These three things are certain: death, taxes, and that trade group spokespeople will defend their product in the face of all logic, complain that they are unfairly maligned, and point out the desirability of their product.

"Some people want to blame our industry because they have a vested interest in doing so, either by making a name for themselves or by hampering the adaptability and usefulness of our products for competitive purposes," said Robert G. Pickel, chief executive of the International Swaps and Derivatives Association, a trade group. "We believe that there are good investment decisions and bad investment decisions. We don't decry motor vehicles because some have been involved in accidents." —New York Times

I guess it's not surprising, since it's precisely that behavior, sincere or otherwise, that is their primary professional skill and the point of their jobs. But the precise word choice, at least, can offer some novelty.

Two eight-hour classes, Friday afternoon/evening and all day Saturday. Right in the thick part of the semester when everybody's assignments are piling up, so we are cheerful but stressed. Our special guest is Marie Danziger from KSG.

We have a handout with pages such as How Listeners Think and Advocating a Controversial Position. So I'm trying to figure out which bullet point from which page is correctly modeling the lecture.

Anecdote: in surveys of KSG graduates, writing skills are the #1 most used skill obtained at KSG; public speaking is second. Regression analysis is something like number twenty-seven. Joel's Note: assuming this is typical for most schools, policy or otherwise, does this mean most people are busy trying to persuade other people about positions which they in fact don't know are true?

Describing a public speaking class, in which everybody takes turns speaking in front of class. Sounds practical, like the Negotiation class.

If you want to be successful speaking publicly, visualize yourself stunning your audience (in a good way).

We know from study after study that people don't change their opinions from rational argument alone. There must be some element of emotion. Joel's note: another example of the thesis that our emotional centers play vital roles in our thinking processes?

You must take into account not only your own filters, but your audience's filters.

Student Debates

Three minute speech on each side.

First student reads her 1-minute speech from her notes. Instructor lets her finish, and then asks her to repeat her speech, without notes, while making eye contact with everybody in the room. Hint: divide the room into quadrants. The second student is one of our most verbal. This is getting very interesting, not for the subject matter per se but for getting to watch how the instructor manages the class.

The second pair of students has the topic of legalizing homosexuality. Too much going on to blog, but it's very interesting. Both students do very active, engaging speeches. Also the whole room (about a hundred of us) are brought to howling laughter repeatedly. Some techniques on display: answering a question with a question, citing personal expertise (15 years as a doctor), reframing a legal issue as a health issue, a soundbite: "not legislation but rehabilitation".

A mention of Mario Cuomo. I still remember seeing a Mario Cuomo speech on TV when I was about six or seven ten, it must have been his speech at the 1980 1984 Democratic Convention. It's still the best speech I've ever seen. I don't remember anything he said; I just remember that I was in complete agreement with the absolute rightness of everything he said and everything the party represented and I couldn't understand how anyone could listen to his speech and disagree. I miss that feeling and that certainty.

Debate on the effect of putting your hand in your pocket. Some people are neutral, others are opposed. Nobody is positive.

Side note: here are some tips on preparing for TV appearances, such as "MEN: I SAY AGAIN Wear Makeup. TV lights can penetrate several layers of skin. You can't possibly shave close enough to prevent whiskers from showing without makeup." and "Tip the bows of your eyeglasses up slightly off your ears. This angles the lenses down to reduce glare from lights."

Don't write on your hand.

Analyzing

Hrm. Instructor suggests that, to improve your diction, you should find someone on TV whose diction you like and record it and try to reproduce their pronunciation, emphasis, intonation. But that's not what diction means. Diction is "4. The manner in which anything is expressed in words; choice or selection of words and phrases; wording; verbal style:" Diction is word choice. It seems fairly common to stretch the word to refer to these other factors of verbal performance, and I'm not so ignorant as to remain a prescriptivist in the face of clear, dominant usage change. But it's clear that our language is poorer for the change (just as it is when comprise is used interchangeably with compose; we end up with two words but only one meaning). Pronunciation, emphasis, and intonation are not diction; they are pronunciation, emphasis, and intonation.

Saturday: Press Conferences

In a press conference, you can communicate two to four ideas at most. The rest of the press conference is spent finding new ways to repeat those ideas while answering questions.

What can go wrong? The media may have their own agenda, and their own stories to pursue: they may ask you questions leading you in a direction you don't want to go.

Avoid answering hypothetical statements. Don't argue with your audience.

Tactic: make a list of topics and phrases you don't want to say.

Storytelling

Storytelling: the latest corporate fad

This recent quote seems relevant:

love the fact that Trey and I have gotten awards for being topical and satirical, but at the end of the day, we are just making jokes. If you ask me how to really solve the health-care crisis, I have fuckin' no idea, and I don't want to be a part of it. But I can make a little fat kid yell some emotional truth about it. That's what we've figured out over the years. If you're gonna make it a TV show, you would never do the actual politics of something, but you would do the emotions behind the politics. Who cares if it's a right-or-wrong policy—here's how it makes me feel. —AV Club Interview

Property rights, contracts, transaction costs.

From an economic standpoint, legal systems' functions are to define, transfer, and protect property rights.

The role of the judiciary: they only clarify and define within the bounds of existing law, rather than creating law. Objection: in practice, this distinction is impossible; the act of clarifying often entails creating new law.

Informal enforcement mechanisms:

• Unilateral
• Bilateral
  • self-enforcing contracts
  • vertical relationship
  • hostages/collateral/third party
  • private enforcement ... violence
• Multilateral
  • reputation
  • enforcement by powerful third party (could be collective government)

I had no idea how much reading I wasn't doing for this class this week:

B. Guy Peters, The Politics of Bureaucracy, Ch. 2 “Political Culture and Public Administration”

Florence Heffron, Organization Theory and Public Organizations, Ch. 7 “Organizational Culture”

M. S. Haque, “The Diminishing Publicness of the Public Sector under the Current Mode of Governance”, Public Administration Review, 2001, 61 (1), 65-82

J. S. Jong and H. Muto, “The Hidden Dimension of Japanese Administration: Culture and its Impacts, Public Administration Review, 1995, 55 (2), 125-34.

J. Jabes, N. Jans, J. Frazer‑Jans and D. Zussman Managing in the Canadian and Australian Public Sectors: A Comparative Study of the Vertical Solitude, International Review of Administrative Sciences, Volume 58, Number 1, 1992, pp 5‑21.

J. Jabes and D. Zussman, Organizational Culture in Public Bureaucracies. International Review of Administrative Sciences, 55 (1), 1989, pp 95‑116

Anne M. Khademian, “Is Silly Putty Manageable? Looking for the Links between Culture, Management, and Context”, in J. L. Brudney, L. J. O’toole, Jr., and Hal G. Rainey (Eds.), Advancing Public management: New Developments in Theory, Methods, and Practice, 2000, Washington, D.C: Georgetown University Press, pp 33-48

Hal G. Rainey, “Building an Effective Organizational Culture”, in James L. Perry (Ed.), Handbook of Public Administration, 2nd ed., 1996, San Francisco: Jossey-Bass, pp 151-166

D. Zussman and J. Jabes, The Vertical Solitude: Managing in the Public Sector, Halifax, NS: Institute for Research on Public Policy, 1989

Lecture

Civil society. Since four of my electives have covered this subject to varying degrees, there's nothing new here I have a great opportunity to review and consolidate my learning.

Microcredit is the subject this week.

What is credit? Something you owe someone. That's credit. Are debt and credit the same thing? Lines of credit. "Credit is borrowed money". Grameen is not the first microcredit lender: ACCION and others came first. But Grameen had the best marketing.

Three C's of credit: Character, Capacity, Capital. Other kinds of microcredit: associations, bank guarantees, community banking, cooperatives, credit unions.

Microcredit as the goal: focus on providing credit to poor; the borrowers have to declare what they will do with it. If the borrower cannot look the lender in the face (c.f. cultural rule that women look down while speaking) and explain what the loan is for, the interview is over.

Microcredit plus: provide credit and training. Example: BRAC.

Microcredit as the means: example: Proshika.

As of February 2008, Grameen has 7.45 million borrowers, service in 97% of Bangladeshi villages.

Grameen's key feature: ultra-high level of contact between bank and borrower. Weekly loan repayment; followup in person one day after payment is missed. Borrowers must learn to sign their own names instead of making a thumbprint. Borrowers are required to use a small part of the loan as a group fund, as mandatory weekly saving, and as emergency fund deposits.

The Sixteen decisions, such as "We shall not live in dilapidated houses. We shall repair our houses and work towards constructing new houses at the earliest" and "We shall educate our children and ensure that they can earn to pay for their education."

Ten poverty indicators, such as "each member of the family is able to sleep on bed instead of on the floor" and "Family members have adequate clothing for every day use".

Despite a hands-off approach, the bank must intervene in some cases, for example, if everyone in a region is using their loan to weave baskets and the local demand for baskets is saturated. But Grameen still avoids telling borrowers what to do, in contrast to some other micro-finance institutions (MFIs).

Measuring success of MFI:

• Outreach (number of loans, growth rate of assets, etc)
• self-sustainability. profit, etc
• Subsidy dependency index: how much does the MFI depend on charity?

Joel's note: isn't poverty reduction the ultimate purpose of MFI? Why isn't it on the list?

Four decade history of MFI initiatives in India. Government project: SHG, vs Grameen-model MFIs. State government raided and shut down all MFIs in one district in March 2006

Related services offered via same channel: insurance, pension, etc.

Note to self: Need to grok the difference between Return on Assets and Return on Equity.

Our presentation

My teammate and I are presenting on the last case this week, Microfinance 2.0. We will go without powerpoint slides. But I haven't practiced my own presentation as much as I should have; I've practiced pieces out loud, but not the whole thing with a clock. My feeble excuse is that I will be flexible after hearing what our classmates do in the two preceding presentations. My rough topic outline:

• theory
  • What is poverty/what is money?
  • A working economy is dynamic: everybody has to dance at the same time
  • systems: capitalist/market; socialist
• How does microfinance help?
  • provide liquidity
  • provide motivation
• How should microfinance work?
  • Reach more people
  • make more changes in people being reached
• Should microfinance be capitalist or socialist?
  • Is there a third way?
  • What are examples of organizations that serve millions of people over a period of decades, but are neither governments nor for-profit businesses?
  • Indefinite charity? Mixed model?

Singapore's Minister for Transport & Second Minister for Foreign Affairs

The talk is about five minutes long before we stop for questions: impressive. Also, I think I heard the Minister mention carbon, which would be a rarity in Singapore where the environment rarely gets even lip service.

Q: long-winded question about bicycles. to give you a hint: "... it's a multiple-sector task, but I feel it should be the transport ministry who would lead in facilitating this bicycle commuting into our transport plan ..." Dude. Your question is, "what are you doing about bicycles?" Ask it and shut up. If you have a more targeted question, ask that. A: We've looked at, what are the immediate things we could do, not just recreation but commuting too. Working with NParks to try and close up the gaps in the system. Try to facilitate inter-modal transfer: look at the route you can take and at the MRT station or bus interchange upgrade the bicycle parking facilities. Also an inter-agency process. Some have asked, why can't we integrate cycling into the [whole city]? You have to balance against other transport: it might take space from buses. (Notice that alternative transport is implicitly a zero-sum ghetto: there's no notion of taking space from car lanes.) ... Also pedestrians: adding more shade; soon 86% of all overpasses will be sheltered. (Recall from earlier posts that overpasses are fundamentally pedestrian-hostile in the first place)

The dean just interrupted to say that this discussion will be off the record, and mentioned bloggers specifically. In my opinion this doesn't apply to what I've typed so far (ask Samantha Power), but I'll respect the request and stop blogging at this point. (I did arrive after the Dean's remarks, though, so maybe I missed an earlier announcement.)

I think I have the liberty to put my own questions on the record. My question was "A few comments and then a question: I've bicycled in San Diego, Los Angeles, Seattle, and Copenhagen, and I would be terrified to bicycle in Singapore. Second, [regarding whether bicycles and transport should compete for space while car space remains inviolable]. Both legally and culturally, cars are dominant in Singapore. What will you do about Singapore's increasing adoption of car-dominant culture?" My followup question was, "What about changing the law so that pedestrians have right-of-way in unmarked as well as marked crosswalks?"

Now I just have to work on my tone of voice: I think I get stressed asking questions and have a needlessly confrontational tone. And in my haste to make a point and ask a question while not talking too long, maybe I was too terse. The point I think I didn't make very well was that there is a cultural problem with aggressive driving in Singapore, as exemplified by drivers honking at other drivers who are slowing to turn off an arterial, honking at pedestrians who are in the middle of crossing the street, etc. While it's true that Singapore probably has the best-behaved drivers and most orderly streets in Asia, or maybe tied with Japan, it could do better.

Sunil Sharma from the IMF-Singapore Regional Training Institute (speaking only for himself, not the IMF). Provides training for 1000 to 1500 officials per year from 38 regional countries. Patterned after a similar office in Vienna. About 60 PhDs on staff providing training in macroeconomic and financial management, statistics, and legal issues.

The IFA, the International Financial Architecture.

Accumulating questions:

• Has there ever been a period of time in which we had both a degree of global capital mobility and some economic stability?
• According to the chart (Obstfeld and Taylor 2002), the only events to reduce global capital mobility have been the world wars. Even the Asian financial crisis didn't dent mobility growth. Are we therefore, assuming a new world war doesn't start, safe from drops in mobility?
• Is there a correlation between global capital mobility and greater human welfare? Is there a causal relationship? (A: studies do show that greater mobility does correlate with indirect benefits. Without some minimal institutional competence, you won't benefit from foreign capital.)
• From other classes, we here that institutional capability is the current hot topic in international development. What's going to be the fad after that?

Financial systems have been liberalized only recently. Italy had interest rate limits into the 1980s. Greece has a primitive system into the 1990s. Regulation Q limited interest rates US banks could pay.

Bretton Woods: currencies locked to US dollar, US dollar related (but not locked) to gold. (Joel's note: An interesting bit of trivia is that the US still values its gold deposits at $42.222/ounce. That's a multi-billion (but not multi-tens-of-billions) dollar bit of trivia. Ran across it reading somebody's review of the US FY2009 budget.)

IMF current statistics: 185 member countries, 2600 staff (with 400 to be fired in the next six months (Joel's note: talk about burying the lede; this is a talk about challenges for the IMF and it's now 40 minutes into the talk)), US$338 billion in quotas, which is smaller than Citibank's subprime losses.

Eight countries have direct membership (the UN Security Council permament members plus Germany, Japan, Saudi Arabia) in the Executive Board; the other 177 members are represented by 16 other directors. 30% women, although there is a shortage of female economics PhDs to hire. The biggest concentration of economics PhDs in the world. (I wonder who's in second place?)

The word corruption is no longer taboo. Q: What's still taboo? A: I would not be able to write what I really think about the exchange rate regime of a particular country.

Notional purpose of the IMF is to serve as a revolving pool of money that member countries could borrow from during balance of payment crises and thus avoid destructive trade policies. The IMF is funded by the difference between receipt and payment interest rates.

Top IMF borrowers in last 60 years: Brazil, Turkey, Argentina, Mexico, Korea.

Ten years ago, reserves of a central bank were guarded secret. Now most banks put them on their website.

What's going on now: deeper financial markets in developing countries; relaxation of capital controls; more international financial market integration and private capital flows.

Bankruptcy laws are important because they allow you to clear the decks quickly. The US recovers quickly because of its bankruptcy laws.

If you peg your currency to a foreign currency (e.g. the dollar), you can no longer change your domestic interest rate to meet domestic conditions. For example, Middle Eastern countries peg to the dollar, and now they have interest rates far too low for their domestic economics. Which exchange regime is better is not generally agreed; it depends on local institutions. Fixed but adjustable is bad because the infrequent adjustments are shocks, preceded by tension.

Canada: has floating exchange rate, and retains control of domestic money supply.

Banks: do a "maturity transformation": borrow short-term, lend long-term. By design, they thus have liquidity risk. By design, the banking system is leveraged. The investment banks in the security markets do not do maturity transformation; they manage liquidity. They are not key to the running of the payment system. They are more lightly regulated. But with the changes in the capital market, the investment banks have a more critical role in the monetary system, and should be held more accountable.

Student Presentations

Bangladesh

Unitary system, Westminster government.

Village life model after independence, then administrative state during military rule, then adversarial, village life, and back to administrative state (under current caretaker government).

Singapore

Detailed powerpoint. Not especially relevant to the assignment, which was "Whether the model describes the politico-administrative relations in your country?" I feel inspired to dig out the stopwatch for the next presentation.

China

First, you must understand why China chooses socialism. It was chosen by the people, with the belief that only socialism can liberate China from a semi-feudal role. Only socialism can prosper the new China. (Sound of Joel smacking his forehead into the table. China didn't chose socialism any more than Taiwan chose capitalism. A communist army conquered China.) China has the party first, then the state. (Which is a feature of authoritarian states, not socialist states.)

Five administrative levels. ... As have many others, I've recommended against reading from slides. Well, I've found something worse than reading from slides. Reading the formal constitutional procedure by which China's senior leadership is selected, from slides.

I'm seriously considering walking down to interrupt the current presenter, in front of 20 classmates, and turning off the projectors, taking the notes out of the hand of my classmate (who is a very nice person), physically turning him around to face the crowd instead of the screen, and encouraging him to complete his presentation in five more minutes or less. The presenter is, let me repeat, a nice person whom I like, and I generally try to avoid criticizing classmates on this public blog, but this is just about the worst presentation I've seen here. Not just for the technical issues of posture, but the content: a detailed analysis of the Chinese government as it is claimed to function. What's the point of that? I certainly hope that not a single person in this class, including the presenter, is that naive. On the plus side, a weakness is listed. Perhaps that's on an official list of approved criticisms, part of some anti-corruption campaign? Ah, yes, the presenter just said "corruption".

If it weren't for the extreme rudeness to my classmate, I would replace the first two minutes of my own presentation (were I called upon next) with a discussion of the technical aspects of the last presentation: the poor time management, looking at the screen, back turned from the audience, reading from paper with head tucked down, the obvious lack of practice, reading from slides.

Papua New Guinea

274 local governments. Westminster government. Queen is ceremonial leader, represented by the governor-general. Three levels of government. Strong parliamentary democracy.

Taiwan

Five branches of government, the usual three plus the Examination and Control branches. The control branch is like the GAO in the US. Best fit for politico-administrative relations: functional village life.

Philippines

In addition to the three branches, a Civil Service Commission with non-partisan employees.

UAE

Pakistan

Administrative model under political regimes; functional village model under military regimes.

Myanmar

After all the fuss of last week's guest and then the overloaded Global Issues class yesterday, today's Non-State Actors looms as an anti-climax. Plus it's raining, but more of a sullen wet than an exuberant storm.

Student Presentation

What is social enterprise? Joel's note: One of the key characteristics of private enterprise is the imperative for growth, which is so pervasive and intense that it appears to be reified as an end goal. I wonder whether, as social endeavors and civil society adopt more of the cladding of capitalism, they will also adopt the growth imperative.

Note that the PP5503 Baumgartner reading for this week dovetails nicely with today's class.

Should social enterprises have the same accountability as private actors? As government entities?

Joel's note: the professor is drawing a graph with X = social return and Y = economic return, making the point that there is an inverse relationship, and that it's curved, not linear. The professor, in referring to the graph, just referred to the economic return axis as "growth". hmmm.

Private enterprises which return lower than market rates on their capital are considered to be destroying wealth. Should social enterprises be expected to have higher SROI than government? That may be missing the point for neo-Gramscian-type civil societies, but could it be a good standard for neo-Tocquevillean entities?

Professor Presentation

Social enterprise and social entrepreneurship.

Joel's note: Wikipedia comes to the rescue to clarify the relationship between social enterprise and civil society: the former is a subset of the latter:

Social enterprises are generally held to comprise the more businesslike end of the spectrum of organisations that make up the third sector or social economy). A commonly-cited rule of thumb is that at least half their income is derived from trading rather than from subsidy or donations.

Joel's note: Um, cost of capital is not "the cost it takes to start the business" or "recouping the money that's put in to it". Cost of capital includes risk-adjusted interest rates. Is there an equivalent on the social side? Is there a social capital interest rate? Is that interest rate positive if the world is getting worse and negative if the world is getting better (or vice versa?)?

Sources of capital for social enterprises....

Something like 4 out of 5 businesses fail within 5 years (numbers I just pulled out of my ass. Here's some data: "The NFIB estimates that over the lifetime of a business, 39% are profitable, 30% break even, and 30% lose money, with 1% falling in the "unable to determine" category."). What's the rate for non-profits?

Guest: Albert Teo

Social Entrepreneurs in Singapore.

Next week

I'm presenting one of three cases, Microfinance 2.0 with BJay.

This is one of those classes where everything happens at once. Along with two other classmates I was assigned to do the student presentation for the week; we decided to have all of the other students each do two-minute presentations, followed by two of our own members doing presentations, and then a carbon cap and trade game. Plus the usual break, discussion, and professor announcements. And then we have three guest speakers, two of which are surprise guests. Urp.

Guest speakers

(I didn't catch all the names). Speaker #1, from World Resource Institute:

I apologize for the acronym SD-PAM. It's a mathematical fact that some emerging economies must limit their emissions if the Earth is to mitigate global climate change. Kyoto has a single solution for Annex 1 countries, and insubstantial, qualitative activities for the rest. For an overall solution, some of that distinction must change, and the changes must be acceptable. Maybe not all of these initiatives will be measured in terms of GHG, but they all have to have something concrete, e.g., going to x% of renewable energy.

Many developing countries are taking substantial activities that stack up well to developed country activities. New plans due by 2009, under the Bali framework: new program, which looks very different from Kyoto Protocol. Countries have to figure out how to make credible commitments of their domestic climate change programs.

Q: Will post-Kyoto agreement have sanctions? A: nothing like the sanctions in WTO, which is backed by "mutually assured destruction" concept. There will be some connections between financing and policy (Joel's note: so the enforcement plan consists of getting serious about not bribing countries that don't do what they're supposed to)

Q: Canada has reneged on its commitments. Will Annex I countries use the new framework to renegotiate. A: In Washington, we tell lawmakers about China's progress, and they say, is it legally binding? and we say, well, with Canada as an example, so not so much. The number one priority for the US team at Bali was to eliminate the difference between Annex I and other groups.

It's important to remember with ETS: it's not fundamentally using the market to reduce emissions. Countries agreeing to ETS agree to meet caps, and then use the market to allocate emissions. Emissions trading is not the way to go; it will be a big part of the policy mix. Caps have a political advantage over taxes: Carbon traders are asking for more caps, because that increases the size of the market they can play in. That wouldn't happen with taxes.

Dubach: Actually, there's not much debate with economists. Carbon taxes are better economically.

Are emission trading markets sending the correct signal? Are they sending the signal that it's morally okay to (? to buy the right to pollute?). There are people who believe that carbon trading is unjust. Many Southern civil society groups are very antagonistic to carbon trading. Other issues: getting credit for things that would have happened anyway. Projects financed by emission trading may not be good projects.

Should SD-PAMS get ETS credit? That is, if the Indian government runs a program to distribute efficient lightbulbs, should they get carbon trading credit for the calculated benefit? The challenge is to promote new behavior. If China does fuel efficiency standards, they probably would have done that anyway because of concerns about oil dependency. People are generating a lot of potential credits, but who will buy them? There's no carbon market, only a market for compliance. That market must be generated by a country accepting a tight cap and forcing its companies to buy credits. The Lieberman-Warner bill, the most advanced bill in the US, does not allow purchase of overseas credits. Countries prefer to do expensive things at home instead of cheap things overseas.

Navroz Dubach: CDM is interesting. It's a market, but a market without property rights. It has huge transaction costs and is not easily verified. The Indian government just loves it, it's just a cash cow for Indian industry. There's supposed to be a technology transfer, but most projects are from one Indian company to another. Land-based projects are even more political.

30 years ago, power companies were all owned by governments, except in the US where they were heavily regulated. A large percentage of GHG comes from electricity generation.

Renewable energy does have environmental benefits, but it costs more. Access rates to electricity are as low as 3% in some countries. 50% in India. We've been looking at electricity and regulatory institutions.

These frameworks have to filter down into actual actions. How does that happen? Nominally, governments implement the frameworks they agree to. But that implementation is political, with winners and losers. So the policies are often vague, and the regulator has to balance pressures. Many regulators in developing countries were set up as part of donor-funded adjustment lending programs. So regulators are poorly integrated with governments.

Carbon Trading Game

It needs more work. We got through three years out of the planned 8 (trimmed from 12). Brief notes: We need more training and examples before the game starts. The auction mechanism doesn't work. The market isn't clearing even though the companies are set up to have a market. The printed tokens and housekeeping are a big pain and the whole thing should be electronic.

Student Presentations

My group asked all students, in groups of 2, to prepare four-minute presentations with topics we handed out, all based on the assigned reading. we discouraged Powerpoint and forbade bullet points. We also asked all seven groups to perform their presentations once before class, in full dress rehearsal in a classroom in front of one of us. (Three and half groups actually did.)

Logistics

Ten page double-spaced policy memo. First draft due April 1. Final due date: April 22.

Prime minister's office (that's me—I'm the PMO for China for this class) initial memo: overview of policy. Planning memo and overall negotiating position. Final memo is country's negotiating position. China and India teams are discouraged from presenting solutions including a hard cap, since that's almost completely unrealistic.

Next week: guest speaker from IMF.

Schedule group presentation Monday, April 14.

J. Gregory Dees, Jed Emerson, Peter Economy, Enterprising Nonprofits: A toolkit for Social Entrepreneurs (New York: John Wiley and Sons, 2001) ; Chapters 1, 2, 3

Case: Social Enterprise Spectrum: Philanthropy to Commerce

Case: Social Enterprise: Private Initiatives for the Common Good

Fundamental missions of social enterprises:

• reduce conditions with socially undesirable side effects
• provide goods and services with socially desirable side effects
• create a safety net for the less fortunate
• promote a more just distribution of benefits and burdens
• advance human rights

Nicholls, A; (2006). Social Entrepreneurship: New Models of Sustainable Social Change, Oxford University Press, Chapter 4

J. Emerson, “The Blended Value Map: Tracking the Intersects and Opportunities of Economic, Social and Environmental Value Creation” – Executive Summary

Concludes with nine areas for further research in the field of social entrepreneurship.

B. Guy Peters, The Politics of Bureaucracy, Ch. 5 “Politics and public administration”

F. R. Baumgartner, “Public Interest Groups in France and the United States”, Governance, 9 (1), 1996, pp 1-22

A notion that's been lurking around the edges in several classes is this: Is it a problem for civil society to do functions that arguably the government should do? It got sharper in Corporate Social Responsibility discussion: if CSR is primarily a means to prevent more direct regulation, then wouldn't social purposes be better met with that same government regulation than with self-regulation and regulation by the civil society sector? According to this article, France's answers are pretty clear. The state is the sole source of authority and power for action on behalf of the public, because only the state is fully accountable. Any more narrowly defined group claiming to be acting in the public interest is assumed to be a special interest seeking rent.

This simple purity breaks down in practice, however, because it turns out that the French bureaucracy differentiates between "serious" and other kinds of civil society groups. If it has enough allies in government, a civil society group is considered "serious" and becomes basically an arm of the government. Otherwise, it's a pest. The differentiation between serious and other, which is effectively a determination of what is in the general public interest and what is not, is made within the French good-old-boys club. You won't be surprised to learn that the French military industry is part of the French public interest.

Sheila Coronel, “Recovering the Rage: Media and Public Opinion”, In OECD, No Longer Business as Usual, Paris: OECD, 2000, pp 215-226

Summary: Investigative journalism is a very important element in reducing corruption. In many parts of the world there are few effective legal protections for journalists, leading to a vicious circle because journalistic investigation is a key means of improving institutions like the courts, which could provide better legal protection for journalists. Also a lot of journalists get killed.

OECD, Open Government, Paris: OECD, 2003, pp 9-21

OECD, Citizens as Partners, Paris: OECD, 2001

Nicholson Baker uses a review of a book about Wikipedia to rhapsodize about it and discuss his own role as a defender of articles facing deletion. The discussion of the dynamics of Wikipedia is very interesting. What's even more interesting is that the entire article goes by without a hint that the "2.2 million articles" Baker talks about are only the English-language articles. These make up less than half of the total. Some obvious questions: When there is discussion to delete an article in one language, what does this mean for the versions of the article in other languages? Which leads to, what are the relationships and communications between the Wikipedia communities in different languages? Are most languages just shadows of the English? How many articles have no English version? Most interestingly, I think: do the bodies of contributors in various languages each comprise distinct communities, and if so, how do they differ amongst themselves and what, if anything, do those differences tell us?

This last week felt like the pivot week between the easier part of the semester and the part where you feel behind all of the time. By Thursday I was starting to stress out so I made up a calendar with all of the due dates for the rest of the semester, and it actually isn't that bad, as long as I don't procrastinate myself into hell, like I did the last three weeks of last semester. But on top of that, it was just a very busy week:

Monday morning was the roundtable with Douglass North (plus his lecture Tuesday, and a seat at a fancy dinner with him Tuesday night at the sort of place where when you tell the wait staff that you're vegetarian, they ask for details; and then, as everybody else gets their eight courses, you seamlessly get gourmet vegetarian dishes); I fell behind on the reading and didn't read for two out of five classes this week, and a third was by the skin of my teeth. I'm doing a carbon emission cap and trade game for Global Issues next week and that took hours disproportional to the fraction of the grade it represents, but it's a lot of fun and I weight fun pretty high when it comes to schoolwork.

Wednesday I juggled my schedule because the other Americans volunteered me to present our findings on the political vs administrative dichotomy in the US. After all my bitching about presentations, I knew I would be eviscerated if I didn't practice, so I ended up giving the presentation once in the shower and a second time to Kona during her morning walk. She pooped during the presentation, which I took as a signal that I was going over my time limit. It went well enough in class, but would have been better if I'd practiced it with my team. For next week's Global Issues class (for which most of the content comes from students, one of the few classes where the professor has actually followed through on early-semester promises to not simply lecture straight through all the time (controversial sidebar for another post: many debates about the value of pure lecture vs student discussion)), we've asked all of the students, in pairs, to do four-minute presentations based on elements of the assigned reading. We're discouraging powerpoint and requiring them all to practice once in front of us (the week's discussion leaders) before class.

We did a trial run of the game Friday, using whoever I could beg or bully to join, including an attempted press-ganging in the student lounge. I thought it would be nice to have some law students in the simulation to better represent the more predatory businesses, but none were willing to come. The trial was excellent, which is to say it took five or ten times longer than I hoped and I found lots of things wrong with the game, which is just about exactly the outcome you hope from from a trial run. (If a trial run actually goes well, that just means something is going to blow up badly when you do it for real.) So I'll spend part of the weekend revamping the game and the rest trying to pull ahead on reading.

The US illegal domestic spying story has been going on for a while, and most of the plot twists are ugly. But finally there's a hint of light at the end of the tunnel: The House just now approved a new FISA bill that denies retroactive immunity to lawbreaking telecoms and which refuses to grant most of the new powers for the President to spy on Americans without warrants.

Before the Senate gets around to gutting the bill in conference, let's savor for a minute that a few hundred of our elected officials still think that restraint of government and accountability are worth voting for.

By the way, every single web page request you make in Singapore appears to go through a proxy server. That is to say, the Singaporean government has the means to view and filter everything you do on the web. Every now and then it glitches a bit and some pages don't load properly until you reload a few times. Like this morning. Just an inadvertent, gently reminder that I'm living in a society which has never even had some of the freedoms that Bush, Senate Committee Chairman Rockefeller (D-WV), and the rest are so eager to dismantle.

Update: It took eight reloads to publish this blog entry.

Das-Gupta, Arindam (2005), “Non-Tax Revenues in Indian States: Principles and Case Studies”

Asher, Mukul G. (2005) “Mobilizing non-conventional budgetary resources in Asia in the 21st century”, Journal of Asian Economics, 16, 947-955. Via ScienceDirect

Here's the abstract:

The 21st century will be characterized by the curtailment of tax policy autonomy and high locational elasticities for economic activities. Resource mobilization tasks for Asian governments will therefore be far more complex. With respect to traditional taxes, base broadening and modernization of tax administration will have to be primary instruments of raising additional revenue rather than rate increases.

The paper suggests that Asian countries will need to substantially enhance their capacity to benefit from innovative instruments of resource mobilization. These include public asset restructuring, treasury management, and revenue from creation of property rights, regulatory levies and more effective use of cost recovery and user charges. Resource mobilization and delivery of public services will have to be increasingly linked. An Asia wide tax forum to address common concerns, such as tax avoidance will need to be considered.

Here's my translation:

Attention Asian governments: it's going to get much harder for you to collect taxes. You should try to collect taxes from more people, and do a better job collecting taxes. But you're also going to have to find new ways to get money, like renting out government land, getting more money for your oil, and charging more for government services. And you should start cooperating with each other to catch people trying to hide taxable revenue in each others' countries.

Bailey, Stephen J. (1994) “User-charges for Urban Services” Urban Studies Vol 31, No 4/5, pp 745-765. Via EBSCOHost/Business Sources Premier. (Optional)

• "User-charges increased from about one-quarter to one-third of all own-source revenue in the US during the 1970s and 1980s" What's "own-source" revenue?
• Some services traditionally have user charges: sewers, street maintenance, waste collection. Not fire or police. Libraries avoid heavy user charges. "User charges for [outdoor] sports facilities [in the UK] ... cover less than a quarter of the debt charges and running costs ... Copy-cat charging leads to a broad uniformity of user-charges ..."
• The history of user charges is more complicated than simply substituting user charges for taxes.
• Look, look, actual humility from an economist: "More generally economists' pricing prescriptions lack situational relevance for practitioners, policy-makers and users .... Government and academic economists [tend to] fail to consider implementation theory. Economists are partisan advocates of efficiency with no natural priority over other participants in the public expenditure process."

Lecture

Various points about wages and taxes. The backward-bending supply curve.

Here's an interesting review of a book about the real shape of the supply curve: inverted S.

[Work Behavior of the World's Poor: Theory, Evidence and Policy by Mohammed Sharif] provides a sound theoretical alternative to the conclusion that poor workers are irrational or perverse when they increase labor supply in response to falling wages. Instead, by focusing on how, when wages fall below subsistence, workers are forced into a distress sale of labor in order to survive, the authors may awaken in economists and policy makers greater sensitivity to the plight of poor households.

We're running in circles on the point that "Income tax with FULL LOSS OFFSET encourages risk taking." I'm not really following the specific math, but the underlying point, if it's the same as the reading (page 589 in Stiglitz), is this: If you can get a full tax offset for your losses, then the net effect is a bit asymmetrical, like a bit of a subsidy (not sure why, lost track of the numbers). Also, and I think this is the main point in the reading, if the government provides tax offsets, the government is effectively acting like a partner. The government thus becomes the partner of last resort, and this is probably economically good.

The Economic Theory of Public Enforcement of Law, A. Mitchell Polinsky and Steven Shavelli

• p 3. "we assume for simplicity that public enforcement is the exclusive means of enforcement"
• p 4. "For simplicity, we focus on the assumption that individuals are risk neutral in fines and in imprisonment."
• p 19. "assuming for simplicity that injurers are always found liable"
• p 31. "assume for simplicity that individuals are risk neutral"
• p 35. "assume for simplicity that sanctions do not deter"
• In the discussion forums for my mail program (mutt), I've seen proposals for a feature whereby, if the body of the email includes the word "attachment" or "attached", but you try to send the email without any attachments, the programs asks you if you are sure. I would love that feature. On a related note, I think that all economists should be required to use a word processor which detects the phrase "for simplicity" and forces the author to include a section that addresses the probability that the simplifying assumption is true in the real world and how irrelevant the previous analysis will be if the assumption is not true.

Class discussion

A chart showing a correlation between income levels and less burdensome regulation. But the ability to go into business without any regulation presumably doesn't correlate as well, since then legitimate businesses would be competing with charlatans who are bad for the economy. How would we measure that, and try to correlate it to wealth? That is to say, a lot of legitimate businesses are quite happy to have enforced regulations, so they don't have to compete in a race to the bottom. Who would want to try to make a profit selling widgets if the competition was a steady stream of fly-by-night companies making widgets that break two days after you buy them? You would have to turn into another fly-by-night company yourself. So what is the measurement that would suss this "level and not-ground-level playing field" issue out?

Today's good news:

A Cal State East Bay math teacher and practicing Quaker who was fired for refusing to sign a state-required loyalty oath got her job back this week, with an apology from the university and a clarification that the oath does not require employees to take up arms in violation of their religious beliefs.

Presentation on the case study

World Bank involvement in financing judicial reform in Peru circa 1996-1997. The question is whether Fujimori's government is serious about reform, or just wants World Bank cover for further abuse of the judiciary. Events make it utterly clear that the latter is the case, but is any way left for the Bank to still have a positive impact?

Why Peru? There was an opportunity to help fix a judicial system that had never worked in the history and pre-history of the country. The Bank justified participation under the theory that a corrupt judiciary hurts the economy.

Extended history of the judicial system reforms in Peru 1994 to 1997. There are a bunch of different entities in the system with various constitutional powers, dealing with: how are judges trained, how are they selected, who has authority to remove them, how much are they paid, etc. All of these are intensely political questions, especially who can remove judges, since without judicial independence the judiciary has no foundation and may do more harm than good. The story of judicial reform in Peru appears to be the story of Fujimori attempting to maintain subtle but real control through institutional tools; i.e., having the power to select the people who select the people who can fire judges, things like that. Each time Fujimori or his pawns make a step or delays real reform, the Bank writes a complaint or delays the next step. Eventually a more or less acceptable structure is in place, and the loan gets approved in late 1997, with money to be lent in early 1998.

Then Peru's Congress passed a law gutting judicial independence, and the World Bank's project director put a six-month hold on the loan. The case ends with the director about to respond to a meeting summons from Fujimori.

Q: what's the best outcome the World Bank could have been responsible for? If you assume that Fujimori would not give up control of the judiciary, could the World Bank still have catalyzed a meaningful (and dare I say, sustainable) improvement in Peru's judiciary? After all, the pretense for their participation, was the impact of a corrupt judiciary on the economy. Perhaps Singapore is a model of the best possible outcome as long as the political elites (Fujimori) keep their power monopoly: Singaporean business courts are world-class but the Singapore government has a 100% success record in suing political opponents in Singaporean courts.

Q: In this case, who exactly should have been more transparent, how would it have been in their interests to be transparent, and what would have been different if they had been transparent?

Class Discussion

Goodness and shrewdness. Do you need transparency to have accountability? (I don't think so) Is transparency a precondition for reform? (I don't think so)

What is transparency? There are two problems with defining it in terms of exposure to external scrutiny. The first is that that suggests that some extra effort is taken to be transparent. The second problem is that if such effort is necessary, that effort implies judgment and thus an unavoidable lack of transparency. E.g., GRI requires that an organization take time to write a report. Inevitably, the report authors will be exercising judgment about what is relevant. Or suppose you are releasing documents; even an innocuous decision about whether documents have anything meaningful, or what file names to use, etc, can spin the outcome. Only universal, automatic transparency (all meetings open to the public, all documents and emails and phone calls shared on the internet as they happen, etc) avoids these problems completely, although it introduces other problems. Although this seems fantastical, some open source projects come quite close to this; all members of the project communicate online in archived, public discussion rooms and all work is done in a public repositories, including all historical changes. Wikipedia is another example, at least up to a certain level; above that level, transparency disappears, and lo and behold it's in the un-transparent point that we hear about all the Wales scandals.

Transparency and the media: Perception of corruption is very high in the Philippines and very low in Singapore, but how much of that reflects a free press in the Philippines and a captive press in Singapore?

How is it in government or corporate interest to be transparent? So far we've got some indirect benefits of perception and reputation. I think it's in the interest of the governed for the government to be transparent, but maybe not in the interest of the government. What about SWFs as an example of both transparency and North's natural state argument?

Q: Does transparency have to have a moral dimension? Does transparency have to have a positive effect? (If there isn't an ultimate purpose then it's just a mechanism, and mechanisms shouldn't be fetishized.)

Prof-led Discussion

Why are we discussing transparency? We can see why non-state actors would want it; why do companies and governments do it?

Rational explanation: companies benefit because transparency may level the playing field and so reduce transaction costs. (I'm not sure I followed that argument to the conclusion. I can see how transparency could be a competitive advantage in a market: I'd rather go to a transparent money-changer.) Ultimately, for self-interest. Reason two: reputation and trust (in turn leading to the same aggrandizement as self-interest.

Other reasons for companies to be transparent: to solicit feedback; to get first-mover advantage (but what advantage?) As a means for credible commitment, which is useful in various strategies (e.g. chicken). As a means for forestalling government regulation. To solve a tragedy of the commons problem within a business context.

Dutch disease and resource curse. UK and other North Sea countries were not damaged by the discovery of oil because they had transparency and good governance, but oil in African countries has been a net negative for societies. (Joel's note: Since evidence is now surfacing of the extent and breadth of corruption in Alaska, does that suggest that Alaska in the 1970s did not have transparency and good governance?)

Origins of transparency

Open Skies Initiative as an early example of transparency. US and Soviets would be allowed to overfly each others' territories for military verification. Proposed in the 1950s but not ratified until 2002. Nonetheless, reframed concepts of openness and transparency. 1986: Gorbachev takes up the US offer of transparency across the board and furthers the norm of transparency.

US corporate disclosure starting in early 20th century in response to trusts and other bits of capitalism.

Sweden's freedom of information act in 18th century.

What are the supposed benefits of transparency? Anti-corruption, economic growth, political stability, civil freedom. Back to, what kind of accountability is necessary for success? And back to the issue of Singapore as an example of success without accountability.

How would you know if Singapore was not doing okay? You wouldn't, if you only read the Straits Times. (Joel's Note: Not only does the Straits Times filter, but I think it's also important that the bad news that it does print seems calibrated to control the boundaries of thought. That is, it provides a steady stream of things to worry about that are small, that direct public thought in desired directions, and that distract from more fundamental problems)

Transparency as a means to efficiency or transparency as a means to rights.

Joel's note: N.B.: A key issue in US politics the last few months is the degree to which the government and telecom companies will be held accountable and/or subject to transparency for illegal domestic surveillance. The courts have made a beautiful catch-22 ruling about who can claim to be damaged and thus have standing to sue in order to get disclosure. If I remember correctly, you can't sue unless you were harmed, but you can't get access to information that shows you were harmed until after you win a lawsuit. The whole dispute comes into even sharper focus in the context of today's class.

This is the one class where we get in trouble if we don't do the readings, and it's in two hours and I haven't done the readings. Erp.

Florini, The Coming Democracy: New Rules for Running a New World, chapters 2 and 9

Mallen Baker, “The Global Reporting Initiative - Leap forward or last gasp?” Ethical Corporation, p 40, March 9, 2006

"Sustainability reports are even more heavily dependent on the context [compared to financial reports]. And yet all the current models of reporting expect the companies to provide their own narrative – to tell the story complete. But that does not work, because the end user actually does not read the reports, and does not even trust the company to provide its own context."

We talked about that in class, but I think maybe in 5263, not 5262, about the problem that we don't have any real feel for the numbers yet. If a corporation outputs 5,000 tons of CO2 in a year, is that more or less than their fair share?

Virginia Haufler, “Corporate Transparency: International Diffusion of a Policy Idea?” Paper prepared for the IR Field Workshop, University of Maryland, April 17, 2006.

One World Trust Global Accountability Project, 2007 Global Accountability Report

How are 30 top TLAs (including NGOs, IGOs, and MNCs) doing with their accountability reporting? They range from pretty good to pretty bad; the average IGO is must better than the average NGO, which is slightly better than the average MNC. Of four dimensions, transparency is worst. "All assessed TNCs have weak external stakeholder engagement capabilities." TNCs are narrowly in the lead on complaint handling, "partly a result of the Sarbanes-Oxley Act".

Case: Aiding or Abetting? World Bank and the 1997 Judicial Reform Project Transparency International

2007 Global Corruption Report 2007. Executive Summary

Executive executive summary: judicial corruption is really really bad. 26 recommendations for reducing judicial corruption.

I fell behind this week and didn't do the reading before class.

B. Guy Peters, The Politics of Bureaucracy, Ch. 5 “Politics and public administration”

F. R. Baumgartner, “Public Interest Groups in France and the United States”, Governance, 9 (1), 1996, pp 1-22

Sheila Coronel, “Recovering the Rage: Media and Public Opinion”, In OECD, No Longer Business as Usual, Paris: OECD, 2000, pp 215-226

OECD, Open Government, Paris: OECD, 2003, pp 9-21

OECD, Citizens as Partners, Paris: OECD, 2001

Lecture

The core executive. The strength and weakness of the center depends on the personalities of the people. Example: Sarkozy in France.

Accountability. The Al-Mashat Affair.

Who was Bush's eminence grise? Google calls it a tie, 4220 hits for Cheney and 3990 for Rove. Q: Is LKY in this role for Singapore?

Student presentation

International trade and the environment.

Brief description of the WTO.

The case for open trade. Comparative advantage.

Simulation exercise

WTO tries to mediate a dispute between Rich Country and Poor Country. Poor Country is complaining that Rich Country is imposing illegal tariffs on raw cotton. Rich Country says that poor country

Comparative advantage

Assumes that land, labor and capital don't move, and that there are constant returns to scale. These call into question the validity of comparative advantage (the notion that if everybody does what they do best, they all benefit, rich and poor alike) and the fairness of the likely distribution of those benefits.

Trade is mostly between developed countries, which suggests that increasing returns to scale is more realistic than constant return. That is, the rich countries have big factories and trade with each other, and the poor countries don't have anything to contribute.

Covering the Week 7 reading. I'll blog more if anything surprising happens.

Who pays Malaysian taxes on food grown in Malaysia and exported to Singapore? Singaporeans, because Malaysia taxes food at the point of production, and that tax gets passed along the supply chain. (Which is good, I think, because source taxes are the most efficient in internalizing costs. Appropriate source taxes on carbon-based energy would solve the global warming problem.)

The Greek letter η sure gets around; Wikipedia lists 17 uses ranging from "the efficiency of a Carnot heat engine" to "viscosity". I wonder which Greek letter has the most diverse scientific uses? Today in Class notes I investigate ... and the results may surprise you!

Letter	# of uses*
α	14
β	11
γ	17
δ	24
ε	15
ζ	4
η	17
θ	13
ι	3
κ	10
λ	29
μ	18
ν	10
ξ	13
ο	0 (zero)
π	17
ρ	8
σ	19
τ	16
υ	1
φ	21
χ	11
ψ	10
ω	24

* According to Wikipedia, counting only direct uses of the letter symbol in a science (math, etc) context, not the name, and combining upper and lower case.

Liveblogging the IPS roundtable. All text is paraphrase of speakers (plus my errors) unless "quoted" or marked as my own notes. Dr. North will be talking about this paper; see also these notes.

Professor Tommy Koh (chairman of IPS and a famous Singaporean negotiator), in introducing Dr. North, explains that North has sought to integrate various social sciences disciplines. Koh challenges North's thesis as Eurocentric.

North: Various disciplines plus cognition. We have to construct things in our brain to understand. You have to have beliefs because they are the way we think we understand what's going on in the external world. Norms, values, all begin with beliefs. Any discussion in the social sciences should start with how we understand the outside world and how it gets arranged in our brain. Then, how do we order that world to satisfy our beliefs. Institutions: the structure that human beings impose on human interaction in order to order the world in a way that meets their objectives. Not everybody's beliefs count: what counts is the beliefs of the people who happen to be in a position to create the institutions.

You have to understand one factor with is not idea: violence. Humans are violent, and kill each other with great abandon all through history. All societies are structured in ways to handle the perpetual threat of violence and disorder. I call these contexts the social order. Culture is the choices in the past that constrain the choices in the present.

Primitive social order, hunting and gathering. Once you settle down and specialize and get division of labor, including division of social, political, religious labor. Natural state or limited access order you get political, economic, religious elites. These elite groups have to coordinate and cooperate for mutual support so they don't try to kill each other. They protect each others' rents. Example: political elites protect the rents of farmers and in turn the elite farmers support the political elites.

Open access order: the Netherlands was first, then Britain, France. Competition in both political and economic markets. You have to have competition in both; monopoly in either market will lead to monopoly in the other.

Setting aside primitive orders, which are only historical, we have two orders to consider. US, Europe, Japan, and some other places like that, places that are very close to developing open access: Taiwan, Spain, places like that. Is open access stable? So far, we don't see open access states falling back to limited access. The one that comes closes to falling back is Argentina.

Three fundamental pieces to all human interaction. Growth in stock of knowledge, demographic features, institutions.

Transition from limited access. Most growth in the world has been from limited access societies starting to open up and broaden. Mature limited access societies will have some institutions independent from the elites. If you go back to the World Bank's biggest mistake, we try to get the things that work in an open access society: competition, well-defined property rights, and impose those on a limited-access society. But you destroy the stabilizing fabric of the limited access society. Iraq will do just fine as a modern example. The US destroyed a villainous dictator, and destroyed the limited-access society, but didn't replace it with anything, and you get the expected disorder.

Three doorstep conditions (see my reading notes). Most controversially, you must have civilian control of the military.

The transition has to happen via steps which are in the interest of the ruling elite. It happens differently everywhere; we've been looking at Europe and the West, but it's happening in the rest of the world too. But the change has to occur within the framework of the self-interest of the elites, because they are not displaced. You continually extend the rights of citizenship to a wider and wider group of the population. You start with elites, maybe 5 to 10 percent of the population, and in the process of extending rents, you give them social security, workers' compensation, things like that, that give you a stable workforce. Some people think that the non-elite groups take over from the elite groups; we don't think that's historically true. It's got to be in the interest of the elites if it's to evolve to open access.

Q: Tommy Koh: may I begin by challenging the central thesis that a monopoly in politics spills over to a monopoly in economics. This is on the record, but any negative remarks I may make about Asia are off the record—that's a joke (laughter). Look at Hong Kong: it had a non-competitive political market. South Korea developed under one-man rule; Taiwan also. Even Japan has had one-party rule. What about Singapore? One could argue that we have a non-competitive political market, but it has not contaminated the economic market. (Yes it has!). A: Good question. First I want to eliminate Singapore and Hong Kong; city-states are a very unusual kind of feature; I'm not sure it's an exception but I want to put it aside. (Joel's thought: Singapore Inc, Temasek, GIC, control 60% of Singapore's economy. North's thesis stands intact; the real question is how a semi-free market can perform so well.) I advise China and I warned them that, in the long term, they can't have a monopoly on power and keep up this growth forever. The leaders agree, when they are off the record. South Korea and Taiwan are on the doorstep, they are in transition. The conflicts that I see, I'm not an expert, seem to be conflict between protecting rents and growing the economy.

Q: Kishore: Tommy, I have to say I'm more on North's side in this argument. (North: Oh boy!) I agree that all of us have to move in the direction you've spelled out, even the Asian societies. The destination is not in doubt, the question is how and when. One issue is how lobbies create rents. Farm subsidies are a big example. Even in open access societies, plenty of rents are being created. But a more fundamental problem is, you need to carry your analysis to a higher level, from nation-states to global society. The former champions of trade liberalization are increasingly captured by lobbies; Doha is not succeeding because the US and EU cannot overrule their agricultural lobbies. My second question: I like how you said you can't understand things from just one perspective, economics, policy. As dean, I've found it's so hard to create multi-disciplinary education in a school of public policy. The economics professors want to teach economics, the policy professors policy. How do you get a multi-disciplinary approach?

A: You don't eliminate all rent. EU agricultural rents are even more severe than US. Everyone wants to protect their own interests. It's a matter of degree, to what extent an open-access society solves this. But open access societies are much higher income, there's a big gap, putting aside city states and the arab oil countries. Limited access are usually under US$10,000 per capita income, open access start as $20,000 and go up to $40,000. Now about global economy, are we destroying it by limits on competition. We may be. In the book, we don't deal with adequately, where do we go from here?

Ergotic vs non-ergotic theories: The physical sciences have theories explaining the real world. We don't have anything like that in the social sciences; we don't have real fundamentals. We don't have anything like that; the constructs are purely in our head. Meanwhile the world doesn't look anything like it did in 1820, 1830. We need adaptive efficiency, institutions that allow for experimentation in the face of uncertainty. You need institutions that experiment, and eliminate failures—special interest groups may have vested interests in failures. The capital market has changed completely from 50, 30 years ago. You can shift $100 billion from one country to another with one key. All this raises some questions about where we are going, and I don't know where we are going, but with adaptive institutions we have a chance, only a chance.

Multi-disciplinary. I don't have a good answer to that question. The same thing is true, the interplay between economics and sociology. We know very little about, for example, how we create different cultural heritages. This book is really an agenda for research, a different kind of agenda. All of the interesting questions are on the borderline between economics and politics, economics and sociology, economics and culture.

Q: Vikram Khanna. I want to take you up on your point about the inadvisability of imposing alien institutions on countries. I see many places around the world with alien institutions, doing quite well. Judiciaries, regulatory frameworks. You could even argue that Japan's Meiji Restoration adopted alien institutions. The interesting question is why they work in some places but not others. Why don't they work in Africa? Iraq is an outlier example, but I'm not so sure about your point that it's always inadvisable to impose alien institutions on a society. A: I don't think you've disagreed with me. The degree of flexibility in a limited access social order; some are clearly acceptable and some are not. I argue that alien institutions are unacceptable if they will undermine the stability of the existing elites, and will not be accepted. A lot of my advice gets rejected: "if I did that, I'll be killed or overthrown the next day".

Take Haiti or sub-Saharan Africa. You can't impose the things that work in the West, but you can in South Korea or Taiwan or the Baltic states. I don't think we're disagreeing. I'm making a distinction between the things that do not undermine the source of order and can evolve within the social order.

Q: Koh: Perhaps you and Vikram disagree about how culture fits. Your view of culture was as a constraint, very negative. Are there views of culture that could strengthen our prospects for success. Lee Kuan Yew in a famous interview with Foreign Affair said that one of the reasons East Asian countries have grown so much is they share cultural values of hard work, saving for the future, sacrifice. You economists just can't handle culture. A recent study showed that rule of law is the differentiating factor between successful and unsuccessful countries.

Q: (another econ professor, missed the name) My findings clearly indicate not only a relationship between political system and ethnic conflicts. The possibility of ethnic conflict is high in limited democracies and low in non-democracies and established democracies. ... Imposing partial democracies is ruinous for these countries. A: Great point. I've got too much to say in response. One of the things I'd like to learn more about is ethnic conflict. We don't know how to get society to allow for greater ethnic diversity. Singapore seems to have done a great job with that. (Impromptu student research: There are about 30 people at the table. A max of three or four have Malay roots, more likely one or zero. Four or five are Indian. The rest are Chinese (plus three white Americans, one Filipino). We students aren't sitting at the table, but include two white, one Filipino, two Bangladeshi. Oops, I lost track of the discussion while conducting this research. Update: I saw a definite Malay. He was bringing a cup of water to the guest speaker, and then left.)

Q: [...] in some cases, unbridled competition leads to suboptimal outcomes. Could it be that you need balance between OAO and LAO? Second question, is the role of access in competition overstated? Maybe access is not a condition of competition but a reaction to it. Perhaps contestability, not actual competition, is the most important thing. [...]

A: Let me look at the competition issue. We economists never did our homework on it; we say that competition is good but we don't mean it in an unbridled state. I've been to Russia before and after the Soviet Union. After 1991, I said to a banker friend, things are great, they're going to improve, and he said, we're going to have competition. We bankers are going to kill each other. He was serious. I like contestability; it fits what I mean better than competition. You want productive competition, and that doesn't happen automatically. Adam Smith just assumed competition creates welfare but that's not true unless it's constrained. (I still haven't read more than a chapter of Smith but I understand him to have understood the need for restraints on competition.)

Q: Neo Boon Siong: The ability to organize to influence economics and politics ... I have two comments. I was fascinated by your term "natural state", which seems to suggest that open order access may not be natural, may not be stable. (That's what I thought, too). [...] Secondly, in society organizing to compete and make organizations real. How organizations can become adaptable and dynamic. We've looked at regional institutions and FDI (Foreign Direct Investment); there are more commonalities than differences. Everybody has an export board, etc. Yet the degree of effectiveness varies tremendously. Not just adaptive efficiency but actual adaptability.

A: Capturing rents, which you talked about. I'm interested in a dynamic force that induces innovative change. That doesn't mean you completely eliminate rents, but you have a Schumpeterian process going on. In our writing in more detail we try to look at the interplay between institutions and organizations. The important distinction is that, in a limited access society, the innovations must be compatible with the interests of the ruling elite, but in an open access society you don't have that constraint.

Q: (heavy paraphrase): people may prefer to live in limited access. Many singaporeans will tell you they are happy to leave the decisions to the government. A: another ten-hour answer. Something else I didn't mention, but it's in the book, is transaction costs. Costs are low because you have trust. ...

Q: Ann Florini: perhaps the economic costs of maintaining trust in a small state are different; Singapore may be such an exception to your theory. My question is about the world going forward. I can see the contest playing out in two ways. One is globalization creates new opportunities for cross-border rent seeking. (Wonder what she means. IP law? Agriculture) But also, some aspects of globalization challenge the rent-seeking elites. On contestability and accountability, I'm researching new modes of government in Asia. Instruments other than standard Western tools such as elections to bring contestability. You may be seeing real contestability, or you may just be seeing a smokescreen to hide rent-seeking.

A: On the last point, yes, I agree. On the other points, I've been asked many times here how Singapore fits. I don't know where it fits, but the points you made about more low-cost information in a small space has something to do with it. The globalization question. ... Is an open-access state stable? I'm not sure it is. My colleagues and I have considering exploring that.

Q: Choo Wai Hong: I'm not an economist, I'm a lawyer by training but a keen observer of world events. In your model, it seems like all countries need to progress to open access. I don't think it's a linear progression. From an Asian perspective, I see it as a war between the West and the rest of the world. The imposition of these ideas seems like another colonial war. I see globalization as a philosophical war by the west against the rest of the world. The real beneficiaries are the corporations in these open access societies. I don't think transition to open access is inevitable.

Koh: I disagree with that; data shows that highly globalized countries, including developing countries, are better off than less globalized countries. This is even causing some people in the West to question globalization. North: I think the biggest beneficiaries in the long run will be China and other non-West countries. You are right in that corporations have a very narrow objective, to make profits at the expense of everybody else. But if you have effective contestability, then in spite of their best efforts they're going to produce something they didn't anticipate.

Joel's note: I want to ask my question about GPA, Malaysia, and market-dominant minorities, which would have fit well with Ms Choo's question, but I'm literally not sitting at the table.

Q: What explains the great transitions between the social orders? in the Marxist theory, there is a dialectic at work. it does seem to me that for any theory that purports to explain social change, you must understand the fundamental dynamics behind change. I haven't read your book but there must be some fundamental dialectic at work. A second point: property right seems to be a universal method for regulating violence but the historical record says otherwise. In China, Confucian culture prevented violence for centuries without any notion of property rights. ... trust, and no need for legal systems.

A: I was a Marxist for many many years, and it had an enormous influence on the way my thinking evolved. I though he asked good questions but didn't get good answers. I don't think there is a source of change. My colleagues and I have had big arguments about the degree to which belief changes are the result of immediate issues confronting organizations, or independent of a particular context, the development of beliefs as simply new ideas. I have argued that the decline of slavery was something you can't make sense of in a self-interest model; it became such an issue after the reformation and beginning in the 18th century, the view that it was immoral. Why that didn't play a big part earlier is a good question. Beliefs also evolve independently of specific things. How those two join together is a big issue.

Q: Arun Mahizhnan: the thesis you have built is based on the European experience, but until a few hundred years ago, India and China had the strongest economies. The emperor was probably the greatest rent-seeker in the Chinese system, but he had to be a just emperor. A: that's a good point, and I thought that was part of my framework. A belief system that sustains stability is much more elaborate than I can explain [in this talk]. I don't think I'm confined to just a western viewpoint.

(I missed the question, something about a 1990 book). A: From property rights, I got into belief systems, and informal norms and where they come from, and trust, and all these things are on the agenda for things we have half-baked knowledge of. but it's moved me in the direction, looking more at how beliefs get formed and how they affect institutions.

Living for two years along the flight pattern of San Diego's N.S. Lindbergh Airport^*, I turned into a little bit of a plane-spotter. For no particular reason, I decided to put this chart together this weekend. It should help anyone with a casual interest in planes identify any of the common commercial jet airliners (except the Russian ones).

There is also a PDF version. Both the graphic (all sizes) and PDF are licensed under a Creative Commons Attribution 3.0 United States License. Please attribute Joel Aufrecht and link to this page.

* N.S. Lindbergh being an abbreviation for Nazi Sympathizer Lindbergh. This is not part of the formal name of the airport, which is simply San Diego International Airport, but as long as they have artifacts memorializing him and a big mural of him by the road, I think it's only appropriate to keep N.S. in the name.

Christopher McCrudden and Stuart G. Gross, “WTO Government Procurement Rules and the Local Dynamics of Procurement Policies: A Malaysian Case Study,” The European Journal of International Law 17, 1 (2006), pp. 151-185

I continue to be amazed, this semester, at how well all of my classes fit together. This article, about the status of "global administrative law" in procurement, brings together a lot of threads. You might think that "WTO Government Procurement Rules and the Local Dynamics of Procurement Policies" would be fairly boring, but in fact, if Douglass North and his co-authors are correct, these are exactly the kinds of things that make the difference between this:

and this:

North argues that the transition from "limited access order" to "open access order" is the key to being a rich country. In limited access orders, the ruling elite use their monopoly on power to monopolize economic opportunity, and use the profit to sustain the monopoly on power. The path to national prosperity, therefore, lies in breaking open the monopolies on both political and economic power. Global procurement rules, in negotiation as part of GATT and then WTO, aim to do precisely that for government spending, which can be easily amount to half of all spending. Obviously, enshrining open access in procurement laws and practices would go a long way towards an open access order, on both political and economic fronts.

The paper is specifically a case study in Malaysia, which has several interesting dynamics going on. The first is a "market-dominant minority", as defined in Amy Chua's "World on Fire", a book which I bought and skimmed a few years ago but regret never getting around to reading through. But I think I got at least the thesis: that a common pattern in economies is for an ethnic/racial/religious minority to have a wildly disproportionate role in the economy. (Which leads to a good question for Douglass North: what does his theory have to say about market-dominant minorities, which on the surface seem to violate one of his premises.) In Malaysia, the Chinese are "a quarter of the population but hold 40% of the economy", while Malays are "60% of the population" but "own just 19% of the economy". The Malaysian state after independence was founded on "the Compromise", which was essentially that the Chinese and Indian minorities would accept second-class status in exchange for not being ethnically cleansed right out of the country. But after decades, the Malay majority remains at an economic disadvantage, and over time a number of government policies have formally enshrined discrimination in favor of Malays. These policies are at odds with emerging international norms of open procurement.

Note that the United States also opposes complete open procurement access, because US government procurement uses discrimination to support minority and woman-owned businesses. Only a small fraction of WTO members are part of General Procurement Agreement (GPA); the US is a member but has negotiated big exceptions.

We can also tie in a bit of current news:

The controversy over the Pentagon decision to award a $35bn refuelling tanker contract to EADS ... Nancy Pelosi, the Democratic House speaker, said Boeing had been on course to supply the US Air Force with tankers until Mr McCain "intervened". "Senator McCain intervened, and now we have a situation where the contract may be - this work may be outsourced." ...

The air force originally chose Boeing to supply it with 100 tankers. But Congress canceled the deal after it emerged that Darleen Druyun, a former top air force acquisitions official, had held illegal job discussions with Boeing while still negotiating the deal. ... The tanker scandal claimed the career of former Boeing chief executive Phil Condit. Ms Druyun and Mike Sears, Boeing's former chief financial officer, were sent to jail.

I'm not a reporter so I'm not going to do the work, but surely there must be quotes in which Pelosi and others who have complained about the EADS award are, in turn, complaining that US companies are denied access to foreign markets because of preferential treatment of foreign domestic companies?

The article goes on to describe negotiations in the last few decades to bring Malaysia and other developing countries into the GPA subset of WTO, negotiations which have to date failed. North would argue that the developing countries are shooting themselves in the foot; they are refusing membership in a group which would help them move to open access orders. I think this has be understood in the context of what I'll call the "Washington Consensus Debate", which is roughly this: Developed countries: "If you agree to play by all of these rules which work well for rich countries, you'll be rich." Developing countries circa 1980s: "Okay" Time passes. Developing countries do not become rich. Developing countries: "Hey, wait a minute! These rules just let you keep exploiting us. You yourselves didn't follow these rules to get rich."

The actual, original Washington Consensus rules are probably not to blame; most of them should help everybody. But the other cruft and ideology that accumulated around the term probably does include a lot of rules with very unequal results, not the least of which TRIPS. (The article quotes a paper alleging that some developing countries have had to spend an entire year's development budget to set up the regulations TRIPS requires, regulations which protect the creators of intellectual property, not the consumers. Guess how many developing countries are major creators of intellectual property (pharmaceuticals and software each bring in hundreds of billions of dollars per year globally; movies bring in far less, and music less still)? Guess who benefits.) So the big question is, are open procurement rules and other steps to reach an open access order really different from exploitative "Washington Consensus" prescriptions like open capital flows (which some economists now view with much skepticism)?

Ann Florini, The Coming Democracy: New Rules for Running a New World, Chapter 7, Brookings, 2003

The Wonderful Wizard of Oz was an allegory about the gold standard? Well. Who knows about th