How Powerful is Rouhani in the Islamic Republic? - Research Paper

Iran's Nuclear talks have recently been extended, whether because Rouhani's engagement or the late rapprochement between USA and Iran due to Daesh/ISIL still remains to be seen. Bastani's "How Powerful is Rouhani in the Islamic Republic?" has a look at the power dynamics within the Iranian government around two key points: President Rouhani's standing vis a vis Supreme Leader Khamenei, and secondly the how the nuclear talks shape does dynamics.

This is an interesting paper that reminds us that while leadership is important, aligning interest groups (in a wider sense) and coalition building are fundamental for actual policy change.

Introduction

"One of the key questions being asked about the negotiations over Iran’s nuclear programme is how powerful President Hassan Rouhani really is within Iran’s unique political system. In other words, in a country where the key power-holder is the Supreme Leader, do Rouhani and his colleagues have the ability to advance their agenda and implement an international nuclear agreement despite their powerful opponents? This question is of particular importance because during the presidency of pro-reform Mohammad Khatami, Rouhani was in charge of the nuclear talks and reached an important arrangement with the international community, suspending uranium enrichment and opening nuclear facilities to International Atomic Energy Agency inspections; a few years later, however, Ayatollah Khamenei, who was unhappy with the attitude of the Western powers towards Iran, halted the implementation of these arrangements.

With this historical perspective in mind, an examination of the balance of power in Iran under Rouhani’s presidency, and a review of the tools at his disposal and those in the hands of his powerful rivals, is critical. This paper examines Rouhani’s chief priorities in the domestic and foreign domains; analyses the factors that help, and those that impede, his administration in attaining its goals; and assesses the relationship between the president and Iran’s other institutions of power, including his influence on the country’s security apparatus. Finally, the effects of the possible success and failure of the Rouhani administration, particularly in respect of the nuclear dossier as its most important priority, will be examined.

It should be noted that the focus of this paper is on the power balance within the Iranian regime. An examination of the role of the elite and of the discontented masses in the overall picture would require a separate study"

Summary from the paper below the fold

The Knowledge and Policy Limits of New Institutional Economics on Development - Paper

Institutions have become the buzzword in development int the past decade, more and more books, articles and Noble Prices go to the field of study where culture and economics interact. Tamanaha's paper "The Knowledge and Policy Limits of New Institutional Economics on Development" wades into the debate by not only highlighting the different interpretations of 'institution' but also the limits that this new institutionalist drive encounters.

Abstract:     

"New Institutional Economics (NIE) has secured impressive achievements in academia and policy circles. The World Bank and other development organization in the past two decades have expended billions of dollars on efforts to build “good governance” and the “rule of law” informed by the NIE theory that economic development requires supportive political and legal institutions. NIE appears to be the new consensus view of development thinking, supplanting the neo-liberal Washington Consensus that dominated global development policy in the 1980s and 1990s. NIE scholars interested in development are currently engaged in an effort to map and measure the institutional terrain with the expressed purpose of producing policy advice on how to improve economic performance through institutional reform.

This essay elaborates on the barriers that stand in the way of the knowledge and policy goals of NIE. Foremost is the “interconnectedness of society:” cultural, technological, legal, political, and economic activities all affect one another and are affected by one another, often in ways that are subtle and all but invisible; each situation unique in its constellation of social forces and is dynamic, constantly changing in reaction to surrounding influences. To show why these aspects cannot be overcome by NIE scholars, I explore the ongoing struggle to identify a shared conception of “institution” — and I explain why this cannot be solved. For reasons I go on to elaborate, NIE scholars also will not be able to get a precise grip on the surrounding institutional influences that affect economic development. This incapacity shows up time and again in NIE research. The same barriers that stand in the way of knowledge also promise to stymie the policy ambitions of NIE scholars who seek to promote economic development. NIE scholars today, it turns out, are repeating lessons announced five decades ago in the law and development field. The problems were insuperable then and will remain so. Owing to these barriers, little advice can be offered beyond commonsense recommendations — pay attention to local circumstances, experiment to find out what works, don’t apply a “one size fits all” model. Interconnectedness, dynamism, and uniqueness are behind this advice. While critical of NIE knowledge and policy objectives, this essay is not negative in orientation. NIE research is illuminating. Greater awareness of the limits will help orient future work in the field in the most fruitful directions."

 

I am not so sure NIE has fully supplanted the Washington Consensus, but it is true that the language around development has shifted towards governance, institutions, rule of law and the like. Whether this represents a larger shift in global thinking remains to be seen, as many discussions around global economic social and political relations are still stuck in the old paradigm (i.e. austerity, organized crime, migration)... and these have as much impact (or more) on development than the development sector itself. While NIE does acknowledge the importance of informal institutions, the greater focus on formal/legal ones does a disservice to the discipline and undermines its utility for practitioners.

The author also points out something that anybody coming into economics from another academic area realizes really quick: economic tools are very, very abstract and inadequate to deal with actual social dynamics. While there is more interest in behavioral economics and other attempts to bridge that gap, there is always a nagging feeling that economists are reinventing the wheel and catching up with discussions that other subject had, at least, a couple of decades ago.

Overall the paper is a good primer on where New Institutional Economics is and the debate on what an institution is.

Militias as sociopolitical movements: Lessons from Iraq's armed Shia groups - Paper

Thurber's "Militias as sociopolitical movements: Lessons from Iraq's armed Shia groups" highlights the issue of labels and trying to fit everything into an specific world view does not actually help in understanding conflict dynamics, or state formation/legitimacy for that matter. This paper can be read together with the previously commented "Organization and Community: Determinants of Insurgent Military Effectiveness"

Abstract

"The Shia militia has emerged as one of the most powerful and important actors in the Middle East security environment. Despite this trend, they remain poorly understood by scholars and policymakers alike. This article seeks to expand our understanding of the militia as a type of non-state armed group through an examination of Shia militia movements in Iraq between 2003 and 2009. More than simply warlords, paramilitaries, or foreign proxies, Shia militias in Iraq enjoyed substantial popular legitimacy, pursued a broad social and political agenda, and participated actively in the formal institutions of the state. Understanding the triangular relationship between the militia, the state, and the population is essential in explaining the rise and fall of the Shia militias during the US occupation as well as in developing strategies to deal with their most recent resurgence"

By labeling militias as warlords, paramilitaries or foreign proxies (or terrorist, if it fits the political agenda), we are simplifying the role that some of them play. While historically some militias have been part of statebuilding process, the view nowadays is that they are rather an indicator of state's weakness and lack of full sovereignty. As the author points out, militias with a strong sociopolitical foundation do have a representational/political role to play on behalf their communities. Instead of dealing with them just with military means, a wider approach that takes into account the community aspirations is much needed. Hence, sociopolitical militias life cycle is part of an ebb and flow of relations between the state and the community: when the state addresses community needs, then the militia weakens. However, if the state is weak, the militia gains importance as provider of security and social services. The paradox comes when the militia replaces the state, as they tend to over-reach (abuse of violence, fundamentalist policies, lack of adequate checks and balances) and increase the discontent among the community (breaking the internal coalition of support), therefore bringing another militia or the state back into play. From this perspective, militia's strengths and structure as an opposition group does not prepare it for a governing role.

I find interesting that the author's focus on the Shia seems to sideline the fact that a similar dynamics of Sunni sociopolitical militias might be growing in response to the Shia preponderance within the government and the role of Shia militias.

The paper also gives an interesting primer on Iraq Shia dynamics. I thought there were only two Sadrs, but if fact there are three. 

Fragile States: A Donor-serving Concept? Issues with Interpretations of Fragile Statehood in Afghanistan - Paper

The term 'fragile state' has become common currency in development circles since 9/11, especially as seen through a security lens as shown by Barakat and Larson's  "Fragile States: A Donor-serving Concept? Issues with Interpretations of Fragile Statehood in Afghanistan".  

Abstract

"Current conceptions and models of fragile statehood in conflict-affected contexts can serve the purposes of international donor governments over and above reconstruction and statebuilding. First, despite remaining ill-defined, the fragile state concept is widely utilized by donors to oversimplify analysis of complex political environments, such as that of Afghanistan, leading to inadequate bureaucratic responses. Second, current models of fragile statehood are unable to capture contextual or temporal dynamics, and invariably omit the contribution of international intervention to entrenching fragility. This is particularly the case in Afghanistan where the effects of international militarized stabilization responses have not been systematically included in fragility assessments, leading to increased insecurity. This article calls for a more nuanced approach to fragility and greater acknowledgement of the role donor governments can play in its entrenchment."

The underlying assumption of fragility in which weak central government = terrorism/regional contagion has meant that much of the focus has been centered on security responses. Moreover, the definition of fragility also assumes a definition of state (termed Weberian by the authors) that does not necessarily match the affected populations view. Fragility as a concept is very anchored in a nation-state system, in which it is both undermined (by acknowledging that the central government is not fully sovereign/legitimate) and reinforced (by making statebuilding around the central government).

Is the concept actually useful for anything? the label helps donors frame priorities by highlighting the sense of impending doom, crisis-prone, destabilizing the status quo and bringing a yet new haven for terrorist and criminals. However, from the 'recipient' point of view, this label is barely helpful (aside from bringing extra donor funds) as it tends to focus more on the container (the visible role of the state) rather than the content (the underlying political economy and cultural/social dynamics that may be the source of that weakness)

The authors, by using the case of Afghanistan, also put forth the claim that international assistance, by the way the understand and address this concept, are actually promoting fragility rather than diminishing. It is interesting how both donor and development community are promoting bottom-up (Community Driven Recovery) and top-down (Statebuilding) in parallel with a vague hope that they will meet at some point in the middle rather than acknowledging that fragile states are in that situation because of an ongoing multilevel societal crisis that may not fit the ready-made nation state model.

                 

Interesting links

Recent interesting articles:

- Mathematically defining Hipsters?

- How can Scandinavian countries tax so much? 

- Distance to the equator and economic development, explanation for the reversal of fortunes? 

- Compensating civilians during war, individual victims under International Law?

Another Humanitarian Crisis in Somalia?: Learning from the 2011 famine - Interim Paper

An interesting paper looking at the 2011 Somalia crisis, Maxwell and Majid's "Another Humanitarian Crisis in Somalia?: Learning from the 2011 famine" goes straight to the point. An easy read that serves also as a primer for humanitarian dynamics in the country.

Intro:
"In July 2014, humanitarian agencies and the government of Somalia warned of a new severe drought in Somalia, only three years after more than 250,000 people died in a deadly famine. In a report for Tufts University and the Rift Valley Institute, Daniel Maxwell and Nisar Majid examine the lessons arising from the international response to the famine in 2011 on how to prevent and mitigate a similar crisis."  

Key points from the paper:
- Early Warning was there despite some recent complains on the quality/reliability of the data. The failure points more to the humanitarian framework, that has a bias towards response rather than prevention/mitigation. How much is forecasting really integrated into planning and funding still remains to be seen, and as we have seen in previous papers, take up of forecasting is different by sector (El Nino oscillations) even if the potential positive preventive effects are quite high (Violence in Liberia). In some cases we do enter in a Chronic Early Warning that lead to an institutionalization of preparedness, mitigation and response (a humanitarian example is Haiti and the Hurricane Season), but I don't believe Somalia is there yet.
- Risk Management, Access... and of course Al-Shabaab. While Al-Shabaab's behavior (internal taxes and blocking of external aid) did exacerbate the crisis, the risk management mechanisms of international actors also limited the response. Reliance on local organizations of variable quality and allegiance coupled with limited direct implementation/monitoring capacity, has meant that many of the interventions were/are shaped by risk management rather that needs and effectiveness. 
- Us, us , us. Most of the discussions around the 2011 crisis are around the international response; yet, in a time were resilience is the buzzword of the day, very little attention is given to the Somali response and how it can be further strengthened. The paper also points out the reinforcement of marginalization for certain clans through the crisis (that further feeds into Somalia's instability by clan competition and Al-Shabaab comparative appeal).
 
Following Amartya Sen's thinking, we can say that famine is not a food failure but rather a political failure (in the wider sense of governance and allocation of resources).

Just How Important Are ‘Hearts and Minds’ Anyway? Counterinsurgency Goes to the Polls - Paper

'Hearts and Minds' is a much used term in counterinsurgency discussions, originating from a now famous sentence by Gerald Templar on the Malayan Emergency. The battle for local public opinion becoming as important, or more, as military operations. Cohen puts that assumption to the test in "Just How Important Are ‘Hearts and Minds’ Anyway? Counterinsurgency Goes to the Polls" by analyzing local perceptions during three conflicts: Vietnam, Iraq and Afghanistan.
 
Abstract

"Despite all the talk of ‘hearts and minds’ being the key to counterinsurgency, local public opinion is rarely studied and when it is, it often yields surprising conclusions. Through analyzing polling data from Vietnam, Iraq and Afghanistan, this article shows that public opinion is less malleable, more of an effect rather than a cause of tactical success, and a poor predictor of strategic victory. As a result, modern counterinsurgency doctrine’s focus on winning popular support may need to be rethought"

What the paper shows is that changes of perception actually follow and are not a precursor to effective military operations, even more, in some cases those changes in public opinion do lag behind in time even if important improvements in security have taken place (by objective indicators). While it has always been difficult to measure both psychological warfare and 'hearts and minds' approaches in times of conflict, the author's analysis does indicate the need, at least, of successful military operations/outcomes in order to turn public opinion. However, I do find the interpretation of 'hearts and minds' somewhat restrictive as it goes beyond the media/community engagement part of it and also includes how military operations are conducted (specially in relation to the community). Also the criticism against the concept of 'uncommitted third' (the section of the population sitting on the fence between two contenders) feels more of nitpicking (should it be the 'uncommitted fourth' or 'fifth'?) rather than actually making the case against it. The fact (even as per the polling analyzed by the author) that there is a section of the population that over time changes alignments and allegiances (whether previously committed or not) has been shown in each human conflict. The 'uncommitted third' concept at the end of the day is a simplification of the acceptance that there is a dynamic environment and competition for the space.

'Hearts and Minds' strategist may have fallen into their own rhetoric by allowing their perceptions shape reality. Maybe they have become a case of successful 'hearts and minds', where the behavior is changed by the mind rather than force. In my opinion, this doesn't undermine 'hearts and minds' as a concept but rather show the difficulty of a full understanding and implementation. Finding the balance between the coercing and convincing is not easy, and, as the study shows, maybe there has to be some coercing before the convincing works.

Inheritance Law Reform, Empowerment, and Human Capital Accumulation: Second-Generation Effects from India - Working Paper

Policy effects across generations are sometimes difficult to measure, however "Inheritance Law Reform, Empowerment, and Human Capital Accumulation: Second-Generation Effects from India" by Deininger et al. does offer an interesting example.

Abstract:     

"This paper uses evidence from three Indian states, one of which amended inheritance legislation in 1994, to assess first- and second-generation effects of inheritance reform using a triple-difference strategy. Second-generation effects on education, time use, and health are larger and more significant than first-generation effects even controlling for mothers' endowments. Improved access to bank accounts and sanitation as well as lower fertility in the parent generation suggest that inheritance reform empowered females in a sustainable way, a notion supported by significantly higher female survival rates."

Inheritance Law is inter-generational by definition (unless it has a strong bias towards widows, but then it becomes a question of patience). India, with its different speed of adoption of the law, allows for a interesting natural experiment, that the authors take a step further by measuring impact on second generation. The study finds large effects on multiple variables, probably due to an increased intra-household bargaining power by women (first generation) that benefit their offspring (second generation). While there are potential indicators for sexual selection (the cost of a female born increases), the survival rates and welfare effects on daughters are noticeable.

The fact that second generation effects are not only measurable but also large, should lead to a rethink on how to time and expect results from such policies. This further adds to the female empowerment literature, the potential for sustained change through policy reform and its welfare related effects.

Naw Bahar District 2010–11: A case study of counterinsurgency Conducted by Naval Special Warfare in Afghanistan - Article

Us, development types, rarely look at the military's experience in stabilization and counterinsurgency (COIN). It is unfortunate because many of the dynamics and constrains they face are not that dissimilar from our work in Community Driven Recovery and local peacebuilding. Briggs' article "Naw Bahar District 2010–11: A case study of counterinsurgency Conducted by Naval Special Warfare in Afghanistan" is a case in point where cross-learning may be of use.

Abstract

"This article provides a critical analysis of counterinsurgency in Afghanistan at the tactical level. The efforts of several Naval Special Warfare detachments deployed to Naw Bahar district in Zabul Province, Afghanistan are examined in detail to identify key successes and failures in planning and execution. It defines the operating environment in which the detachments worked and identifies the goals and outcomes of the first and second phases of the counterinsurgency effort. The article concludes by placing the tactical effort in the context of the overall strategy in Afghanistan and suggests that time is the limiting factor to success"

Key take-away notes.

Know your context: Tribal governance, relations with both insurgents and central government, and conflicts within the district are key to understand what is going on.

Population? which population?: COIN claims that is population centric, and that is fair enough. However, as the article points out, the center of gravity regarding insurgency in the district was actually not at the district center. We tend to focus on visible sources of 'power' like concentration of houses, markets or official buildings around which we build our activities... and while this locations may serve multiple purposes for the community, it may not be as relevant for the issue at hand (be that counterinsurgency or building a water well). Also depending on how we define population (and their representatives) we run the risk of mis-identifying or ignoring key stakeholders.

Local Economy: While local sourcing seems like a great idea, in practice it can lead to inflation and higher costs for local population (let alone dependence). How external resources are injected into a local economy is very important.

Governance: There are already governance mechanisms in place, however many of the linkages are broken and are a source of mistrust and conflict. Reestablishing those links, specially around dispute/grievance resolution, dialogue and information flow is paramount.

While this article per se is not telling us much new (if I were to venture a guess, the major outcome of this is bonus points for the author for publishing), even from the military point of view (how relevant is Naval Special Warfare to the article, I still don't know); it also highlights common issues that we encounter in conflict or post-conflict areas. This requires us to design and implement with very context-based lens (that allegedly we already do!!). 

The article also shows that the military, like the development business, keeps reinventing the wheel time after time... but that is whole different debate regarding organizational learning, mission setting and leadership.

 

 

Getting teachers back to the classroom. A systematic review on what works to improve teacher attendance in developing countries - Paper

Education remains one of key pillars of development, and indicators like literacy rate and school attendance are regularly used as a measure. "Getting teachers back to the classroom. A systematic review on what works to improve teacher attendance in developing countries" by Guerrero et al, looks more specifically at one component of education: teacher attendance.

Abstract

"This article reports on a systematic review of research on the effectiveness of interventions aimed at increasing teacher attendance in developing countries. After a comprehensive search process, nine studies met the inclusion criteria. Pooled effects sizes of included studies were estimated (with the exception of three studies that had unavailable information to calculate their effect sizes). Results show that direct interventions coupling monitoring systems with incentives and indirect interventions involving the community and parents in students’ education had statistically significant effects on teacher attendance, suggesting that close monitoring and attractive incentives are mechanisms of high potential to reduce teacher absenteeism".

To note that this paper looks at a very limited set of studies (9), as it only reviews rigorous impact evaluations within their parameters. The findings themselves are not groundbreaking and fairly intuitive: both direct and indirect interventions have a positive effect. Those that already following educational issues will not be surprised, but it may be useful as a quick overview on teacher attendance for newcomers.

Probably the most interesting fact is that they could not link teacher attendance and student achievement (although the study was not specifically looking at that). While school may have other social benefits (i.e. socialization, keeping youth contained), the main stated objective is educational outcome. However, increased teacher attendance does not necessarily lead to improved educational outcomes. Probably the leading advocate these days on this issue is Lant Pritchett, but also others have highlighted time and again the disconnect between educational inputs (focus on teachers,  buildings, materials) and actual educational outcomes.

How Islamic is al-Qaeda? The politics of Pan-Islam and the challenge of modernisation - Paper

Although both ISIL and Boko Haram have recently taken the spotlight, the Al Qaeda franchise remains a recognizable actor. Hellmich's paper "How Islamic is al-Qaeda? The politics of Pan-Islam and the challenge of modernisation" looks into Ben Laden's ideology and how it fits into the wider contemporary Islamic discourse.

Abstract

"This article investigates the contested ideology of al-Qaeda through an analysis of Osama bin Ladin’s writings and public statements issued between 1994 and 2011, set in relation to the development of Islamic thought and changing socio-political realities in the late nineteenth and twentieth centuries. Challenging popular conceptions of Wahhabism and the “Salafi jihad”, it reveals an idealistic, Pan-Islamic sentiment at the core of his messages that is not based on the main schools of Islamic theology, but is the result of a crisis of meaning of Islam in the modern world. Both before and after the death of al-Qaeda’s iconic leader, the continuing process of religious, political and intellectual fragmentation of the Muslim world has led to bin Ladin’s vision for unity being replaced by local factions and individuals pursuing their own agendas in the name of al-Qaeda and Islam."

The demise of the Ottoman Empire (and the sense of unity it carried), secularism/modernization and the expansion of literacy have opened up the Muslim world to an internal crisis/revolution. As individual Muslims increasingly interpret Islam for themselves, without making reference to the traditional schools of Sunni law (Hanafi, Maliki, Shafii or Hanbali) a divergence within develops. Pan-Islamism, with its core message of Muslim solidarity and the unity of umma, is the message that Ben Laden would send over the world. The appeal he represented was not a radical political/religious ideology (the actual political structure of the future is quite vague) but a social message of solidarity, personal responsibility and victimhood that many Muslims could relate to.

Even before Ben Laden's death, we could see the fragmentation of Al Qaeda along more locally driven agendas under the banner of global action.The fact that most of the victims of Al Qaeda are actually Muslims, the increase fighting along sectarian lines and the more limited objectives of affiliates and franchises show the drift away from Pan-Islamism. Although the rhetoric remains important in order to appeal for funds, foreign fighters and support from the Muslim community, what remains, to paraphrase the known sentence about politics, is that 'all insurgencies are local'. While Al Qaeda's position in the global ranking has diminished, some of the root causes for its appeal are still current and part of the ongoing debate within the Muslim world.

Drivers of Entrepreneurship and Post-Entry Performance of Newborn Firms in Developing Countries - Working Paper

Quatraro and Vivarelli offer us a review of the latest research in "Drivers of Entrepreneurship and Post-Entry Performance of Newborn Firms in Developing Countries", that I believe bring some interesting questions around livelihoods and local economic development and also tags along nicely to my previous post on "Non-Farm Enterprises"

Abstract:     

"The aim of this paper is to provide an updated survey of the "state of the art" in entrepreneurial studies with a particular focus on developing countries (DCs). In particular, the concept of "entrepreneurship" is critically discussed, followed by a discussion of the institutional, macroeconomic, and microeconomic conditions that affect the entry of new firms and the post-entry performance of newborn firms. The reviewed literature bears some policy implications for the support of the creation new firms, such as the targeting of policy measures to prospective entrepreneurs who possess high education levels, long previous job experience, and innovative skills. Specifically, for DCs, tailored subsidies and support should be coupled with framework and infrastructural policies that are able to improve the business environment such that new ventures can start and grow."

Findings of relevance for programming are:
- Minimum Efficient Scale (Size matters). Risk of failure dramatically drops once it gets to its MES. Programming could be built around benchmarks like MES that allow for reallocation of resources towards more at risk business, instead of a fixed/same across the board timeline. This would also imply that each business may have a different growth objective/requirement (and not just slightly above break even) depending on the sector.
- Previous experience in the sector. While this may seem an obvious, sometimes selection criteria for interventions are based on needs rather than chances of success. Programme design has to be clear on what is aiming for (temporary relief or longer term livelihood) and act accordingly. 
- Financial. Credit constrains may have been overplayed as an obstacle to enterprise survival and maybe the focus should be more on savings rather than borrowing. Microfinance user may actually using it in that manner, as some studies have shown negative returns (they may actually be losing money) but positive savings (they save money in comparison with the previous situation). There is an increasing shift towards savings but the rethoric still remains around credit constrains.
- Education is a mixed bag. Higher level education reduces the chances of starting up, probably because the first preference is salaried labour (and seeking to avoid defensive entrepreneurship) that education gives access to. On the other hand, education is a high predictor of business growth and survival. It is interesting to note that there is a "threshold effect" depending on context/location, were there is a minimum level of education that leads to faster growth. Being able to identify that level for the target area may help in yielding better results. Then again we encounter the issue of selection criteria and programming priorities.
- Unemployment is negatively correlated with enterprise survival. Previous unemployment increases the risk of failure and tends to be linked to lower economic outcomes and job creation. Much programming is built around entrepreneurship for unemployed youth, wouldn't it be better to have a two staged/tiered system where unemployed would initially be waged labour (and gaining sector experience at the same time) before start-up is considered?
- Minorities. I am troubled with their recommendation of specific support to entrepreneurial minorities. While this may make sense from an economic point of view (building on an existing strength), the political and social risks of such actions can be large. Business minorities have been violently targeted even in recent times, and a policy that singles them out in a sector they may already have a comparative advantage will only fuel negative perceptions.

   

Interesting links

Latest round of interesting articles:

- Separatism meets Charter Cities, in Sardinia via Switzerland

- Missionary printing presses in Africa and contemporary newspaper readership

- Privilege and higher interest rates in the Ottoman Empire

The Second Wave of Independence: Shopping for Solutions - Working Paper

From time to time there is a paper that aims at the foundational dynamics of the development industry, this time it is Gaarder and Bartsch's "The Second Wave of Independence: Shopping for Solutions"
Abstract:     

"In the 21st century, many developing countries will become emerging markets and will no longer be in need of the carrot-and-stick approach to development assistance most prevalent today: development financing made available conditional on certain policies and interventions. This paper suggests that interactions between development agencies and recipient governments are mostly about inputs deemed (but not known) to contribute to improvements in living standards in recipient countries, rather than outcomes. The paper argues that the development marketplace is beset by market imperfections because of externalities, principal-agent problems, and decision making under uncertainty, which not only make it difficult to achieve the right outcomes, but also take away incentives to learn about outcomes. A fundamental rethink of responsibilities and accountabilities in the development business would make sure that development outcomes are traded in the development marketplace. It would put recipient countries in charge of contracting development agencies to provide these outcomes. Development agencies would commit to and be held financially accountable for outcomes, that is, real improvements in welfare indicators. The paper describes the role of the evaluation function in aligning incentives with the ultimate goal of improving lives and provides examples of emerging solutions."

 

The authors use an economic analysis of the interaction of development agencies, donor and recipient countries, identifying three key issues (market imperfections):

- Externalities. The focus on inputs (funds, resources) and outputs (stuff built, people trained, gadgets distributed) instead of outcomes (improved health, better access) creates a singular kind of externality, not as an unintended consequence but rather an acknowledged but not fully included in the transaction

- Principal-Agent. A classic issue in economics literature, the misalignment of interests between the contracting parties, compounded by the fact that they are entering the agreement on behalf of third parties (be that recipient's poor or donor's rich)

- Uncertainty. In many cases we don't have strong evidence that an specific intervention in a given context will bring the stated outcomes. Theories of change are full of assumptions of assumptions that are unable to address causal relationships, specially within the timelines that many development projects operate

The proposed solution is to internalize the externalities by a tendering process focused on outcomes. The recipient country would contract out the delivery of outcomes to the development agency. This would create an interesting dynamic in relations between development actors and recipient countries... however it requires some assumptions and does raise some questions. While the Principal-Agent issue is sorted in one part of the equation, it still remains that the recipient country in representing the final set of beneficiaries. It also requires an alignment of interest between donor and recipient, and the internal governance of the recipient... or rather, how is the contractee (development agency) is going to interact with different parts of the recipient country that may not have been party to the original negotiation. In an input-ouput model it is easier to deal with institutions as they can be co-opted with more tangible things.

Also the paper tends to make loans and grants equal, while the negotiation dynamics would clearly be different if repayment is on the table or not. I also have trouble defining as donor a provider of a loan, but that may be a personal issue.

Finally there is a call for more rigorous evaluation and improvement of M&E. On face value it is a winning formula, and it would be hard to argue against, but at the same time it feels like the common opt-out 'more research is required'. I would say the key issue is not necessarily M&E but rather to be clear (and humble) on both the intervention objectives and the learning outcomes. RCT is not the magic wand that will answer all the questions.

A good read that keeps the discussion open, whether you agree with the authors or not.

Calculating Bandits: Quasi-Corporate Governance and Institutional Selection in Autocracies - Working Paper

Following the bandit theme (from the stationary bandits in Congo), this time formal 'bandits' in "Calculating Bandits: Quasi-Corporate Governance and Institutional Selection in Autocracies" by Salter and Hall. While my (economic) Austrian-ness is limited, this is an interesting attempt to explain successful autocratic economies, not through a developmental state but rather through a firm-like approach (rent maximization)

Abstract:  "This paper applies the logic of economic calculation to the actions of autocrats. We model autocrats as stationary bandits who use profit and loss calculations to select institutions that maximize their extraction rents. We find in many cases autocrats achieve rent maximization through creating and protecting private property rights. This in turn yields high levels of production, with expropriation kept low enough to incentivize continued high production. Importantly, while this leads to increasing quantities of available goods and services over time, it does not lead to true development; i.e. the coordination of consumer demand with producer supply through directing resources to their highest-valued uses. We apply our model to the authoritarian governments of Singapore and the United Arab Emirates, showing how they function as quasi-corporate governance organizations in the business of maximizing appropriable rents"

There is a clear selection bias, they explicitly choose two successful examples (Singapore and UAE). It would have been better if they would have also presented a failed case of quasi-corporate autocracy to show institutional design paths (instead of using Kuwait as a comparison, that is probably not a random choice). 
Are we explaining away two outliers or a potential 'second-best' (third-best?) model for short/medium run economic success?
The authors do acknowledge some of the shortcomings of the paper, but I think they would have been better served by keeping it in draft form or as a discussion hypothesis as it feels like a weak case so far (case study development, comparative strength, testing the theory beyond two cases). Nevertheless, this feeds into a wider discussion of state formation and its role, institution design and political economy.