Jerald Greenberg, Robert A. Baron, Behavior in Organizations. Chapter 13: Leadership in Organizations

The leader is the person with the most power in a group. A leader is non-coercive, goal-directed (Joel's note: I think this one is debatable; if someone can effectively veto any other goals, but puts forth no goals of their own, perhaps they are a leader that breaks this definition or an anti-leader; either way, their role clearly has something to do with leadership), and has followers.

A leader, who determines the group mission, is different from a manager, who implements that mission. But this distinction can be blurry, and one person can have both roles.

Great person theory says that all leaders tend to share special traits, such as drive, honesty, motivation, self-confidence, intelligence, domain knowledge, creativity, and flexibility.

Behavioral analysis of leadership suggests several dimensions. One grid is Autocratic to democratic and permissive to directive. Another is high to low person orientation and high to low production oriented; these are two different axes, and grid training is a technique to move people who are low on one or both to high on both, "9,9".

Analysis in terms of followers: the leader-member exchange (LMX) model, which defines "in-groups" and "out-groups"; leaders treat in-group members better. In self-managed teams, a team leader builds trust and teamwork, expands the team's capacity, attempts to create a team identity, exploits (in a positive way) differences between group members, and tries to foresee and influence change. Grassroots leadership empowers people to make decisions.

The attributional approach is a theory in which leaders try to understand and change the causes of followers' behavior. It also describes how followers think about leaders' motivations, e.g., the "rally 'round the flag effect" when followers extend additional trust to leaders when the group is in crisis.

Charismatic leaders exert special power due to personal charisma. Transformational leaders revitalize and transform their organizations.

Contingency theories focus on the relationship between leaders' characteristics and the context in which they lead. Least Preferred Co-worker (LPC) contingency theory says that leaders can be evaluated by how they treat the follower they like least (like judging someone by how they treat waiters and servers). A low LPC leader is likely to succeed in environments of low situational control, when impersonal direction is usually appropriate, and high situational control, when the leader has unchallenged power. In context of moderate situational control, a high LPC leader will be more effective. The notion of putting leaders in situations appropriate for their personal capabilities is leader match.

Situational leadership theory defines two axes: task behavior (higher means more direction required) and relationship behavior (higher means more support required). In low task, low relationship, delegation is the best strategy. In low task, high relationship, participation. In high task, high relationship, selling. In High task, low relationship, telling.

Path-goal theory says that followers like leaders who help them on their path to their goal. Leaders can adopt four styles: instrumental, supportive, participative, and achievement-oriented.

Normative decision theory says that seven criteria (leader information rule, goal congruence rule, unstructured problem rule, acceptance rule, conflict rule, fairness rule, acceptance priority rule) together suggest which of five basic strategies (autocratic, autocratic with input, consultative with individuals, consultative in group, group decision) is best for a specific context.

The substitutes for leadership framework describes conditions where leaders are not necessary, such as when individual characteristics of workers make leadership unnecessary, or when the jobs or organization are structured to not require leadership.

Leaders can develop via 360-degree feedback, networking, coaching, mentoring, and on-the-job experience.

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Okay, that was the study guide. Now I will stop biting my tongue on my personal interpretations:

• p 504. "In view of all the attention that has been paid to the dishonest dealings of many top business leaders in recent years (e.g., most notably the late Ken Lay and his associates at Enron), it's important to note that successful leaders do, in fact, place a considerable emphasis on ethics and morality." This is the purest bullshit, special pleading of the rankest species. "oh, those guys don't count, because they were caught. real leaders are good people. How do we know that? Because leaders are good." This line of logic comes from the same batch of mental vomit as Bush's assertions that the US doesn't torture, or the idea that, "When the President does it, that means that it is not illegal."
• p 517. Rupert Murdoch's vision is cited as "To provide accurate access to news for people throughout the world." He may have said that, but nothing in his record suggests he's ever believed that for as long as one second.
• p 522. "An airline pilot leading a cockpit crew is expected to take charge and not to seek the consensus of others as she guides the plane onto the runway for a landing." In fact, the most horrible air disaster of all time happened because a pilot, impatient to take off on a foggy runway after many delays, ignored his flight engineer's concerns about another plane possibly being on a runway. 583 people died. It's certainly true that, "when the demands of the task make it clear what a leader should be doing, it is perfectly acceptable for them to focus on the task at hand." But the example cited better illustrates the risk of a leader refusing to listen to subordinates.
• p 529. So, can we run nations through the checklist and see if democracy ever comes out as the appropriate leadership style?
• p 540. Question for discussion: "What special qualities make Chan Suh [founder of Agency,com, an online advertising company] so effective as a leader?" Oh, I know. The quality of being lucky. Lots of people are bold visionaries who create companies in sectors that conventional wisdom says there is no market. It takes leadership to do that. But most of those companies fail; it takes luck to land in a sector that really does explode. Bad leadership will help you destroy a success, but good leadership is not a sufficient condition for success. Again, the premise of the question is that, because person X has success, they must be an effective leader, and to me this is a circular premise.

Ethnocentrism is in-group versus out-group identity; pride in the in-group; disrespect for the out-group. Ethnocentrism is necessary for maintaining group identity, and thus for maintaining groups. Every country's foreign policy discourse is ethnocentric, not just China's.

Okay, I'm having trouble following his point. Looking around the room, I'm not the only one. Looking around the room, I see only two other white people; perhaps the speaker would do better to switch to Chinese? He's reading prepared remarks, and his head goes up and down from the table to eye level every second or so, and if I look directly at him, I get dizzy. The talk is grammatical but, given how much trouble he's having getting to any sort of discernible point, the speaker is ill-served by his poor pronunciation.

Okay, none of the details and examples are registering in my brain, but the gist is that both the Chinese and Americans are ethnocentric. China and other countries are somewhat obsessed with the US; this is somewhat natural given the weight of the US, but many countries magnify that perceived weight. For example, there is a slogan that "the Chinese-American relationship is the weightiest of the weightiest" (it sounds better in Chinese). A sign of progress is that this slogan is no longer used. China's foreign policy elite were thrilled after good Clinton/Zhang Zemin relations, but the Belgrade embassy bombing was very bad for relations.

Many Chinese policy elite—challenge from the audience after the speaker names a Chinese academic: what makes him an elite? Does Deng Xiaoping listen to him? The tone in the rooms starts to turn a bit impatient. The speaker thinks the crowd is hostile because of his position; personally, I can't really figure out what his position is in order to judge it.

Chinese policy elites and newspapers give excess weight to the US; Kissinger and Brzezinski get quoted regularly and the US dominates "foreign"-oriented Chinese newspapers.

Some article titles, loosely translated: "Who else can take the ring after the inevitable decline of the United States". One academic's recent article is "Let's compete against political ideologies with the west." He was explicitly denying there is any universal ideology among men. "China should try to slow down the inevitable decline of the United States." "China's moral hegemony will sustain while the US immoral hegemony will not sustain." An outburst from the audience as an academic is named: "He's not an elite. he's my friend actually"

Obsession with the US will be counterproductive to a more dynamic Chinese foreign policy. Some signs of progress in shedding US obsession. The weight of the US in China's interests has declined. China cannot always use the US perspective on things, human rights, development, etc.

Q: You're saying that China's making its own policy based on its own interest. That's simple; why do you have to spend so much time working through this? What is your sample size? What is your hypothesis? How do you test it? A: (he's talking but I don't follow what he's saying or how it relates to the question.) I'm not taking a quantitative approach. How many articles? Fifty, and more than a hundred pieces ....

Q: Among "elites", have you found anyone promoting universal rights, individual human rights? (interjection from another person at the table: What universal rights? US or Chinese?) A: Because of the Chinese political system, talking about universal rights must be "fuzzy".

Q: Psychologists use experiments, not guesswork. Your sampling could be subject to selection bias. How do you define the foreign policy elite? Look at all their writing, speeches, comments, and then decide what are the dominant themes. (that reminds me of this.) A: Yes, in psychology you can do experiment, but not in foreign policy. You can't do a Cuban Missile Crisis experiment. ... Nietzsche, foucault, ... a lot of things can't be quantified. Interjection: you could use one journal back to 1997 or earlier and study all the words and issues.

Q: Many African-Americans and Hispanics still say in surveys that they are inferior to whites. ... A ...

Q: where is Chinese foreign policy formulated? At the X school, or the "muliao"? A: It's far more open than any time before; Zhang Zemin initiated more openness.

Q: There is a theory that national perception and interest are part of the context of foreign policy. But the elite groups actually express foreign policy.

Q: Who and where to watch for changes in foreign policy? A: Read journals, but it's mostly private internal discussions. I can't name who I think are the most influential; I have a list but I can't tell you.

Q: At X university where I was for some time, perhaps half of students and professors' research focus was on US domestic politics or Sino-US relations.

Q: What's the percentage of Chinese elite have a strong version of ethnocentrism? A maybe 30%.

In reaction to the huge response to their last event, SPMI's schedule is blossoming with events. Another full room today (A few more ang moh's here today. Apparently we're all doing the shaved head thing now) for "Collaborating with the Enemy", by Steven Blais of IIL. This event is S$10 for SPMI members, including a very tasty Indian Vegetarian meal (places in the world that have to deal with halal and other religious requirements tend to be very kind to vegetarians as a bonus. Some sort of drawing with a prize over $1000 is announced, which gets a loud murmur going as people dig for their business cards. Given that S$10 each probably doesn't cover catered meals plus rental, IIL must expect to drum up a lot of business here.

Joel's executive summary: Projects must solve problems. Problems come from business. Business analyst, project manager, and system analyst are distinct and mutually exclusive roles. The business analyst role is responsible for ensuring the project solves the problem.

The rest of this post is my paraphrase of the speaker unless otherwise noted.

The great gap between project managers and those people who want our services. We have to bring in projects that are on time, on budget, and have all the features we promised. And what keeps us from doing this? The customers! When I started they didn't have this gap, they didn't have users. My first system was the automated payroll for the Navy. Punchcards, line printer. Chesty Puller: "I don't really understand this stuff; we have a printer that can print 1400 lines per minute; who can read that?" Not much user interface, the users worked with us, it was fine.

The project manager: what are your requirements?

The business person: I have a problem. You're the IT, you fix it. What are requirements? I have a problem with the annuities system.

PM: Give me some requirements

B: Well etc etc

PM: (to self) this is great, I can use that new java framework and ...

Joel's note: it doesn't seem like hilarity is going to ensue. Summary: the project manager and business person have different goals, contexts, and languages. Process-oriented business versus project-oriented project management. Business teams are together for years; project teams may last two months.

Anecdote about delivering a computer system to which the user responds, "it doesn't feel good." After many weeks, this was articulated into how it looks, how the mouse moves across the screen.

Standard personalities for technical people: INTJ (that sounds familiar. Now can we get the stereotypical FIRO-Bs?). For business people: ESFP.

How does the gap affect the project? changes, delays, scope creep, cost overruns. What tools help deal with this? change management, product acceptance. Joel's note: Hmm, agile techniques are one way to try and deal with this structural problem. I wonder if he'll talk about them, or some other approaches? Here's some thinking on integrating Agile and PMBOK.

I won an award 35 years ago for a US Navy project. On time, under budget, delivered everything promised, never had a defect reported since delivery. Of course, it was never used, and we knew it would never be used before we started working on it. Best project I ever did, because there were no users to mess it up. The point is that a successful project is not the same thing as a successful business. Projects are tactical, not strategic. Strategic business people should not be involved in projects. But now there's a gap between the business needs and the project. Who fills the gap? The PMO? No, it's not their business either.

Let's fill the gap. Organizations have a role for that, whether they label it or not: business analyst. Most of you PMs also do that role. The business analyst's job is to ensure that the project produces a product that solves the problem. The business analyst is a bridge.

As a consultant, I'll be working with a company to improve their project management, and I'll ask, what do you see the role of the business analyst as? And they say, they're a bridge between technical and business. Actually, they are a bridge between problem and solution, which may or may not be technology. The definition of the solution is the requirements. The business analyst establishes the bridge and the project manager gets us across the bridge. In SCRUM we call them the product owner. (Ding! Agile mention. Quick sidenote: I don't want to be mistaken for an Agile cheerleader. My own experiences with Agile are mixed. Whether or not one or more Agile methods is a good solution, they are at least addressing the right problem, which is basically this same gap he's talking about.)

Business Analyst is a role: they define the real business problem, completely and accurately; and "maintains full communication between stakeholders with the problem and solution team". At IBM we weren't allowed to have problems, only challenges.

The business analyst should ask, how will you know that we've solved your problem? If there isn't an answer, there isn't a problem. When we have that, we have acceptance criteria, a contract. The issue is that many times, the business doesn't know their real problem. Incidentally this happens well before we have a project.

If customers get more features, it's scope creep. If IT throws in some extra things, it's gold-plating. Notice who's naming these things.

Incidentally, this guy is a very good speaker, even though he's got powerpoint in the background. I think he could spike 80% of his slides, leaving only a few diagrams, and be better for it. But perhaps the other, wordier slides, which he generally ignores, are helping the readers? Anyway, he's very animated, vivid; you can see the punchlines coming but that just makes it more intimate.

Users don't have requirements; they don't know what's possible. They develop requirements together with the technical team. It's not if the requirements change, it's when. Plan for that evolution and you won't have creep. Halting scope creep won't help if the product doesn't solve the problem, e.g., have the right scope; if the product doesn't solve the problem, why are you making it? And, scope can't creep unless somebody agrees. It's up to the PM to say no to anything that doesn't solve the problem. Um. It feels like there's some sleight of hand here. How can you predefine the scope, given that we've agreed that it's impossible to understand the requirements before you start? I'm not convinced that scope exactly equals problem.

A need is not a problem. Why do you need it?

PM has conflict of interest. PM defines the project she's responsible for, and may push for a better project rather than a better solution. The business has a conflict of interest: it is not objective about the problem or solution. Businesses rarely do due diligence over the project: creating a charter, determining ROI, etc.

The business analyst starts before the project and ends after the project. The business analyst communicates changes back and forth between the business and the project. After project close, the business analyst is still confirming that the delivered product solves the problem. "If you have a solution that does not create at least three new problems, you have the wrong solution." If you are a PM who is also a business analyst, skip the party, go down and have just one Singapore Sling with the project team, then go back and see if the product works in production.

What's the difference between business analysts, project managers, and system analysts? They all do the same functions, (plan, manage risk, work with stakeholders, requirements, test, estimate, impact analysis, evaluate alternatives). But they all do them differently, for different people. BA does acceptance tests; PM tests project plan; SA tests integration. How to test the project plan? The plan breaks everything down into work tasks. Each task has an input and an output. You test the plan by ensuring that all inputs and outputs are used. You test it by laying out the tasks with your team (not with MS Project, but with the actual people). BA focus is business; PM focus is project; SA focus is technical. It is very difficult for one person to do all three roles, especially if they aren't trained.

How many of you grew up and went to school and said, I want to be a project manager. We're almost all accidental project managers. There are people who grow up to be systems analysts, go to school for that. Hopefully some day there will be schools for PMs, fraternities, etc. These three roles call for different personalities, different talents.

BA to customer: Is what you are asking for going to solve your problem? My job isn't to build something, it's to solve your problem.

(Side note because he said something about dodgeball: this is cute but raises the disturbing question: why would you pay three dollars to see the equator?)

How to wear two hats: As the PM, focus on the team. As the BA, don't let project noise (deadlines, etc) influence your relationship with stakeholders. I literally had different hats that I switched back and forth depending on the work I was doing.

First, make sure you understand what the role of the business analyst is. Keep the roles separate. Write the requirements as a BA; come back as a PM and pretend somebody else wrote the requirements.

about ten people just got up and left simultaneously. It's 8:35; are they all going to catch a bus, or like CEOs giving themselves raises, did they just realize that they could leave? The speaker is good but it's true the crowd (myself included) has been drifting for a few minutes.

An abrupt ending, and only one question. I think he could have wrapped up ~8 minutes earlier and had 10 minutes of good questions.

Q: Who has authority? A: The project manager has authority and accountability for the project, the BA for the business.

A lecture from Shaukat Aziz, former Prime Minister of Pakistan.

Joel's note: The Boston Globe seems to think he's one of the good guys. The following notes are my paraphrase of the speaker unless otherwise noted.

"Think beyond and outside the box, and try to meet the new challenges with vigor. ... The only constant in life today, ladies and gentlemen, is change. You must adapt to change. ... Staying still is not the answer." Apparently this will be an all-platitudes speech?

Today's topic was chosen and approved by Dean Mahbubani. Perhaps he thought that as a survivor of several assassination attempts I would be qualified to speak ... Terrorism is global.

With the recent upsurge in terrorism—clearly it has increased. If you try to travel today, it is a hassle. If your name is Muhammad .... This is done because not everybody knows who you are and there's a risk that if they let the old person in, they will cause trouble.

People link terrorism with a particular region or religion, Islam, but this is not historically the case. In my view, one word can describe most, not all, of the causes: "deprivation".

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Joel's note: Hm. Let's see what a cursory literature search says.

Club de Madrid says ... well, they certainly didn't come down to one word. "Poverty per se is not a direct cause of terrorism."

The Strategic Logic of Suicide Terrorism, Robert A. Pape, U Chicago :

"this study collects [188] terrorist attacks worldwide from 1980 to 2001. ... This study shows that suicide terrorism follows a strategic logic, one specifically designed to coerce modern liberal democracies to make significant territorial concessions. Moreover, over the past two decades, suicide terrorism hasbeen rising largely because terrorists have learned that it pays.

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Meanwhile back to the speaker, who has said essentially nothing notable. "If you treat people with respect, they'll be less prone to getting into extreme behavior. More importantly, we must give people a voice. ... At the end of the day, if people have a voice, can within certain norms express their views .... Give people a level playing field and a sense of hope and you will see ... this will bring the temperature down. It has to happen, because there are many fires burning around the world ...."

"Here the role of the media in civil society is critical. The media ... if there is a message that, see how destructive this is, it will help in the hearts and minds of people."

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Q: (from Dean Mahbubani) We both lived in New York, in fact in the same apartment, St James Tower. A: but your apartment was twice as big. Q: But your salary was more than twice as much. A: That's true.

Q: How do we change the American conception of Islam? A: If you see what goes through their minds, 9/11 and 7/7, these are not minor incidents. The whole country was shaken up. ... Make people aware that the acts of a few angry people do not represent ...

Q: So Pakistan decided to side with the US. We hear that Pakistan is signing deals with the people it was fighting against. Is this a good idea? A: We joined the coalition against terrorism because terrorism is bad [my paraphrase]. If a group is willing to talk, I think that is the right way to go. The more people you can get back to a normal life, you have gained.

Q: Assassination of Bhutto discouraged good men and women. to some, terrorists are merely freedom fighters. Can you comment on that? A: Bhutto's death was a national and global tragedy. Every life is precious.

Q: [A regular attendee at these seminars reads from two pages of notes until he is cut off firmly. No idea what his point or question was. He started with "Singapore has found racial harmony with four races and four religious beliefs living together." Aziz responded that the questioner had an incorrect view of Islam?

Q: Is Islam being used as a force multiplier, or is the root cause relative (not absolute) deprivation? Is there a need to control radical madrassas? A: Madrassas are religious schools. I was asked to open a school; they had O-levels and were going to A-levels, they had proper computer classes. In Pakistan, the madrassas we have are clearly performing a role. There may be a few, who are, not as an institution but with individual teachers promoting extremism. Largely they are helping people memorize the Koran and so forth, and also free lodge and board for children who need education. Free books. The curriculum is being broad-based; those who are strictly in religious teaching, no need to be defensive about them, this is an important function in any society. To your first part, there may be affluent people going into terrorism, but they can still be deprived. They may be living in a country where a dispute is festering for ages.

The dean is getting very impatient with long-winded questions. A: The question is on ISI and its links to uh. Let me say that ISI is professional and respected. They pursue the national interest. The Taliban, the people in Afghanistan ... the rest of the world together recruited young people to fight the Soviet Union. ... Pakistan is very clear that we do not allow on our soil activities that are prejudicial to our interests or any other nation's. The Taliban is an Afghan government. We have 3 million refugees in Pakistan, Afghan will not take them back. We would like resettlement, more aid (which is happening in the Paris conference), a concerted effort against drugs.

Q: Karzai threatened to send troops to Pakistan after a jail break? do you think he's serious? A: Pakistan has always said that a strong, stable Afghanistan is good for the region.

Q: in the west, there's a myth that the religious reasons for terrorism are more important. Is that true? A: Faith does play a part, but it's only part. Islam as a faith doesn't promote violence. There are many attacks outside the Islamic world.

Q: When you were prime minister, what did you do to improve the quality of life of the people and deprive people of the financing for the terrorism? A: Great economic growth in Pakistan. Pakistan's per capita GDP is much greater than India. For the last several years, 7.5 percent growth, 5.5 percent this year. In terms of quality of life, reduction of poverty .... In terms of financing, it's a global effort.

Q: What is the greatest cause of deprivation that is leading to terrorism and what can we do? A: It's hard but I'll give you a few. Lack of people having rights, lack of income, feeling of hopelessness, ...

Like many of these seminars featuring politicians, the informational content of the seminar is very close to nil. The value in attending is in getting a sense of the personality of the speaker.

Impact Analysis

What would have happened to those receiving intervention if they had not received the intervention? In scientific terms, you need a control group. Remember that a control group is not a population that remains unchanged. A control group is a population that is subject to everything the target group is subject to except the intended intervention. The important thing to know here is that there are many, many ways to end up with useless data, as this Economist article about randomized evaluations discusses. A randomized study showed that giving away mosquito nets for free was far more effective that charging anything.

You might conclude that the trial showed that they should always be given away. Yet it turns out that millions of nets were already in use in the part of Kenya where the field trial took place, so their value was known. The experiment guaranteed supplies, so it did not test the assertion that you need to charge something to encourage reliable suppliers. And the recipients were pregnant women, whereas the point of giving bednets away is to provide anti-malaria treatment universally. The evidence from western Kenya was clear. But it hardly settled the question of whether the government should give bednets away across the country.

As an aside, it seems like we could very profitably spend a few weeks on the scientific method directly, rather than orbiting it with alternate language.

Experiments

The best experiment possible: fully blind, randomized, large sample size, repeated.

Since this is rarely possible in economics and social science, especially at larger scales such as national development, we can use alternative methods:

• natural experiment. For example, when different states in the US which are otherwise similar adopt different policies.

  An example of a natural experiment occurred in Helena, Montana during the period from June 2002 to December 2002 when a smoking ban was in effect in all public spaces in Helena including bars and restaurants. Helena is geographically isolated and served by only one hospital. It was observed that the rate of heart attacks dropped by 60% while the smoking ban was in effect.—Wikipedia

• matching
• statistical equated controls
• non-experiments

The instructor apologizes for putting Mao in a list with Stalin and Hitler in a previous lecture. I certainly think, based on my understanding of history, that by many plausible definitions of the set of "most prolifically evil dictators of the 20th century", Mao is a solid member (scholars actually put him at the top of the democide league table). Where's my apology for taking him out of the list? The instructor further notes that anyone who thinks that Hitler, Mao, et al were "born evil" is missing the point of the class. Judging from remarks in this and previous classes, those of us who are not in the habit of writing and forwarding angry emails are missing out on a substantial portion of discourse for this class.

Perspective: when I get somewhat frustrated with the challenges of this course and fantasize about nasty feedback (example: instructor: "students who are not faring well in terms of points right now should ..." me: "is there a way for us to know how we are faring in terms of points right now?" instructor: "no, but there will be soon" Oh good, it's the final session of class for the semester and the only information about our performance is a single paper that has been returned.) I find it helpful to read things like this, which illustrate how you can easily out yourself as an asshole to be ignored. Then I take a deep breath and pet my dog.

Since we are still talking about cost-benefit analysis and how to apply it to situations with hard-to-value outcomes, here's an interesting article in the New York Times:

The Bush administration is about to propose far-reaching new rules that would give people with disabilities greater access to tens of thousands of courtrooms, swimming pools, golf courses, stadiums, theaters, hotels and retail stores.

... The Justice Department acknowledged that some of the changes would have significant costs. But over all, it said, the value of the public benefits, estimated at $54 billion, exceeds the expected costs of $23 billion.

If you've seen my sidewalks photo-essay, you'll know that Singapore isn't great with accessibility. This is not scientifically collected data, but I do see very very few disabled people, such as people in wheelchairs. in public here.

About half an hour before class was over, a camera crew from "Corporate Communications" came in to film the lecture in progress for some unspecified purpose. A few minutes later, we came to this slide in the lecture:

Design contamination refers to the situation where participants know that they are being observed (tested) and act differently because of it.

In the slightly stunned silence after they left, someone muttered, "this is contamination."

Evaluation

Programs convert inputs to outputs, which lead to outcomes. Process evaluation is a descriptive analysis, performed after implementation, which measures the efficiency of inputs to outputs. Impact analysis measures the relationship between outputs and outcomes and seeks causes.

Reading

Rossi, P., M. Lipsey and H. Freeman (2004) Evaluation: A Systematic Approach. 7th Edition. Sage Publications, Chapter 1—An Overview of Program Evaluation, pp 1-28

Rossi, P., M. Lipsey and H. Freeman (2004) Evaluation: A Systematic Approach. 7th Edition. Sage Publications, Chapter 12—The Social Context of Evaluation, pp 373-419

Each time I try to do the readings for this class, I bounce off. There's more than a few Harvard Business Review articles, and they all tend to blend into one ur-article, which goes something like this:

Does A Successful Dynamic Leadership Framework Need Great Followers?¹

I've dedicated my entire life to following the greatest men in the world. I know that they are great because they are the CEOs of big corporations that make lots of money. And they have security guards, so I can't follow them too closely. But I am compelled to understand why they are so, so great. When I first started in the 70s, everyone said I was daft to research greatness, but I did all the same, just to show them. I conducted research so intense that they had to invent a new kind of supercomputer to crunch my data. It melted. So I recruited a team of highly trained interns and conducted more research, on a more powerful supercomputer. That one melted. So I built a third. That one caught fire, set off the halon system, killed three of my interns, then melted. But the fourth one stayed up. And that's what you're going to get, reader, the strongest leadership research on the strongest leaders in the world.

And what I discovered is that one single factor explains why some men are great and others are not. That factor is awesomeness. The greatest men are awesome. In the chart, you can see a list of awesome men and details of how awesome they are. If you train yourself to be awesome, you too can be a great man. But you have to be awesome.

By the way, I have a consulting business where I teach people how to be awesome. Call me.

Yes, these articles really annoy me. If you want straight-up notes for the exam, go read my notes for Policy Analysis, the other core module this semester. I promise those are straight up. Anyway, here is the reading for the class.

Peter Drucker, Managing Oneself. Best of Harvard Business Review 1999.

Know yourself, including what kind of learner you are (visual, auditory, etc) and if you are more of a leader, follower, or adviser. Do this by feedback analysis. "Whenever you make a key decision or take a key action, write down what you expect will happen. Nine or 12 months later, compare the actual results with your expectations." Once you know yourself, do what you are good at.

W. Chan Kim, Renée Mauborgne, Tipping Point Leadership. Harvard Business School Publishing Corporation.

Bill Bratton is great. Do what Bill Bratton did. Which is Tipping Point Leadership. So you should do Tipping Point leadership. There are four hurdles, Cognitive, Resource, Motivational, and Political. You should, respectively, Break Through, Sidestep, Jump, and Knock Over these four hurdles. (Yes, the palimpsest on this one is pretty easy to see through. They had an article about hurdles, a book called "Tipping Point" was a big best-seller, so they put the words "Tipping Point" on their hurdle article. What it really is is a missed opportunity to talk about the tipping point of the hurdles. But you only actually tip the Political Hurdle, so I guess that wouldn't work.)

Here's a reality check, courtesy the Washington Post. It shows crime over Rudy Giuliani's whole tenure as mayor; remember that Bratton was only commissioner from '94 to '96. And don't forget to look for the tipping point:

As a further aside, as long as Rudy continues bragging about his 9/11 leadership, perhaps those deaths should be included in the graph in 2001, which would obliterate the notion that violent crime decreased in New York over his tenure. But happily we haven't heard much of him lately; presumably running one of the worst presidential campaigns in American history has shown that platform consisting of three digits and a punctuation character isn't a winner.

In fairness to Malcolm Gladwell, the graph shows an inflection point, not a tipping point, which is "the level at which the momentum for change becomes unstoppable", something more relevant to network theory and propagation models. Whether or not there's anything to "tipping point" beyond glib pseudo-science is a discussion for another day; suffice it to say there's little of Gladwell in Tipping Point Leadership.

Daniel Goleman, Richard Boyatzis, and Annie McKee. Primal Leadership: The Hidden Driver of Great Performance. Harvard Business Review: Breakthrough Leadership, December 2001.

Summary: emotions matter. Great leaders cited: Jack Welch, in a sidebar.

Maria T. Farkas, Linda A. Hill, A Note on Team Process.

This is actually quite useful. It is from Harvard, but not from the Harvard Business Review. It's a note prepared "for class dicussion". It's too good and thoughtful to glibly condense to one sentence. And it mentions women and other groups that may be excluded from team discussion.

Jim Collins, Level 5 Leadership, The Triumph of Humility and Fierce Resolve

Out of 1435 Fortune 500 companies, only 11 sustained greatness for 15 years after a major transition. All 11 had a "level 5 leader." Therefore, you should become a level 5 leader. A level 5 leader is deeply humble and intensely willful.

From page 6: "If Moclker had given up the fight, it's likely that none of us would be shaving with Sensor, Lady Sensor, or the Mach III—and hundreds of millions of people would have a more painful battle with daily stubble." All I can do in response is point to this article by Moclker's successor, James Kilts: Fuck Everything, We're Doing Five Blades. (Here's some more serious criticism, noting among other things that "Kilts was personally never part of our community anyway. He never moved here, commuting from Rye, N.Y., and even holding his ''worldwide annual meetings" within a few miles of his home."

If you google for Level 5 Leadership, Jim Collins' home page cites David Maxwell of Fannie May. When "Maxwell’s retirement package, which had grown to be worth $20 million based on Fannie Mae’s spectacular performance... became a point of controversy in Congress", Maxwell voluntarily gave up the last $5.5 million of it. Wow! Amazing. What humility! Meanwhile, Fannie Mae engaged in "extensive financial fraud" over six years by doctoring earnings so executives could collect hundreds of millions of dollars in bonuses. Of course, Maxwell retired in 1991 and fraud was only uncovered going back to the late 1990s. I'm sure Maxwell was completely clean..

Louis B. Barnes, Managing Interpersonal Feedback

Jerald Greenberg, Robert A. Baron, Behavior in Organizations. Chapter 13: Leadership in Organizations

Nothing to do with Harvard.

Ron Heifetz and Marty Linsky, A Survival Guide for Leaders. Harvard Business Review.

When people are forced to change, they often attack the person responsible. Be prepared for this.

This is actually a perfectly reasonable point, and there's some good advice: recruit the uncommitted; "resist resolving conflicts yourself—people will blame you for whatever turmoil results"; "restrain your desire for control and need for importance", "read attacks as reactions to your professional role, not to you personally". I have only two objections to the article. First, it very strongly encourages you to assume that the change you are promoting is the right change, and dismisses the idea that people are resisting the change because it's a bad idea. It's quite true that people resist good changes, but people also resist bad changes and the people directly affected by a change do have special insight into its impact. That shouldn't amount to an automatic veto, but it shouldn't be treated primarily as resistance to overcome or subvert, either.

Second, Heifetz and Linsky are the perpetrators of "Adaptive Leadership", the basis for books and articles and who knows what else. It just reeks of bullshit, in this case the bullshit of perfectly good but un-novel ideas repackaged under a new name to start the next fad. "Who Moved my Tipping Cheese Fish: Adaptive Leadership Lessons from the Great Lieutenant Bligh".

I think what really gets my goat on these things is that I don't buy the premise. The premise of almost all of these articles is, X is objectively great, as proven by outcome Y. X's secret is Z, and therefore you should do Z. But outcome Y is often quite flimsy. Bratton wasn't responsible for decreasing crime in New York. Jack Welch's financial success with GE may have been partially built on sand. Maxwell shows humility for giving back a fraction of a monstrous cashout. I think the real lesson is that, at a minimum, we know much less than we think we know, and we should be really cautious about people drawing bold conclusions, especially when they are trying to sell us something. I hope that's not news to anybody.

What about Enron?

I found two HBR articles about Enron prior to 2001 (plenty more afterwards). Both were positive:

Enron, with its "loose-tight" management policy, is an example of an organization that has figured out how to effect change without the usual pitfalls, says Mintzberg. [It] manages only two corporate processes very tightly: performance evaluation and risk management. Everything else is managed loosely, and local leaders get an enormous amount of discretion in figuring out how to get things done.

—Burning Questions 2001: How to overcome Change Fatigue". Harvard Management Update

[Enron] has invested millions of dollars ... to ... ensure that fluctuations in gas prices do not jeopardize the company's existence. ... [Enron]'s success - measured by both market share and profits - illustrates how financial engineers, working with marketers and strategists, can differentiate a commodity product without taking undue risk.

—"How Financial Engineering Can Advance Corporate Strategy", Harvard Business Review Jan-Feb 1996

---

1 This title is derived from the most commonly used words in the 90 Harvard Business Review articles with Leader in the title.

Presenter: Larry Hahn, retired DEA agent now living in Singapore.

Training was in Jordan, not Iraq, for safety reasons.

8 week training period, would have preferred 16. Time pressure came from political timetable for government turnover. Training to a standard of "minimum competency".

Trainees were motivated primarily by job-seeking. Instructors were from about twenty coalition countries, and all spoke English (except for the Scots), using Arabic-speaking translators. Almost a third of instructors were Jordanian and spoke Arabic.

Training based on UN/Kosovo model, emphasis on human rights; 4 weeks general policing and 4 weeks tactical exercise. Modified to a more paramilitary curriculum: democratic policing; patrol; terrorism; crime; firearms; defensive tactics; patrol 2; patrol 3.

Training site built in the desert in Jordan (by DynCorp, on a no-bid contract).

What went wrong? See "The Coalition Provisional Authority's Experience with Public Security in Iraq", US Institute of Peace. Large-scale public order breakdowns; army not trained to deal with civil disorder or provide police functions. Existing Army and police force disbanded, and probably would not have been effective anyway.

Some recruits said that when they went back, their bosses would just send them out to get money. "When you do this training, you've got to train all segments." It takes about five years to train an effective police force.

Context analysis of Queen Elizabeth I at her ascension to power.

Scope	Boundary	Opportunity
Global	Catholic Church, Spain, France	Colonies
National	decentralized power system sectarian civil war threats from abroad	public desire for peace Crisis=opportunity
Organizational	No money no standing army parliamentary limits on monarch	offer of marriage Institutional power of monarchy
Personal	gender limitations questions of legitimacy	daughter of a king

Seven sources of power: positional, coercive, reward, expert, referent, network, and associative.

Reading

The readings come from a book in pre-publication.

• p 40: "power without legitimacy is always transient." Oh really? An awful lot of dictators-for-life (or their subjects) would disagree, surely. You could argue that the ability to maintain power through violence is a form of legitimacy, but then you get fairly tautological: power without the ability to maintain power is transient.
• p 49: Wikipedia says Bill Gates topped out at just over $100 billion, not $160B.

Guest lecturer.

Context matters. Um, was somebody saying it didn't? The context paradox: it both enables and constrains. Four levels of context: personal/team, institution/organization, the nation, global.

Does a good leader adapt to the environment or pursue a consistent vision and, perhaps, choose the moment where the variable environment suits that vision?

The most critical part of leadership is knowing when to step aside, and a system which enforces that is a good idea.

Reading

The readings come from a book in draft form.

• p 8: To quote Samuel Huntington, "a framework is a simplified way of viewing reality." I don't care for that definition at all. I think "modeling" is a much better term for simplifying reality. OED's first definition is "A structure composed of parts framed together." A conceptual framework may set some things as more or less important, but that's not essential to its function.
• p 13: "According to ... the US State Department ... between 1985 and 2004, 13,096 people around the world were either injured or killed as a result of terrorist attacks." This is then compared to deaths from a few genocides and wars. Setting aside the incorrect conflation of casualties with fatalities, if this chapter is about context, then how about seeing death tolls from diseases, malnutrition, natural disasters, and so forth. (An interesting side-note would be to look into somehow better identifying "inevitable" versus "evitable" consequences of natural disasters, where evitable consequences come from population patterns, building codes, etc. Then we would get into which population shifts are themselves evitable and inevitable and ... maybe that thread is better left unpulled.)
• p 14. You can compare GDP with sales revenue? We've been discussing that here (1, 2). As a rule of thumb, profits plus one half of revenue (approximating labor costs) may be a better equivalent to GDP. Although this quibble does just bolster the point of the book, that the biggest companies are still smaller than "minor regional powers". Although I wouldn't call Taiwan minor. What's halfway between minor and major?
• p 14.

  ... what then defines the national context? We offer a simple list of three defining elements:

  1. Geography
  2. History and Culture
  3. Economy

  That's four elements.
• p 16: "Huntington identified a number of conflicts which were occurring at what he termed the fault lines between Civilizations. His choice of a geographic expression to describe this phenomenon was not accidental because most of the conflicts he identified occurred in places where two civilizations came into proximate contact and hence conflict." But the majority of conflicts since World War II have been civil wars. So I'm not clear on what point Huntington (or his paraphrase) might score by showing that most conflicts between civilizations happen where two civilizations come into contact. It seems like the (wrong) point lurking in the shadows is that most conflicts are are between civilizations, which they aren't.
• p 17. Now we're citing Bernard Lewis, having heard from Samuel Huntington and Francis Fukuyama. It would be nice if every public intellectual who was utterly wrong about the Iraq War was then treated more critically for the rest of their career.

The point of the chapter seems to be that context matters. I agree, but don't see anything novel or outstanding about how the chapter develops that fairly obvious point that justifies the existence of the chapter. It felt like a series of, "yeah, and?" moments.

Chee Soon Juan, leader of the Singapore Democratic Party, is in the news lately because of court hearings to ... well, there are a bunch of things, all stemming from civil disobedience and arguments with the Singapore establishment, e.g., Lee Kuan Yew. There was a three-day hearing to "assess damages in a defamation suit brought against them by Prime Minister Lee Hsien Loong and Minister Mentor Lee Kuan Yew." During that hearing, Chee and his sister "behaved in a manner that 'scandalised the court, adversely affected the administration of justice, and impugned the dignity and the authority of the court'," which led to contempt of court charges. One of Chee's lawyers was Mr Jeyaretnam, who "became an opposition MP in 1981, but has been in the political wilderness since 2001. That was when he was declared bankrupt for failing to pay damages totalling about $600,000 from defamation." During the course of the hearing, both Lees were witnesses, and Chee, acting as his own lawyer, had some intense confrontations with the Lees, which (judging from the newspaper accounts) amounted to Lee Kuan Yew being so kind as to tell Chee what his problem was.

For good measure, "in a separate hearing ... Chee Soon Kuan and a party supporter were fined for speaking in public without a permit."

I'm not informed enough about the details of the cases or the laws to offer my own opinion; it wouldn't surprise me if Chee was technically guilty of everything he's charged with. What's more striking to me is how utterly thin-skinned both LKY and Singapore's legal system appear to be. For Lee, who is profoundly powerful many years after his nominal retirement, to castigate Chee, who was never more than the most token of opposition and seems just about as close to powerless as one can be—broke and nearly devoid of allies or public sympathy—is graceless and petty.

Followup articles about the incident quote the judge as saying that, if left unpunished, misbehaviour in court will diminish the dignity and authority of the court. Chee and his sister started serving 10 and 12-day jail sentences for contempt this week; I didn't see what happened with the damages for defamation.

On the same page of the Straits Times we read that

Singapore's Attorney-General has warned against "fanatics" who seize on the cause [of human rights] to further their own political agendas. Human rights has become a "religion" that breeds devotees who border on the fanatic ...

The A-G's fellow speaker was Professor Thio Li-ann, whom I've quoted before for her anti-gay bigotry.

The last thread of this saga is Gopalan Nair, a former Singaporean who is now a US citizen. Singapore disapproves of his calls for civil disobedience on his blog, and threatened to arrest him when he arrived in Singapore to observe the Chees' hearing. He dared them to, and they did. He's now out on bail, though he surrendered his passport. He's asking for the right to travel in order to, among other things, deal with accumulating parking fees for his car at the San Francisco airport. I just have to say, if you are going to fly to a country whose authorities behave as demonstrated above, and you dare them to arrest you, do not leave your car in short-term airport parking. That's just a failure of common sense.

On a personal note, I've tremendously enjoyed my stay here in Singapore, a stay which is due to end in six weeks. I'm quite grateful to the Singapore government and taxpayers for partially subsidizing my stay here. It's a very interesting country with some lessons to teach, both good and bad. I cannot imagine being comfortable enough with the political climate to settle here, and I think even a two-year stay would have been a bit too long. The only other place I've lived that had the same oppressive sense of fearful self-censorship was mainland China. I guess you could say I have to leave for religious purposes.

Discount Rates

A thousand dollars today is not the same as a thousand dollars in ten years. Cost-benefit analysis must account for changes in the value of money, i.e., inflation. This affects both costs and benefits.

Dealing with uncertainty

Several tools to account for uncertainty in cost-benefit analysis.

Sensitivity Analysis

Adjust some of the variables and see how much the projected outcomes change. Ignores relationships, especially non-linear relationships, between variables. This can be addressed by bundling various "consistent combinations" of changes into scenarios and comparing scenarios.

Monte Carlo Analysis

Estimate the probabilities of the different values of the key variables, including probabilities relative to other variables' changes. Use a computer to simulate thousands of different outcomes and see which are most likely. (Example)

Reading

Zerbe, Richard O., Jr., and Allen S. Bellas. 2007. A Primer for Benefit-Cost Analysis. Chapter 9-10, pp. 215-289. Edward Elgar Pub

This book says benefit-cost instead of cost-benefit. The difference has me counting syllables and emphases to figure out why it sounds worse. I think cost-benefit is iambic, or nearly so, as "cost" is de-emphasized. And analysis is purely iambic, so putting them all together is magical: "cost ben-e-fit a-nal-y-sys". But be-ne-fit-cost a-nal-y-sis sounds terrible.

• p 250. Using inflation numbers like 5% or 10% for discounting, when extended over a human lifespan or longer, produces a discount multiplier close to zero. That is, it says that the present value of something 70 or 100 years in the future is nothing. Taken at face value, this makes long-term cost-benefit analysis useless, and raises ethical questions. Instead, other rates such as "Social Rate of Time Preference" and "Shadow Price of Private Capital" can be used; charts on page 251 suggest values for time periods measured in decades and centuries.
• p 256: Risk is typically ignored in cost-benefit analysis. That's been very clear to me as a project manager doing estimates, and the key reason is that the users of the analysis don't want the risk. They just want a number. So I try to present a range instead of a number, but I think it just gets collapsed to the side of the range that the user wants to hear.

The class to date in context. First, we did a two-day module on leadership and communication, unfortunately scheduled in the middle of the busiest stretch of the previous semester, and discussed "inner compass" issues (classes -1 and 0). Then we did reviewed our Myers-Briggs results (class 6), which are a bridge from the self to the group and FIRO-B (class 5, I think). The 360 reviews (class 6) are very much, how does the group see me. Presentation skills (class 7). Today is the penultimate lecture by the professor; then a guest lecturer gives two lectures on context, then the final lecture is on theory. The self-oriented material is more psychological than other things, and that can chafe. At the outer areas, context and organizations, studying these issues hasn't been proven to change behavior.

Class exercise to identify and deconstruct the behavior that we want to change.

Cost-benefit analysis

Financial Analysis

Starts with the cash flow, the direct, measurable flow of money as a consequence of a policy alternative. Then broaden to include indirect costs, such as opportunity costs. IBM, for example, calls these green dollars and blue dollars. I once worked with a CIO who said that a particular policy option would be "free" because they could use their existing staff without extra training or having to hire or rent experts. This fallacy reflects a failure to understand "blue dollars".

Financial analysis vs cost-benefit analysis

To get to a true cost-benefit analysis, the scope of analysis must be widened even further. In addition to direct cash flow and indirect costs, complete cost-benefit analysis includes broader social costs and externalities.

Ex ante CBA is performed during planning, to inform decision-making. Ex post CBA is performed after a project is complete, to evaluate the outcome and add to general knowledge. It is also possible to do CBA in the middle of a project, and to compare ex post and ex ante CBAs to see how accurate the ex ante analysis was.

Kaldor-Hicks Criterion (an improvement on Pareto optimality): a policy should be adopted if the gainers could, in theory, compensate the losers and still be better off.

What's better, a cheap project with a very high benefit/cost ratio, or an expensive project with a lower benefit/cost ratio? They have different scales, and cannot be directly compared without more context.

Standing is very important: who and what should be counted in CBA?

Include only the changes in costs and benefits which are attributable to the alternative, i.e., the difference between baseline and the alternative. Exclude sunk outcomes. Exclude costs which are shared across all alternatives. Exclude transfer payments (not to be confused with transfer pricing), because they don't change the net cost or benefit, just the distribution. Treat taxes and subsidies case by case. Include true opportunity cost of government costs, not arbitrary prices. Avoid double-counting. Consider changes in asset value. Include externalities. Consider secondary outcomes. Include unpriced outcomes.

Reading

Boardman, A. E., D. H. Greenberg, A. R. Vining &D. L. Weimer. "Cost Benefit Analysis Concepts and Practice. Chapter 1

• p 5: Discussion of US federal requirements for performing CBA, starting in 1981. I think it's important to note (though the authors don't) that CBA is often a partisan political tool. A few ways it can be manipulated: require CBA for disfavored projects while not performing CBA on favored projects; control the scope of CBA to include or exclude important factors; selectively use or ignore the results of CBA.
• p 18: three perspectives, based on role. Analysts do real CBA. Guardians (e.g., OMB) tend to do only financial analysis. Spenders (in "service or line departments") tend to see all expenditures as benefits. They also weight their CBA heavily by political support.
• p 22: "CBA is often taught in a way that is completely divorced from political reality. We wish to avoid this mistake."

Sinder, J. A. & D. J. Thampapillai, "Introduction to Benefit-Cost Analysis", Chapter 4 & 5

• p 52: exclude international outcomes. Um. It's hard for me to get on board with that while still feeling like an ethical person.
• p 61: handy checklist of private vs social perspectives on various costs.
• p 62: Review questions. This looks like good practice.

Framework for feedback observations:

Situation

Behavior

Impact

Student presentations

The groups that volunteered to present today on Adaptive Leadership had a very vague brief. Our group decided after some discussion to present by play-acting our discussion about how to present, simultaneously a bold move and a kind of cop-out. (Amusingly, the way we played with the fourth wall was by raising it, since we interacted as if the audience didn't exist, instead of by speaking to them.)

We were lucky to have an expert presentation coach present for class, albeit a grumpy one since she had come directly from the airport without a stop home. It was tough for me to listen positively to the feedback, because I was proud of our work and wanted more strokes before the criticism, which the coach was simply not in the mood to provide. So it might have been an artifact of my imagination that her final words, congratulating us for making a presentation tailored to the group that communicated our message, came across in a tone of damning with faint praise.

Our most essential feedback, I felt, was when the class was asked for a show of hands: who thought we achieved our objective. The majority raised their hands. Other feedback: our method of writing out dummy text for our points as we went, and then revealing well-formed writing on another whiteboard as we left, was a bad idea. We should have just planned our stagecraft better to write out legible points as we went.

The presentation following us used the overhead for powerpoint, a minus in my book, but they more than made up for it by showing clear signs of practice: they all spoke freely and naturally without notes (except for the over-long Churchill quote). So the fluency was a big plus (update: well, two and a half well-performed segments out of five was still a huge step up from most presentations last semester). Content-wise, it didn't seem especially penetrative; something about politics as an integral part of leadership; a profile of Jesus as a leader, another of Churchill, and a shout-out to Jack Welch. At the very best, they didn't get any closer to defining "adaptive" leadership than our group did. (The message of our group was that adaptive leadership was an ill-defined buzzword, even to the point that we weren't sure whether it was intended to mean leaders who adapt, or leaders who lead people to adapt. While there might be useful ideas related to adaptive leadership, we weren't convinced they were new ideas.) Overall, the second group seemed like five independent presentations on peoples' personal interests, coordinated neither with each other nor with those before or after.

Side note: Jack Welch's leadership skills should be continually re-assessed for the next twenty to fifty years as the long-term damage he did to GE in search of consistent, indefinite short-term results emerges.

Second side note: I don't think Jesus is a good example to use for illuminating adaptive leadership. Religious figures aren't very suitable as case studies or anecdotes, because they're mythological. I don't mean that they're false (though as an atheist I happen to think that as well), I mean that they are loaded with content and meaning that is distracting from the point. Believers may overly credit, or perhaps not bother no notice, the actual context; disbelievers may wonder how the speaker's belief colors or undermines the suitability of the case study to the point at hand.

Watching the coach criticize the second group is illuminating, though again I'm not a neutral observer. She came to the front smiling, whereas she did not with ours. She asked for a show of hands between liking slides with pictures versus slides with only text, but her body language seemed to dictate the result (half the class raised their hands for the first, but only about 1/6th for the second choice). I have the impression that she has a number of pre-scripted points to make and is looking at the presentations largely for cues to spool out her points. I agree with many of the points, but don't care for the style of presentation (I'm complaining about the style of presentation used to critique the presentation - I'm so meta(l)).

Third group: finally, somebody seems to have found what the prof told us is the one paragraph buried in the entire book about Adaptive Leadership that actually defines it. (My paraphrase) Adaptive leadership is when a leader changes group behavior to better solve problems. Both the leaders and the followers are adaptive. More specifically, the problems and solution may be ill-defined, and the methods of changing behavior include cooperation and personal communication.

Sadly, it doesn't look like groups 2 or 3 haven't adapted anything in their presentations to address how the first two presentations went. We deliberately dodged this by going first. Although, we did consider making a change in our last rehearsal just before class and were unable to work it out, and so stuck with our original plan, so we wouldn't necessarily have adapted any more effectively.

Review of our 360 Reviews

A mention of the five stages of grief (denial, anger, etc). I had read that this wasn't actually grounded in clinical evidence. Here's a 2007 study:

Results: Counter to stage theory, disbelief was not the initial, dominant grief indicator. Acceptance was the most frequently endorsed item and yearning was the dominant negative grief indicator from 1 to 24 months postloss. In models that take into account the rise and fall of psychological responses, once rescaled, disbelief decreased from an initial high at 1 month postloss, yearning peaked at 4 months postloss, anger peaked at 5 months postloss, and depression peaked at 6 months postloss. Acceptance increased throughout the study observation period. The 5 grief indicators achieved their respective maximum values in the sequence (disbelief, yearning, anger, depression, and acceptance) predicted by the stage theory of grief.

I've read that three times and I'm still not sure what they are saying. I guess they sort-of validated Kübler-Ross?

Decision Matrices

We're looking at this chart on page 249 of "Expert Advice for Policy Choices". For some reason, the authors assert that both of the choices, pushing welfare recipients to get jobs, and "child support enforcement", are strongly supported by Conservatives, but "jobs" is only weakly supported by Liberals, and enforcement is actively opposed. Our overall topic is how to set up decision matrices to evaluate outcomes, but this example shows pretty clearly that this can be a very thin exercise. Let's catalog how it can go wrong:

• Are all of the important criteria included?
• Are all of the criteria weighted accurately?
• Can each criterion be accurately converted into a proportionate numerican value?
• Can you accurately determine the value of each alternative according to each criterion?
• Are all of the criteria mutually independent?

At the very least, it seems like malpractice to me to make and present measurements like this as single numbers instead of ranges.

Anyway. Three kinds of matrices:

• Alternatives by criteria.
• affected parties: what is the benefit or cost on each affected party for each alternative?
• political matrix: which constituencies support or oppose which alternatives?

Once you have a decision matrix, how do you reduce heterogeneous criteria scores to comparables?

• Qualitative:
  • Remove dominated alternatives. If an alternative is worse or tied with another alternative on every criterion, remove it. This can be combined with any method, qualitative or quantitative.
  • Rank the criteria. Whichever alternative is best by the #1 criterion wins. Ties go to the #2 criteria, etc. Assumes that the #1 criterion is more important than all others combined.
  • Pairwise. Compare two alternatives across all criteria and judge the winner. Compare the winner to the next alternative. Repeat. There can be only one.
• Quantitative
  • Satisficing. For each criterion, determine a minimum level to be acceptable. Score each alternative pass or fail for each criterion. This effectively quantifies everything, but does not address the relative value of different criteria.
  • Weighted criteria. Assign each criterion a value proportionate to its relative merit, and convert ratings within criteria to fractions of that value.

Another possibility is to combine elements of several alternatives.

Analytical reports should do as much as possible to simplify the decision for the decision-maker. If some alternatives are clearly excluded, they should be identified as such. If more information is needed to rank tied alternatives, that information should be precisely specified.

Readings

Bardach Part I, pp 47-59. Appendix A, pp 107-121

Weimer, D. & A. Vining (1999). Policy Analysis: Concepts and Practice, Chapter 1, "Review: The Canadian Pacific Salmon Fishery," pp 1-26

Weimer, D. & A. Vining (1999). Policy Analysis: Concepts and Practice, Chapter 11, "Goals/Alternatives Matrices: Some Examples from CBO Studies"

Today we are reviewing our Myers Briggs test results. This is also the deadline to complete our 360 Reviews. This is a third-party program to whom the school is paying lots of money to operate an independent website where we can type in our co-workers' emails and names to harass them to fill out a questionnaire about us. I think we're supposed to get seven people to respond. I sent invitations to thirteen people, of which three completed the survey and two started and abandoned it. I don't blame them for abandoning it; it's seventy questions and a lot of them read like this:

AHMED reduces complexity to a few core priorities in pursuit of 
the major strategic objectives
 	1. Substantial improvement needed
	2. Slight improvement needed
	3. Effective
	4. Very effective
	5. Role model
 
	0. Not observed

Here's a few more actual questions:

• ...develops strategies in accordance with the business vision
• ...monitors the effects of change initiatives and reviews their value

Please excuse me while I go monitor the effects of my change initiatives.

Class Session

We got our Myers-Briggs results back, and spent 90 minutes arranging ourselves around the classroom in order of score. Then we got and discussed our FIRO-B scores. Some of this seems helpful but it takes me a conscious effort of will to ignore the similarities with horoscopes and cold reading techniques.

Paul Kagame spoke at the Shangri-La Hotel in Singapore to a crowd of students, diplomats, and reporters. All text is my paraphrase of his remarks unless otherwise noted.

Africa has a reputation for perpetual crisis and unfavorable investment climate, but this is no longer completely correct. What changed? Africans deposed many dictators; the end of the Cold War; the end of apartheid; the spread of information technology, finance, and investment in Africa. Resulting in improved investment climate. Joel's note: He said "investment" nine times during his remarks.

Q: What is the key to better governance? A: You need good leaders at many levels, not just at the top. [some empty verbiage] It's a matter of choice that Africans have to make.

Q: Singapore has its own kind of "democracy". What kind of democracy will Rwanda have? (Joel's note: this is a very loaded question in Singapore, since Singapore's form of democracy is not very democratic. Kagame didn't seem to pick up this nuance.) A: ... common principles of democracy, different details. People must free themselves, not just apply foreign formulas. When I'm watching TV [of the West?], I get the impression that it's about having the most money to splash about.

Q: Did Rwanda choose Singapore as a model/advisor? A: [...] yes.

Q: Being Tutsi, how did you feel about reconciliation? A: ... from my background of injustice and prejudice, I know how good it is to be different [from that behavior]. ....

Q: Your focus on human rights is rare for Africa. What steps are you taking to promote this in the African Union? Do you see leadership on this in Africa? A: [...]

Q: I commend your zero-tolerance on corruption. What institutional framework are you implementing to prevent more massacres? A: genocide is ideological, from the colonial legacy ...

Q: You come close to fitting the bill of the "Big Man" trap. What are you doing to not follow that role? A: "I don't feel close to a Big Man ... I am very conscious of the fact that there is a tomorrow without me." You have to build institutions ... constitutional processes ... limits .... "I will follow it to the letter. If you want, there is another time of judging coming up [when Kagame reaches his term limit]"

Q: What about the office of Vice President, which was created just for you in 1994 and dissolved after you became President in 2000? A: "yes..." It was during a transition period. I didn't want to be in government, but they said I couldn't leave after our struggle to get to that point, so they made me VP. The guy I recommended for president didn't work out and problems remained, so I accepted the presidency.

Q: Will China rape our resources too? A: "This is the most important thing you have come to ask. They say the right things ... the US is more worried about China in Africa than Africans are. They [the US] are worried they [China] are going to beat them at their own game." Africa must step back and plan. "I don't think anybody owes us anything. If they find you sleeping, they will take things and leave you sleeping. They will not wake you up." There is no value-added industry in Africa; cotton is exported raw instead of being processed in Africa. It's up to Africa to demand cotton processing in Africa. It's not discrimination; we have to set the terms. China and India compete for what we have, so [having both interested] will give us a better price, "if we are not sleeping."

Amory Lovins, Chairman and Chief Scientist, Rocky Mountain Institute, Inc, on "Winning the Oil Endgame". Unless noted, all text is my paraphrase of the speaker's message.

Winning the Old Endgame, a free book describing a for-profit path to eliminate oil usage in the US by 2040. How? Improve efficiency, at (US$ ca 2000) $12 per saved barrel, and new sources (cellulosic ethanol) at less than $26/bbl.

Global response to the 1970s oil crisis was drastic worldwide conservation, in which the world reduced demand so much that OPEC lost pricing power for a decade.

Whaling was the fifth-biggest US industry in the early 19th century. New technologies rendered whaling obsolete (for lighting oil) before the whales were (all) gone.

Cars could be made more fuel-efficient (via streamlining, lower mass, etc) at an effective price of US$0.15/liter. Trucks can be similarly improved.

Cars can be made more efficient without being made undesirable. Of the chemical energy in auto fuel, 6% ultimately moves the car (as opposed to pushing air out of the way, warming the tires, etc etc. Only 0.3% goes to moving the driver. Carbon fiber crash cones can solve the issue of lighter cars being more dangerous (all other things equal).

Showing a demonstration design: "Think about it like a computer with wheels, not a car with chips." Uh, that may not be the best line to use. Also, the information design of his presentation is awful, not even counting the horrible black backgrounds.

Joel's note: this is very sexy, so far, but he's focused solely on replacing oil and on lighter cars. He's not talking directly about carbon emissions, although those are reduced when cars are made more efficient. Also, carbon-fiber construction is much more energy-intensive than steel, at least for now: "the effective combination of [reduce/reuse/recycle] could decrease the energy intensity of CFRP to the level of steel parts." Aside from that, I'm accumulating cognitive dissonance as he keeps describing and demonstrating all of these technology solutions that don't seem to be showing up in force in the real world. Industry conspiracy again?

Plug-in hybrids could alter the pattern of electricity usage. Power up your hybrid at night with cheap power; during the day, park your car at work at a smart plug and sell your power back to the grid at premium prices. "The first two million Americans to do this can earn back the cost of their car."

Blended body airplanes can be three times as efficient as tube and wing construction.

Joel's note: I start to suspect that the real benefit of four dollar gas is that it will batter down the social resistance to doing "weird" things. Anybody running a long-distance truck fleet could have saved a lot of money any time in the last few decades (or more, for all I know) by introducing more efficient, but weird-looking trucks. Why didn't they? I bet social resistance is a huge factor. Oh, and just to mention: we are once again sitting in an heavily air-conditioned room at noon with the shades drawn and the lights on listening to someone talk about energy efficiency.

Sweden planned to get off oil by 2020, but a new government postponed that to 2030.

Most of this will happen without government participation. Five ways governments can help.

Stimulate demand for more efficient vehicles. Feebates: rebates on more efficient cars paid for by fees for less efficient cars; revenue-neutral and serves to internalize the pollution externality. Require government procurement to include only most efficient cars. E.g., don't let officials pick their own prestige SUVs etc. Working with Wal★Mart to get more efficient supply trucks.

Share R&D risk. 50% of casualties in US military come from convoys; 70% of their cargo is fuel. This is because of military planning that assumed fuel delivery was free. By changing this assumption in procurement rules to account for fuel delivery cost (in money and human lives), fuel will count one or two orders of magnitude more, and 0.1mpg tanks will be more accurately perceived as very limited military options.

It is possible to shrink the adoption curves, so they don't take 15 years to turn over from old products to new products. How to rebuild the US military with efficiency in mind.

The Department of Defense is the largest single consumer of energy in the United States. In 2006, it spent $13.6 billion to buy 110 million barrels of petroleum fuel (about 300,000 barrels of oil each day), and 3.8 billion kWh of electricity. This represents about 0.8% of total U.S. energy consumption and 78% of energy consumption by the Federal government.

Breakthrough competitive strategy via platform efficiency. Boeing 1997 is like Detroit now.

An hour in, he mentions carbon intensity for the first time.

Peak oil is a distraction, because 1) we can't know when it happens because so much oil reserve is in non-transparent countries, 2) efficiency justifies the same actions that peak oil justifies, 3) (I missed #3).

The biggest threat to US energy security is US energy policy. The effects of US policy have transferred tremendous wealth to Venezuela, Russia, Iran, and Saudi Arabia. US policy favors overly centralized systems of oil, natural gas, and grid distribution, and creates terrorist targets.

What about Singapore? Sitting on a gold-mine of "negabarrels" and "negawatts". You could save 3/4 of your usage in the next few decades. Singapore does have a good policy of charging close to the true social cost of driving. A modern power system (distributed, diverse, renewable) will cost less and emit less. Singapore is uniquely positioned to demonstrate the path to an oil-free future and set an example for China.

Q: Why are the policies so backwards? Is this just special interest capture? A: The oil industry is split, more good than bad. We're used to thinking that the oil problem can only be solved by draconian measures, but design, technology, and business strategy can solve the problem better. The Prius did outsell the Ford Explorer last year, and compacts and subcompacts are outselling SUVs. If I actually want to get things done, I'll work with the private sector together with civil society, not with government. I open-sourced "Hypercar" concepts in 1993 so that nobody could patent it and the industry would have to compete to implement it.

Q: How energy-efficient are the lightweights to make? A: Lifecycle analysis is very favorable. If you have a limited carbon budget, it's better to spend the carbon turning it into structural materials are light and strong and don't rust or fatigue than to burn it to propel steel.

Q: Is this a case of negative externalities? A: The car-making industry is in many ways the biggest human enterprise ever. It's fairly unique. They base strategic decisions on accounting, not economic analysis. Breaking these habits requires strong leadership, like Mulally at Ford. Car company employees tell me they have all of the necessary capabilities but they've never been asked to put them together.

Q: I'm an engineer. Why aren't we doing these things if they are so easy? A: See my lectures on the topic. It costs less to do things right, but it doesn't happen. It's about rethinking economic assumptions. "Singapore has some of the best engineering in the world for clean rooms, HVAC design, ..., but it doesn't get much respect here because it didn't just step off a plane with slides." See also 10xE

Now that people are abundant and nature is scarce, the Next Industrial Revolution will raise natural resource productivity 10- to 100-fold.

We want to get CEOs to call school deans and warn them that they will only hire properly trained engineers.

Leadership Direction

If a person has a sense of purpose, they seem to go much further, including perhaps going further biologically.

Happy life: research points to three factors: pleasure, engagement, and meaning.

Randy Pausch Lecture

The Food Crisis, by Juan Jose Daboub, managing director of the World Bank.

Food prices have risen dramatically. Dollar-denominated prices have increased 2.5 times since 2002, most of that in the last year or so.

Boilerplate description of the problem and solutions. It's hard to pay attention to him reading from his prepared remarks, especially when they give the sense of being polished to a fine state of inanity and inoffensiveness. "Power is shifting not just between countries, but within countries." Seriously? I refuse to believe you until I see it on a powerpoint slide (to his credit, no Powerpoint). "A few years ago, few people knew of Youtube. Today ... million videos are downloaded each day." Really? Wow. "Singapore has much to teach the world. Of course not all lessons from a small island nation are applicable, we understand that .... but I do believe Singapore can and should do more. As a small but highly successful state highly integrated with the global economy ...." "These are unprecedented times and they call for us to work together ...." "There are no excuses for failures; Singapore's example shows hard work pays off ... you have a responsibility to help keep the flame of economic freedom burning."

And the moderator: "In a short twenty minutes you have cast canvas on a range of issues we in Singapore and we in ASEAN have to deal with, and are dealing with."

Q: My question has to do with the implications of recent food price increases for the Doha framework. Is more rapid progress in the Doha round needed? Is that one of the measures you have in mind?" That was a much less pointed question than I expected from that questioner.

Q: Can you provide more explanation of why the food crisis is happening. What kind of response is necessary?

A:

We estimate 7% of world food production is traded internationally. ... Short-term actions: we are working with 54 countries that need to provide some temporal relief to 5, 10, 12% of their population. They are providing some direct, transparent, focalized to the demand subsidies ... In the medium term, the solution is to have the supply side respond. We are reviewing policies that certain countries have and try to advise ...

Reading notes

Economies don't have purpose. They just happen. Just as wearing a striped shirt in front of a television will cause a pattern to appear; collecting a number of independent actors who can exchange things of value with one another will cause an economy to happen. There's no purpose for the moire pattern on TV; there's no purpose for an economy. It just is. Since material wealth (broadly defined to include drinking water, health care, etc) is the primary source of happiness, a good economy is better than a bad economy. A good economy is one with allocative efficiency: the most possible output for a given input. Of course that's not the only way to define "good" for an economy; other contenders include Pareto efficiency, equality, and fairness, but in purely economic terms the best economy is the most efficient one. The challenge for public managers is to balance the various definitions of "good" in a way that more or less reflects the preferences of the public, and having defined aggregate good, to do what they can to help achieve it. Last weeks' readings pointed out the danger of skipping that first part, the definition of the problem. This week's first reading assumes the problem is simply one of efficiency:

Boadway, R. & D. Wildasin (1984). Public Sector Economics, Chapter 3, "Market Failures"

A economic fundamentalist justification of the public sector's existence as a cure for (some) market failures.

• p 58: "... the jointness in use of public intermediate goods prevents the market from extracting a price from firms unless they can be excluded." Ack. No. Jointness of use does not prevent the market from extracting a price; only lack of excludability does. Jointness of use, more commonly (but no more usefully) called rivalry, is separate. Consider a golf course. It is, up to a point, non-rival. If I'm playing the tenth hole, I could care less whether or not somebody is playing the first hole. Within a certain range, let's say between one and a hundred golfers at a time, adding an extra golfer has no cost. That's great for the club because it provides them with a large "inventory" of time slots to sell. But it neither enables nor prevents them from "extracting a price". What enables the golf club to extract a price from golfers is the fence they put up around the course to keep the public out. That's excludability.
• p 73 to 77: charts of US government expenditure. Not adjusted for inflation, so mostly worthless; they do include percent of GDP, though. The total expenditure table does include state and local, which is nice. Still, I think this is pretty skippable.
• p 77: "Veterans Services", as it usually is, is mistakenly broken out into a separate category instead of included within "National Defense". If you send a million people to war and promise to take care of them, surely the lifelong cost of that care is part of the cost of war. (And if you manage that obligation as a cost to be cut, obscenities like this will be inevitable.

Kleiman, M., and S. Teles (2006). "Market and Non-Market Failures," in Moran, M., M. Rein and R. Goodin (eds) Oxford Handbook of Public Policy, Oxford University Press, pp. 624-650

Same topic, two decades later. Let's see if anything has improved.

• p 625: "Under certain highly restrictive assumptions, the market can be shown to be a a Pareto optimum." Those are better qualifiers for "assumption" than the last article's "It has been shown by Friedman and Savange (1948) that under certain reasonable assumptions individuals will behave [so as to maximize their expected utility]". Does that reflect 20 years of progress or are these authors just more rational (hah hah) to begin with?
• p 625: "The economic analysis underlying the doctrine of market failure assumes an individual capable of maximizing expected subjective utility ... That assumption is obviously false for children and the insane. But it is also false for many decisions made by ordinarily competent people about, for example, time management, saving, financial risk taking, diet, exercise, and the use of psychoactive chemicals. ... Thus the scope of suboptimal performance in voluntary individual choice and spontaneous organization is substantially larger than orthodox welfare-economics approaches suggest." Yay! Much better.
• p 637: causes of government failure: Inadequate Penetrative Capacity, i.e., not enough detailed information; Inadequate voluntary cooperation; institutional overhead; voter attention and inattention; path dependence of political decision-making; competition for technical expertise; weak administrative culture.
• p 647: "Public policy, institutional analysis, and political philosophy do not deal with three distinct subject matters; rather, they are three different attempts to deal with the problem of how human beings ought to govern themselves."

Much better.

Class notes

Class lecture starts with the material from class 2 reading.

Cheese is almost all flown in from Australia or further, and it's not cheap, ranging from S$20 to S$60 per kilo (S$10/kg is about as US$3/lb). This pale orange stuff was fairly cheap, but the way it was packaged, I couldn't tell what it was. It smelled good, so I bought it, but then I couldn't get it to taste very good. I tried various combinations of dark rye, crackers, dijon mustard, and soylent pink, but it was never more than so-so. Until I made some pasta and threw tiny cubes of it into the pasta sauce; then it was incredible. Umami festival in my mouth. Still no idea what the cheese was, though. It seemed like a visitor from the hard cheese family, Parmesan and Romano and whatnot, but it was closer to chedder in consistency, a bit crumbly and not very plastic.

Kona has a new chew toy:

And here are a few pictures from the balcony.

Three causes of mass death: disease, famine, and deliberate killing. The last is the domain of the leader. (I guess the traditional inclusion of Death in this list violates fourth rule of good categorization systems.)

Speaking of Jim Jones, here's a transcript of part of his final speech:

Please get us some medication. It’s simple. It’s simple. There’s no convulsions with it. . . . Don’t be afraid to die. You’ll see, there’ll be a few people land[ing] out here. They’ll torture some of our children here. They’ll torture our people. They’ll torture our seniors. We cannot have this. . . . Please, can we hasten? Can we hasten with that medication? . . . We’ve lived — we’ve lived as no other people lived and loved. We’ve had as much of this world as you’re gonna get. Let’s just be done with it. (Applause.). . . . Who wants to go with their child has a right to go with their child. I think it’s humane. . . . Lay down your life with dignity. Don’t lay down with tears and agony. There’s nothing to death. . . . It’s just stepping over to another plane. Don’t bethis way. Stop this hysterics. . . . Look, children, it’s just something to put you to rest. Oh, God. (Children crying.). . . . Mother, Mother, Mother, Mother, Mother, please. Mother, please, please, please. Don’t — don’t do this. Don’t do this. Lay down your life with your child.

The key to getting people to do awful things is to diffuse responsibility.

Extended discussion of the Milgram experiment. The Wikipedia entry raises the point that the phenomenon in those experiments is more probably learned helplessness than obedience to authority.

Positive psychology: instead of how to get from negative to normal, how to get from normal to positive.

Shreekant Gupta, an NUS econ professor.

The drain of CO2 from the atmosphere is negligible. This is a detail I'm still not clear about: if the drain is close to zero, then how can any level of emissions over zero be sustainable? I know that, at this scale, there's a big difference between zero and negligible, and it's important to count your zeros. So it might be possible to emit X gigatons of CO2 without moving the PPM count more than Y points per year, but since Y really needs to be zero or negative (since the total accumulated CO2 in the atmosphere today already commits the Earth's climate to change pretty radically), surely X can't be all that big, and so Z, the amount of economic activity that produces X, is kind of a mystery.

The current situation: if emissions have to peak by 2020 and drop dramatically, we can stabilize CO2e (CO₂ plus methane and other gases, all converted into the CO₂ equivalent) around 550 PPM, with a total temperature change around 4 or 5 degrees C (which is huge).

The best current climate change legislation on the table in the US is the McCain-Lieberman Act. Seriously. It was voted down 43-55 in 2003.

Most countries in the world really are bit players in GHG. The 173 smallest countries add up to 20% of emissions (if you count the EU-25 into one country, and speaking as someone who would (grossly simplifying) love to see some kind of global government and welcomes the black helicopters, it's encouraging to see the EU being treated as one entity instead of 25)

Q & A

Points of analysis for different proposals:

• how much price certainty is provided. Adoption of alternatives to status quo, i.e., fossil fuels, depends on some price stability. Lots of things become competitive when oil is $40/barrel, but the multi-year, multi-billion dollar investments in these things depend on oil staying over $40/barrel for years and years.
• economic efficiency
• how will it be enforced?
• wealth transfer from North to South

The South would have no objection to joining into a global climate treaty on some kind of per capita basis. The tacit assumption is that the South is going to get paid a lot to join, via emission credit transfers. But this may not be true, because it depends on the actual price of emission credits. The Montreal Protocol is an example: the North basically paid the South to stop using CFCs.

There should be a sense of liability from past performance (historical GHG emissions) but in reality the Northern countries refuse to take any responsibility for historical emissions.

Getting agreement is easy compared to implementation and enforcement. Canada stopped complying with Kyoto without any penalty.

Update: While looking up the question of how many people Hitler personally killed (for Leadership class), I came across this comment linking Hitler's rhetorical ability to induce genocide with global warming advocates' rhetorical ability to ... induce genocidal economic damage, I guess. What's most interesting to me is that those concerned with global climate change bemoan the total lack of substantive action to address the problem, while, simultaneously, others are warning that efforts to address climate change will cause effects parallel to genocide. Maybe both viewpoints are right.

Update: Jon reminds me that there's a lot of mystery in how land use relates to carbon emission and sequestration, and suggests that sustainable CO₂e emission levels might not be much higher than pre-industrial levels. Which obviously is never going to happen the easy way. In the face of news like this I always like to retreat to my environmentalism bottom line mantra to cheer myself up: Pollution doesn't hurt the Earth; the Earth is a six- billion-trillion-ton ball of rock that is beyond our power to hurt. Pollution only destroys the capacity of the surface of the Earth to sustain our lives.

The Singapore branch of the Project Management Institute isn't especially active, which is surprising considering Singapore's reputation for management. If you hold the PMI's "Project Management Professional" credential, you need to earn 20 PDUs per year to maintain your credential; a PDU is a "Professional Development Unit" and you get them from attending seminars and meetings and such, at about one PDU per hour. The Puget Sound and San Diego branches (home to Microsoft and Boeing, and to half the US Navy, respectively) offer monthly breakfasts, dinners, and whatnot so you can pick up PDUs steadily. Singapore's branch does very little, aside from an annual all-day seminar that's only worth 8 PDUs.

So when they announced a seminar for Monday night, on a topic that's not completely boring, for two PDUs, and for free for local members, they should not have been but were surprised to get 270 registrations instead of the seventy they planned for. I'd bet that the total number of credentialed PMPs in Singapore is probably right around, oh, 270? Anyway, on to my observations: Attendence was announced at 270, which seemed about right. Counting the five rows around me, there were 44 people, of which 10 were women. Mostly Chinese, but a strong Indian representation. If there were Malays, I couldn't clearly spot them, but I'm not so good at telling Malay from Chinese without staring or telltales like headscarves or names. Two people carried on extended conversations on their cell phones; the local norm is apparently that it's okay to do this as long as you talk very quietly and cup your hand over your mouth.

---

The talk was by Assistant Professor Lieven Demeester from INSEAD (an international business school), previously a management consultant. Following is my paraphrase of the speaker, unless otherwise noted

• What's new in the last few decades in project management and uncertainty? Game theory, psychology, etc. And globalization.
• If you plot the chance of a task completing against time spent, with time on the X and chance on the Y, you get something like this (Joel's note: found this on Google, not from the seminar): There's a 50% chance the task will end within, say, 10 days, and a 95% chance it will end in 20 days. If you ask how long the task will take, an answer with a single number is misleadingly simplified. It's probably going to take about ten days, not much less, very possibly twice as long, and maybe even longer.
• The consequence of this is that if you ask for an estimate and they are conservative, it will come back much closer to 20 days. Then the schedule gets built around these estimates, and they reify. That is, the (longish) estimate becomes the reality; workers will pace themselves to complete the task at the "deadline", called the "college student" effect. If the task is completed early workers will probably go and do non-critical work until the deadline instead of reporting completion promptly. If they are juggling several tasks, especially with several bosses, they will load-balance tasks, which may be optimal for them but sub-optimal for the big picture. And even if early completion is achieved and reported, other people may not be ready to start early.
• Goldratt's solution with "Critical Chain Project Managament" from 1997 is to set the expected duration for each task on the lower side of the estimate range, and then put the difference between low and high estimate for all of the tasks into a single, project-wide buffer. This has two benefits:
  1. The earlier dates motivate everybody
  2. Because the buffer is based on lots of individual risks, it's more accurate. (Under the same principle as insurance: Even with good historical data telling me you have a 0.001% chance to crash your car every day, I can't predict if you will crash today. But if there are a million drivers, it's a safe bet there will be about ten crashes per day.)
• "It's very hard to eliminate multi-tasking" but you should try
• Joel's paraphrase: Failure is an option, in fact small-scale failure is nearly certain, and you should plan for it.
• Some of the cognitive biases that hide risk: framing the issue too narrowly, overconfidence, confirmation bias (counting the hits and forgetting the misses), escalation of commitment.
• Well-managed projects are boring and appear to have a lot of time wasted on risks that never happen. Joel's note: we end up with an Institutional Design problem: how you do structure an organization so that finding and mitigating risks is rewarded instead of punished?
• Four strategies to manage risks (this was arranged in yet another two by two matrix, probability of risk vs impact; I'll let you figure out which strategy goes in which box): let it run but monitor it, delegate, control (with help from above), and actively manage.
• Two strategies to deal with unknown unknowns
  1. Iterate and learn. Joel's note: Examples: China's economic policy, called "crossing the river by feeling for the stones one step at a time"; agile programming, spiral development, etc. Timing depends on the speed of learning. Note that this strategy requires the capacity to learn
  2. many parallel attempts. Example: electronics and car manufacturers rolling out many products and then discontinuing the losers. Internally competing teams to build the same thing.

Overall, I think this was a great event, because it did exactly what it's supposed to do: teach some new lingo and buzzwords in use in the field. I learned things I didn't know, I could imagine applying some of it, and the speaker was competent at presenting. It was only during questions that the quality of the event dropped: the question I remember was in two parts: why are you talking so much about CCM and not at all about CPM, the last big buzzword? And how do I do CCM if my client wants firm deliverables?

Unfortunately, the speaker chose not to give direct answers. For the first, he danced around so much I'm not sure what the answer was, other than that you can buy CCM add-ons to some CPM tools (which could mean anything; vendors love to be buzzword-compliant and adding a frobitz tool to your Enterprise Schmebling System could do anything from nothing to breaking everything to actually turning your Schembler into a Frobitzer; the only thing you can count on is that whatever the effect, it's simultaneously the opposite of what the salesperson told you it would be and what you want (and in a stunning demonstration of non-transitive math, even if you want exactly what the salesperson told you, the way in which it's different from the promise is different from the way in which it's different from what you want)).

For the second question, I felt he committed the original sin of project management: he wouldn't deliver bad news. The point of CCM, if I understand it, is to make the project somewhat more efficient by being more honest and focused in accounting for risk. You can be more confident that the whole thing will be finished by the end of your buffer, but your visibility along the way is not radically better than before. It's better, because you have genuine fuzzy information instead of precise but false dates, but the only firm date you can expose is the last one. So if your client wants lots of firm dates, you have to have lots of little chains, which erodes the benefit of having a chain (which is, to reiterate, that pooling the risk for lots of little tasks into one shared buffer is better than baking risk, i.e. padding, into each individual task). But instead the speaker ran like a broken record on the script that, if you talk to your client (or vendor) about how doing it the old way you can promise them September, but with the new way you can maybe hit March but probably May or June. Which first of all doesn't make sense as an example, because why wouldn't you just promise June? But more importantly, in my experience it's not credible to promise great results from a new method. People who've been in software for a long time learn that it doesn't work that way. The best you can promise is transparency.

The second core class for the special short semester, two three-hour classes per week for six weeks. Six classes on Policy Analysis, four on cost-benefit analysis, three on program evaluation.

One of the other students asked me how to blog at the end of last semester (that is to say, last Friday) and said he experimented with all of the big blogging sites over the weekend, so I hope to share a link to his new blog this week.

This Monday morning class marks the beginning of our third semester: two core classes, each at twice per week, to wrap up two complete classes in six weeks plus finals.

This class has a lot of personality test sorts of things, including (of course) the MBTI. There's also some sort of online assessment thing where you ask one boss, four peers, and four "reports" ("report" being the very unpleasant word for people who report to you, e.g., subordinates (not a better word)). Which confused me because we don't have an "reports" here at school, but now I'm realizing that we were supposed to pick people from the real world, not from school. D'oh. That makes more sense then my addled thinking. I guess I'll go and invite some more reviewers. Some discussion; a student comments that back home, nobody who reported to him has internet access. Apparently, if you are Japanese it's unlikely you will get high ratings from your peers, no matter what. Questions about the wording of the invitation that "reports" get; what if many of my "reports" were more politically powerful than me, even if I technically wrote up their reports? What if my boss was my father? What if I've never had a boss?

FYI: American Dental Association's notes on brushing and flossing. (Yes, it's relevant to class.)

Group discussion on whether phones, SMS, and laptops. Consensus: phones bad, SMS fine. Some mild mockery of the student in the back who has been emailing and SMSing for the whole first hour of class and is oblivious every time class attention is directed towards her. No problem with laptops (or phones, for that matter) perceived by students. Faculty have discussed banning laptops. Suggestion (from students) that there should be no laptops in class except for taking notes. Joel's note: My own behavior fits the "infovore" or "internet addict" profile. I want to pay attention to class, but I struggle. Blogging helps by keeping me focused, but it leads to a bigger problem, which is that I follow up interesting things and tune out of class. I have actually tried playing solitaire simply as a way to occupy a bit of the more spastic part of my brain so the bulk of it can pay attention, and that does actually seem to work, but of course it looks terrible to anybody sitting behind me. I think knitting would accomplish the same thing and be more socially acceptable, but I don't especially want to have a bunch of knit things. And I'm not the sort of person who dresses my dog. From the prof: "When somebody's taking notes, you get a sense of participation and eye contact. When they are day trading, it's simply a void and you ignore them and the students near them."

People who get silver (where silver means something pretty special) and want gold instead. The psychology of peak performance. Joel's note: but peak performance and peak achievement are only loosely related. Most peak achievements can only be reached by via extreme performance, but peak performance doesn't guarantee peak achievement.

The value of IQ and EQ as performance predictors. Applied EQ is called, of course, Primal Leadership.

As an aside, (almost) everything that's wrong with the Business self-help industry can be found in this quote adorning the Amazon page for that book: "Harvard Business Press is discovering innovative ways to conquer the changing business universe while keeping its focus on the basics." As Orson Welles would say, "This is a lot of shit, you know that?"

Photos from this morning's walk down to and along the Singapore river

Institutional Change

"What's the point of knowing the world if you cannot change it?"

Theories of institutional change:

• functional/efficiency theories

  North 1993: When groups see opportunities that cannot be realized under existing institutions, they make new ones. (Examples: new companies. bankers inventing new financial instruments. Property rights). North's ideas are tricky because they are so obvious that it's hard to tell if they are genius (things which are obvious to all but only after a genius figured them out) obvious or tautologically obvious: people create institutions because they need new institutions in order to get stuff they want.

• public interest
• power
• path dependence
• evolutionary
• Bayesian Learning/demonstration effect
• Crisis as trigger

Exam notes

35% of final grade. Computer lab 2. From 12 problems, choose six. For each problem, describe in one paragraph and look at appropriate institutional mechanisms. E.g., poverty, rent-seeking, regulatory capture, externalities. Think about enforcement, about principles behind mechanism. Discuss hypothetical consequences of adopting the prescribed institution: solve problem, don't solve problem, perverse incentives.

Final Paper

Due May 5.

Student Presentations

I've generally given up the struggle to comment productively and politely about student presentations, in favor of the uncontroversial point that the LKY school should put more resources into training students on public speaking and presentations at the beginning of the school year, and should do something to get professors to be a bit more rigorous and consistent on evaluating student presentations. And I do have one more point:

A simple test to determine if a recommendation is meaningful or just bullshit is to see if offers a real choice. Would you actually consider doing the opposite? Consider:

• get on the "learning curve"
• build capacities

Is that helpful? Did you depend on that advice to help you NOT do the following things:

• get off the "learning curve"
• destroy capacities

That aside, I want to make a point about cancer. There's a serious problem in how cancer statistics are interpreted by scientists, doctors, the media, and the public. I think Gird Gigerenzer's book was my first exposure to this paradox. It's this: cancer screening is not a purely positive thing, and actually may be a bad thing in some cases. Let's look at how this could be true:

Take a simple country with 1000 people, who live to age 70, and only one kind of cancer. If there is no cancer screening or cancer treatment, 10 will die of cancer, and all at age 60. Since there's no cancer screening, these ten cases are not discovered until they have severe symptoms, let's say at age 58. So the average survival duration after cancer detection is 2 years.

Now restart our clocks and add cancer screening, every two years starting at age 40. This time, 10 cases of cancer are discovered, all at age 54. Everybody gets treatment. They all die at age 60. The average survival duration after detection has risen to 6 years. But all that really happened was that ten people each spent an extra four years dealing with cancer. They didn't actually have longer, better lives.

Now, let's go one more time around, adding super-sensitive cancer screening. This time, 20 cases of cancer are discovered, all at age 50. Everybody gets treatment. Many go into remission, but ten still die of cancer at age 60. The rest die of other causes at age 70. The average survival duration after detection has risen from 2 to fifteen years! But in fact, nobody lived any longer than they would have without screening, and twenty people lived as cancer survivors for years or decades, having paid in money and blood and tears for treatment that didn't actually help.

Think this model is absurd?

AN Australian researcher says there's little evidence that prostate cancer screening saves men's lives.

And Professor Simon Chapman of the University of Sydney said a study of Australian newspaper and television stories about such screening for prostate cancer found most of them promoted it aggressively, ignoring the almost complete absence of evidence that it would save lives. — The Australian

The point is that not all cancers will kill you, at least not before something else will. We can detect cancers that we can't effectively treat, and we can't always differentiate between cancers that will kill you and cancers that won't. And it's a fallacy to say it's always better to be safe than sorry, because it doesn't work that way. False positive results, being told you have cancer when in fact you aren't slated to die from cancer, can lead to more than a little sorrow, especially if you undergo expensive and painful unnecessary treatment. The National Cancer Institute in the US says the same thing, but in a much more convoluted way:

At least two requirements must be met for screening to be efficacious:

1. A test or procedure must be available to detect cancers earlier than if the cancer were detected as a result of the development of symptoms.
2. Evidence must be available that treatment initiated earlier as a consequence of screening results in an improved outcome.

These requirements are necessary but not sufficient to prove the efficacy of screening, which requires a decrease in cause-specific mortality. For example, these two criteria are met in the case of screening for childhood neuroblastoma by assessment of urinary catecholamine metabolites. On the basis of these criteria, a mass screening program was conducted in Saitama Prefecture, Japan, between 1981 and 1992 for 6-month-old infants.[3] Over that 12-year period, the annual incidence of neuroblastoma in children younger than 1 year increased from about 28 per million to 260 per million but without a significant reduction in incidence in children older than 1 year. Because there also was no reduction in mortality for the disease, this experience provided strong evidence of overdiagnosis—diagnosis of some neuroblastomas detectable by screening, which would not have been clinically diagnosed later. Similar experiences have been reported elsewhere in Japan [4] and in the Quebec Neuroblastoma Screening Project (QNSP) in Canada.[5] The history of screening for neuroblastoma also provides a useful illustration of the benefit of undertaking well-designed evaluations of emerging screening technologies before implementing screening programs. Although such studies are very costly, it has been shown that the QNSP itself averted unnecessary morbidity for thousands of children and did so while returning a yield plausibly estimated at a cost savings 64.5 times the investment in the study.[6] —NCI

In case you didn't follow, let me translate:

Cancer screening is a bad idea unless there's a test that finds cancers early, and treating these cancers early actually helps. Even then, screening may not be a good idea. They did a twelve-year test in Japan where they found way more brain cancer in infants under age 1, but cancer detection rates in older children didn't change and on average nobody lived any longer. So screening infants for brain cancer (at least, with that kind of screening and that kind of brain cancer) was a big waste. That 64.5 times savings they mention is, if you read carefully (and I had to check the abstract of footnote six to be sure I had it right), is the savings from scrapping unnecessary cancer screening programs, not the savings from performing screening. Bury the lede much?

Remember, these are general points. This is not a diatribe against all screening, or in favor of cancer. But it is clear that screening is not an unmitigated positive, and it's a big mistake to think it is. This is a tough point to make in the face of powerful individual appeals from survivors, but the underlying issue is the same as other kinds of medicine: individual testimonials are not data. If you have a mental picture of someone dying unnecessarily from a late diagnosis, you need to balance it with a mental picture of someone dying unnecessarily from treatment for a cancer that they don't actually have. Then you can put all of this emotion to the side and get back to evidence-based medicine. Put another way, humans are not wired to think accurately about statistics, and we need to remind ourselves of this weakness constantly.

Service Delivery for the poor

Per-capita spending on health doesn't correlate with better health conditions for poor. One key reason is that, in almost all countries, most of that spending is concentrated with the wealthy, so per-capita spending on the poor remains very low.

Guest Speaker

Sasa Vucinic from Media Development Loan Fund. See him speak here.

We start with this video.

Only 18% of the world's population lives in countries with a free press. "Only 18% knows exactly what's going on, gets unfiltered views ..." Um, there went a big non sequiter? Are we going to talk about media failings in countries with freedom of the press?

Got financing from Soros in 1996. Financed 167 different projects worldwide with 70 teams in 23 countries. Current loan portfolio $23m with interest rate 2% to 10%, lowest rate to riskiest projects. Overall, 2.5% loss rate. One case of fraud, in Macedonia, involving imported chicken wings.

Funding is from large agencies, however they have inconsistent direction due to management turnover. Now offering bonds for individual investors.

How not to censor a radio station: send troops to confiscate the equipment. Very photogenic. How to censor: call the potential advertisers and threaten them.

Student presentations.

CPF changes in 2007

CPF is Singaporean Social Security. The first presenter spends 6:30 giving a recitation of minor details of the 2007 changes to the CPF, presented devoid of context or interpretation. Example: "By legislating re-employment by 2012, to require employers to offer re-employment to workers reaching 2 up to age 65, and eventually to 67".

Second presenter: Analysis. Will the reforms encourage people to work longer? will they benefit low/middle income/older? Will the resource be enough [sic]? More reading verbatim from slide.

Do the changes actually benefit low/middle? Not really.

Questions: What does it mean that the plan allows reduction of older workers' wages?

Joel's evaluation:

• Reading/reciting text from slides: check.
• Poor time management: check
• Slides filled with hundreds and hundreds of words in small text: check
• Overall thoughts: might be a good presentation to a group of Singaporean accountants. As a presentation of policy analysis, dry and difficult. Dives directly into excessively detailed exploration of minutiae without without any introduction, explanation of context.

Prof's evaluation: presentation doesn't refer to any economic concepts from class.

Public Housing Subsidy: UK vs Singapore

• Reading/reciting text from slides or notes: check. Softer-spoken reader, too, so the soporific effect is amplified. I want (as I do with most student presentations) to go up and rip the notes out of her hands and shout "snap out of it!" Next presenter in the group much better on this account. Update: no, I take that back. As she's gotten deeper into her time period, she's talking way too fast as she simply shovels out words in a stream. If you have 20 minutes, you need to reduce the number of ideas to fit, not just talk faster. And you need to present a hierarchical structure: here are my main ideas. Now I'm talking about the first main idea. Now I'm telling you three details in support of my first main idea. Now I'm telling you my second main idea. Etc. Instead, this is just a flood of words that goes on and on, almost in a chant, without any use of pauses or any other structure, so once you tune out, you're gone.
• Poor time management: No. finished 2 minutes early
• Slides filled with hundreds and hundreds of words in small text: check
• Overall thoughts: Once again, the presenters' focus is on the minute facts and details that they have researched, not on introducing an idea to the audience. These presentations are way, way, way too detailed in the wrong, wrong wrong places. All facts and data, little to no information or knowledge.

Singapore Healthcare Policies and Financing

In 2005 Singapore spent 3.8% of GDP (with government contributing a total of 0.9% of GDP, or about a quarter.) Would love to see that directly contrasted with other countries (the US as the most expensive, Japan, the other Tigers, etc). Oh, now we get some pointless small details.

• Reading/reciting text from slides or notes: Check. Just as painful as the last one. If you are reading your entire presentation verbatim from a piece of paper, you are failing. If you can't hold the ideas of your presentation in your head, how do you expect your audience to do so? Second presenter is much better on these terms, though he's picked up the hyperfast talking problem. (I also talk way too fast when presenting.)
• Poor time management: finished 4 minutes early. borderline between good and too short, but certainly far better than too long.
• Slides filled with hundreds and hundreds of words in small text: check. Bonus demerits for using clip art figures with incongruously pink skin. Further demerits for pointless animation. Credit for actually stating a conclusion more or less clearly, but still the same absurdly busy, pointlessly overformatted, essentially randomly organized slides as everybody else.
• Overall thoughts:

I realized over the weekend, the same weekend that included 16 hours of Leadership and Communication training between from 2:30 Friday afternoon and 5 pm Saturday, that I've mentally checked out for the semester. This is not the fault of the training program, which was taught as well as possible for such a large class at such an inconvenient time. (In fact, that kind of public speaking training, as well as basic presentation skills, ought to be moved up to the pre-semester 1 special classes.) Nonetheless, my brain has departed for greener pastures.

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Unfortunately, it's only week 11 out of about 13, not to mention reading week and two weeks of exams. While my attendance is unblemished (so far) and I've written or transcribed or quoted about eighty thousand words of class and lecture notes over the last three months, the semester is far from finished, and my groupmates in my three or four or five group assignments would probably not appreciate my permanent mental departure. So, I guess I'll just mentally check back in and get back to work.

The World Bank

Note that there's a very substantial difference between the World Bank and the IMF. The World Bank has a lot to do with development, whereas the IMF is a bunch of economics PhDs.

Is the World Bank part of the problem or part of the solution? (Or both?)

Joel's note: When I started thinking about getting a post-graduation job, I talked to some professors and started reflecting on my options. One of my epiphanies was that, even though these multinational agencies and NGOs and such have global scope and deal with issues all over the world, they all have offices. If you work for one, you'll probably work in one of its offices. And those officies are in specific cities. If you want to work for one, you'll probably need to live in its city. Like these, in Washington D.C:

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In 2006 the World Bank approved US$23.6 billion in loans. Global FDI was US$1.3 trillion, and total capitol flow was $6 trillion. (The US economy was $13 trillion that year.)

The World Bank IDA offers 40-year plus interest-free loans, in theory funded by repayments from older loans but in fact always short of funds. Accounted for $9.5 billion of the World Bank's total 2006 lending. "In contrast to previous studies we find that the US exerted a significant influence on IDA lending during the period 1993 - 2000. We demonstrate that the influence was both statistically as well as economically significant." (University of Copenhagen study)

You can't talk about the World Bank without mentioning the Washington Consensus. And here's a useful-looking Stiglitz interview:

Multinational Monitor: What was the "Washington Consensus?"
Joseph Stiglitz: It was a consensus formulated between 15th Street and 19th Street in Washington among members of the International Monetary Fund (IMF), the U.S. Treasury Department, and the World Bank. It argued that the keys to success in developing countries were three things: macro-stability, liberalization (lowering tariff barriers and market deregulation) and privatization. It was largely formulated out of experience with Latin America.

MM: Does it still exist as a consensus?
Stiglitz: No. There is a consensus that those precepts, while important, are neither necessary nor sufficient for successful development.

Institutional Economics is a large part of the post-Washington Consensus thinking.

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?

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

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.

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?

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.

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 that, but any piece of art which supports interpretations and reinterpretations as diverse as the movies The Wizard of Oz and The Wiz, the book Wicked, and the musical Wicked, the Dark Side of the Moon soundtrack, and the possibility of being an allegory for bimetallic fiscal policy is something special, verging on Shakespeare territory as an ur-text. None of which has anything to do with the chapter, which is about global economics.

The global poverty level is US$1/day. Out of curiosity, if you had to survive in the US on $1/day, you would do well to buy M&M jumbo packs, apparently, at 36 calories per penny. Probably all of the best buys will be in candy, since it's almost purely reprocessed, heavily subsidized corn. You could afford 3600 calories, which is roughly double the daily calories you need. Of course the malnutrition would probably cripple or kill you, and you wouldn't have anywhere to live or clothes to wear or medical care, and we're ignoring food kitchens and govenment programs etc etc. But still, Bulk M&Ms, and probably clip some coupons. Food economics is always fascinating; see here.

A Conceptual Framework for Interpreting Recorded Human History Douglass C North, John Joseph Wallis, and Barry R. Weingast. NBER Working Paper No. 12795, December 2006

Thesis: The main social order for the last 10,000 years has been limited access order. These systems limit economic participation in order to create rents, and then using the rents to stabilize the political system and limit violence. Remember that rent in a technical economics term meaning, loosely, the excess profit you can get out of something when you don't have real competition. E.g, monopoly profits. So the paper is saying, essentially, that the ruling elites have always monopolized the economy to cheat people and then used that ill-gotten wealth to stay in power.

The rest of the thesis is that some countries have, over the last 300 years, started switching to open access order, with real competition, and that this provides a different basis for social and political stability.

Update:The paper defines three orders, primitive, limited access, and open access. I got about 30 pages in and was eagerly looking for the difference between the primitive and the limited access when I suddenly realized that, when the authors started using the term "the natural state", which I assumed was another way to say "the primitive state", they might actually mean something different, such as lumping both the primitive and limited access states together as "the natural state". Or something. Whatever "natural state" means, it's a bad term: it's ambiguous and overloaded with meaning from other disciplines. Nor is "natural" the defining characteristic of a natural state in the way that "limited access" defines, well, limited access orders. I'm still reading, but with much dismay as part of the foundation of the understanding I thought I was building is undermined.

Update 2: A classmate takes pity on my poor reading comprehension and points out where in the paper North defines "natural" as another term for "limited access". I continue to believe the paper would be better if the term "natural" was removed.

• p 5:

  Social orders are composed of constituent systems, such as the economic, political, military, and religious systems. ... Our framework acknowledges that political and economic systems are organically related, as they are both parts of the same social order.

• p 6: political and economic systems are interdependent. So "development economics and the international donor community" both keep failing to promote development because they can't or don't change both systems simultaneously.
• p 10: "every society has to develop mechanisms to ensure or restore order. The benefits of even moderate limits on violence are large enough to gain support from most non-elites as well as elites." I've thought about this in the context of China previously, but I suspect that this is the single strongest explanatory factor for popular acquiescence to dictatorship and authoritarian regimes. Note that mortality from violence is sharply up in Iraq from pre-2003 levels.
• p 11: an economic explanation of how two neighboring warlords might reach peace: the economic advantage of peace is incentive to make "credible commitment" to peace and set up a social order. Note that this mechanism only provides incentives to limit violence, not to renounce it. They're still warlords, maintaining both their internal political power and the state of peace through the credible threat of violence.
• p 12: "modeling the state as a single actor is inherently flawed. Unless we understand the dynamics of relationships within the organization of the state, we can never understand the interrelationship of politics and economics." Yay!
• p 14: "Recognizing and supporting elite organizational forms, that is by providing the institutional framework within which elites (and no one else) can form organizations, is one of the most valuable privilege that elites possess." A very formal way to say that The Man stays on top.
• p 25: "the clean break in the conceptual framework between the three orders is not matched by a neatly observable clean break in the historical record." Things are not very binary (recursion intended).
• p 26: transition from limited to open social order historically takes about 50 years or less.
• p 27: "Dictatorships, strong men, juntas, aristocracies, monarchies (hereditary and not), single party regimes, and representative assemblies (of the elites not the masses) all seem to represent viable internal structures for a natural state in some historical circumstances. ... internal revolutions ... change the faces of the leading elements in the dominant coalition without changing the nature of the social order." Q: Which order best describes Singapore? "... the same institution will operate differently in an open access order than in a limited access order. ... Elections, for example, work differently ..."
• p 30: typo: "If the coalition becomes to large,"
• p 32: the difference between the natural state and limited access orders. Er, maybe not. See my update at the top. I think they are saying that the difference between "primitive" and "limited access" is that limited access is a more impersonal, scalable version of "primitive."
• p 36. "Neo-classical economists believe that prices always work to allocate resources and have done so throughout all of human history." But this is probably wrong (paraphrasing) because elites often have monopolies but don't charge monopoly prices, as a bribe to other elites to maintain loyalty. So price-based signaling has probably been broken for much of human history.
• p 39. Broken sentence: "The ability of entrepreneurs to perceive new opportunities to capture rents and to form organizations to capture those benefits."
• p 39. The authors weigh in on the "democracy leads to economic growth" argument, by taking up the inverse position: "Sustaining competitive democracy is possible only in the presence of economic competition and the emergence of sophisticated economic organizations."
• p 39: "... the open access state suppresses alternative sources of violence. Open access orders that fail [to do so] typically fail to remain open access orders. ... Further, the illegitimate use of violence by the state can be identified and policed by sanctions against members of the government. [Footnote:] The rules about legitimate use of power must be clear, typically through constitutional “bright lines” that make it clear when those in power have violated the rule." Which would lead me to two conclusions regarding the US: first, the erosion of the rule that only the Congress can declare war is threatening our capitalism and our democracy. Second, impeaching any of the recent presidents who waged war without a declaration of war would help restore our capitalism and our democracy.
• p 43: Agreement with the "neo-Tocquevillean" view of civil society, though not using that term.
• p 45: typo: " A key way to limit the stakes of power at issue in political competition is to specifying a range of rights, including economic rights, that the government must not transgression."
• p 50: The explanation for transition must include only changes which are, at the time of adoption, in the interest of the dominant coalition. (The same principle is found in biological evolution.) So I guess radical change that ultimately harms the dominant coalition is possible only through unintended consequences, external forces, or ... what? Revolution?
• p 51: "The central feature of the transition is the development of impersonal exchange among elites." Huh. That sounds right, but is bemusing because another point that I'd been thinking about before coming to school, and which has been reinforced in classes, is the importance of interpersonal relations in successful projects and organizations. I guess that's not exactly the same scale or locus (whatever locus means) that the article is talking about, but still. Certainly my willingness to buy things over the internet, perhaps the most impersonal transaction possible, helps the economy, but I don't see that as an exchange among elites.
• p 52: the doorstep conditions: rule of law among elites, perpetual forms of organization for elites, political control of military. Perpetuality depends on the ability of office holders to bind their successors. (And hence, the Roberts Court's attack on stare decisis threatens our social order. Boy, there's a lot of strong conclusions just one step away from the text.)
• p 53: typo: "The doorstep conditions fosters impersonal elite exchange "
• p 64: typo? "When elites see this extension to their advantage, access natural states have an incentive to increase access." Another: "Moreover, having created the institutional mechanisms for maintain rule of law among elites"
• p 64: Transition mechanisms. First, fiscal mechanisms. Example: "banking. In the 1810's Massachusetts set up a system of taxing bank capital. The intent of the tax was to limit entry! But the state soon realized it obtained more revenue from the tax on bank capital than from dividends on bank stock in the banks the state was trying to protect. The state decided to sell its bank stock, and proceeded to allow open entry into banking. ... open access incorporation in banking, what is called “free banking” in the United States, began spreading widely in the 1840s."
• p 65: second mechanism: the institutions surrounding representation. Third mechanism: international competition.
• p 68: "Early corporations were created explicitly to generate rents by giving one group privileged access to an organizational form ... Once the corporation had been accepted as a legitimate organizational form, however, it was actually relatively easy to make minor changes in the institution itself that had dramatic effects on the polity and economy."
• p 69: "As a result, important pieces of the transition may occur without obvious or overt institutional change."
• p 70: "We have termed the political and economic structure of the limited access order the natural state for a reason: it is the natural form of human society." So the primitive order comes before the limited access order, and the limited access order is also called the natural state? Huh? Confuse much? And now we are changing to an "unnatural" state with liberal capitalist democracies? I think it's better just to not use the term natural state.
• p 71: "Natural states are not failed states, they are typically not produced by evil men with evil intentions, and they are not the result of pathologies in the structure of these societies. Nothing is unnatural about natural states. And because natural states are not sick, policy medicine will not cure them." But they are the result of pathologies in the structure of these societies. Just like the tragedy of the commons, individual people act rationally but the society is irrational. Q: What is that if not a pathology? Perhaps they mean that the culture, rather than the society, is not pathological?
• p 73: "only eight countries have made this transformation [to an open order society] since WWII. [footnote:] Moreover, none of these countries were the focus of international donor agencies." Q: Which eight? Korea, Taiwan? Some in Europe?

Last July, when our class was welcomed by the dean, we were all asked to stand up by country. This produced an ugly moment when one of the Chinese students obsequiously invited the Taiwanese student to stand with them, since Taiwan is a part of China. He demurred.

Last night this tedious controversy resurfaced in the context of an invitation to class party. I don't mean that the issue of Taiwan is tedious; it's very interesting and raises issues about self-determination and national sovereignty that question the fundamentals of our modern global political system. I mean that the mechanical repetition of the Chinese party line like a Pavlovian response is tedious. All eight Chinese classmates are perfectly nice, smart people whom I like and who are very courteous when I speak my few words of Chinese. But when the propaganda takes over, they're as much victims of uncritical thought as the Americans who parrot lines about "fighting them over there so we don't fight them over here." Please, give it a rest. You aren't winning any friends when you talk like this. The problem isn't the political dispute, it's the insulting vapidity of reflexive stridency: "I strongly protest .... According to the international conventions, Taiwan should be named as Chinese Taipei."

Oh please.

The other interesting question is why all eight Chinese students acted in concert. I hadn't thought all eight to be so doctrinaire or nationalist. Perhaps some of them know or suspect that some of the others are reporting to the Party.

What are the fundamental problems of political institutions?

• How does government control the governed, and how does it control itself?
• How do we reveal and aggregate preferences?
• How can we provide public goods?
• who will guard the guardians
• Joel's note: how about, how to guarantee the rights of the minority?

Federalism and compound republics

• Individuals, not the state or the collective or the church, are the basic unit of design and analysis. C.f. China or Singapore: the interest of the state trumps the interest of individuals
• government's purpose is to use individual interests to constrain and order individual behavior. "that the private interest of every individual may be a sentinel over the public rights." (Federalist) C.f. Marxist theory, that "class consciousness" will motivate people. Joel's note: I guess, putting it that way, that both are right. People do act out of individual interest, but that interest is determined in a cultural context in which class is very important
• When individual, rational pursuit of self-interest results in an emergent irrational result, we have a collective action problem. Republics solve this by providing a mechanism to reveal and pursue a more rational collective outcome.
• Individuals can learn, to institutional design is always experimental.
• covenant approach: do unto others what you would have done to you.
• Government institutions are pluralistic. There are 89,527 units of government in the US. (About 3000 counties, 36,000 cities and towns, and 50,000 special districts, half of which are school districts.) C.f. Indonesia or the Philippines, where most provinces have only limited authority to create governments (although there are autonomous exceptions: Aceh, Kashmir, etc).
• The constitution provides the basic rules for everything else, including rule-making.
• Perpetual contestation is built into the system. Conflict elucidates information, clarifies alternatives, stimulates innovation, helps achieve complementarity of interests. Stalemates are better than a dominant center.

Besides executive, legislative, and judicial, what other institutions often serve as branches of government? The military, media, civil society, the monarchy (yes, in some countries the monarchy still plays a meaningful role), the church.

Discussion: When you have a democracy, it's unlikely to go back to authoritarianism. But Pakistan has had a real democracy but had the legitimate president suspend the elected national government twice and local government once. Both the president and the government were elected; who should trump whom?

Ulysses as an example of the credible commitment problem. In order to prove his promise, he ties himself up. Joel's note: bad example: Ulysses ties himself up because he needs to be able to hear the sirens without acting under their control. He needs to be able to hear them so that his crew, all wearing earplugs, know when it's safe to take out their earplugs. Which raises the question of why the sirens didn't force Ulysses to prematurely signal the end of danger. I guess their control wasn't that granular. But either way, Ulysses and the sirens was just a tactical problem, not a classic commitment problem.

Which elements of federalism preserve markets in the US?

• Single-party system provides a credible promise that government policy will not change over the near or medium term.
• Hierarchy. At least two autonomous levels controlling the same territory.
• Trade is protected as the federal level (an example of both the minority (free traders) having protected rights over the majority (people who would gain from parochial barriers), and of the collective action problem being solved by ceding local power to an aggregated authority).
• Hard budget constraints on lower levels. Only the national government has any legitimate reason to run deficits.
• Restrictions on federal government plus competition between lower levels limit the growth of economic regulation.

How does federalism interact with markets in China?

• Hierarchy. Because of the multi-level hierarchy, there is a series of principal-agent problems.
• sub-national governments have regulatory control
• Dependence on foreign direct investment
• Hard budget constraints on lower levels.
• Corporations are the main contributors for local government revenues.
• State-owned enterprises pay the government, which redistributes back to local governments. Local governments provide most of the social goods.

  Discussion: 18 million people in Shanghai. Medical care comes from employers; unemployed people do not have substantial safety nets. Gamesmanship between provinces and central government. 75% of Chinese are farmers, and when they are cut off from their land, they go through the cracks. New initiatives to organize groups of farmers into shared medical and pension funds.

• Individuals pay income tax to the provincial government, which forwards it to the central government, which redistributes among provinces.
• Provinces compete for big projects funded by the central government.

Problems with decentralization

• Diffusion of authority, leading to bargaining between central and local governments
• Unequal distribution between local units
• If local governments can borrow, the total government borrowing at all levels could be excessive and come at the expense of private investment. Happening now in the Philippines.

The case of Singapore

The framers of the US constitution did not trust single parties; Singapore's philosophy is that the single party is suited to run the country, and depends on internal controls for checks and balances. In China, smart people join the party to get ahead. Singapore recruits the smart people. In Bangladesh you join the army to get ahead and later go to politics. In other countries families determine opportunity and succession.

Side discussion, eventually reaching the point of emigration. Here's the punchline:

Consider this: every year, 6,000 to 7,000 Singaporeans leave to settle down overseas, including many professionals. This is 15% of today's annual births, probably the highest proportion in the world.

One website survey, which is unverified, has put Singapore's average outflow at 26.11 migrants per 1,000 citizens, the second highest in the world - next only to East Timor (51.07).

Mechanisms for preference revelation

• direct democracy
• representation

LKY prefers a trustee model to a representative model; if politicians represent narrow constituencies, they will promote factions and racial disharmony.

Arrow's theorem: it's impossible to have voting which is both fair and consistent. Joel's note: yes, but only if there are more than two choices. Bottom line: those who control the agenda can manipulate social choice.

Direct democracy problems: tyranny of the majority. Bundling problem: candidates come with an array of positions, and you may agree only with some of them but you're stuck with all of them.

Other mechanisms: Singapore. Government determines preferences from feedback units, meet the people sessions, people's associations, appointed opposition. Narrow interest groups can dominate diffuse public interest.

Principal-agent problem where representatives spend public resources to win elections.

How political contestation affects the economy

Proportional rule leads to more parties than majority rule; more parties leads to more pandering and higher budget deficits. Example: Indonesia vs UK. Also fiscal reform is harder.

Problems with representative government

• provide an avenue for special interests and geographic constituencies to take from the whole
• electoral cycles and the need to address constituents distort policy

Discussion: it doesn't seem like the representative system, and the US constitution, really address the economic issues. It was designed for political reasons, not economic considerations.

Joel's Q: Modern political discussion, especially since WWII and even more especially since 1989, is completely dominated by economics and, in particular, with growth and "developed vs developing". What was it like hundreds of years ago?

Modern institutional design in liberal democracies includes divesting some fiscal powers to an independent or semi-independent entity.

Christine Loh, et al., “Climate Change Negotiations: An Asian Stir Fry of Options,” Civic Exchange and Singapore Institute of International Affairs

Conflict

Evolution of thinking from avoiding conflict to managing conflict. Task-related conflict is more productive than socio-emotional conflict, which leads to escalation.

• Task independence
  • Pooled interdependence: units can function independently but are part of the same organization. Minimal task conflict.
  • Sequential interdependence.
  • Reciprocal interdependence.
• Goal incompatibility
• Scarce resources
• Differentiation
• Ambiguity
• Communication problems
• Reward structures

Joel's note: A classmate and I have been talking about conflict in terms of fundamental versus superficial causes, more or less agreeing that either or both can cause or resolve conflicts (sort of like how good pitching beats good hitting, but good hitting beats good pitching). And these causes fall variously into either category. Which reminds me that there's a third category: the conflict behavior programs that have evolved in our brains. Both superficial (communication problems) and fundamental (goal incompatibility) problems can serve as triggers for socio-economic conflict and escalation. And the next step of that argument is, are those emotional responses detrimental or, perhaps, an alternate form of intelligence?

Robbers Cave experiment, yet more data that could not be acquired since the rise of cursed Human Subjects Committees. Psychologists posing as camp counselors got two sets of kids to form in-groups, then compete with each other, then cooperate with each other.

Joel's note: If we wanted to generalize from this single data point, we would note that the Summary has direct implications for Global Issues class:

we discarded certain procedures in [the cooperation] stage, such as introducing a "common enemy" ... [cooperation between previously hostile groups was obtained through introduction of a series of superordinate goals which had compelling appeal value for both groups but which could not be achieved by the efforts and resources of one group alone. When a state of interdependence between groups was produced for the attainment of superordinate goals, the groups realistically faced common problems. They took them up as common problems, jointly moving toward their solution, preceding to plan and to execute the plans which they had jointly envisaged.

Once again I'm the designated resource for Americana, and once again I get it almost right. "Winning's not the best thing, it's the only thing." Bzzzt!

A major change in anglo-saxon culture: people now say "I work with" when referring to their boss, rather than "I work for".

Organizational Politics

A basic taxonomy:

• Attacking or blaming others
• Selectively distributing information
• Controlling information channels
• Forming coalitions
• cultivating networks
• creating obligations
• managing impressions

Note: Chinese has an idiom, "the 36 strategies"

Presentation on Case Study

Slum Rehabilitation in Mumbai. A case study of one project in which several NGOs collaborated with Citigroup to fund a mixed market-rate and free housing project in Dharavi, a slum neighborhood in Mumbai. Complications included disagreements about the viability of the project and the amount of financial risk the various actors should take. Joel's note: You can take a tour of Dharavi. And I just learned that Dhoby Ghaut, a subway station here in Singapore, is actually a term for Indian laundries.

A music video about Dharavi. One million people in 535 acres, with 150 toilets. More pictures.

The actors:

• SPARC
• NSDF
• Homeless International
• Slum Rehabilitation Authority
• Citicorp, Citigroup, Citibank
• ?? The presentation identifies one with a picture but no name
• Rajiv-Indira Cooperative

Why is there an alliance between NSDF, SPARC, and MM? SPARC started the alliance to find financing for people to build houses.

SPARC and Citibank reached the first or second stage in Austin's model of NGO/business relationships. More than just money for reputation.

To analyze: where is the money from? Who carries out the construction? SPARC persuaded Citibank to give loans to the project; Homeless International provided loan guarantees. (But Citibank didn't actually provide money in early stages; SPARC provided the initial funding, not Citibank.)

Complications:

• market drops reduced demand for the TDRs, transferable development rights (to build higher than local limits), that the free housing would generate
• New Coastal Regulation Zone II rule also threatened the TDRs.
• Citibank made new analyses suggested that nobody who could afford the market-price apartments would want to live near the slum, or vice versa. But the local activists believed that there would be plenty of non-impoverished people living in the slum, for example those owning some of the 15,000 single-room factories within the slum.

Original financing: US$750,000. By 2001, Citibank's actual input was $190,000, and SPARC and NSDF contributed $435,000. Final cost was $1.5 million (but whose money was that?).

Very limited government involvement. Maharashtra Slum Areas Act.

Classmate note: The NGO participation in building housing in Dharavi incented local slum dwellers to stay put instead of participate in government programs to move them to more distributed housing.

More recent news: a $2.3 billion project to bulldoze the whole slum and put up free housing for the poor, though "outraged local activists say the plan will benefit wealthy developers instead of the poor, leaving many with no place to go." The plan "calls for apartments to be built for the 57,000 families the government says live there." Yeah, if there are really a million people there, then that's not going to turn out well. The government plan would provide 225 square feet for each family.

Class discussion

My turn, with a classmate, to lead discussion this week.

Second case study discussion

Identifying the key points from case (not the Mumbai case, the other case; Steamburgh, in "Midstate" USA):

• 40% poverty rate, high unemployement
• tax base comprises property taxes only
• revenue shortfalls
• Growing private sector, 40% services, financial sector with $75B assets under management.
• Robindale industries, $5B in assets, international sales, cyclical employment. Their foundation supports education and art; they have renovated 2 city blocks of retail space.
• Robindale calls the mayor to invite him to a business group dinner, where they will probably ask for support to build a new stadium.

Bilahari Kausikan, Second Permanent Secretary of the Ministry of Foreign Affairs, Singapore

What is East Asia? The definition has changed over time; it's a political as much as geographic definition, and now comprises countries with great economic growth. The region is being stitched together by trade, etc. But interdependence doesn't necessarily lead to harmony.

What does all this mean? Not too long ago you could sketch things out just by looking at US-China-Japan relations. Now it's a more complex mix. Example: China and India. They fought a war, but then tried to ignore each other.

A need for some kind of mechanism to improve stability. Experiments such as ASEAN plus 3. Three theoretical scenarios for ASEAN as China and India grow, with ASEAN as the land between. ASEAN could get torn in half. Or it could be squashed flat as they take up all the political/economic space. Or it could draw together.

Q: You mentioned Japan-India, which I've never seen discussed.

Q: China-India relations are discussed much more outside of India than inside.

A: Nobody has a plan in these relationships. They are moving forward one step at a time.

A: I don't believe your ethnic origins give you an advantage in foreign affairs. Maybe if you speak the language. But I'm half Indian, half Chinese, and I don't know anything about either.

A: Even the smartest idea of a small country can be ignored, but even the stupidest idea of a big country must be attended.

Q: What about Brazil? A: The distance, and not only geographic, between South America and East Asia is very great.

Joel's note: The question I'm not going to bother asking: What would it take for Singapore to stop collaborating with the generals in Myanmar?

Q: What's the relationship between Singapore and Africa? A: Superficial.

Q: What are the things ASEAN can do about Myanmar and North Korea? A: Very little. What can we do? Are we going to get together a multinational coaliting, invade, and institute regime change? How could sanctions work on a country that has little engagement with the world? Countries in South Asia can't afford to take a moral stand because of strategic interests: stability in the region. It's a buffer between China and India.

Joel's note: If I get a chance, I may ask my question after all. Here's an interesting rebuttal to his point:

an e-mail attributed to [the son of Myanmar arms dealer Tay Za] and reviewed by Asia Times Online announced, "US bans us, we're still fucking cool in Singapore. We're sitting on the whole Burma GDP. We've got timber, gems and gas to be sold to other countries like Singapore, China, India and Russia."

He reminds me of LKY. Very smart, very glib, seemingly very frank; if you listen critically you'll notice some very repugnant justifications. He does giggle a lot more than I've heard LKY.

A: Myanmar's neighbors will not join a sanction unless there is a UN Security Council resolution, which China will veto. They want their buffer. Singapore has become more vocal, criticizing Myanmar, but we still have to work within the ASEAN structure.

Brad Smith, Microsoft's general counsel.

Starting in the late 19th century in the US, companies started having their own lawyers.

International law in the 1970s was a very specialized practice, but now international law is virtually a part of all law, because business and technology go around the world. This is especially true of intellectual property law. Back in the 1980s, it was possible to get through law school without taking a class in IP law, which was considered a bit of a backwater.

This is because so much of the value being created today consists of intellectual property, not real property. Microsoft would not be among the world's biggest companies if it only made hardware. It's very costly to create software but very easy to copy and distribute it. Is this the recipe for economic failure? You would think it would be very difficult to create a business like that. But many companies do this, create lots of jobs, employ lots of lawyers. It is the copyright law, and only the copyright law, that stops people from engaging in that massive theft, if you will.

What is the fundamental ingredient of your economic value? For many companies, research and development. This is true for IT, pharmaceuticals, films, books, music. A lot of what we value in the 21st century is fundamentally about the creation and protection of intellectual value. So globalization is very important to a company grounded in intellectual property. Lawyers at these companies play an especially interesting and important role. Lawyers are important anywhere, but at an IP-based company they are critical. (Joel's note: see the "strategic contingency model" in this week's PP5503 reading. In particular, this seems like a pertinent quote about the consequences of the model: "But there are two complications: the job to be done tends to grow itself. ... Second, power institutionalizes and lingers beyond its justification.")

The way people have changed the way they think about intellectual property will continue affecting you [the young lawyers in the audience]. In the past, just by copying things on disks and walking around with disks, people could disseminate software around the world in a month. But now computers are all connected to each other immediately.

A big reason security has been such an issue for our software this decade has been that we created our software with the assumption that it would not be connected to other computers. Well, we also had to rethink how we deal with intellectual property. Lawyers are trained to advise clients about how a court in the future is going to decide a case based on looking at the past. And yet [in IP law for global companies] now we are trying to make predictions when the future is murky, with many many governments reaching different or even opposing conclusions.

Meanwhile two other things are going on in the world. First, more companies are doing business in places that don't have many lawyers. While there may be too many lawyers in the US, there are many countries that may not have enough lawyers to have adequate rule of law. Cambodia has four times as many people as Singapore but has fewer than 300 lawyers. (a bit more data on lawyered up countries)

We were talking at Microsoft about how to reduce piracy in a certain region, but someone said, there are no lawyers. When I say there are 187 lawyers in Mozambique, that includes all the judges, all the government staff with law degrees. We've tried to support through our philanthropy more lawyers in the world.

People have come to expect and demand more from companies than in the past; some of this may be the fault of the companies themselves; for example, Enron. Sometimes, now, lawyers have ended up being the conscience of the company. People look at scandals and ask, what where those people thinking, and were the lawyers awake? You realize that lawyers have a special responsibility. (Joel's note: Brad Smith is also the chief compliance officer for Microsoft). People trained in the law are trained very broadly, and can give advice that starts with, is it legal, and ends with, is it right?

The world isn't really flat; I went to bed here in Singapore at 1 am and got a call at 3 am. But the person at the other end often has an interesting question.

Questions

Q: You said there are some countries where Microsoft doesn't wish to pursue patent rights. Why? A: If it costs nothing to apply for patent rights, every company would everywhere. But it can be very expensive. Microsoft spent US$135 million on patents last year (I think he said); to patent everything in every country would have cost us closer to $350m. (long-winded answer trimmed). I really think it shows that we need to reform the patent system around the world. It's much too expensive and too complicated ; if it's so bad for Microsoft, think how hard it must be for smaller companies. There's been cooperation between the EU, Japanese, and US patent offices. I will be very surprised if the patent world doesn't look very different before the end of our careers. I think it will be possible to start a company in Singapore and patent something around the world without filing 187 different applications.

Q: Can you give an example of a recent social responsibility issue Microsoft has had to deal with? A: The article by Michael Porter and someone else last year in the Harvard Business Review was very useful. Three kinds of CSR: what you do locally? What do you do globally? If we create software that isn't secure, we create problems for other people. Parental controls for software. The third area, the most interesting: think about steps that will make society better and help you grow. For example: one of the most important things for people (for example: kids, unemployed people, people outside their home countries) to have is not just access to computers but knowledge of how to use a computer. So we've asked ourselves, we had a meeting just two hours ago (I guess that's why he was 30 minutes late), what can we be doing to give people access to these skills?

Q: for a period of time, Microsoft and EU has been having discussions, of great financial impact. I'm trying to put this in context of what we've been discussion. ... It's a business, so cost is very paramount. So in this discussion, which is the dominant factor, is it cost, or is the alternative even more costly? Was that why Microsoft took that choice? Could it have been prevented? Was it an issue of intellectual property? Perhaps Microsoft looks at it as IP and the EU as antitrust? A: It's many things. it's a good example of the law changing over time. The law is always changing, and with new technology the law is changing in ways that no-one can predict. An example from the state of New York, the most important US state in terms of commercial law. If someone designs a product, do they owe a legal duty to someone who uses it? In 1871, the court of appeals ruled that the answer is no, there is no duty beyond a direct contractual relationship. In 1916 the same court again ruled on the same question, again unanimously, but in the opposite direction. In 1871 it concerned the building of scaffolding around a house. In 1916 it concerned Buick automobiles. The automobile changed every aspect of the United States: mobility, banking, the law. If you change the world, you change the law, but not necessarily in ways that are easy to predict. In the 1970s and 1980s there were many cases in the US concerning IBM. Could IBM add new features to its products? IBM was sued by a company that made a utility for IBM software, and the courts said that was not a violation of antitrust. IBM settled with the European Commission in 1984. But in this decade, the law has changed in both the US and EU. Microsoft, we're not going to treat you the same way we treated IBM; that is not the legal standard any longer. Even though we said in the 1980s that IBM does not have to open its standards, you do have to. I'm not going to argue the law; we did that and we lost. It's important to step back and say is this good or bad? It's less focused on encouraging innovation and more focused on a level playing field. The question is now, where do governments in Asia want to place their priorities?

We have a student presentation on the readings. This week the overlap between my two classes from this professor is large and disorienting. In 5263, this Tuesday afternoon class, we read a lot about corporations and climate change, and had homework on what corporations in our own countries are doing about climate change. In 5262, Wednesday afternoons, we read a lot about public-private partnerships and NGO/corporation partnerships. I ended up handing in my 5263 homework in the right place at the right time but with 5262 in the heading.

Presentation

Corporate participation: too little too late. Joel's note: Was Y2K an example of too much too late? I wonder if there's an authoritative analysis of the Y2K effort which answers the question of, was it mostly a bunch of wasted effort or was a big disaster really averted?

Class activity: simulation of WBCSD meeting.

Joel's note: if you would like to bend your mind, read this article. It's in CRO magazine (yes, there's a title Corporate Responsibility Officer, and yes, there's a magazine for that). It's about giving awards to the best PR firms in Corporate Responsibility. 'nuff said.

The Wikipedia page on the WBCSD provides another good laugh. Remember that this is an industry group built on the ashes of the GCC, a greenwashing group whose swan song ended with "Carbon dioxide: they call it pollution; we call it life.". Here's what Wikipedia says about the new group:

Membership of the WBCSD is by invitation of the Executive Committee to companies committed to sustainable development. Among its members[9] are well-known companies such as General Motors, DuPont, 3M, Deutsche Bank, Coca-Cola, Sony, Oracle Corporation, BP and Royal Dutch Shell.

The student presentation has included BP, Ford, Toyoto, and now Sinopec presentations. These faithful presentations include some of the same inadvertant self-parody as the GCC ad. Joel's side research: Japan's fuel efficiency standards for cars will rise to 40 mpg in 2015. Given all the complexities and tricks in efficiency standards, you probably can't take that number at face value; however, Japan also plans to extend fuel standards to trucks, which is unprecedented.

Sinopec has dramatically improved its efficiency per RMB of income over the last five years; e.g., much less water consumed, CO₂ emitted, etc. This is good, of course, but should probably be interpreted as an indication of how staggeringly inefficient and destructive Chinese industry has been, just as China's enormous growth numbers reflect in part just how devastated China's economy was under Mao.

Tata. Exxon: the student who was supposed to role-play an Exxon flack at the WBCSD refuses even to pretend to work for Exxon.

Joel's side research: here's a tidbit I wish I'd included in my homework:

The legislation [passed in 2007] thus effectively bars Washington [state] utilities from entering into long term financial commitments for any pulverized coal-fired generation unless they use some form of carbon sequestration.

And lest you think, as I did, that my casual browsing was wandering totally off-topic from the presentation, our presenters just said that two governors in the US have committed to greenhouse emission limits.

I think we are covering the material from week 4's reading. Market power, monopolies, and regulation. Did I mention that Brad Smith will be talking at the NUS Law department tomorrow afternoon? The topic is "Globalization: The Changing Role of Lawyers In A Flat World". My dismay about the further propagation of a classic Friedman malapropism aside, I think it should be interesting. We'll see what he has to say about Microsoft's steady accumulation of billion dollar fines from the EU; it must be frustrating to buy off one government only to have another shake you down for more petty cash.

Detailed explanation via supply and demand curve (as our management professor says, economists have only one trick, that of drawing diagrams with crossing lines) of how a monopoly imposes a net social cost. That is, not only does a monopoly transfer more than a "fair share" of wealth from buyers to it, but an market with a monopoly has lower total productivity than a market with competition. Joel's note: A classmate previously opined that the key to making serious money is to make some kind of monopoly, c.f. Bill Gates and Carlos Slim. (But what is Buffett's monopoly in?). So the real meat in economics, especially in terms of public policy, is probably in figuring out how organizations make monopoly spaces in which they can rake in the rent while, presumably, hurting society.

If you regulate a monopoly by allowing them to earn a certain rate of return, they are incented to over-invest.

A legal cartel: OPEC. Joel's note: OPEC is only legal because there is no international antitrust law. I guess a libertarian would say that anything that isn't outlawed is legal, but I wonder about that from a linguistic standpoint. If there is no relevant law one way or the other, it seems neither legal nor illegal.

No mention of AT&T and monopolies should go without this picture.

Joel's note: if we are talking about monopolies in the context of Public Administration, especially in Asia, shouldn't we be talking about how many governments depend on telecommunications monopolies for tax revenue?

If a monopolist can perform complete price discrimination, it will operate with no deadweight losses, which is good for society.

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

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

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:

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.

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?

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?

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)

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?