Perspectives, Vol. 7, No. 3. (Summer, 1993), pp. 51-69.

This is of course one of the $64,000 questions in modern political science: what is the relationship between democracy and economic growth? And do China and Singapore (and the other Asian tigers) prove the latter doesn't depend on the former? Let's see what they have to say.

• p 53: "The property rights literature treats the state as the only source of potential threat. But property rights are threatened by private actors: capitalist property is threatened by organized workers, landlords' property by landless peasants." Um. Talk about missing the point. Yes, it's true that the state is not the only threat to property rights, but it's a bit blind to cite workers and peasants as the next threat. Not to put too fine a point on it, how did the landlord get that property in the first place, and why are the peasants landless?
• p 54: Democracy can't be taken for granted as a defender of property because the median person will have more power as a citizen then property as a market participant, so democracy will always be prone to redistribute property.
• p 56: There is an argument that authoritarian governments can pursue autonomous governance (meaning free from the influence of, in particular, unions and large firms) that uses the best possible policies to get growth.
• p 56: So far, this entire paper reads to me like a parody of economists who seek only abstract economic explanations for the world, completely ignoring human behavior or relegating it to footnotes: "Dore (1978) offered a culturalist explanation: 'I suspect that a major motive [of dictators]. . . is to increase national 'strength' and prestige ... and thereby their own position in the ranks of the world's rulers.'"
• p 57: More reasoning on why authoritarian states might be more autonomous, and therefore potentially better at running economies. Finally, the word "behave" appears: "What [this reasoning] fails to answer is why an autonomous state would behave in the interests, long- or short-term ones, of anyone else."
• p 58: Thinking in terms of who gets to decide how big the government is and who gets the excess economic output. Democracy, citizens decide both; autocracy, state decides both; bureaucracy, state decides how big it will be but citizens get the "fiscal residuum".
• p 60: we conclude an un-edifying tour through the literature and move on to a survey of the data. But "what is even more puzzling is that among the 11 results published before 1988, eight found that authoritarian regimes grew faster, while none of the nine results published after 1987 supported this finding. ... one can only wonder about the relation between statistics and ideology. For reasons discussed below, we hesitate to attach much significance to these results one way or another. Hence, we still do not know what the facts are." So the point of your twenty-six page paper is to tell us that neither the theoretical literature nor the existing statistical experiments can tell us anything about the relationship between type of government and economic performance? Well, a null result is information too. But why should I read the rest of the paper?

As an aside, note that an unspoken and fundamental assumption of the paper is that GDP growth is the sole important measurement of economic welfare. This is so pervasive that the authors write that "Observing Brazil in 1988, we discover that it was a democracy which declined at the rate of 2.06 percent." Brazil's economy didn't shrink 2.06 percent, Brazilians didn't become 2.06 percent poorer or 2.06 percent less happy: Brazil as a nation and as a democracy declined 2.06 percent. Ouch.

Florence Heffron, Organization Theory and Public Organizations, Ch. 6 “Power, Politics and Conflict in Organizations”

• p 183: "Nonetheless, many of the aspects and processes of organizations that have been examined to this point refute the rational organization concept." Right on. I'm going to like this book.
• p 184: "The power approach to organizations is relatively new and definitely unsettling to those who prefer rational bureaucratic theory." Wait a minute—can't we dump rational theory without getting a new single-issue theory? Organizations are very complicated, since they are made up of humans, who are very complicated. No single point of view is likely to capture all the information we need to understand them.
• p 184: conflict. I've only worked in one environment where employee conflict was, on balance, positive and productive. That is, we had professional conflict, often intense, about the nature of the product we were creating, but the conflict was a means to create a better product, was not personal, and was regularly resolved with mutual consent, if not always agreement.
• p 188: natural conflict between line and staff units. (In other jargon, line = vertical and staff = horizontal.)
• p 191: many executives (e.g., Roosevelt) encourage line vs staff conflict, because it increases the executive's power.
• p 193: authority is legitimated power.
• p 194: the ability to reward and punish. Even in the absence of authority, you may find ways to reward or punish. Control of information. Control of resources. Control of access (always be nice to secretaries).
• p 197 to 199: the passage on the power of people low in the hierarchy is key. A tremendous amount of power is locked in the norms and habits of an organization, and nominally powerful people who cannot access and alter these norms don't have real power. However, the conclusion I draw from this is not that lower-status people have more power than is commonly realized. That's true, but not the point. The point is that the power to get organizations to function effectively to accomplish goals is often simply non-existent; the boss doesn't have it, but neither do the rank and file. The typical challenge is not to change how an organization functions, it's to get it to function effectively at all. Perhaps we could say that there's a lot more negative power in the world than positive power.
• p 202: "Political behaviour does not emerge for routine, clear-cut decisions for which specific, well-known rules exist and are followed."

That was a really good chapter. Not one to skim, but one to read thoroughly.

G. R. Salancik and J. Pfeffer, “Who Gets Power- and How they Hold on to it: A Strategic Contingency Model of Power”, Organizational Dynamics, Winter 1977, Vol. 3, No. 5, 3-21

Strategic contingency theory: when an organization faces crisis, power accrues to the unit of the organization best able to address the crisis. In heavily sued organizations, the legal department has power. In organizations that need lots of new workers all the time, recruiting has power.

• p 16: "an intelligent person might react [to this theory] with a resounding ho-hum, for it all seems to obvious ...." But there are two complications: the job to be done tends to grow itself. Napoleon as an example of scope creep. Second, power institutionalizes and lingers beyond its justification. (c.f. the Polish floppy disk procurement case from Week 1)
• p 20: "one of the more interesting implications of institutionalized power is that executive turnover among the executives who have structured the organization is likely to be a rare event that occurs only under the most pressing crisis." Once you've shaped your nest to benefit yourself, why leave?

R. M. Kanter, “Power Failures in Management Circuits”, Harvard Business Review, July-August 1979, Vo. 57, No. 4, 65-75

• Organizational structure often determines who has power and how much. Three positions are "classically powerless: first-line supervisors, staff professionals, and CEOs."
• Effective power requires lines of supply (money, staff, office space, etc); lines of information; and lines of support from other people.
• p 69: a sidebar on women concludes that research shows that "when a woman exhibits the petty traits of powerlessness, people assume that she does so 'because she is a woman.' A striking difference is that, when a man engages in the same behavior, people assume that behavior is a matter of his own individual style ... and do not conclude that it reflects on the suitability of men for management." See this for a graphic illustration of the principle.

L. R. Pondy, “Organizational Conflicts: Concepts and Models”, Administrative Science Quarterly, 1967, 12, 2, 296-320

• p 297: three models of conflict. Horizontal, leading to bargaining (e.g., equal units fight for budget), vertical, i.e. bureaucratic (e.g., the workers support or undermine the boss), systems (?).
• p 300: five stages of a conflict episode: latent conflict, perceived conflict, felt conflict, manifest conflict, aftermath.
• p 312: conflict is often felt negatively; minor conflict leads to pressure to stop the conflict but preserve the relationship (can't you just get along?); major conflict leads to pressure to change or end the relationship. If people are stuck together, there can be permanent conflict in a stable relationship.
• p 317: systems model of conflict. about problems of coordination. Various means of resolving conflict have costs; that is, if two departments fight over budget, giving them both a big budget resolves the conflict but is expensive. Hence, "running a tight ship" leads directly to conflict.

K. W. Thomas, “Conflict and Conflict Management”, in M. D. Dunette (Ed.), Handbook of Industrial and Organizational Psychology, Chicago: Rand McNally, 1976, 889-935

A few questions popped up during my reading and thinking, so I went back to the IPCC report again.

1. Q: If the Third Assessment Report was the TAR, what is the Fourth report called? It couldn't be the FAR, because that could be confused with the First Assessment Report. Unless the FAR was like WWI: they didn't know there would be a WWII, so they didn't know to call it WWI. In which case the first FAR was actually just the AR, so the Fourth could be called the FAR, but then the Fifth would have to be the SFAR (Second FAR). A: It's called the AR4.
2. Q: what are current GHG emissions? A: about 50 gigatons of CO₂-equivalent per year as of 2004, coming from energy use (26%), industry, agriculture, forestry, and transport (each between 10 and 20%), and a few smaller sources.
3. Q: How much CO₂ gets absorbed every year? Does any emission level above zero damage the climate? A: Can't find the answer in the IPCC AR4.
4. Q: What's up with that special language like highly likely and exceptionally unlikely? How can I incorporate those terms into my normal speech?

   A: The IPCC defines its terms thusly:

   Term                   Likelihood of the occurrence/ outcome
   Virtually certain      >99% probability of occurrence
   Very likely            90 to 99% probability
   Likely                 66 to 90% probability
   About as likely as not 33 to 66% probability
   Unlikely               10 to 33% probability
   Very unlikely          1 to 10% probability
   Exceptionally unlikely <1% probability

   Take for example this product, a bag of colored rocks that you can tape onto your stereo cables to improve the sound. We can say that it's

   virtually certain that the product is just colored rocks in a plastic bag, and doesn't actually "[reduce] comb filter effects caused by very high sound pressure levels in the corners when music is playing"

   very likely that the author knows this

   about as likely as not that the site makes serious revenue from the same fools that buy hundred-dollar audio cables or thousand-dollar power cords

   unlikely that the site is a hoax

   exceptionally unlikely that most of their revenue comes from skeptics who think the site is likely a hoax but can't resist buying something just see if it really takes your money

More on the topic of presidential nominee advisors (see 1, 2 previously). A mixed bag, and the article itself has some problems, but still very interesting.

Bad sign: "Just before the Iowa caucus, I saw Goolsbee approach New York Times columnist David Brooks in Des Moines and gush when the quirky conservative agreed to pose for a picture."

Good sign: "Gration is a vocal proponent of eliminating nuclear weapons globally." I'd never heard of him before, but he seems like an interesting military guy, along the lines of Anthony Zinni. Who, I just discovered reading his Wikipedia article, is allegedly a VP possibility for Obama. I think that's precisely the sort of Wikipedia factoid that is utterly unreliable yet utterly fascinating. Back to Gration: although the article doesn't specify this detail, I love the idea of Obama having a white American fighter pilot as his Swahili translator in Africa.

Mixed sign: "Probably the closest thing the Obama campaign has to a Richard Thaler on foreign policy is Lee Hamilton, the longtime Indiana representative who recently co-chaired the 9/11 Commission and the Iraq Study Group." The 9/11 report could have been much worse, but it also could have been much better. An awful lot of very important information was left missing and important questions unanswered, and Hamilton seems to deserve a big share of both praise and blame. I guess the most optimistic reading would be that it was amazing anything useful came out of that report at all, given the climate and pressure to lie and whitewash.

Bad writing: "And yet, just because the Obamanauts are intellectually modest and relatively free of ideology, that doesn't mean their policy goals lack ambition. In many cases, the opposite is true. Obama's plan to reduce global warming involves an ambitious cap-and-trade arrangement that would lower carbon emissions 80 percent below 1990 levels by 2050. But cap-and-trade--in which the government limits the overall level of emissions and allows companies to buy and sell pollution permits--is itself a market-oriented approach." But cap-and-trade is conventional wisdom for addressing climate change, and is baked into Kyoto, which was written over ten years ago. No audacity points to the Obama team for this one. The audacious policy, as I understand it, would be to tax oil as it comes out of the ground.

Ann Florini, The Coming Democracy: New Rules for Running a New World, Chapter 8, Brookings, 2003

Global warming, etc.

My own summary of my understanding of the problem. First, there's no precedent in human history for any collective action big enough to solve the problem. That notwithstanding, how would we solve global warming?

The theoretical best solution probably looks something like this: total GHG emissions for the planet are capped at some level. Zero or negative would be good, but even in a fantasy land that's unrealistic, so let's say X gigatons/year, where X is a number small enough that we don't radically change the climate. This level of allowable emissions is distributed across countries or smaller units. GHG markets then provide economically efficient distribution of pollution reduction. If a political unit exceeds its allowed emission total, it is sanctioned or subject to military coercion (I keep coming back to the mental image of the (inter)National Guard coming in to shut down a factory in an updated version of Little Rock).

Questions:

• Are we already committed to radical climate change even if we stop emitting today?
• What number is X? Some earlier reading led me to believe it was 7 gigatons/year, but this source suggests current global emission is already 28 gigatons/year in 2005 (ignoring, for the moment, CO₂ vs CO₂-equivalent). Is the difference because the earth absorbs billions of tons per year?
• What are all the non-linear factors that could mess this up, like ice shelves collapsing, permafrost melting and releasing methane, etc etc?
• What's the best political unit over which to distribute emission credits? Countries? Individual humans? What if everybody got a personal carbon emission credit? (logistics aside—assume everybody gets a cell phone with a DNA reader to access their account)
• If all that is sorted out, what's the market price of GHG? The trigger for this whole chain of thought is, the current European price is €20/ton. What would that price be if based on a real, global, meaningful limit? The reason I want to know is that we can then figure out which alternatives to fossil fuels are economical. At the current Euro price, I previously calculated that coal is getting about a 50% subsidy: it costs 4¢ per kilowatt hour, but the GHG emissions would cost another 2¢ if purchased in today's carbon market. But what should that 2¢ really be? 2? 4? 20? If GHG-safe power costs 20¢/kWh, then orbital solar power and other really far-out stuff should move to front and center.
• How would we transition to this economy?
• How would we address the moral hazard and fairness issues that come with caps? Distributing the right to pollute evenly across all humans is better than giving the historical polluters big credits (as Kyoto does, by capping everybody relative to 1990 levels, effectively punishing anybody who wasn't polluting heavily then), but still lets the US and other big historical sources off the hook. If each human has an equal credit, then anybody with a big family is rewarded. What will keep people from having lots of babies immediately just to get more credits? What if parents had no access to their children's credits? What if nobody born after the starting point got credits?

David Vogel, The Market for Virtue: The Potential and Limits of Corporate Social Responsibility (Washington, DC: Brookings Press, 2005), pp. 121-132.

• p 123: BP set up an internal emission reduction plan and internal trading market, and successfully reduced BP's operational emissions by 10 percent between 1990 and 2002. However, they then shut down the market. It's likely that they only implemented the changes that made business sense anyway, like more efficient lightbulbs, or not wasting natural gas by flaring it. Their total investment in solar power was smaller than their investment in rebranding with a green-colored logo; and they ended up writing off some of their solar investment, suggesting it was not a profitable business.
• p 128: Bob Lutz in January 2005: "Right now the drive for more and more power in cars is way larger than the drive for more hybrids." 1) Was that even true in 1Q2005, and is it still true three years later? 2) How much of that was marketing-driven? 3) Will anybody miss GM when it's gone? (Note that Toyota, while less utterly stupid, is also far from perfect.
• On climate change,

  as the Washington Post observed, much of "business is far ahead of Congress and the White House."

  But that's because Congress and especially the White House are far far behind the science and even the popular will. Not to mention that the same businesses spend $20m/yr to keep Congress far behind. Note also that Clinton got more oil and gas money than McCain this election cycle, and Obama was tenth on the oil and gas love list.
• p 131: By January 2004, "only fifty of the thousands of American firms with significant greenhouse gas emissions" had adopted even token reduction commitments, and "only fourteen announced numerical goals."
• p 132: a GAO 2003 study says that voluntary business agreements will reduce emissions in the US by only 2% compared to business as usual. Only legal requirements (the article, not the GAO, argues) will have substantial effects. Most emitting companies in the US "are virtuallly ignoring the financial or environmental risk posed by climate change."

Environmental Defense website on corporate partnerships

Homework

Two page, double-spaced paper on what the business community in your country (or state) are doing about climate change.

• Greenhouse Gas Emissions in Washington State: Sources and Trends
• House OKs climate blueprint to set limits on greenhouse gases

Real manatees, 1,200-pound mammals sometimes referred to as 'sea cows,' are not considered the most agile of creatures and often get caught in boat propellers. —AP

Uh, yeah. If only those clumsy fools would stop bumbling into boats. Certainly the fact that humans are operating motor boats in manatee habitats is not the problem. This reminds me of Diddy's claim that the other guy's "face ran into my fist.

N.B. The picture above links to a fairly mild story. Here is a much more pertinent story about manatees and boating, but the picture is slightly more gruesome. This story claims that "25-30% of manatee deaths statewide [Florida] are attributed to watercraft injuries". However, it also claims that "the difference between the force of a strike at 30 miles an hour is exactly twice that of a strike at 15 miles an hour, all other factors being equal". Grammar error aside, the problem with that sentence is that kinetic energy increases by a factor of four if the speed doubles, and kinetic energy is more pertinent than force in determining the severity of the wound.

P.S. Yes, I am procrastinating from class public finance reading. You would too if you had to read that "if private savings currently equals 5 percent of GDP, and the interest elasticity is .1, then reducing the tax by 50 percent increases the return to capital by 12.5 percent, and increases savings by just over 1 percent, or .05 percent of GDP". And this is a relatively well-written and very readable text.

Stiglitz: Chapter 18 (except 510-513, US taxes), 19

• p 483: Taxes often end up affecting people other than those intended. In the United States, social security tax is paid equally by employers and employees, but economists believe that employers have enough power to shift almost all their share back to workers. This makes it a bad tax, because it is not transparent: the actual incidence (distribution of tax burden) differs from nominal incidence. (This becomes apparent when people argue that low-income Americans don't pay any tax. It's true that workers below a certain income level don't have any tax deducted from their paychecks. But the employer still pays payroll tax, and to compensate the employer reduces the wage of the worker. This can be so invisible that even the US Treasury leaves it out of some analysis (see "Who Really Pays?" section in that link))
• p 484: Subsidies have the same shiftiness problem. A subsidy paid to corn farmers may not stay in their pockets: "if the price of corn falls, the benefit is shifted forward to consumers; if the price of land ... increases, the benefit is shifted backward to the owners of the land"
• p 486: If an item currently selling for $1 is taxed at 10¢, the supply curve shifts by 10¢. In a perfect market, sellers will always raise prices as much as the market will bear. How much the market will bear is determined by elasticity. If price elasticity of demand is 1 (or perhaps -1?), then the new equilibrium price will be $1.05, and half the tax ends up landing on consumers.
• p 495: taxes on purely inelastic factors will land on the intended recipients and can't be shifted. The supply of crude oil is long-run inelastic, so a tax on oil in borne by owners of oil and can't be shifted.
• p 496: taxes on purely elastic factors are shifted completely. "The supply of capital to a small country is ... highly elastic." The capital can go anywhere, so if the country tries to tax it, it will go to another country. The only way for anyone in that country to get capital from abroad is to offer a return equal to what the capital can get elsewhere, plus the tax. So the tax is shifted to local users of capital, not paid by the suppliers of capital.
• p 496: Philadelphia's wage tax ultimately is paid by landowners.
• p 498: with imperfect competition, these rules change.
• p 507: corporations don't bear taxes. Shareholders, workers, and consumers bear corporate taxes. (Yes, but how do you push the corporate tax burden onto shareholders instead of workers and consumers?

Chapter 21, pp 582-592

• p 584: "FairTax" proponents are correct that, in theory, a tax on consumption is macroeconomically better than a tax on income. But in practice, many factors intervene, most notably foreign investment.
• p 589: Capital gains tax, with provision for deducting losses, may increase risk taking (in a good way, I think the point is) because the government is effectively sharing the risk for people who could not otherwise find any investors.
• p 591: His name is Steven, not Stephen. Also he's adopted and his biological father is a Syrian political science professor.

Chapter 24, pp 678-686, and 25, pp 704-711( Tax avoidance)

• There are lots of ways to avoid taxes (legally). They boil down to moving taxes to the future, or moving taxable assets to a category with lower rates.
• In 1997 Americans spent $60B on illegal drugs. The US underground economy is about seven or eight percent of the size of the visible economy.

Rajan, R.S. (2004), "Measures to Attract FDI: Investment Promotion, Incentives, and Policy Intervention", Economic and Political Weekly, January 3.

A new study involving 32 developing economies indicates there exists a statistically and economically significant negative [correlation] between administrative costs and FDI to GDP ratio.

If there's a lot of paperwork, you get less foreign investment. If you think foreign investment is good (which is the consensus view), this is a bad outcome.

Das-Gupta, Arindam (2005), “The economic theory of tax compliance with special reference to tax compliance costs” in Amaresh Bagchi (Editor) Readings in Public Finance New Delhi: Oxford University Press, pp. 250-255. (Rest of the chapter is optional)

M&M, Chapters 14, 15 and 17. (Optional)

Fletcher, K. (2002), “Tax Incentives in Cambodia, Lao PDR, and Vietnam”, Paper prepared for the IMF Conference on Foreign Direct Investment: Opportunities and Challenges for Cambodia, Lao PDR and Vietnam Hanoi, Vietnam, August 16-17, 2002

Thomas Mann is a guest speaker in class today, and we have an extra dozen Korean visitors from Jungwon in class, doubling class size. Mann:

The election ... but whoever wins, they'll discover all of the limitations of the institution of the presidency. Campaigning and governing are different tasks, but they have effectively merged in US politics. Campaigns last for years and governing involves using campaign strategies to build support. ... However, there was no golden age in American democracy; the institutions have never performed exactly as intended by the framers.

Two important properties of American governing institutions: separation of powers and ...

The first article of the constitution is about Congress, not the President.

Political parties are not mentioned in the Constitution, and the framers were very worried about parties.

There has been a natural accumulation of power to the president under conditions of threat or perceived threat. It will be interesting to see the extent of the backlash and whether the next president will be similarly inclined.

Q: in many countries, the armed forces constitute a fourth branch of government. How has the US avoided this problem? A: Civilian control of the military has always been a central idea. Some generals have gone on to the presidency, but civilian control is a strong norm. (Note that Michael Hayden is serving as director of the CIA while still holding an active miitary commission. Johnson and Carter also appointed active military to this job, so it's not just another Bush attack on our norms)

Two biggest perceived problems with institutional design of US government: electoral college, and under-representation of big states in Senate.

Q: In a system where lobbying is allowed, how do you balance the difference in lobbying power between businesses and civil society? A: We haven't solved this in the US.

Class lecture

Back to property rights, public goods, etc. Property rights in extreme:

This shockingly bad BBC article is better than most of the US-based articles: although it introduces the purpose of the missile shot as protecting human life from the deadly hydrazine in the satellite, it at least mentions that one possible alternative motive for the satellite shoot-down was to test the anti-satellite weapon. But it presents the flimsy hydrazine excuse as fact and the alternate motive as merely a "Russian claim". And the graphic at the bottom is so misleading as to disqualify any person involved in its publication, from the graphic artist to the editor, from ever doing any fact-based journalism again and, in a just world, have them banished to Sports or Style or Royalty or other content-free sections.

When a missile hits something in orbit, you get a lot of smaller things in (depending on the relative masses and speeds) roughly the same orbit. Some higher, some lower. But still in orbit. They don't fall out of the sky as if their wings broke off, the way the picture might lead you to believe. They'll come down as their slightly varying orbits bring them through thicker bits of the upper atmosphere, which slows down the pieces which puts them in lower and lower orbits until they orbit into the dirt. The Australian dirt, by preference.

That stupidity aside, the plausible reasons for the shoot-down that I've heard:

1. To make sure some secret bit of spy technology is kept secret
2. To saber-rattle, especially in response to the (even more stupid and destructive, because it was done to a satellite that wasn't in a decaying orbit and so the debris drastically and semi-permanently increased the space-junk count in Earth orbit) Chinese test last year
3. To help justify the budget for an unnecessary, expensive, and destabilizing military program

Kudos to the BBC for mentioning even one of these reasons, which is one more than any US-based MSM reporting I've seen.

Update: the Washington Post story isn't bad, actually.

Disclaimer: pressed for time, summaries from skimming only.

Rubin, P. (2005). Legal Systems as Frameworks for Market Exchanges. In Menard C. and Shirley, M.. Handbook of Institutional Economics. Elsevier.

• Legal institutions last for centuries. Countries' legal systems very clearly reflect who colonized them, and even vary depending on what fraction of population the colonial settlers actually comprised.
• You can't just graft on a foreign legal system.
• legal protection of private property correlates well with economic growth. To put on the Marxist hat for a moment, that's not exactly a shocking surprise, especially since the term "economic growth", as used, implies a lot about the nature of the economy being measured. In other words, protecting property rights correlates well with the growth of a system in which some people own a lot of stuff. In that light, it's a bit of a "duh?". From there we circle back to and perhaps dead-end at the usual arguments about GDP versus other measures, productivity versus happiness as the ultimate goal, self-determination, paternalism, etc. Just a thought.
• "The major cost of opportunism [cheating] is neither the cost of cheating, nor even the cost of precautions taken .... Rather, it is the lost social value from the otherwise profitable deals that do not transpire." This sounds dead-on. China's miracle is in getting everybody to work in productive ways. In broken economies, wealth creation just doesn't happen much; people probably still expend a lot of effort, but not on creative activities.
• Common law evolved out of competing legal systems in the same country and embodies the victory of Merchant Law over the King's Bench, the Exchequer, the Court of Common Pleas, and other suppliers of judiciousness.
• Implications: institutions are hard to change. Rule of law and property rights increase economic well-being. Competing legal systems within the same jurisdiction are useful for generating efficient outcomes.

Posner, R. (1998). Creating a legal framework for economic development. The WB Research Observer Vol. 13 No. Feb. 31998. p. 1-11

When trying to improve the legal system in a developing country, as seems to be required or at least helpful for growth, it may make sense to focus on getting precise rules first, and adding staff and other institutional improvements later. Copying legal rules in bulk from other countries, with some adjustments, might actually work fine.

To the extent that the business community in a poor country has its own law, it may be better to codify that law than to try to borrow another country's model. But the law may be underdeveloped in a poor country ... and the task of codification may require technical skills of drafting and organization that are in short supply. ... It is important, however, to adopt the imported code to the local culture, a task for local, not foreign, lawyers ... I do not advise dispatching European or American lawyers to tell acountry how to adapt foreign laws to its legal and social institutions and stage of economic development.

Meanwhile, don't completely neglect the judges. One cost-effective idea is to offer very big pensions, which judges forfeit if removed from office for corruption.

As for granting extensive rights to criminals, this is bound to undermine the efficacy of the criminal laws, and by doing so, unsettle property rights. Rights make it harder to convict the guilty as well as the innocent.

I am so not happy with the idea that Posner is a lifetime-tenured sitting judge in my own country. Let's at least hope that, given the chance, he would rewrite that sentence to say "As for granting extensive rights to the accused ...". He's already decided that property rights are more important than civil or human rights (a possibly unfair simplification, and I'm running low on time again so I'll just note in passing that this is back once again to the "does capitalism need democracy, Asian Values, Singapore/China as example" question), the least he could do is concede that not all suspects brought before him are necessarily guilty.

Judicial Institutions, World Development Report (2002). Chapter 6.

• Developed countries have about one professional judge and six judicial staff for every 10,000 people
• Key themes in judicial reform: increased accountability of judges, simplification, increased resources.

Note, by the way, a still-unfolding judicial corruption scandal in Malaysia. Note further that Anwar Ibrahim leaked the tape that started it all. Another data point supporting the notion that the main way in which the shell around the corrupt elites cracks is from within?

Djankov, et al. (2002). Courts. (Manuscript)

Based on studying the exact rules for evicting tenants and collecting on bounced checks in 109 countries, the authors conclude that the higher formalism of civil law (what the French have) doesn't work as well as common law (what the US and UK have), which may have hurt developing countries who got a civil law transplant.

Dam, K. (2006). Legal Institutions, Legal Origins and Governance. Chicago Working Paper Series.

It's hard to give a good presentation, especially if you have little experience speaking in front of groups, or if you are speaking in a foreign language. I would like to tell you some things that I have learned as a presenter and an audience member. There are three important ideas: practice, practice enough to give a relaxed and comfortable conversation, and practice enough that you don't need Powerpoint slides. There is one most important idea: practice.

Now that I've mentioned the importance of practicing, I have a question for you. Why are you giving a presentation? Aside from the fact that your boss or your teacher told you to, I mean. Why are you doing this, and how will you know if you succeed?

Let's think a bit. What does a presentation offer that nothing else offers? People can read, they can watch a video, they can listen to a recording, or even a webcast of a presentation. Those are all more convenient, but none of these is the same as an in-person presentation. Why? What is unique and special about an in-person presentation?

The human connection. So if you give a presentation but don't make a human connection, you create a wasted and probably unpleasant experience for yourself and for your audience.

What else is special about a presentation? Two-way interaction. You can see them, and hear them. So you can adapt to your audience, which means that you can do a better job of teaching them something. Remember that it's impossible to teach: it's only possible to create a chance for someone to learn. With a book there is only one chance to learn, but with a presentation you can get feedback and make adjustments, and provide more, and more specific, chances to learn.

So, what are the goals of a good presentation? Make a human connection, help your audience learn something, and entertain. If you do all three, you will have a successful presentation.

How are you going to do this? Imagine that your friend has just asked you, "hey, you know a lot about (some topic), right? Tell me something about it." Now have a conversation with your audience. You are going to talk and move and point, and they are going to respond with body language from their seats, and you will have a dialog. Would you respond to your friend by reciting everything you know on the topic in alphabetical order as detailed on slides? I hope not.

Instead, think in terms of your goal. You want to create lots of chances for everyone in the audience to learn. You must provide many chances in many modes: visual, auditory, and kinesthetic are the classic modes, but also think about input versus output, reading versus writing, listening versus speaking, absorbing versus creating. You must touch as many modes as you can, without being a clown, and in particular you must make your audience do some work.

Each person will respond differently. Pick one or two most important ideas that you want everybody to learn, and repeat them; beyond that, don't worry whether everybody understands everything. In fact, don't even worry about covering 100% of your material. It's better to have a relaxed conversation with the audience in which each person retains two or three points, maybe even the important points, and has a nice time, than a presentation where everybody is asleep or thinking about lunch and retains nothing.

The tips:

1. Practice. Stand in front of a mirror. Start a timer. Go. When the timer goes off, stop. If you didn't cover what you needed to, cut stuff and start over, until you can say what you need to say in time and without rushing. If your talk is over ten or fifteen minutes, do this in sections.
2. Think about your audience. Who are they? How are they going to react? If they don't understand you, how will you know? How and when are you going to test for comprehension? for interest? How might you need to adapt in the middle of your presentation? Practice being interrupted with imaginary questions, and adjusting accordingly. Practice getting more detailed. Getting less detailed.
3. Present without Powerpoint slides. Your audience should have a conversation with you, not with some text on a projector screen.
4. Practice until you can do the whole thing without notes. At most, you can have one card to remind you of the basic topics. Reading a speech is not having a conversation.
5. Face your audience. Look at them. Make eye contact. Don't turn your back. Don't look down.
6. Speak comfortably. Vary your pace and volume and tone. Especially if you are not a native speaker, your audience will much prefer listening to your casual voice, which will be free and easy (because of all your practice), than your formal voice, which will be stilted and awkward.
7. Be bold. Lowering your voice or trailing off signal that you lost confidence and you should be ignored, so speak confidently and don't send that signal.
8. Move.
9. Stop when your time is over.
10. Make the audience think. Ask them a question, wait in silence for five seconds, and then answer your own question. Don't expect answers from the audience, and don't make everybody uncomfortable by waiting for them. Just pause enough for them to use their brains, then give them the answer. Do this with easy questions at the beginning, harder questions later on.
11. Don't set yourself up to fail. The best time to ask if there are questions is when you can see someone wants to ask a question. Don't ask "are there any questions?" because the answer could be no. Solicit questions in a way that makes the audience think and helps create more learning chances: "Imagine yourself trying this technique I've just showed you tomorrow morning. How will your colleagues react? Tell me some examples of how you imagine them reacting."
12. Before you decide to use text or pictures, ask yourself if you really need them. Would you use them while explaining to a friend? Maybe you would draw her a picture. I hope you wouldn't use bullet-point text. During your presentation, try to draw pictures on a board instead of showing slides. The audience watching you draw wants you to succeed; the audience receiving new slides is just consuming.
13. If you do need to use a computer to present pictures or data, do so in a way that your body and voice are still the focus. Does music, animation, clip art, or a zippy sound effect serve your goals of making a human connection and providing chances to learn? Are they likely to entertain your audience or distract or annoy them?
14. Test everything before you present. Give a complete dress rehearsal in the real space. If you have drawings, make the drawings. If you have a presentation, load it and use the computer. This reduces the chance of problems. And when the problems happen anyway, you will not be surprised and you will continue with your human conversation.

Resources

• Dick Hardt's OSCON 2005 presentation on Identity is a great example of polish, practice, and entertainment value. The content is irrelevant for our purposes: study and understand the style and technique.
• Hans Rosling at TED 2006; an entertaining presentation of global statistics. Notice how he keeps himself the focus despite the incredibly sexy visual display.
• Some very good, practical tips on presentation
• My own post from last semester, based on obversation of many presenters who did not practice. A bit more critical.
• The best powerpoint presentation of all time (that's not a compliment)
• Tufte on Powerpoint

G. Allison and P. Zelikow, Essence of Decision: Explaining the Cuban Missile Crisis. Longman, New York, 1999

Irving Janis and Leon Mann, Decision-Making Strategies, in Barry Staw (Ed), Psychological Dimensions of Organizational Behavior, New York: Macmillan, 1991, 479-496

Charles E. Lindblom, The Science of "Muddling Through”, Public Administration Review, Vol. 19, No. 2 (Spring, 1959), pp. 79-88

Herbert Simon, Making Management Decisions: the Role of Intuition and Emotion, Academy of Management Executive, 1987, 1 (1), 57-64

Dennis P. Wittmer and Robert P. McGowan, “Five Conceptual Tools for Decision-Making”, in J. Rabin, W. B. Hildreth and G. J. Miller (Eds.), Handbook of Public Administration, 3rd ed., Boca Raton, FL: CRC Press, 2007, pp 315-342

Roger Cowe, “Business/NGO Partnerships -- What’s the Payback?” Ethical Corporation April 2004.

Deep partnerships between NGOs and companies, as opposed to "loose relationships or traditional sponsorship". Some obvious risks, such as tarnishing the reputation of the NGO, which is its primary asset. Less obvious risk: partnering with a company which later gets acquired by a less friendly company.

Key success factors (paraphrased): the company has to be serious; the NGO can't let itself get co-opted; both parties must benefit; the participants must have real authority within their organizations.

Bottom line: If NGOs want to make a difference, they have to partner with companies who are actually part of the problem, and get them to change behavior, while at the same time not get taken advantage of as a PR gimmick.

Glenn Prickett, “Can corporate-NGO partnerships save the environment?”, Posted February 7, 2003.

Answer: probably not, but any little bit helps. And "NGOs also need to learn to work more collaboratively with each other. Too often ego and competition for donors and media attention prevent NGOs forging alliances that could yield larger-scale results. Competition among NGOs leaves corporate partners confused. The Center for Environmental Leadership in Business has found that it is often harder to get NGOs to collaborate than companies in highly competitive industries."

J. Austin, “Strategic Collaboration between Nonprofits and Businesses:, Nonprofit and Voluntary Sector Quarterly, 29:1, Supplement 2000, 69-97

Five in-depth case studies and ten more case studies (each comprising interviews) to support some new theories on how to think about NGO/business partnerships.

• p 73: three stages on the Collaboration Continuum: philanthropic (example: write a check every year), Transactional (example: use designated company time to help an NGO), Integration (CEO serves on NGO board).
• p 76: Collaboration Value Construct: NGO gets money, stuff, access to other corporations, etc; corporation gets reputation, image, employee morale, recruiting and retention, etc. More value at deeper stages on the Collaboration Continuum.
  • Generic resource transfer: cash for image.
  • core competencies exchange: CARE's knowledge about coffee farming in exchange for Starbucks' promotional abilities and retail network
  • joint value creation. An MCIWorldCom manager: "They have unbelievable assets, but they don't necessarily know how to exploit them all. When you work with them in a really close partnership, they will let you use those assets."
• p 81: Alliance drivers: strategic alignment (Time-Warner with "Time to Read" NGO); personal relationships; shared visioning (this article is really full of painful buzzwords, the author being from Harvard Business School, and I kept my mouth shut as long as I could but seriously: shared visioning).
• p 85: Alliance enablers: communication etc
• p 88: no marketplace for matchmaking; hard to value most activities and put a price tag on them.

Case: Public-Private Partnerships

Discussion Questions (it's my turn this week):

• The case mentions a public-private partnership, possibly in the context of a construction project to attract a new sports team. What defines a public-private partnership? What are the benefits and disadvantages of a partnership?
• What are the economics of attracting a professional sports franchise?

Case: Financing Slum Rehabilitation in Mumbai: A Nonprofit Caught in the Middle

• What governance exists in Indian urban slums?
• Is it significant that certain organizations are all-male or all-female? If so, how?
• Which stage (from the Austin article) is the SPARC-Citibank relationship in?
• Citibank and Homeless international are concerned about uncertainty in several different factors. Which factors, and what could be done to reduce uncertainty?
• Is this project in its current state benefiting its stakeholders?

Case: Financing Slum Rehabilitation in Mumbai: A Non-Profit Caught in the Middle: Epilogue

Tadashi Yamamoto and Kim Gould Ashikawa, Corporate-NGO Partnership in Asia Pacific (Tokyo: Japan Center for International Exchange, 1999). Suggested.

Discussion of the case. There's a case? Crap. On the bright side, it turns out nobody else realized there was a case to read either.

Here's an article about the subject of the case, Casas Bahia. It's one of the biggest retailers in Brazil, selling furniture and appliances on credit to poor customers in the slums

The big question: is any poverty alleviation happening thanks to Casas Bahia? Not on the income side; do their consumers have the chance to purchase things that they couldn't otherwise purchase? Is their overall wellbeing or standard of living better?

Reading discussion

Example from India: CSR evolving from business groups centered around commodities and trying to stabilize prices.

The first and second readings synthesize nicely to make this point: corporations put forth CSR as the means to forestall regulation that might otherwise put "non-negotiables" like the rights of corporations to exist back on the table.

Are the business values (which I quoted in my reading notes) actually those that businesses want? Blowfield's list is closer to the classical liberal values, but what companies actually want is to secure protected rents (the economic term for monopoly profits); they don't want free trade, they want trade on terms that benefit them and hurt potential competition.

Should local religious values be considered within CSR? Buddhism in Myanmar, Islam especially in banking.

Myths about the bottom of the pyramid: the poor don't have any money. Joel's note: Let's think about the issue behind the notion that the poor don't have money. Money is a red herring; the real issue is that the poor don't have anything that rich people want. That's not strictly true: there's sex trafficking, importation of cheap labor, etc. But in general, the poor market is neglected by the wealthy because the poor have little to offer. Of course the poor (to generalize three or four or five billion people into one word) do have economic activity; I'm sure that many or most impoverished people work harder every day than I do. But a lot of it is black market, or not monetized, or very inefficient, or otherwise of low value, and especially of low perceived value by the rich. So the real issue with marketing to, or exploiting, or making profit from, the bottom of the pyramid, is how to convert the current labor of all of these people into an industrialized or post-industrialized context.

Michael Blowfield, “Corporate Social Responsibility: reinventing the meaning of development?” International Affairs 81, 3 (2005) pp. 515-524.

Some very refreshing skepticism about CSR. Not from the angle I've been concerned about, that it's simply a PR stunt, but from a different direction. Rather: To what extent does simply thinking in terms of CSR mean accepting basic premises that should be examined more carefully?

the right to make a profit, the universal good of free trade, the freedom of capital, the supremacy of private property, the commoditization of things including labour, the superiority of markets in determening price and value, and the privileging of companies as citizens and moral entities ... CSR has had no impact on these ... non-negotiable values

In other words, if you substitute the word "morality" for corporate social responsibility, as many people implicitly do, you end up with a very constrained definition of morality before you've even begun making judgments.

Rhys Jenkins, “Globalization, Corporate Social Responsibility and poverty,” International Affairs 81, 3 (2005) pp. 525-540.

More skepticism. Does CSR have any bearing on poverty reduction? Even the UN Global Compact fails to explicitly mention poverty reduction. The assumption seems to be growing that FDI in and of itself is a poverty-reducing force, and that providing FDI in a developing country is a moral act. But MNCs can hurt the poor, e.g., by marketing unsafe or inappropriate products.

Three channels through which corporations can reduce poverty. Directly through employing people or buying from local suppliers; through efforts to enrich the poor enough to buy corporate products; and through government revenue streams (e.g., taxes on resource extraction). Each of these channels can be subverted, for example by free export zones that are untaxed and use local labor only to process materials brought in from elsewhere.

Employment at a higher than local wage is a positive, but the total number of people so employed is only 19 million, which is one percent of the number of people living at US$1/day or less.

Only one out of 248 codes mentioned taxation. Taxation could be made an important part of CSR codes (and, one hopes, corporate behavior). Few codes mention corruption.

Conclusion: CSR is unlikely to contribute materially to poverty reduction, nor can it easily be reformed to do so.

C.K. Prahalad and Allen Hammond, “Serving the World’s Poor, Profitably,” Harvard Business Review September 2002.

Rhys Jenkins in the previous reading take issue with the quality of Prahalad's arguments, and it's easy to see why and to agree.

Take the assumption that the poor have no money. It sounds obvious on the surface, but it's wrong. ... Grameen Telecom's village phones ... generate an average revenue of roughly $90 a month ...

And that supports your point? The aggregate of a very small amount of money is still a very small amount of money. If an average cellphone bill in the US or Europe is (just to guess wildly) US$40/mo, then a village of 100 such people, half of whom have phones, will generate at least $2000/mo.

Customers of these village phones ... spend an average of 7% of their income on phone services—a far higher percentage than consumers in traditional markets do.

So even after these people desperately squeeze the rest of their budgets to get this essential service, they still aren't producing much revenue. Whether or not the poor make up a great potential market is not my point; my point is that Prahalad and co-author aren't making a very competent argument.

The article feels like a collection of cherry-picked, qualified, vague anecdotes: this company has the potential to generate $200m/year in revenue with candy for the poor; this company provides smart ATM cards; this company has internet kiosks that provide access for up to half a million people. Although a flavor of ROI, "return on capital employed", does appear, there are no hard numbers for it.

The conclusion is that corporations should try to market to the poor because it will be a moral act—the corporations will be more accountable and effective than the governments and aid agencies have done— and because it is profitable in and of itself. In reaction, I find Rhys Jenkins concerns to this entire line of thinking to be extremely convincing.

Classmate presentation

• Economic challenges
• existing arrangements (Kyoto, CDM, carbon market)

All of the current thinking about global warming solutions is in either economic terms or technological term. How can we build a market with both carbon trading and carbon tax and make it efficient and effective?

Coal is still the cheapest source of energy, so developing countries will still rely on it for the next 30 years as the main source of energy. Other perspectives on solutions: population control. (Interesting. More generally, how many of different policy issues are positively linked? Improved educational opportunities for women tend to reduce family size. What does the overall web of development policies look like? Improving women's education is win-win-win. Improving medicine and nutrition make people's lives better but do also lead to more people living longer, which is bad in terms of overpopulation and global warming and over?)

Class discussion on these issues: "how can you convince people that if you give birth to more babies, you are degrading the environment?" Our Chinese classmate is taking a more hardline stance on population control, but other classmates are skeptical about means. ... Perhaps there isn't such a direct link between population growth and climate impact; curbing population should be a last resort. (Last resort? What are real last-resort measures, and when do we reach the last resort? ) More skepticism that population growth is a causal factor for global warming. Huh? surely the total footprint of human activity is directly, indisputably linked to the number of people who act and the intensity of their actions?

Existing arrangements

• UNFCCC (United Nations Framework Convention on Climate Change)
  • Kyoto Protocol to the UNFCCC
    • Joint Implementation: emission trading program within industrialized countries
    • Clean Development Mechanism: emission trading program between industrialized and developing countries.
      • CDM in 2006 accounted for hundreds of millions of tons of CO₂ emissions averted. Remember that we need on the order of ten billion tons/year reduction to really make a dent, and much more to actually reverse global warming.
      • "In early 2007 the CDM was accused of paying €4.6 billion for projects that would have cost only €100 million if funded by development agencies".
      • China lands 60%+ of CDM funds. It seems like, in game theory terms, the rest of the world has a sort of blackmail relationship with China, just as we all do with North Korea. Give us cash or we'll destroy the planet. I don't mean to say that this is a deliberate policy of the Chinese government, but it may be an accurate description of the inevitable, emergent relationship between China as a whole and the rest of the world (in contrast with North Korea, which clearly does intend blackmail)
• G8 Summits, L20

Problems with Kyoto: sanctions only work on governments which are already cooperating. Time horizons are too short. Moral hazards. Looking at the outline I just made, it's clear that Kyoto basically the only game in town, and that even if it's too little too late, it comes with a lot of institutional structure and that's going to be the foundation of future progress.

Shouldn't it be easier for countries to join Kyoto, perhaps partially, instead of all in or all out? Why not have additional agreements, such as between pairs of countries, to have more things in place to catch what slips past Kyoto?

I've been talking with a classmate about fundamentals vs superficials. Climate change efforts keep failing because of fundamentals: countries won't bind themselves to any agreement that has any real cost, because the politicians who make those decisions are controlled by companies, and the companies are driven by profit and controlled only by the marketplace (which to the extent they can control or at least manipulate), which is consumers, and consumers aren't willing to give up anything. So we're screwed, or at least prevented from real climate change mitigation, until several big parts of our economic system change: how companies behave and how consumers behave.

Carbon tax

• Often regressive.
• Should carbon moving over a border be taxed?
• If China has taken on carbon emissions from the US, by building Chinese factories to build stuff to sell to the US, how does the cost of the carbon get put back into the system? Is it as simple as China accepting a cap and trade system?

Joel's note: The carbon market is clearly a good way, probably the best way, to reduce emissions efficiently. But the real challenge is how to get everybody to agree to binding caps. Here's an idea: Countries have strong political reasons to be protectionist: protectionism benefits narrow interests and spreads the damage over everybody else, the classic recipe. And every country wants to export stuff; it's considered the magic recipe for growth. Could we somehow use these forces to get binding caps? What if the WTO allowed countries to apply tariffs to any imports from countries that didn't have caps or were out of compliance? Update: I asked this in class and the prof said it's in upcoming readings. Dammit. We're still on the rails.

Classmate: I'm not worried about the US and warming, because my impression is that the US always waits until the last minute but then does the right thing. Joel's note: so who is Obama's science advisor for climate change, and what would Obama do? If Clinton won, would she appoint Gore to do something? Would McCain? That reminds me that I asked Thomas Mann yesterday what he thought of the notion that looking at candidates' advisors tells you more about their probably policies than listening to their speeches and policy papers. He thought Clinton and Obama did not have substantially different people around them, but come to think of it I don't think he addressed the notion itself.

Alternatives

Many of the alternatives have a greater total lifecycle emission than they save, because constructing and using them uses a lot of carbon.

Some quick math during class. Coal power costs roughly 4 cents per kilowatt hour. Coal power emits about 2 pounds of CO₂, or a thousandth of a ton, per kWh. If carbon emissions currently run at €20/ton, that's an extra 2 cents per kWh, and suddenly alternative sources are quite competitive. Things glossed over in this analysis: difference between US$ and €; lifecycle carbon costs of renewables; what level of global GHG the current Kyoto/ECX price reflects, a 2°C change in 2100 or a 6° change or a 0° change?

Classmate anecdote about solar water heating in Tibet.

Climate change, free riders, and game theory

Climate change denial as a Nash equilibrium. How to change the rules of the game: reciprocity, repeated games. Altruistic leaders (and ways to get them without real altruism, e.g., Russia and Germany meeting their targets by historical accident, but they still met their targets). Play the game more frequently, i.e., negotiate new frameworks more quickly. What if there was an annual treaty signature at midnight on Dec 31, and your country was either in or out (or in some special limbo) each year?

An Economist article on the Prisoner's dilemma and climate change.

[Robert Axelrod] argues that the most successful strategy when the game is repeated has three elements: first, players should start out by co-operating; second, they should deter betrayals by punishing the transgressor in the next round; and third, they should not bear grudges but instead should start co-operating with treacherous players again after meting out the appropriate punishment.

See Thomas Heller's talk about what's wrong with the CDM trading mechanism.

Remember that a cap and trade system, while it unleashes a market mechanism (which is good), requires a serious regulatory mechanism (which is a challenge). So some people are back to preferring the tax solution instead. That may be even more technically complicated, and it may be even less politically feasible. An upstream tax is probably the most economically efficient solution but requires getting legislation that the oil companies oppose, and so is not likely.

Homework

Two page, double-spaced paper on what the business community in your country (or state) are doing about climate change.

Thomas Mann from Brookings is here at LKYSPP for a week, and a few American students were invited to lunch. He's a very nice and smart guy, and we had a nice lunch. During conversation, I asked about the perception that the US Congress has largely failed to perform what it was elected for (stop the war was a pretty clear mandate; to a lesser extent rolling back other Bush policy and power grabs was perhaps another mandate). He very energetically disputed the reality and pointed me toward his research paper and New York Times editorial taking the opposite view.

I'm reading the paper now (the executive summary isn't very helpful; try the whole paper) and stuck in a conceptual trap. The blogs I read generally take the perspective that the Democrats in Congress have hugely disappointed, a perspective that opinion polls suggest most Americans share. Mann and his co-authors argue that, compared detail by detail to historically similar Congresses like the 104th (1995), the 110th Congress has been okay. "Congressional oversight of the executive branch has increased dramatically, with real consequences for policy and administration. Assertions of the inherent powers of the presidency are now routinely challenged in both the House and Senate. Congress has toughened ethics regulations, increased the transparency of and reduced the amount spent on earmarks, and reaped a modest but significant legislative harvest."

The two opposing perspectives, even though they seem to be talking about the same thing, don't seem to line up very well. It's a bit like religion and atheism: there's no successful rational argument for the truth of religion; only a perspective of faith makes sense, and a purely rational approach excludes faith, so you have to pick only one winner, reason or faith, if you want a coherent worldview. To see that in the Congressional perspective conflict, consider this example: "Still, to the Senate's credit, Democrats secured confirmation of a controversial Bush pick for a judgeship on the southern 5th Circuit Court of Appeals." Why is that to the Senate's credit? Democrats were elected in part to block bad/partisan (and sadly, part of the Bush legacy is that partisan Republican so often means bad by more objective standards as well, c.f. the loyalty tests for US workers going to Iraq, or heckuva job Brownie (I don't even remember his real first name)) appointments. Although "controversial" "Controversial" should not be a black spot—Thurgood Marshall's appointment wasn't unanimous— but it certainly should be a warning light, especially with the utterly terrible judges Bush is prone to appointing.

When I'm talking about blogs, I'm talking about relatively mainstream, non-radical blogs, in particular Talking Points Memo. I try to steer clear of blogs that use namecalling and offer repetitive complaints about "them". Even with that caveat, compare the language:

Senate Republicans killed three major measures via filibuster threats today: habeas corpus for enemy combatants, a House member for DC, and the Webb Amendment on troop rotations. It is part of an unprecedented use of the filibuster by Senate Republicans in the 110th Congress. — TPM

and

Given the differences between the parties, the Democrats’ tenuous hold on the Senate majority, and the most wide open presidential race in nearly a century, we suspect it is no coincidence that Republicans targeted Democratic priorities with filibusters.

Some of the more useful parts of Mann's paper detail the positives:

The Democratic majority in 2007 significantly outperformed the Republican Congress that took up the gavel in 1995 in terms of both the number and the significance of new public laws. Only one item in the Republican Contract with America was signed into law at the end of 1995 while most of the Democratic New Direction Agenda proposals were enacted. Democrats aimed lower in their specific legislative promises and managed to overcome the many obstacles in their way. Their legislative harvest included a minimum wage increase, higher fuel efficiency standards for motor vehicles, a restructuring and expansion of college student assistance, implementation of the 9/11 Commission recommendations, an innovation and competitiveness package, and substantially increased funding for veterans’ health care and Gulf Coast recovery.

Still, there's big a gap between the paper's interpretations of facts, and even the facts themselves, and the blogosphere's. For example, I had the impression that a lot of 9/11 commission recommendations were gutted or ignored. I can't verify that or analyze the bill in the time alotted because a quick google only produces evaluations from before the 110th Congress. But even if all of the 9/11 recommendations were implemented, there's a strong argument that the 9/11 Commission was itself quite compromised and that its conclusions shouldn't be the baseline for progress.

So there are two competing narratives, and they each try to discredit the other, such that you need some kind of additional framework to adjudicate. Is Mann a co-opted part of the Establishment, part of the "Village of the Damned Idiots", or is the mere use of such a title to the discredit of the person using the term?

A mind-bogglingly detailed and long post about all of the electronic data flows that can happen on a street:

In an adjacent newsagent’s, the stock control system updates as a newspaper is purchased, with data about consumption emerging from the EFTPOS system used to purchase the paper, triggering transactions in the customer’s bank account records.

Data emerges from the seven simultaneous phone conversations (with one call via Skype and six cellular phones) amongst the group of people waiting at the pedestrian crossing nearest the newsagent.

...

A police car whistles by, the policewoman in the passenger seat tapping into a feed of patterns of suspicious activity around the back of the newsagent on a proprietary police system accessed via her secured BlackBerry. A kid takes a picture of the police car blurring past with his digital camera, which automatically uses a satellite to stamp the image with location data via the GPS-enabled peripheral plugged into the camera’s hot-shoe connection.

...

In the shoe-shop next door, a similar hand-held scanner, unknowingly damaged in a minor act of tomfoolery a day earlier, fails to register the barcode on a box of sneakers, resulting in a lost sale as the assistant is unable to process the transaction without said barcode. The would-be customer walks out in disgust, texting his wife in order to vent his furious frustration on someone. She sends a placating if deliberately patronising message back within a few seconds, which causes him to smile and respond with an ‘x’ two seconds after that. In doing so, his allocation of SMSs for the month tips over to the next tier in his payment plan, triggering a flag in an database somewhere in Slough.

It's a cop action/procedural story, like 24 or CSI or something. But it's set in 1974. And it's about crimes against books. And it's a graphic novel, not a TV show.

Ninety percent of the housing for Singapore's 4.5 million residents is HDB, public housing. The rest has gotten far more expensive in the last two years. The chart shows a roughly 50% increase between 2005 and 2007, but people have told me anecdotes of 100% increase. The latest government data shows an increase in rental rates in the central district of over 40% in 2007 alone. My scholarship at LKYSPP included a stipend and partial tuition waiver (later increased to full), but no housing. The LKY school occupies part of the beautiful and historic Bukit Timah campus of NUS (the National University of Singapore), a campus dating back to colonial times in the 1920s, when the design was selected through an "Empire-wide" competition. The downside to this is that there is no cheap housing for a several-kilometer radius around the school. In this context, and with a dog, I ended up roommates with another American student in an apartment less than a mile from school, Naga Court.

(As a side note, this very interesting column makes a very interesting argument. To paraphrase: the price for real estate is the measure of how much stuff those who want property will have to give to get it from those that have it. Since property owners tend to be older than buyers, the price level in the real estate market indicates the rate of wealth transfer from the young to the old. So "falling markets are bad news for the old, good news for the young." And presumably, rising markets are opposite.)

One interesting phenomenon in the Singapore real estate market is the "en bloc" sale. If 80% of the residents of a condominium agree to sell, everybody is compelled to sell. This is usually followed by the building or complex being demolished and a newer, bigger one being built. Naga Court was sold en bloc in 1999, but was still standing in 2007, despite the real estate bubble. Most of the residents had moved out, but a company specializing in these projects came in and subdivided many of the large apartments (~2000 square feet). My classmate and I signed a lease for a two-bedroom apartment roughly a thousand square feet in size. It had originally comprised the living room, kitchen, utility washroom, and a small sideroom that might have been the maid's quarters. With the addition of some paper-thin walls, the living room was split in half and the whole thing was isolated from the rest of the apartment, which was turned into three more apartments (master bedroom and its bathroom, two small bedrooms sharing a bathroom, and another room that I never got to snoop around in). The carpet was disgusting, the kitchen featured disintegrating particleboard cabinetry (complete with bugs) and no hot water, the bathroom was unfortunate; but it was spacious, dogs were allowed, and it was easy walking distance to campus. The buildings to either side lease apartments for S$10,000 a month or more, and we were paying S$2600 (US$1700 at the time). When we signed the one-year lease in July 2007, we were assured profusely that the building was not supposed to be demolished until August 2008. Perhaps you can already tell where this story is going?

We lived in blissful ignorance until I overheard some kind of building inspector having a cell phone chat in the front lobby, and the month December being mentioned. We were therefore not completely surprised when we got an one-month eviction notice on November 30, but the timing was inconvenient, given that final exams were in a week, followed by a school trip to Malaysia and then and my roommate was going to India for a month immediately after. So when the company showed us another apartment (as they were contractually obliged to do), we took it, even though it was S$600/month more. Perhaps the only compensation was that they provided the movers and moving truck.

After finals, my roommate packed her stuff and left on vacation. I packed at a leisurly pace—we don't have that much stuff between the two of us—while the exodus proceeded:

Kona was not allowed in the swimming pool, and by the time I got around to checking out the pool on the last day to see if she could finally take a swim, it was already being drained:

The new place is much nicer. Same template, a two-bedroom apartment carved out of a living room and kitchen, one small maid's bathroom with jury-rigged shower. But the building hasn't been on death row for eight years, so the decay has barely started. Tile floors, no carpet. Hot water in the kitchen, and our own washer and dryer (built in Singapore, and the washing machine often gets stuck mid-cycle and runs water through your clothes for six hours or more if not stopped). We are a few blocks from the big shopping district (Orchard Road), which is more bad than good because it "justifies" (or at least motivates—we had a signed contract and I'm sure we couldn't have unilaterally started paying S$600 less rent, so nothing will ever justify the increase to me, but when you don't have good alternatives you don't have power, and when you don't have power, you get screwed) the rent increase while at the same time we are more than twice as far from school. On balance, though, I like the new place better.

When we signed the new, shorter lease, the leasing company agents assured us that this building would not be emptied before our lease expired. At least a year, they said. Definitely no problem. Probably. How long are you staying again? Meanwhile, the property is adjacent to no less than three different construction projects:

A few weeks later there were movers in the elevators, as the owners started fleeing. One mover asked, "when are you shifting?" "Why, what do you know?" He shrugged. Here's what I saw on the next floor up: (Incidentally, a classmate who is an expat for a big MNC said his moving allowance is two containers. That's two forty-foot shipping containers. The expat package is alive and well.)

Next I asked the nice people at the desk. They had no idea when the building would be destroyed, they said, but at least a year.

A few weeks after that I saw someone in the elevator with a "Far East" shirt, Far East being the property company that owns this building along with half of the hill. No idea, he said. October, he said.

So we'll see. Personally, I figure 50/50 odds of our being displaced again before July.

S. Pacala and R. Socolow, "Stabilization Wedges: Solving the Climate Problem for the Next 50 Years with Current Technologies," Science, Vol. 305, Issue 5686, pp. 968-972, August 13, 2004.

How to stabilize CO₂ in the atmosphere at 500 parts per million (well above the current 375 and almost double the pre-industrial amount) by technological means? Think of a successful program which by 2054, is reducing output by one gigaton of carbon per year; hence, between 2004 (when the article was published) and 2054, each success forestalls 25 gigatons of carbon emission. In order to keep carbon emissions at their current level through 2054 in the face of growing population etc, we need seven such successes. And all of that work will still leave us at 500 ppm CO₂, which is enough for substantial climate change.

(Note further that the article talks only about CO₂; what about the other gases? Our total GHG level is well over 300 ppm in CO₂ equivalent, if you count the methane and other good stuff.)

Thirteen candidates for success: efficient vehicles; reduced use of vehicles; efficient buildings; efficient coal plants; replace coal with gas power; capture CO₂ at power plants, at hydrogen plants, at coal-to-synfuels plants; replace coal power with nuclear power, wind power, solar power; use wind-derived hydrogen instead of gasoline in hybrid cars; use biomass instead of fossil fuel; reduce deforestation; use conservation tillage.

Each of these is massive: to get the needed 1 gigaton/year of reduction through biomass would take one sixth of total global cropland. To get that amount of reduction by replacing coal power plants with gas plants would require four times more gas plants than currently exist on Earth. To get the gigaton/year from efficient cars requires replacing two billion 30mpg cars with 60mpg cars. And remember that we need seven successes just to freeze the amount of carbon we emit, which still won't be enough to freeze the amount of GHG in the atmosphere, much less start reducing it.

So solving the global climate change problem through technological solutions is utterly possible in technical terms and apparently impossible in political terms.

Fiona Harvey and John Aglionby, “Who bears the load? Bali leaves big concessions needed on climate change,” Financial Times December 17, 2007.

What happened at the Bali climate conference? Papua New Guinea shamed the US: "We ask for your leadership, we seek your leadership ... If you can't give us what we want, please get out of the way." The US was only mostly intransigent, and did not completely block all progress. The "Bali roadmap" sets up two years of talks aimed at producing a successor to Kyoto by 2009. Various symbolic (in a good way) things happened but no hard decisions were made.

Also, a nice graph in this article shows that anyone who says that the US has no obligation to do anything until China and India also agree is an oaf. The US is responsible for almost 30% of all CO₂ emissions since 1840; Russia, China, Germany, and the UK are each responsible for between five and ten percent.

Nicholas Stern, The Stern Review on the Economics of Climate Change, Chapters 21 - 23

• p 460: developed countries should both take responsibility for huge reductions as well as make physical reductions. That is, they should be willing to pay/invest in a lot of foreign reductions as well as reducing their internal emissions.
• p 460: "The key challenge is to devise an agreement or a set of arrangements that attracts wide participation including all countries with significant sources of emissions, and achieves deep and lasting reductions in emissions from all sectors." So the key challenge in addressing global climate change is to get everybody important to agree to reduce emissions and then stick to their agreements? That's pretty basic but I guess it needs to be said.
• p 460: different countries have different short- and medium-term motivations other than saving the world, for example reducing acid rain, regional development, more jobs; these should be considered and exploited.
• p 461: ethical and selfish motivations should both be used.
• p 462: non-binding agreements aren't worthless because they still lead to pressure to act the right way; countries follow their neighbors' leads; rules at many different levels are harder to circumvent than one rule.
• p 463: transparency is a word that keeps being repeated.
• p 465: A Pew poll says 45% of Nigerians think that climate change matters a great deal. However, a Nigerian classmate's anecdotal evidence suggests this is an overestimate. Ah: it's "based on those who have heard about the "environmental problem of global warming". So most Nigerians who are sufficiently educated to know about global warming think it's serious, but how many is that? Meanwhile, in the US, 47% of those who know about it think it's only a little serious or not at all. Is it better to be more ignorant or more in denial? It's tempting to cite the None so blind ... proverb but certainly global climate change is less certain than other bits of science with heavy denier contingents: that tobacco harms people, that life evolves, etc. On the other hand, the tobacco companies are funding climate science deniers.
• p 468: "As we have established in Chapter 23..." But I'm reading "Chapter 22 Creating a global price for carbon". The PDF title of chapter 22 is Chapter 24a. Waah!
• p 468: "private sector trading schemes are now at the heart of international flows of carbon finance." That would seem to be expectable. Is it a good thing? Are carbon finance and carbon trading the key mechanisms to reduce carbon emissions? Or are they just the mechanisms to ensure that, once a certain amount of resources have been allocated to reduce carbon emissions, we get the most efficient distribution of those resources? Or is the point that the allocation of resources itself will happen piecemeal through the markets, helped along by laws and norms?
• p 469: "A broadly similar global carbon price is an urgent challenge for international collective action. A global carbon price can, in theory, be created through internationally harmonised taxation or intergovernmental emissions trading, but neither is straightforward in practice." The global price is important because carbon emissions from any location are equal, unlike some other forms of pollution, and so the most efficient system tackles the cheapest mitigations anywhere in the world. If it costs a Hungarian factory US$50 (I have no idea what order of magnitude the right number is) to reduce emission by 1 ton, and a Turkish laundry US$60, then there should be a market mechanism that ultimately allows the laundry to pay the factory. But pay the factory what? $10? $50?
• p 470: internationally harmonized tax. Avoids the baseline problem (which is, if we all agree to cut relative to, for example, 1990 levels, then the grossest polluters as of 1990 will find it much easier to cut. I don't know if this is inefficient, but it's certainly unfair).
• p 471: a global quantity constraint. Okay, if the total global budget for emissions is 7 gigatons/yr, how is that allocated? One ton per person per year? But my carbon footprint is between 5 and 11 tons. I guess I better buy some credits. What does that cost? Oil is about US$90/barrel. In a few years will we all know the price of carbon credits as well as we know the price of oil? It looks to be roughly between US$4/ton/yr and $40. Not much of a market if there's that much spread.
• p 473: trading schemes allow maximum efficiency without prejudging the issue of who pays
• p 484: "An SD-PAM would be a voluntary or mandatory commitment to implement a policy or measure that makes the development path of a country more sustainable, with the co-benefit of lowering GHG emissions"
• p 485: emissions from international flights are not currently assigned to any country. So give half to each endpoint.
• p 487: "The most important test for the international community will be to reflect the scale of action required sufficiently within their commitments." How many different ways are there to say "everybody's got to do their part"?
• p 1 (Chapter 23): "The investment that takes place [in the developing world] in the next 10-20 years could lock in very high emissions for the next half-century". There are some successes in cancelling coal plant construction in the US but lots of bad news from China. Meanwhile, someone who stands to make a lot of money if the US builds coal plants warns that the US will be in trouble if it doesn't build more coal plants.
• p 2: "1.6 billion people without access to energy ... and 2.5 billion using traditional biomass for cooking and heating" (see some examples, 1 , 2, of efforts to make more efficient stoves)
• p 3: existing barriers to better energy policy in developing countries: subsidies ($160b/year in the late 1990s), existing infrastructure, lack of funding; "low levels of capacity relative to demand means that it is difficult for operators to take plants off-line to make improvements ... Hence, old and carbon-intensive infrastructure tends to be maintained in operation even where it would be cost-effective to upgrade it."
• p 5: "China has now established a goal to reduce energy intensity by 20% between 2006 and 2010 ..." Actions like these are both economically efficient and ecologically good. But there is even lower-hanging fruit: " As part of this strategy, the Indian Ministry of Power is working to remove market distortions caused by existing subsidies for kerosene in favour of less polluting, low-carbon home cooking systems based on solar and biomass technologies." Stop making things worse is usually the first step in any policy revision.
• p 6: what does "strengthening intellectual property rights" show up in a list of "measures that governments can take to create a suitable investment climate for energy investment and the adoption of new technologies"? Some inventors are sitting around thinking, I've got a great idea for nuclear fusion but unless my country joins TRIPS and extends patents to 50 years, I think I'll just sit on it? p 7: "There is some evidence that fear of competition and concerns relating to intellectual property rights may lead companies to offer older technologies"
• p 10: case study: "CFL [compact fluorescent light] promotion policies – including changes to Ghana’s import tariffs, installation task forces and sales through employers and retail outlets – have led to a dramatic increase in adoption. ... added US$10 million to the Ghana Economy ... reduced electricity consumption by around 6%"
• p 10: "In many cases intellectual property rights are not the key barrier to transfer of technology." (Presumably poverty is a bigger barrier?) Surveys show most companies (other than drug companies and a few others) use means other than patents to protect their IP. OECD study showed that IPR is not limiting technology transfer (does this mean the existing of IPR is not limiting, or the absence of IPR?). "Some of the case studies found that there are many environmental technologies available that are not protected by patents, so IPR were not relevant to much of the volume of clean technology transfer." "IPR protection is just one issue in a complex process for technology transfer, and only a component of the cost of a technology and should not be overplayed."
• p 12: the case for public ownership of IP. (yay! But isn't it kind of roundabout to first create a private right, IP, and then make it public? Why not just skip creating that private right? Meanwhile, note the latest abuse of the US patent system: a Texas company managed to get a patent on "digitally scanning, sending and archiving checks" and survive a challenge, so now they will sue all of the banks in the US. Jeff Sessions' solution? Immunize the banks and compensate the company US$1billion (note that the article seems to suggest that the $1b cost is the effect of some pre-existing compensation rule, not directly part of Sessions' proposal). I thought we didn't negotiate with blackmailers? Maybe he's just keeping them on the line so we can get a trace.
• p 14: the CDM (Clean Development Mechanism) is the first attempt at a pollution market between rich and poor countries. Rich countries can get emission credits at home in exchange for investing in emission-reducing projects in poor countries. So far it's too small and concentrated to have much impact, but it's a start. Need to move closer to full emissions markets to really broaden the effects.
• p 18: China's 1000 Enterprises program. Looking at these details of China's plans, here and elsewhere, it seems inaccurate to say they are doing nothing. The Chinese government is as active as any other in making policy decisions re: emissions, and they seem especially smart about doing the stuff that pays for itself. Collectively all this is nowhere near enough, but neither is anybody else's work.
• p 19: long-term structures are necessary for banks and industries and governments to really take emissions into account in planning.

Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World., Introduction

• p 11: weaknesses of Kyoto protocol: no effective limits on the top member polluters, China, Russia, India. Biggest polluter, US, not a member. If a country misses its target, the penalty is that it has to make up the different as extra reduction in the next period. Or it could just withdraw.
• p 12: Argentina tried to join Kyoto in 1999 but nobody wanted to revise the Kyoto agreement to make that possible. Compare that to WTO and EU, two agreements that are planned for growth.

Kyoto Protocol (suggested reading)

United Nations Framework Convention on Climate Change (suggested reading)

Musgrave, Peggy B. (2006) “National Taxation in a Globalizing World”, in NPF, pp 167-194.

I started reading this, and fell asleep. When I woke up, I tried again but stopped when the drowsiness returned. I do think the subject is interesting: how should personal and corporate taxes work when the residency/location and citizenship of the taxed person are in different countries? But just about every sentence in this text was filled with specific technical terms from tax policy and I couldn't get my mind to track.

Lecture

How is globalization affecting the ability of countries to raise funds? Many countries derive substantial revenue from taxes on or ownership of telephone monopolies, which are challenged by globalization and new technology. Countries have to pay attention to financial analysts who cover them. Taxation issues cross national borders. Many US policies, such as international phone call rate agreements, have had substantial fiscal impacts on developing countries, which were not planned.

The next big global argument may be on procurement. Should domestic companies get preference in procurement? (Joel's note: this is certainly an issue already in the US in military equipment issues. Don't forget the Richard Perle scandal, when the uber-hawk was being paid to lobby the Pentagon to use a phone system owned by a Chinese company. That's perhaps a bit off the main point of global procurement issues, but it's so easy to forget just how comprehensively corrupt so many people in the Bush administration were and are.)

"The tax and expenditure to GDP ratio has held reasonably steady" but will be under steady pressure as globalization undermines tax bases. Examples of fiscal termites: ecommerce, e-money, intracompany trade (e.g., transfer pricing to shuffle money between subsidiary companies to avoid taxes), offshore financial centers (race to the bottom), derivatives and hedge funds, inability to tax financial capital (because it's so mobile) or to tax incomes of workers with mobile skills, growing foreign activities (e.g., the Rolling Stones stashing their money in the Netherlands), and foreign shopping.

Joel's note: This article, although containing some silliness ("the Coolidge tax cut in the 1920s, the Kennedy-Johnson tax cut in the 1960s, the Regan tax cut in the 1980s and the Bush tax cut a few years ago all led to both increased economic growth and increased tax revenues"—see this rebuttal), raises interesting points about nationality and taxation.

Further note: here's an interesting tidbit from the 2008/9 Singapore budget that came out last week:

Singapore’s financial centre has seen good growth and has significant new opportunities ahead, particularly in Asian markets. Islamic finance is a promising area and we will ensure that Singapore’s financial markets are conducive for its growth. To encourage more Shariah-compliant financial activities to be done out of Singapore, I will introduce a 5% concessionary tax rate for income derived from qualifying Shariah-compliant activities ...

Race to the bottom: it turns out people realized that the environment is economically important, and so there was no race to the bottom after all. (Joel's note: I don't think I captured the explanation properly, but he definitely just said there was no race to the bottom. Huh? Does shifting headquarters to tax havens not count?)

China didn't set up a national tax entity until 1994.

More tidbits from browsing the budget: "I have therefore decided to remove Estate Duty from our tax regime, with effect from today." Notice not just the tax policy content of this, but the tone and process. Doesn't the budget have to get ratified by Parliament? Or can the finance minister just get rid of the Estate tax by executive decision?

Comprehensive vs gradual tax reform. Crisis provides the political window but is not a good time to solve complex, long-term issues. Gradual reforms have less shock.

Is there a case for global tax? "The world hasn't even digested WTO yet," so no.

Non-conventional sources of revenue

Prediction: taxation as a revenue source is going to get trickier; there will be less emphasis on ideology and more on practicality.

New sources: use existing assets more productively: forex reserves, real estate, people. Create new property rights: emissions trading, fees and user charges, property rights for the poor. More revenue from oil and mining concessions.

When Singapore left Malaya, the government owned 40% of the land. Now it owns 80%, and generates 3-5% of GDP from leasing. (Joel's note: I'm assuming that Temasek or GIC owns my landlord, Far East Corporation, and so my rent is paying for my tuition scholarship.)

Better treasury management. More efficient procurement. Better use of remittances. Gambling duties and taxes on TV prizes.

What is institutional analysis?

The relationship between rules and behavior (you can think of it as law and economics (Joel's Note: I think I'd rather think primarily in terms of sociology and psychology, and I'm not the only one: "The opening chapter by Bob Goodin attempts to 'name the parts' by identifying the social science literature relevant to institutional design and formulating normative design principles. But it is not clear that Goodin's list is comprehensive (it excludes anthropology, social psychology, cybernetic control theory)..."¹)).

Institutional design is a subset of institutional policy.

Prof brings up US primary elections as example of diverse institutional design. Classmate question about why there is no secret ballot, so as the American I explain a bit about the primaries. What's interesting for this class is that the US primaries are a nearly perfect experiment into institutional design. Obama is winning most of the caucuses; Clinton most of the primaries. Is this a consequence of the different institutional designs? What are the pros and cons of winner-take-all (the predominant Republican design) versus proportional allocation of delegates? The downside to analyzing the primaries, though, is that the ultimate goal, producing a winning candidate, is much harder to measure since there are too many variables and not enough general elections to really tell what happens.

Two views of Institutional Analysis and design: institutions can be analyzed with economic tools; or, we aren't able to design good institutions, only markets can do that (Hayek's point is actually more subtle: just as he thinks markets produce collective wisdom that no one person can match, he thinks that collective tradition encodes more wisdom than one single person can match. Sounds interesting and, in the quick paraphrase I just put together from skimming a few secondary sources in class, wrong; will have to dig in more later to see what he actually thought.)

Frameworks

SSP. IAD. (Hmm - the week 3 readings)

IAD: institutional analysis and development. The "rules of the game": the properties of the goods (selling water is different than selling electricity), the community (the PAP in Singapore can recruit all of the good politicians and leave none for the opposition; this is impossible in India), the institutions. From this context, the unit of analysis is the transaction. Examine patterns of transactions within the incentive structure, and what outcomes result, and how those outcomes feed back to the context.

Joel's note: this is consistent with what I saw in Denmark: having a small, homogenous population makes certain institutional designs possible and makes other capabilities unnecessary. At least, until a bunch of outlanders immigrate and then the society stutters a bit because heterogeneity breaks one of the basic design assumptions of the system. Some class and race issues in the US can also be understood in these terms; a good-old-boy network is an institution; job interviews are an institution; the steps necessary to identify an opening and get an interview are an institution.

Two-thousand year old rice terraces in mountains in the Northern Philippines. Why have these terraces persisted and been maintained? What institutions have made this possible? Water supply, water management conflicts between the top and bottom, construction, rebuilding after storms or earthquakes, etc.

Rules

These are the control knobs for institutional design.

Boundary rule. What constraints keep players in or out? In markets? In politics? In games? E.g., in the Philippines there is no divorce: no exit rules for marriages. In Singapore, bankruptcy as a tool to keep people out of politics. Saudi Arabia: no exit rules for the monarchy. Property rights (I don't see at first glance how property rights relate to boundary rules) The fact that it's technically impractical to build mines on Mars is a de facto boundary rule; the international agreements and norms to not exploit Antarctica are de jure rules; they are both examples of boundary rules.

Position and authority rules. Even in the Philippines terraces case, there is a ranking, from the high priest and low priest on down. Buyers, sellers, brokers.

Aggregation rule: how preferences are aggregated. (That's a misleading name, if this is really about preferences.) In markets, price aggregates everything. You can vote with your wallet. Voting rules ...

Scope rule

Information rules: transparency, disclosure. Formal laws. Informal norms and customs (in some cultures, income is a private subject; many civil services disclose everybody's salary).

Payoff rules. Winner take all elections. That is, democracies where the winning party can dispense spoils and cronyism. Similarly, unstable systems subject to coup are stuck in a feedback loop, because it's hard to take power militarily, killing people and making enemies in the process, and then feel personally safe giving it up to a democracy.

Behavioral assumptions

Homo Economicus assumptions: unlimited information processing power, consistency, utility-maximizing.

Behavioral science assumptions: bounded rationality, emotions, behavioral regularities, capacity for learning. Shame in Western cultures and Eastern. Classmate mutter: Monica ... it would be very different in our country. China is willing to pay a billion dollars (more!) for pride.

1. "The Theory of Institutional Design", Robert Goodin, Review author[s]: Christopher Hood, Journal of Public Policy, Vol. 16, No. 2. (May - Aug., 1996), pp. 231-232.

Update: Another example of how institutional design affects behavior. The institution here is the ordering of author names in published research.

I have participated in both alphabetically ordered and non-ordered authorship cultures and think that there are problems with both schemes. Alphabetical ordering seems simple enough, but if anyone with a surname after D is going to be disadvantaged in their career, then that system is not as objective as it might seem.

Weimer and Vining (1998 or 2004). Policy Analysis: Concepts and Practice. Prentice Hall. New Jersey. p. 159-195

World Development Report (2002): Chapter 5: Government

Despite their reputation as rigidly orthodox "Washington Consensus" institutions, a lot of IMF and World Bank papers are startlingly non-dogmatic and useful. This one, though, seemed to have a bit of a sneer lingering between the lines.

Groups. Now, often called teams. Outputs of a group: productivity, satisfaction.

Despite decades of academics telling bureaucrats about the advantages of flat organizations, no changes.

While trying to pay attention to the lecture (which is fine, but covers exactly the same material as the reading), I came across this anecdote about sitting next to someone with ADD. No further comment.

Sidebar: the North Koreans were extremely good at handling US prisoners during the Korean war. First, separate officers and enlisted men to break the existing authority relationships. Second, move people around quickly, to break up group relationships that would lead to trust relationships that would lead to escape.

Primary groups (family), secondary groups. Formal and informal groups: in a well-designed organization, the formal work teams should be visible in the organization chart; cross-functional teams. Exclusive and inclusive groups. In-groups and out-groups (Joel's note: this strikes me as far and away the most psychologically powerful dimension of groups.)

An impromptu grilling on the case, which we the class failed. I got my question wrong (did Levi's Community Involvement Team have local partners? the correct answer is yes).

Talking about sweatshops. Here's an NGO on the topic.

In the class presentation, it's not clear who they are addressing their recommendations to: Levi, the government of the Philippines, the workers? In addition to the recommendations, there are some action proposals: use CSR to internalize the externalities and make them locally enforcable.

One very interesting angle to the case, which today's presenters did not address, is the difference between the FLA and WRC. Both are NGOs focused on working conditions in the garment industry, but the FLA comes out of industry while the WRC was initiated by university students. The big question (which I haven't researched at all) is, to what extent is FLA just a fig leaf? This is of course the essential question about CSR at large.

we've now watched two anti-sweatshop Youtube videos, which on the one hand are a bit simplistic for a graduate-level course, and on the other hand are important for seeing how people attempt to communicate about the problem. I find myself wondering, where do the clothes that sweatshop workers wear come from?

Class Discussion

Have you ever bought and tasted Fair trade coffee? discussion: Is it even available in Singapore? It's supposed to be in every Starbucks. You don't pay more for it. I used to work in New York for Oxfam; the Starbucks staff got sick of us asking for the fair trade coffee and once it took 25 minutes. Nobody asks for, and the staff turn over quickly and they don't know about it. Carrefour has fair-trade products. What are the effects of having a single fair trade product within a product line: does it get the company off the hook? Does it make people think when they buy non-fair-trade products?

The supply chains are so big, does fair trade advocacy really make a dent? 90% of child labor is in agriculture, not manufacturing?

Should corporations care about moral obligations? This isn't purely a moral issue: in the case study example, the companies are not following local laws.

Is asking corporations to be more moral a pointless effort since it's asking the capitalist system to behave in a sub-optimal way? If we want different behavior, the answer may lie in changing some basic rules of the system. Does this point back to some kind of regulation? (This line of thinking seems to point back to the "Institutional Design" answer: that if you have good institutions, everything will be mostly okay, and if you don't, nothing will be okay.)

(One set of answers seems to be more fatalistic: this is just the way it is, and there's no realistic alternative in sight, just constant struggle on the margins. Another set of answers includes points such as the many past successes of civil movements (vs slavery, etc) ... [incomplete thought - my brain doesn't seem to be working at full speed today]. Perhaps the best model of CSR is that CSR is part of the civil society function of identifying and making decisions; once those decisions are made, it's a government function to enforce them.

Nuts and bolts issues: many factories supply dozens of countries, and so are dealing with dozens of codes of conduct. What could corporations who actually want to change things (whether for moral or practical reasons) do—is that even a problem, or are we still in the situation where the buyer corporations are winking when they demand good conduct?

I guess behavioral economics is ultimately the best tool to address the problem of abusive corporate behavior. Who are the people who are doing bad things, and why are they doing them? I'm picturing factory owners deciding to lock workers in, etc. It must be a combination of economic incentive and culture; different cultural backgrounds set different expectations of what's possible and appropriate. A factory owner in Germany, faced with economic pressure, will think of different choices than a factory owner in Myanmar. Which makes we wonder to what extent the de-humanizing effects of the Cultural Revolution enabled some of the abuses in China, or if that's silly because plenty of other places have similar abuses.

The western companies are to blame because that's where the behavior comes from. Well, take slavery as an example: the large-scale demand for slaves came from Western economic arrangements, but they depended on many local people turning into suppliers of slaves, i.e., by enslaving their neighbors.

Externalities. Power and exploitation.

Is it true that dealing with externalities is itself a a public goods problem? Under what conditions will corporations internalize their externalities? When it affects their bottom line (which is to say, corporations never internalize their externalities; when consumers change their preferences and impact a corporation, the corporation is responding to market forces; it's the consumers who've done the work of internalizing).

Should there be global standards of labor and conduct? There's a global market, so why not global standards? What about the impact of investors? Institutional investors? SWF investors?

Regulation by revelation.

What's a corporation? A juridical person. Limited liability. What was the first big modern corporation? Standard Oil. Rockefeller created the company to provide a stable supply of refined oil. ILO: created by the West in response to the Russian Revolution, to forestall further communism. Includes governments, capital, and labor unions.

Pop quiz. I couldn't remember what the A in TAR stands for (Third Assessment Report). I had trouble listing the concrete evidence for existing impacts of warming because 1) I tried to stick to things that were in the report, but kept drawing a blank, and 2) of the things I could remember, especially increased severity of tropical cyclones, I couldn't remember which ones were definite evidence that possibly pointed to warming and which ones were possible consequences of definite or possible warming.

Carbon Footprint homework

I tried several sites and scored between 5 and 11 tons per year. I was among the lower in the class, because a lot of people fly and I haven't flown since coming from Seattle last year. We also noted the apparent lack of calculators for tropical residents or for Chinese.

IPCC Fourth Report Class discussion

Carbon dioxide accounts for three quarters of greenhouse gases. Methane is second with 14%. (As a pedantic sidebar, note that this is an apples-to-apples comparison. Methane is 21 times more powerful a greenhouse gas, pound for pound, as CO2. So we aren't emitting 14 parts of methane to 75 parts of CO2 by weight or volume or anything. We emitted 37 gigatons of CO2 in 2004 and about a third of a gigaton of methane, but the methane is much worse. If you really wanted to destroy the climate, you'd release lots of 1,1,1,2-Tetrafluoroethane, which is thirteen hundred times worse a greenhouse gas than carbon dioxide. Where, you might ask, would you get 1,1,1,2-Tetrafluoroethane? Ask for it under the name R134a, which is how it's sold as an ozone-safe refrigerant replacement for freon. Oops. The champion greenhouse gas is SF6, which is used to fill those heatproof double-paned windows. I saw this stuff demonstrated outside a hardware store; you can put a pane of it between your hand and a heat lamp and you won't feel anything from the lamp. So put it in your home to cut your heating or A/C bills, but don't ever break a window or you'll probably undo all the good.)

What is the impact of climate change in your country?

• Korea: not so vulnerable compared to other countries
• Mongolia: landlocked, but affected by "zud" weather.
• Alaska: getting nicer by the day. As are Canada and Russia.
• China: Chinese don't tend to link pollution and climate change, and so are nonplussed by foreign accusations of China's contribution to climate change.
• Lebanon: people say, "we're so far behind that it's a privilege just to worry about climate change."

Anecdote of people from developing countries who move to Canada. Initially no awareness of recycling and similar civic norms, but that changes over time.

Blame for climate change

Smaller countries think, how much difference can I make? Whatever we do, China will make it up in three weeks. Joel's note: Which is apparently the Singapore government's party line. The logical fallacy is, I hope, obvious. If not, think of this argument: Power plants and factories emit lots of dirty smoke that contains all kinds of poisons. Since they're not stopping, there's no reason I shouldn't burn toxic waste in my backyard; it's not much, so it really doesn't make any difference.

The manufacture of cement releases tremendous amounts of carbon dioxide. Joel's note: What if we reversed that? One of the fringe strategies for mitigation is to capture and store carbon dioxide through technological means. What if we had a building material that could replace cement but which absorbed, rather than released, carbon dioxide when manufactured? Which ultimately gets back to the notion/moral question of, can or should we rely on technology to save us again, or is there some moral imperative to try and do the impossible: change the behavior of most human beings. Hmm, altogether cement accounted for less than 1% of US emissions in 2006. The consumption of energy accounted for 84%.

More class discussion. If the US can't build a wall to keep out Mexicans, then when people need to migrate for climate change reasons, what will stop them? It's in America's benefit to help Asia now, to keep this from happening.

The changes from global warming are fairly small and subtle; if people don't have direct evidence, how can they be convinced? The engineer's answer: Isn't that a marketing problem?

Behaviors get entrenched and are hard to change. China and India have the opportunity to leapfrog entrenched patterns in the West But (reordering some other classmate points into a rebuttal) it's also true that norms have changed dramatically in Western countries, e.g., smoking.

Until you address the two gaps, information and channels for action, you won't see any government action.

The facts are straightforward; the dispute over the facts is political.

Bathtub metaphor for climate change: carbon in the atmosphere is the level of water in the tub, and the carbon we add every year is the flow from the tap. This seems like a potentially confusing metaphor, since the real system has three factors: the rate of increase of greenhouse gases, the amount of greenhouse gas, and the impact those gases have on the climate. The bathtub metaphor simplifies by leaving out the third factor and replacing it with the notion that, if the water level in the tub gets too high, we drown—e.g., if the total amount of gases gets too high, climate catastrophe ensues. I don't like metaphors that misalign so readily. Further, the level of water in the tub could be mistaken as representing the level of water in the ocean, which is a big consequence of climate change.

2 degrees C has emerged as a new "red line" beyond which we shouldn't pass because then things will get really bad. In fact, while the reality is quite uncertain, this is probably too optimistic. Slipping the red line from no change to 2 degrees C is not a revisionist Chicken Little act, in which we blow past zero with no effect and so the scientists move the target. Instead, it's putting a brave face on an even worse reality: we're locked in to serious climate change and, on our current track of emissions, will probably hit six degrees (C) of total average warming by 2100.

Should China be charged with the greenhouse gas emissions required to produce the products sold to the US? Should Singapore be charged with the emissions to run the ports that help transport products and refined petroleum to other countries?

Next week: cap and trade vs tax. (Which one reflect's Coase's solution of privatizing the commons?) Regulation or voluntary action?

The Washington Republican Party chairman, having declared a winner with only 87% of the votes counted, now tries to backpedal without backpedaling:

Esser said this afternoon that the Republican Party was going to try to get as "close as we can to 100 percent" in the vote count, and may have more numbers by later today. But Esser doesn't believe counting more votes will change the outcome. — Seattle Times

Note the Times' penetrating and perceptive analysis:

According to the GOP's Saturday tally, Arizona Sen. John McCain won about 26 percent of delegates, Arkansas Gov. Huckabee won 24 percent [with 87% of the votes counted]

...

The state Republican party posted new numbers late this afternoon, with 93 percent of the precincts reporting. The percentages didn't change much, with McCain winning about 25 percent of the delegates, Huckabee 24 percent...

So in counting half the outstanding votes, McCain's lead shrank from 2% to 1% (roughly). Apparently that's not much change. Since every candidate is running as an agent of change, perhaps the word change itself has been devalued.

Economic Effects of Taxation

A multi-million dollar study of the effects of tax breaks on research showed no real effect in research—companies just redefined their existing business activity as research. (Boy, it's hard to google for research on the effects of tax breaks on research.)

A direct tax is one which can't be shifted. If a doctor used to see you for 10 minutes, and after the tax increase they see you for 7 minutes, they just shifted 30% of cost to you. In practice, there's no meaningful difference between direct and indirect tax, despite their entrenchment in policy thinking.

A progressive tax is one in which the effective tax rate increases as income increases. Classmate: corporate tax rates are flat, so is that a progressive tax? A: corporations don't pay taxes, only households pay taxes. You have to do the analysis to find out to what extent the corporate tax is borne by wealthy and unwealthy households. It's shared among shareholders, possibly consumers, maybe the suppliers. Every tax in a capitalist economy can ultimately be traced to households. In terms of this deep analysis, economists don't exactly know who pays corporate taxes or property taxes.

Income is anything that increases a household's potential consume more scarce resources. Joel's note: Where does that put stock options? It seems like, by that definition, a lottery ticket that doesn't pay off isn't income, so is a stock option income prior to being turned into stock?

After taking into account the bigger definition of income and all of the different taxes, the effective tax rate in the US is fairly flat, with a little increase at the end. Joel's note: That's not what this report shows, although it is from 1994 and from a likely biased organization.

Meanwhile, the "poverty trap" still exists: "A woman called me out of the blue last week and told me her self-sufficiency counselor had suggested she get in touch with me. She had moved from a $25,000 a year job to a $35,000 a year job, and suddenly she couldn’t make ends meet any more. ... I told her I didn’t know what I could do for her, but agreed to meet with her. She showed me all her pay stubs etc. She really did come out behind by several hundred dollars a month. " —Jeff Liebman.

The key is not more savings. It's possible to implement government programs that appear to increase savings but don't. What's most important is how well savings translate to productive investment.

In rem: "of judicial actions, claims, or rights: against or with reference to an object or property and not availing against a specific person; so as to impose a general liability, esp. to respect ownership" (OED). A sales tax is in rem, because it can't be tailored to the taxpayer. An income tax is personal, not in rem.

States greatly overestimate the amount of impact on behavior they can effect with tax incentives.

A lot of tax policy is based on normative thinking.

While I'm of the opinion that corporate codes of conduct are mere window dressing that corporations adopt to help forestall real action, the SWFs apparently don't want to go even that far:

Officials involved in the drafting of a code, which the International Monetary Fund is overseeing, say that many funds are resisting the pressure to embrace even a voluntary set of “best practices” that disavows politics. The funds argue that a code is unnecessary because their investments are already strictly commercial in nature.

Any time someone assures you that a constraint on their behavior is unnecessary because they would never act that way, it's pretty safe bet that they've already done whatever it is you don't want them to do, many times. Anyway, somebody call Edwin Truman and ask him for plan B.

(Source: Brad Setser)

Kucinich and Dodd best matched my values. Of the big three, I can visualize any of them as an excellent president and I can visualize (and have seen) all three of them disappoint. For context, here are a few of my beliefs:

1. Bill Clinton was a big disappointment as president. He compromised far too many liberal values. The economy was good, including by more stringent standards such changes in income inequality. On balance, the best thing about Clinton was that things didn't get worse.
2. The only people who really love a candidate unreservedly and never get disappointed, are probably those who are getting paid to do so. The nature of politics is compromise, especially with 100,000,000 million voting constituents. If you turn your nose up at this, you give up your voice; there isn't another, better, cleaner, purer system of government hiding in the back.
3. The nature and quality of a candidate's advisors are probably better predictors of performance than their rhetoric.
4. I'm thrilled that there will be a major-party nominee for president of the US who is not a white male. Symbolism often matters.

Since Washington State's primary doesn't affect delegate apportionment, I didn't bother to get an absentee ballot. In the general election, I'll happily vote for whichever one is nominated.

T. Doherty and T. Horne, Managing public services, Chapter 6 "Managing groups and leading teams in public services", London: Routledge, 2002

This is a weird text. It defines a group in academic terms on one page and provides breezy but specific instruction on distributing meeting minutes a few pages later, in a way that is not comprehensive in scope but not especially practical or applied either. I can't really understand who the intended audience is.

• p 170: out of nowhere, a paragraph specifying how disfunctional committees actually work: "behind the scene power and influence determine what is put on or kept off the agenda. ... Excessive time allocated to earlier items can ensure perpetual deferment of unwanted issues. ... The 'public performance' usually emphasizes rational discourse; the 'backstage activity'; on the other hand, is less rational...." Thanks for telling us; what do you propose we do about all that?
• p 175: perhaps the best (the only?) convincing rationale I've read for personality tests: "Their main merit seems to be in developing a group language — a vocabulary of shared meenings. The development of this shared language seems to make it legitimate for members to discuss each other's behavior in the group. This helps with group identity and cohesiveness." But why all the "seems"? No research to quote, so you launder your opinions with 'seems'?
• p 178: "The level of anxiety" from being in a group rises "until the group reaches a size at which the person feels anonymous." Anxiety and other pressures can make it impossible to do any deep thinking in a group: "our studies have shown that silences during a two-hour group task rarely exceeded 20 seconds!"
• p 179: types of group thinking: recollective (taking advantage of the group's accumulated knowledge). Predictive. Imaginative and creative. Emphathetic and Ethical thinking. Evaluative and critical thinking.
• p 181: conflict in and between groups. The unitary view: "conflict as a malfunction ... undesirable and to be avoided." The pluralist view: "a legitimate evolutionary way of bringing about organizational change." The Marxist view: "organizations as arenas in which people battle for limited resources ..." Sadly, the bottom of the page is missing right when it starts talking about classes.
• p 182: positive and negative consequences of conflict, e.g., the search for new or better ideas; suspicion and distrust.
• p 183: managing conflict: competing, collaborating, compromising, avoiding, smoothing.
• p 192: "managers are well placed to be typecast as authority figures with whom the difficult person has had difficulties in the past ... It is easier for managers to turn down roles in other people's dramas when they are aware of their own histories and their own patterns of behavior."
• p 196: "when difficult people have connections in higher places" unfortunately, it's a short section and the only advice is to keep your own copies of files.

Patrick Dunleavy, Democracy, Bureaucracy and Public Choice, New York: Prentice Hall, 1991, Ch. 3, "Reconstructing the Theory of Groups", pp 45-78

Promoting the "group identity model" as a better way of understanding how public interest groups function. Size is less important than previously believed; organization is important and leaders may have less power to set the agenda.

• p 71: "Existing public choice models portray interest groups as quasi-commercial bodies, run on hierarchical lines by entrepreneurial leaders maximizing membership. ... Yet in practice, most interest groups are much less hierarchical than business organizations ... decentralization down to local level not just in organizing activities but also in policy-making."
• p 73: "[Bendor and Mookherjee's] sophisticated game theory analysis offers a formal proof that ongoing collective action can be more easily maintained in a large group which adopts a two-tier structure ... [in realistic conditions] a centralized unit has to be added to develop and administer selective incentives, and to make all local branches conform with organizational policy. The greatest level of collective action is achieved where hierarchical control is combined with local branches, rather than displacing them." Could you analyze the WGA strike in these terms? Consider each individual picketing area to be a local branch?
• p 74: In attracting potential members interest groups stress that the are large, viable, nationally organized and worth joining. Yet simultaneously potential members are told that the group is small and local enough for their participation to make a difference ..." Come join a team so powerful that you must be a small cog, but locally everybody gets to be a big cog. It seems like the same problem as the voting paradox: since any one vote can't really matter, why does anybody vote?

John C. Dvorak, "The Groupthink Phenomenon", PC Magazine, 2001, 12, p. 75

Dvorak laments poor-quality journalism such as celebrity news, which is "driven by the paid publicity machines that cater to lazy reporters." In the computer industry, Dvorak blames carefully planned group-think conferences for the CD-ROM boom, the tablet computing fad, and "push" technology. "Very few significant dead-end ideas have independently popped up on the scene outside of this mechanism."

Sue R. Faerman, "Managing Conflicts Creatively", in James L. Perry (Ed.), Handbook of Public Administration, 2nd ed., 1996, San Francisco: Jossey-Bass, pp 632-646

Steps toward conflict management, as applied in American history:

1. Face the conflict
2. Get the other party to face the conflict
3. Schedule a meeting in a neutral environment
4. shoot at each other

Faerman has six other steps (and her step #4 is different), so you may want to read the article.

Daniel C. Feldman, The Development and Enforcement of Group Norms, Academy of Management Review, 1984, 9 (1), 47-53

Norms are most likely to emerge when

• they facilitate group survival
• they simplify or make predictable expected behavior
• they help group members avoid embarrassment
• they express the central values and unique identity of the group

Irving Janis, Groupthink, Psychology Today, 1971 (also in Barry Staw (Ed), Psychological Dimensions of Organizational Behavior, New York: Macmillan, 1991, 514-522)

Not a lot (if any) actual research here, other than possibly talking to members of Kennedy's circle to get their Bay of Pigs anecdotes.

Ann Florini, The Coming Democracy: New Rules for Running a New World, chapter 5.

• p 90: A shorter version of Susan Sell's story of how a few MNCs in the 1980s initiated the global IP regime.
• p 94: "Now that socialism has demonstrated its inadequacies" I'm always bewildered by the exact definition of socialism. When communism fell, I assumed that meant it was communism, or perhaps totalitarianism, that had demonstrated its inadequacies. I've always understood socialism to be a lot broader and milder and to include things like social security, minimum wages, and universal health care.
• p 99: "Formerly viewed as exploitative agents of neo-imperialism, these corporations are increasingly seen as much-needed providers of capital, technology, management skills, and access to export markets." Why can't they be both?
• p 101: "[The Louisiana-Pacific Corporation] pleaded guilty to eighteen felony charges and agreed to pay $37 million in penalties and $5.5 million for criminal violations of the Clean Air Act." The notion that corporations are legal people is a legal fiction, granted, but how many humans that pled guilty to eighteen felonies would get off with a fine of 20% of their annual income and no jail time?
• Type A and type B social compacts. Type A are usually drafted by the corporations, are vague, and have no enforcement or monitoring provisions. They are more likely to represent a superficial approach to responsibility. Type B are drafted by second parties and have at least some teeth.

Teresita C. del Rosario, "Social Responsibility and the Multinational Corporation: The Case of Levi Strauss’ Code of Conduct in the Philippines," Labour and Management in Development Journal, vol 4, no. 4, 2003

David J. Vogel, "Corporate Responsibility for Working Conditions in Developing Countries," in The Market for Virtue: The Potential and Limits of Corporate Social Responsibility , pp. 75-109.

UN Global Compact

OECD Guidelines for Multinational Enterprises

UN Principles for Responsible Investment

Musgrave, R.A. and Musgrave, P.B. (1984), Public Finance in Theory and Practice, McGraw Hill, 5th edition, Chapters 12 and 13

A study of tax incidence, that is, who actually pays a given tax. Like cockroaches, tax burdens tend to squirm around. If there is a tax on X, the price of X will go up, so some people will buy Y instead, which increases demand for Y, so the price of Y goes up. (It reminds me of orbital mechanics: "East takes you out, out takes you west, west takes you in and in takes you east".)

Since this seems to affect almost all kinds of tax, it doesn't seem like something to worry about too much. But it is useful to consider progression vs regression. In particular, tax on capital tends to be progressive, and tax on income tends to be regressive. Now you know why the capital gains tax is lower than the income tax: the people who can afford to buy legislation would prefer to pay less tax.

• p 213: there's a great chart of "points of tax impact in circular flow". If you want, I dunno, maybe 30% of the knowledge of the entire class (for example, the difference between a VAT and a sales tax), understand that chart. Here's another version of it, although not as good.
• p 215: In order for a tax to take into account the taxpayer's ability to pay—that is, in order to have a progressive tax—the tax must be applied at the householder. So most of the tax points on the chart are going to be flat or regressive.
• p 219: two theoretical foundations for defining fairness in taxation, benefits principle and ability to pay.
• p 220: this definition of benefits principle is starting to sound like use tax: "each taxpayer would be taxed in line with his or her demand for public services." What about the notion that, if you live in a secure, free-market society, the richer you are the more benefit you are deriving from what that society makes possible? That is, it seems like both of the theories should support progressive taxes.
• p 220: by benefits theory, whether a system should be regressive or progressive depends on the ratio of income elasticity of demand for public services to price elasticity. Given how sticky the market for citizenship in different countries is, how can either of those elasticities mean very much?
• "Conclusion: ... the choice of tax base cannot be made in a theoretical vacuum."
• Defining equality in terms of equal sacrifice. Under what circumstances is the sacrifice of not being able to buy a Gulfstream IV jet equivalent to the sacrifice of not being able to buy a used Honda station wagon?

A video from the World Social Forum. Interesting that the voiceover at the end puts the WTO, the IMF, the World Bank, the occupation of Palestine, and the occupation of Iraq are all grouped together.

What kind of impact, if any, does this have? Well, what kind of impact could they have? Either internal impact, inspiring and enabling themselves, or external impact, changing the behavior of other people. How can they have external impact, if they don't have power or media coverage? Classmate: on the one hand it gives some voice to the marginalized, but on the other hand it's messy, sometimes they end up delegitimizing some of the valid concerns about the IMF.

Once the Davos people tried to reach out to the WSF with a simultaneous video link. They sent four white men, including Soros, as their representatives to the WSF. It was poorly received.

Hmm. Who are they? The marginalized victims—workers, un-free. Note that one guy says his dream is the struggle for workers' rights—he doesn't express his dream as having rights, he says its to struggle for rights. Telling slip?

The epistemological dilemma of anti-authoritarian organizers: How do protesters take the group actions necessary to execute a large action (a meeting of 100,000 people) as a group?

Northern vs Southern origins of these non-state actors. Originally mostly Northern (US, Europe); after shutting down most new dam construction in the US and Europe, they went after World Bank dam projects, but initially failed to work with the affected people. Over time, however, locals took over the campaigns. Jubilee campaign started as a UK group; an alternate group emerged.

What do NGOs do? Produce policy papers, convene people, board whaling ships, meet with governments, march in the streets, riot, get shot, barricade streets, through food, commit protest suicide.

It used to be called the anti-globalization movement, until people figured out that they aren't all anti-globalization; many of them are opposed to how globalization is going. Yes. There are many different viewpoints and opinions.

What was the first international campaign? I'm sitting on my hands. The campaign against slavery.

It's interesting to note that the US street protests against the Iraq war had no effect, because Bush didn't care and had enough power to continue running the war as he pleased; but the Falun Gong street protest triggered a large set of changes in the Chinese government and the fabric of civil society. In both cases, and perhaps in street protests in general, the goal is to change the behavior of another actor (the government, the mass support for the government) rather than to take direct action, and so street protests by definition and frame cede power.

Discussion of protests in China. Chinese classmates suggest that the Chinese society is not receptive to mass action/chaos. Role of mass protest in nation conflict between China and Japan (perhaps the Chinese government allowed/promoted street protests as a form of saber-rattling vs Japan). What's the difference between a mob and a social action? morality?

Where is civil society strong and active? The US. Philippines, India. Western Europe, Scandinavia. Some parts of Russia. Some state leaders came from civil society: Vaclav Havel, Lech Walesa. Africa has a lot of transnational NGOs; is this legitimate? Those trying to take over a state are not counted within civil society. Also Latin America. What about the Middle East?

Red Crescent. Aga Khan foundation. It is beginning to grow, but there isn't much. Maybe that's because civil society often emerges from religion, but in the Middle East religion is linked to the state? Classmate rebuttal: the religion-based civil society groups are fanatics and are not considered "civil". In Singapore the politicians deliberately use "civic" instead of "civil" society, stripping the notion of advocacy. (I.e., tame neo-Tocquevillean. Alagappa's framework is surprisingly useful.)

Classmate: What about movements that have both a military and a political wing? So Sein Fein is not a civil society, because both the IRA and Sein Fein want political power, but Hamas is a more mixed case.

A 12 trillion dollar wealth transfer is beginning in the US, from previous generations, and some of that may be earmarked for active philanthropy, with Gates and Buffett as examples. (Or maybe not)

The role of the IMF as a focal point of protests. Blaming the fire truck for leaving the house a smoking wet mess.

The movement. Rejectionists: nationalists, localists, anarchists (Ron Paul). Reformers. Is the movement a good thing or a bad thing? Classmate: I support your cause but I have no way to hold you accountable.

Discussion about consensus. Issues of majority rule, power to the powerful. Is consensus desireable? possible? Consensus among whom?

Whose face is this?

• A Singapore taxi driver complaining about congestion pricing
• A Cambodian alleged war criminal
• A famous Hong Kong kung fu actor

Florini, The Coming Democracy: New Rules for Running a New World, chapter 6.

It was interesting to consider, after reading this chapter, how deeply it assumes the "Neo-Tocquevillean" civil society norms that Alagappa refers to. Not having read any source material on this, I rely entirely on Alagappa's usage and especially on the class discussion. With the exception of a brief mention of Al Queda, Florini describes civil society as a positive force, recounting success stories (to varying degrees) including the campaign to ban land mines, human rights campaigns, and the nuclear test ban treaty. But Alagappa talks about the "neo-Gramscian" view of civil society, which (without having more than the vaguest recollection of Gramsci's name, much less his writing or its later interpretations and applications) I understand to mean civil society as a battleground, sometimes literally, to determine which norms will dominate. I think both analysis are helpful: certainly Gramsci's frame is more helpful to understand the battles in many countries for abortion rights, divorce, gay rights, religion, etc.

Something in the reading about the role of government vs civil society reminded me of this, Martin Luther King Jr's own answer to Hillary's charge that while King (Obama) made noise, it took Johnson (Clinton) to make change actually happen. King's reply is "No president has really done very much for the American Negro, though the past two presidents have received much undeserved credit for helping us. This credit has accrued to Lyndon Johnson and John Kennedy only because it was during their administrations that Negroes began doing more for themselves."

Barbara Gemmill and Abimbola Bamidele-Izu, "The Role of NGOs and Civil Society in Global Environmental Governance," in Daniel C. Esty and Maria H. Ivanova, eds., Global Environmental Governance: Options and Opportunities (New Haven: Yale School of Forestry and Environmental Studies, 2002) pp. 77-99.

Some more or less nuts and bolts details on how NGOs can fit into the UN and other global authorities' activities: spreading information, monitoring, raising awareness, providing legitimacy in decision-making bodies, etc. Come to think of it, it does seem to make the implicit assumption that NGOs have to fit into an existing structure of "real" entities, UN entities and governments. Hmm.

Interesting definition of civil society (women, children, business, labor, science ... apparently the only people who aren't in civil society are non-unionized male government employees).

Homework: Write-up on group exercise topic. Due at the beginning of class.

Huh? what group exercise? What group exercise topic? What kind of write-up? I have nothing in my notes, I don't think we discussed this. I feel like I just slept through an exam. I should probably read this stuff earlier than the night before class. Hrnnnn.

Inter-governmental Panel on Climate Change: Summary for Policymakers 2007

Despite the title, it's not really accessible to the sort of person I imagine as a policymaker. Here's a translation:

It's been getting warmer. It's hard to be sure about any specific effect, but overall there are a whole lot of things changing, from planting seasons to infectious disease carriers to skiing. Humans have put a lot of CO₂ and other gases in the air, and we're pretty sure that's the main source of the warming. It's going to get worse, both the emissions and the climate change they cause.

If we stop emitting any more CO₂ today, it will still get about 0.1°C warmer every decade for a long time. But we're probably going to keep emitting, and not just emitting but emitting more and more. Based on that, we're guessing it will be about 3°C warmer in 2100, but 6°C wouldn't surprise us.

The world won't heat up evenly, and the effects will be much more complex than just "warmer". It will increase heat waves and heavy rains; shift rainfall towards the poles; probably increase the strength, if not number, of hurricanes and send them further north and south. We're talking more drought in the Mediterranean, the US Western states, southern Africa, and northeast Brazil. If the warming is on the higher side of estimates, we'll kill really lots of coral and many more species, get a lot more sick people, have two or three meters of ocean rise, lose maybe 30% of coastal wetlands, and have less food from cereal crops. Oh, and the ocean's going to get more acidic and the island nations are in a lot of trouble.

On the bright side, heating bills will shrink and fewer people will freeze to death. Also, we don't think that the ice sheets will melt enough to really screw up the coastlines. At least, not in the next hundred years.

What can we do about it? We can't mitigate it all. There are some technologies that help reduce emissions and even pay for themselves. Better building design is a biggie; energy, transport, industry, and agriculture are all tied for second in areas we can reduce emission. Mitigation in the next two or three decades would help buy time, and cost maybe 0.12% of GGP growth. Beyond that, we're just going to have to adapt. Basically, we need to do everything better, from water policies and public health to transportation planning and alternative energy. Otherwise, a lot of peoples' lives are going to get worse and worse.

International Institute for Environment and Development, Up in Smoke? Asia and the Pacific, the Threat from climate change to human development and the environment

It's ninety two pages. Tempting to read just the press release....

• The text on the front page claims that "Tropical cyclones are projected to increase in magnitude and frequency." The IPCC thinks magnitude will increase, but maybe not frequency.
• p 4: "increases of 1°C at night-time during the growing season would reduce global rice yields by 10 per cent"
• p 7: "when the climate push factors, such as lack of fresh water or sea-level rise, become too extreme the international community must ensure that there are no barriers to [peoples'] movement."
• p 8: a one-meter rise in ocean level (on the optimistic side of IPCC's projections) will remove 12% of Vietnam's most fertile land.
• p 10: an implicit rebuttal to US demands that China must match any US reduction: "Much of the historical responsibility for climate change lies with these industrialised nations and their use of fossil fuels over the last 150 years."
• p 12: OECD subsidies to "domestic, fossil-fuel industries stood at US$73 billion per year in the late 1990s."
• p 14: up to 70% of Bangladesh floods in some seasons. "At least 174 disasters affected Bangladesh from 1974 to 2003."
• p 67: A daily activity schedule for Agabag men and women in Kalimantan, Indonesia. Very much worth downloading the whole thing just to see this.

The Week five assignment is to calculate our carbon footprint. Readers keeping score at home can follow along. I calculated my carbon footprint last year, I think. Since I had no car and worked from home, it was relatively low ... until you included my plane trips.

Joel's Q: Why does Messner, and everybody else, take such care to specify that they aren't promoting world government? Is it some kind of third real of political science? Strobe Talbot said it was inevitable in 100 years, which caused him trouble at his confirmation hearing. What would it look like? Classmate: nations don't want to give up their sovereignty. Would require greatly enhanced international law. Classmate: The EU example is interesting—how do you maintain the cultural diversity of the different states?

What are the benefits? What's special about a world government? The property unique to governments is a monopoly on legitimate power. A world government would have coercive power at a global level, which would make some kinds of problem solving possible or easier.

How would it work? Classmate: in Lebanon we all wanted to vote in the US election. Joel's note: why not let anybody who wants to vote in US elections, provided they pay taxes? If you're not a citizen, you get a special category with no rights other than voting—no residency, no court access, etc. Just a federal vote (maybe a global Senate?). Classmate: some kind of federal system like the US, comprising many states.

Did the EU prevent war, or was the EU only possible after a devastating war and the imposition of an American umbrella put an end to war in Western Europe?

Classmate: Asia is growing in importance because of economic growth, so it should have a bigger role. That's Kishore's argument, and he's wrong—the Asian governments haven't yet supported much global governance or developed any expertise in collective action problems.

What would a global government actually look like? Classmate: it's an issue of centralization or decentralization; maybe everybody will give up some kinds of rights. Classmate: there must be some executive powers. Joel's note: that's a good angle to think about it: how many people would work for it, what percentage of GGP would it take, would it have a legislature, judiciary, etc?

Talking about coercive power, which backs the police, which back executive, legislative, and judicial decisions. Do you need military force to have coercive power? If a global warming law is passed and one country doesn't meet its target, do armed guards take over a factory?

If we have a world government, is there still a China? Classmate: there should be two levels. Joel's note: Are we saying anything in this discussion that wasn't old news in 1950? What's new since them? More globalization? The internet?

Richard Faulk: the only way to have a legitimate, representative global government is with a world parliament. But he hasn't addressed the executive/coercion issue.

Joel's note: Why would the US join a body where they are a minority of 300 million, outvoted by any 1/3 of the Chinese or of the Indians?

The crux of the class is, if global coercive power is not an option, how can we solve global problems?

Joel's note: The other science fiction answer to the problem, after the alien invasion that unifies humanity in resistance, is ceding governance to benevolent, omnipotent artificial intelligences.

What examples of global governance backed by genuine coercive power have already happened? The Chemical weapons convention is one example, with actual surprise inspections of factories. There are some reasons for optimism.

So the answer to the question is, I (the prof) don't focus on world government because it's too far away to be relevant. Governance, without a global government, is a more realistic tool.

Classmate: look at the most basic, strongest human invention: the market. We should rely on market systems that don't require strong enforcement. Prof: Sulfur dioxide (acid rain) cap and trade market in the US is the model for market enforcement, but people forget that it's backed by strong regulations.

Classmate: focus on building shared world culture/identity first. For example, the EU passports promote dual identity, half French and half EU. Prof: Messner says this is already happening. (And Neal Stephenson argues that radical fundamentalism is a reaction to it happening:

The problem is that once you have done away with the ability to make judgments as to right and wrong, true and false, etc., there's no real culture left. All that remains is clog dancing and macramé. The ability to make judgments, to believe things, is the entire point of having a culture. I think this is why guys with machine guns sometimes pop up in places like Luxor, and begin pumping bullets into Westerners. They perfectly understand the lesson of McCoy Air Force Base. When their sons come home wearing Chicago Bulls caps with the bills turned sideways, the dads go out of their minds.

Now that I reread the quote, it's more nuanced than I remember. Better pay attention to class again.)

Epistemic communities: "transnational networks of knowledge-based experts who define for decision-makers what the problems they face are, and what they should do about them." (Wikipedia) The IPCC is the canonical example.

Summits

Joel's Q: What's the point of expanding G8? Now they meet and make promises and don't do anything; how will it be better to have 20 countries break promises instead of 8?

How does G8 work from the perspective of staff? G8 is assembled by "sherpas", typically the #2 in the foreign ministry for the big meetings. What do they want on the agenda? Priority #1: don't embarrass the boss. Priority #2: make things look good. #3: make progress on important issues. On climate change, the G8 has pushed climate change issues even over US objections. The finance ministers started working on a 20-person spinoff. Does this make sense, is it a useful tool to address climate change?

There's currently a meeting in Hawaii with US auspices, under the theory that the top 15 CO2 emitters are the only important factors in global warming, so any deal must include them and any deal without them is pointless. Joel's note: how can we threaten the political leaders with embarrassment and ultimately loss of office unless they take and maintain action?

Note that the G8 may be evolving into the G13 already.

Refresher: stages of collective action:

• Definition
• Negotiation
• Implementation
• Monitoring
• Enforcement

Transparency. (Joel's note: So was my question about threatening leaders with embarrassment that predictable?) Access to information, and the ability to take action based on information. FOIA around the world. India and South Africa now have the most sweeping, enforced FOIA laws. The Indian law was enacted by the Congress Party after regaining power, partly on a platform of transparency, and drafted by FOI advocates. (It's nice to see the "right kind" of special interests draft a law, although I say that with full understanding that the definition of "right" is not a universal given.) The IMF has become much more open.

How does transparency help? Even if the public can't do anything, the corporations themselves may realize (as they did in an anecdote of a pilot project on pollution monitoring) how much they are wasting and cut pollution out of economic reasons. Civil society groups can act on, repackage the information. Fighting corruption.

Third prong of transparency (first two were technology and civil society): Joe Stiglitz new economic theories on information.

Joel's note: The fact that Sweden's FOIA act dates back to a power struggle among the aristocracy in the 18th century, and that India's FOIA came about as part of a change in government, are both examples of how internal conflicts within a class (in these cases, political/economic classes) are often the key to getting information to a broader public. There are other examples in different contexts.)

What about Singapore? The government claims that there are plenty of internal checks and balances and so transparency is not necessary. Another example of how Singapore, as an economically successful authoritarian state, is a convenient example for less successful authoritarian states. Classmate: it (the authoritarianism) can't continue for another 40 years; the cracks are already showing. In China and Singapore, it appears from public activity that bloggers are currently ahead of attempts to control them. Classmate: It's Chinese tradition for the people to want strong political control. Classmate: first countries want to reach a certain economic level, and then democracy becomes an issue: Taiwan, Korea, maybe Singapore. As long as the ruling party can deliver economic success, why should they be concerned about transparency?

Update: we talked about openness and satellite photography in class and in the readings. Today's NYTimes features an article about the inverse: people who observe the spy satellites and share that information openly.

Ann Florini, The Coming Democracy: New Rules for Running a New World, Chapters 2, 9, Brookings, 2003

Chapter 2: transparent society, from satellite pictures to Freedom of Information acts.

Update: Bruce Schneier's rebuttal to David Brin's argument that the only response to privacy-destroying technology is to insist on reciprocal transparency:

When I write and speak about privacy, I am regularly confronted with the mutual disclosure argument. Explained in books like David Brin's The Transparent Society, the argument goes something like this: In a world of ubiquitous surveillance, you'll know all about me, but I will also know all about you. The government will be watching us, but we'll also be watching the government. This is different than before, but it's not automatically worse. And because I know your secrets, you can't use my secrets as a weapon against me.

This might not be everybody's idea of utopia — and it certainly doesn't address the inherent value of privacy — but this theory has a glossy appeal, and could easily be mistaken for a way out of the problem of technology's continuing erosion of privacy. Except it doesn't work, because it ignores the crucial dissimilarity of power.

Chapter 9: a fantasy in which things go right, for no convincing reason, and the world gets better. I wonder to what extent the implausibility of the chapter reflects the skepticism of the writer vs that of the reader.

Colin Bradford and Johannes F. Linn, "Reform of Global Governance: Priorities for Action", Brookings Institution Policy Brief #163, October 2007

This policy brief summarizes the current prospects and priorities for reform in a number of key global institutions. We focus on the IMF, the World Bank, the UN, and the G8 Summit

Institutions must be representative, effective, part of a system, and affording opportunities for leaders to make things happen. Aren't some of these goals contradictory?

IMF and World Bank reform: uncertain. Some small fixes at Singapore 2006 meeting. The US should give up its veto power and its claim on naming the World Bank president. Hah! A list of things it needs to do but no evidence that it can or will do them.

UN: fading. See previous anedocetal reports on this blog that John Bolton was the stake in the heart to any reform effort. More generally, it seems obvious that the US, as the prime mover of "unilateral globalism" after WWII, must resume that role (or be rendered irrelevant) before anything can really happen.

G8: growing momentum for reform. Again blocked by the US.

Johannes F. Linn and Colin I Bradford, Jr., "Pragmatic Reform of Global Governance: Creating an L20 Summit Forum", Brookings Institution Policy Brief #152, April 2006

My paraphrase: What used to be G7 is now a political meeting, G8, and a finance meeting, G20. To reduce confusion, we'll call them L8 (for leaders) and F20 (for Finance). Expanding L8 to L20 would help provide more global leadership. It would be undemocratic, but if it got things done that would give it legitimacy.

Dirk Messner, "World Society – Structures and Trends" in Paul Kennedy et al., eds., Global Trends and Global Governance (London: Pluto Press, 2002), pp. 22-64.

A perfectly good article, but we've been reading so much "globalization" stuff that it blends into blah blah global blah. Exceptions noted below.

• p 30: Different ways in which global structures are formed
  • transnational interaction between actors. Between states (UN), between states and private actors (tourism code of conduct, without states (ISO standards), in the context of regional governance, between regional projects.
  • concatenated global interdependencies: financial crises as a negative example; MNC investment in poor countries leading to development as a positive example.
  • integration processes in the course of globalization, e.g., Greenpeace International
  • Process of interpenetration in the course of globalization, e.g., Chinese kids wearing Yao Ming NBA jerseys.
• p 41: What's wrong with a global state (world government)?
  1. wouldn't solve territory and self-determination problems, would just change them from international to domestic conflicts. Joel's note: Isn't that an improvement? Lack of state boundaries would "lower significant thresholds to warlike conflicts." huh? Would eliminate any chance of flight and exile, would be impossible to exert outside pressure to topple dictators.
  2. Would be a remote, faceless bureaucracy. Without competition between states, there would be no new institutional designs forged in competition.
  3. Would not be able to protect social and cultural diversity
  4. Would not be peaceful transition from current system to global government.
• p 56: New lines of conflict
  • sociopolitical. labor market battles.
  • ecology-related distributional conflicts. water wars.
  • moral-ethical conflicts. cloning.
  • one world, many world-views. human rights vs "Asian Values"

Recap of the first three weeks.

Comprehensive budgets

The US has among the most transparent budgets in the world, but even the US doesn't have a consolidated budget, because the federal, state, county, and city levels all have different budgets.

Joel's side research: the seven key budget documents are the budget, the pre-dudget report, monthly reports, the mid-year report, the year-end report, the pre-election report, and the long-term report.

Tax expenditures: forgone revenue, i.e., subsidies, in the form of tax exemptions, deductions, rebates, or concessional tax rates. Should be counted as costs in the budget but nobody does (though the US and Canada put them in addendices). By the way, note that the US budget has grown as a percentage of GDP during Bush's tenure. It was roughly the same at the end of Reagan's terms as at the beginning, grew during Bush 41, and shrank during Clinton. In absolute terms, of course, it grew the whole time.

Autonomous agencies: Owned by the government but not part of government. "Singapore specializes in them."

Governments are switching from cash-based accounting to more economically accurate accrual-based accounting.

If you must have a partial budget, what can you do to keep it from being totally fictitious? Don't net. Use consistent categories on and off budget. Provide full oversight of off-budget funds, even if legislatures don't do it. Fully disclose.

Budget systems

• line item/compliance. Money is subdivided into various buckets, "line items". Money can't be moved between lines ("virement"). Tightly controlled, but inflexible (Joel's note: which usually means that, because it's too tight, people find all kinds of workarounds in order to get their work done and so the nominal figures are meaningless).
• performance budgeting. Never widely used. Focus on cost efficiency, but not on the purpose of the expenditure. Florida has something called performance budgeting, but it's not the same thing. Based on some searching, it looks like the definition in this class is the anomaly. Perhaps input-based budgeting is the better term.
• Activity-based costing
• zero-based budget. Impractical. Announced in India in 1980s but abandoned. Classmates: we use this in the Philippines.

History of Singapore's budget process:

1. until 1978: line item
2. to 1988: programme
3. to 1996: block vote
4. to 2000: "Budgeting for Results"
5. to 2003: "Budgeting 21"
6. present: Resource management (accrual accounting, Net Economic Value)

Next step in Singapore: take into account the value of Singapore government's assets.

Joel's note: as we discuss "features of sound budgets", it's worth noting that Alaska's congressman, Don Young, is head and shoulders above the crowd doing his best to bring the quality of the US budget process back down to third-world standards. In addition to the pork that all US lawmakers pursue, he has also earmarked funds for a Florida road that benefited a (Florida) campaign contributor. (It's 3934 miles from Naples, Florida, to Anchorage, Alaska.) Even more egregiously, he's violated the constitution by changing the text of a bill after Congress passed it. Which makes you wonder ifhow often that's happened before ....

Alan Schick's Reform Sequencing. Things like account for cash before accounting for accruals. External controls before internal controls. Financial auditing before performance auditing. Etc.

Png, Chapters 8 and 9.

Economics of the Public Sector, Joseph E. Stiglitz, Chapter 8.

A basic discussion of what conditions under which governments should, in addition to funding goods and services, actually produce them. This is the crux of privatization, and I suppose that what you think of privatization depends on what mental image it summons: exceptionally inefficient government agencies with bad lighting and employees that should have been fired years ago, or corrupt companies buying off congresspeople to get money for nothing. It also depends, fundamentally, on something Stiglitz perhaps doesn't state strongly enough: the purpose of civilization is not to maximize allocative and productive efficiency. It is to improve the lives of its members. These two purposes are not universally coincident. That said, two details in the chapter caught my eye. Remember that the text was written circa 1998 or even earlier:

"There is concern that if the Patent Office became a performance-based organization, it might not make these decisions in a way which best reflected the national interest."

In 1991 the US Patent Office was changed to be funded by fees on patents. The more applications processed, the more money they take in. That, combined with the internet boom and various bad decisions about what can be patented (business methods, genes), has led to a meltdown of the patent system, to the point where there's a plausible argument that the patent system in its current form is doing more economic harm than good. See James Gleick's 2000 article for starters. Here are some actual patents:

• Animal Toy (a plastic stick)
• Getting a cat to chase a laser pointer
• Swinging on a swing

(many more here). Why is this a real, multi-billion-dollar problem instead of just a gag, you ask?

Bad patents are everywhere: covering obvious inventions (the crustless peanut butter and jelly sandwich), ridiculous ideas (a method of exercising a cat with a laser pointer), and impossible concepts (traveling faster than the speed of light). More troubling, countless patents that seem reasonable to a lay audience overreach in technical fields as blatantly as that peanut butter sandwich overreaches in a familiar one.

For example,

• System and method for creating multiple files from a single source file
• Method and system for installing software on a computer system.
• Information pointers

(More here). No matter how stupid they are, no matter how obvious the prior art, each one is a legally valid, enforceable claim that will take time and money to challenge. Here's how they get used:

After IBM's presentation, our turn came. As the Big Blue crew looked on (without a flicker of emotion), my colleagues—all of whom had both engineering and law degrees—took to the whiteboard with markers, methodically illustrating, dissecting, and demolishing IBM's claims. We used phrases like: "You must be kidding," and "You ought to be ashamed." But the IBM team showed no emotion, save outright indifference. Confidently, we proclaimed our conclusion: Only one of the seven IBM patents would be deemed valid by a court, and no rational court would find that Sun's technology infringed even that one.

An awkward silence ensued. The blue suits did not even confer among themselves. They just sat there, stonelike. Finally, the chief suit responded. "OK," he said, "maybe you don't infringe these seven patents. But we have 10,000 U.S. patents. Do you really want us to go back to Armonk [IBM headquarters in New York] and find seven patents you do infringe? Or do you want to make this easy and just pay us $20 million?"—Gary Reback

While some of these abuses predate 1991, I think it's safe to say that patent office has not been making decisions in a way that reflects the national interest. The current status of patent reform remains murky.

The other quote from Stiglitz:

In many areas, there cannot be competition, or competition might be feasible but undesirable. Do we want ... two competing judicial systems?

It seems to be working just fine; the secular court simply defers to the religious court on any conflicts, and the followers of that religion are happy and everybody else is denied judicial recourse. What's the problem? A bit more responsive to Stiglitz's point, here's an article about fatwa shopping, a market for religious decisions.

My background knowledge of happiness used to be that research shows there's no strong connection between happiness and wealth, that even dirt-poor people were statistically as happy as anybody else, and this surprising information because my own conventional wisdom. Recently I saw statistics that poor people are indeed unhappy, but once you get about US$10,000 per year, happiness flattens out. Here's some data that's even more precise, and it suggests that we have gone full circle back to the idea that, the more money you have, the happier you are.

Here's Dani Rodrik's writeup of the paper. My biggest question, before reading the report, is how distorting is it to group people into income vs happiness by country, instead of in smaller units?

A Saturday morning class, pre-emptively making up for next week's class, which is on Chinese New Year's Eve.

The reading

A collection of articles in various journals from the 1950s through 1980s about rewarding and motivating employees. Some notes:

• MBO (Management by Objective) was a hot buzzword in the 1960s.
• There isn't much of a link between employee happiness or job satisfaction and employee productivity.

Lecture

Why do we study employee satisfaction? To retain workers, to motivate workers, to increase productivity, to prevent sabotage, .... Joel's note: but the reading said that productivity does not correlate with satisfaction, and so the professor notes that nobody did the reading.

The Hawthorne studies of worker productivity: a study of productivity in factory workers revealed that attention from management, rather than the variables being studied, improved productivity. Joel's note: productivity in software development is very different from many other fields, so it's hard for me to set aside the very specialized rules of thumb and think generally.

Studies show that people with a higher education tend to be more easily dissatisfied. They also show that peoples' attitudes don't predict their behavior very well. One way to get people in organizations to do things they are against: ask them to do things they don't want to do, with very little reward. When they do them (I guess because you made them), cognitive dissonance drives them to justify why they did it. A study showed that people paid a lot to do a boring job agreed it was boring, but that people who did it for little pay found reasons why the work was interesting.

"When people are interested in their jobs, you do not have to go the extra mile to give them all sorts of extrinsic rewards." Joel's note: when I'm frustrated in a job, then given a choice between more money to keep doing something doomed to failure, or the same money but an obstacle removed, it's a pretty easy choice.

Types of performance-based rewards:

• individual rewards
• team rewards
• organizational rewards

Rewards rupture relationships, ignore reasons, discourage risk-taking, weaken intrinsic motivation.

Joel's note: my own anecdotal knowledge of group motivation is that people stay in extremely exploitative situations out of loyalty to their friends in that situation. But that's also the motivation of their friends. Everybody stays in out of loyalty to each other, and the employer laughs all the way to the bank, or, in the case of the Army, all the way to the morgue.

The case study

The case covers the performance raise process at a Water Resource board. Classmates offer experiences at their various workplaces. According to the case study, almost all of the employees are disgruntled about the raise system. Q: Is the 15-issue merit raise questionnaire useful? Classmate A: yes, provided that you show the weights for each issue so that the subjective criteria are made objective through statistical measures.

Joel's note: The research on a sense of fairness in primates seems germane.

Merit systems fail because: pay is not perceived as related to performance, it is perceived as biased; rewards not viewed as rewards; degrades trust; changes emphasis from work satisfaction to reward satisfaction.