Institutions and Development

Oh how I would love to sit in on this class.

Political Economy of Institutions and Development

Daron Acemoglu and Abhijit Banerjee

Hopeful Sentences

There is some chance that 2011 will be the new 1989.

 Not that I can remember 1989, but it does kind of feel like it. Here's to freedom from bad government. 

"The East African" African President's Index

Bashir comes in second-bottom. I wonder how Salva Kiir will do in next year's edition?

HT: John Ashworth

Notes of a Subpar Footballer

The organiser of my indoor football team is blogging our travails. This one is probably of limited general interest, with the possible exception of my mum. I scored a goal!

Photo of the Day

Of votes counted so far in the referendum, 98.81% have been for secession. Seems like a good occasion to post this photo of a billboard in Khartoum, taken by a friend during the  2008 Census.

More Clarifications: On Academic Publishing

So my position on Elsevier also requires some clarification.

on the one hand you say it is in the nature of a private firm to maximise its profits, but at the same time you say that if they don't decide to make no profit at all they should be nationalised?

Ian Thorpe also discussed a number of different business/revenue models:

Journals are not “free” to produce of course. Producing them costs money, whether it’s to organize the peer review process, for editing, layout, printing, distribution, advertising, web design, subscription management and so on.

Well firstly I refuse to believe that the costs for online-only access are (or at least should be) that high. Look at this blog! It costs me nothing absolutely nothing to publish. With the exception of $10 for the domain name.

But let me start again – informati0n basically has most of the properties of a textbook public good, which kind of suggests that it should be publicly funded and made freely available to all. Public funding could co-exist with the existing publishing companies through some sort of contractual arrangement. I don’t buy the arguments for establishing new journals, reputations are too difficult to acquire. Rather, governments should tell publishers that they will now be publishing things online for free, and then maybe give them some compensation for it, but then as the costs are so low they could basically afford to just do that bit for free and cross-subsidize the slightly loss-making online versions by selling physical copies to libraries. And yeah sure, let them stick some advertising on it too, the basic point is that they should be compelled to allow free online access.

And finally whilst it is of course completely logically understandable when profit-maximising firms happen to behave utterly disgustingly in the valid pursuit of profits, it doesn’t mean that we shouldn’t pour scorn on them.

Is that any better/clearer?

I made a Facebook page for my blog

I would feel a bit presumptuous spamming all my friends by putting all my blog posts on my personal page, so I made a special page just for the blog, that way you can opt in, or not. Might be useful for those who don’t use an RSS reader or something.

So go look here and Like it.

Or not. Whatever.

2 Lessons from Tunisia

First, the west is wrong to think of old dictators as useful allies.

our second lesson is that  leaders of extraordinary tenure are rarely good for their own countries.

In sum, little good comes from allowing a president to remain in power much longer than a decade.  That is why I have long argued that the imposition of presidential term limits is perhaps the single most important measure to improve the governance and economic performance of developing countries.

Nicholas van de Walle, who I believe is probably one of the foremost Africanist political scientists

Player-hating: Some clarifications on institutions

My fiercest critic [I’m sorry for the typos! I’m sorry! Please stop shouting at me!] just harangued me for my lazy and inadequate response to these comments on institutions.

So allow me to make amends.

Anonymous said “knowing that (persistent) social stuff matters isn't at all the same as knowing that institutions matter, and even if we define institutions to mean "persistent social stuff" that still doesn't say what needs fixing.”

Firstly, the terms we use are vague and confusing. What is an institution? What is governance? I like Paul Romer’s use of “rules.” It is easy to think concretely about what rules are, and why they might matter. Even if you think his prescriptions are a little crazy, he does a very good job of explaining the importance of institutions (rules), and you should really watch the TED talk if you haven’t already.

Secondly, you are absolutely right, we don’t know what needs fixing. Which is exactly my point – we know what good institutions are, but we don’t know how to make them.

Here is Dani Rodrik, discussing his canonical empirical paper Institutions Rule in the Finance & Development magazine:

Institutions are thus critical to the development process. But for each of the functions performed by institutions, there is an array of choices about their specific form. What type of legal regime should a country adopt—common law, civil law, or some hybrid? What is the right balance between competition and regulation in overcoming some of the standard market failures? What is the appropriate size of the public sector? How much discretion and how much flexibility should there be in arrangements for the conduct of fiscal, monetary, and exchange rate policies?

Unfortunately, economic analysis provides surprisingly little guidance in answering these questions.

Ed Carr questioned the power of institutions as an explanatory variable, “this is a relative measure - institutions are better than things like geography for predicting outcomes, but they still leave a hell of a lot of variance out there.”

This chart is from the same Rodrik Finance & Development article. There is a fair amount of variation, but in the world of real-world data, that is about as tight a correlation as you are ever going to find.

Finally Bottomupthinking asked “Maybe the institutions operate so badly simply because they are not really understood by most of those who live in or with them (the wider populace)?”, which leads me to believe that we are again confusing terms? In any case, I think we agree on the difficulty of improving rules, governance, institutions, whatever you want to call it.

Lant Pritchett is doing some very interesting work on the related-but-not-quite-the-same question of state implementation capacity.

At their current pace of progress countries like Haiti or Afghanistan or Liberia would take hundreds (if not thousands) of years to reach the capability of a country like Singapore and decades to reach even a moderate capability country like India.

Pritchett is also one of the most vocal public advocates for migration as a development policy. It perhaps is no coincidence that he has also spent so much time studying development failure and “state capability traps.”

Shame on Elsevier

The academic publishing industry is broken. Academics produce research, then give it to the publishers for free, who then make profits by restricting access to it.

Elsevier, publisher of the Lancet, have just revoked free online access to their journals for doctors from poor countries.

Shame on you Elsevier for this shameful move, and shame on your CEO Erik Engstrom and his £1.8 million salary.

All credit to the Editor of the Lancet for speaking up in opposition to this move.

But it is the whole industry that is broken. Private firms try to maximise their profits, that is what they do. We should not be surprised. And yet the fruit of research, information, is the ultimate public good. My "consumption" of a research paper in no way diminishes your ability to consume the very same paper. This absurd industry needs a wake-up call. Publishers should be offered a choice between making academic research available online everywhere for free or being outright nationalised.

Quote of the Day

If there's one thing government has going for it, it's the ability to make anything unfashionable. This insight into government's jujitsu-like capability to render the cool uncool should be more obvious to conservatives than to liberals. (The Economist on drug decriminalisation)

Aid and tax dodging

Scott Gilmore has a great article discussing the absurdity of the UN, donors, and their contractors operating tax-free in developing countries. We even pay advisors to go to developing countries to help them improve their systems of taxation, whilst these very same advisors are getting paid tax-free, helping to undermine those systems. Apparently the irony is lost.

#Stuffexpataidworkerslike: Tax-Dodging.

Southern Sudan: What happens next?

The referendum is finally here. I am overjoyed for the people of Southern Sudan. There is no doubt that there will be a resounding vote for independence. So what happens next?

The short answer – not very much actually changes. The Government of Southern Sudan (GOSS) has been in existence for 5 years now, with responsibility for the majority of core government functions.

There are serious challenges to be faced in terms of building functional capability and increasing accountability, but they are the same challenges which have existed for the past 5 years. Nothing is about to fall apart,  any more than it already has done.

With perhaps one major exception. GOSS has so far not had to deal with monetary policy, and this is a serious concern. Establishing a new currency and managing the risks of inflation for the first time will be extremely difficult. And as Keynes said, “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose” (HT:TH).

Another concern is the potential for new borrowing once the South becomes a sovereign nation, which is really not needed when oil prices are so high and spending controls still too loose.

Southern Sudan has some smart leaders who understand many of the challenges. Robert Klitgaard discusses meeting Pagan Amum and Deng Alor in 2005, and the sharp grasp they had of the scourge of corruption and the difficulty in creating accountability. But good policy and good decisions take more than a few good individuals – establishing good systems is difficult and will take time, as will training enough mid- and lower level civil servants to run these systems.

A distinct positive should be an influx of Southern politicians and government officials from Khartoum, who have been serving as part of the Government of National Unity (GoNU). This influx will create some welcome competition for the top jobs (and hopefully not just new Ministries to accommodate them).

And finally one question to which I’m not sure anyone has the answer: what shall we call you country 193?

Don’t hate the player, hate the game

Here are some great reflections from Tom, an ODI Fellow who just finished his term as a Kenyan civil servant.

I think one of the very many things I'm going to miss about Kenya is the people I work with, just not necessarily the system we were working in.

Which rings very true to me. I worked with some amazing people in Southern Sudan, but good systems take a really long time to create, and bad systems leave you hamstrung.

Which is partly why I am so enamoured by the idea of international migration (and charter cities) as shortcuts to bringing good institutions and poor people together.

We know the secret of development. It is good institutions. We have a reasonable idea what good institutions entail. The only problem is that we have very little idea about how good institutions are established in societies that currently have bad ones.

Yet we persist with the frustrating task of attempting to bring our good institutions to them, rather than contemplating the relatively simple task of bringing them to our institutions.

We already have incredible systems for delivering rule of law, healthcare, and education. We can give these systems to the global poor overnight, and they will stop being poor. Overnight. We could let them move here.

ICG-CSIS Online Sudan Referendum Event

The Center for Strategic and International Studies is hosting a discussion

“Sudan: Post-Referendum Scenarios and the Way Forward”

on Monday, January 10, 2011 8:30am - 10:00am

with International Crisis Group’s new Africa Program Director, Comfort Ero, and its AU and Sudan Special Advisor, Fouad Hikmat. 

And if you can't make it to Washington D.C., you can watch it LIVE RIGHT HERE ON THE INTERWEBS. How about that eh?

Last Week's *Anonymous NGO* Southern Sudan Security Report

Central Equatoria state: 02/01/2011, at Jambo,a soldier had a dispute over money at the dancing place as result, he exploded a hand grenade which resulted to several people wounded. The injured people were later taken to Yei hospital.

Western Bahr Ghazal State: On 27/12/2010, at night, a drunken soldier shot three of his comrade at Hai Dinka after a dispute with them. One soldier died and two sustained gunshot wounds.

On 27/12/2010, at Gogrial, UN staff reversed his vehicle over a sheep that was sleeping under the car. The case was reported to the police and the staff was charged to pay 1000 SDG as compensation. The UN staff refused and he was detained for two hours, he was later released.

I swear to god this is a real thing.