29 September 2006


Good Jobs First, is a briliant website, which I've added to my blogroll. From just one of their many pages:

"What causes sprawl? Urban experts cite many factors. ... But another important factor [sic] are economic development subsidies like tax increment financing (TIF) and enterprise zones that have gone awry and are being abused in ways their creators never intended. In essence, taxpayers buy sprawl with the following types of subsidies.

--TIF is an arrangement in which a portion of the property tax associated with a redeveloped property is diverted into a subsidy for the developer. ... [O]ver the years, about a third of the states have loosened their TIF rules, so that even affluent areas qualify. The wealthy Chicago suburb of Lake Forest, for example, has a TIF district--and a Ferrari dealership! Pennsylvania's TIF statute allows a trout stream near Pittsburgh called Deer Creek to be TIFed because the land has "economically or socially undesirable land uses."

"--Enterprise zones, another geographically targeted program originally intended to help poor inner-city areas, have also been weakened in many states so that affluent areas can grant lucrative zone subsidies. New York, for example, allows zones to be gerrymandered non-contiguously. As a result, Buffalo's two original enterprise zones have morphed into more than 130 non-contiguous areas, thus raising questions about favoritism. A scathing Buffalo News investigative series found that "[t]he program, crafted to create business in distressed areas and jobs for the down-and-out, has transmuted here into a subsidy program for the up-and-in."

Also of interest, though a couple of years old, is this study (pdf), which showed that Wal-Mart:

...the giant retailer has received more than $1 billion in economic development subsidies from state and local governments across the [US]. Taxpayers have helped finance not only Wal-Mart stores, but also the company's huge network of distribution centers, more than 90 percent of which have gotten subsidies.

28 September 2006

Incentives for peace

Did "codes of honor" inhibit men like Hitler and Stalin? Chirot and McCauley reply that genocidal followers typically think less fanatically than leaders. Farsighted policies of engagement can thus stem genocide from the bottom up rather than the top down. "Those who want to set forest fires," the authors write in a rare punchy image, "will always be around, but if they have less material to work with, they are more likely to fail." For all that, they warn, "no single method seems to us to offer a comprehensive solution." Is the Crematorium Half-Full or Half-Empty? Carlin Romano
Exactly. No single method will work. We cannot therefore delegate the prevention of genocide to existing organisations, however well resourced, however well meaning. Organisations have their own objectives, of which the over-riding one is self-perpetuation; they have few incentives to be imaginative in their approaches to social problems. What is needed are highly motivated new organisations, whose goals are exactly congruent with society’s. These organisations might not have a stable structure, nor a stable composition, but their societally determined goal would be stable. Prevention of genocide and other violent conflict could be the raison d’etre of such organisations, if their rewards were inextricably tied to their achieving it. I suggest Conflict Reduction Bonds, redeemable only when absence of conflict had been sustained for a defined period. These bonds would contract the achievement of peace to the market, instead of to the inevitably poorly-resourced, distracted or corrupted bureaucracies that are currently charged with the task.

27 September 2006

Defining democracy

En route to Bangkok Airport I passed Government House and a couple of rows of tanks parked behind metal barrier fences. Most of the tanks were garlanded with flowers and young couples took each other's photos with the tanks as backdrop. The Thai coup d'etat brings home the difficulty of defining the important features of democracy. Mr Thaksin, the deposed Thai Prime Minister had installed his placemen in the Senate, the law courts, and the Electoral Commission. Through, as far as I can tell, legitimate means, he controlled a high proportion of Thai media. Most recently, and this might have precipitated the coup, he wanted to appoint his army classmates to top positions in the Thai military. It's difficult to anticipate and guard against all abuses of power. New Zealand's three-year period between elections, which does have disadvantages, may be one helpful weapon against them.

24 September 2006

Thailand, democracy and policy outcomes

My last day in Thailand for a while. The recent political events have made it clear that democracy is just that, democracy. It does not mean freedom from corruption, it does not mean peace or unity. Democracy can accompany rampant abuse of power and serious divisions. If the circumstances are wrong, democracy can even legitimise such flaws.

21 September 2006

Life in Bangkok...

...is remarkably normal, 48 hours after the bloodless military coup. For a while I was less informed than if I were overseas: the tv was playing old footage of the royal family. Guests at my hotel were advised not to stray too far away yesterday (Wednesday). The streets around the hotel were strangely calm. There were no stalls up at the daily street market. Some shops were open, but the mood was subdued, with none of the usual chatter and animation. Today, Thursday, life has returned to normal. In retrospect something like this now seems inevitable; there has been no parliament for seven months and the Thai Prime Minister was deeply divisive, power-hungry and corrupt. For myself, I'm very relieved it has turned out bloodless. The Thai King's carefully calibrated 'reported' endorsement of the caretaker government will no doubt help.

The BBC, desperate for something dramatic to report, had to settle for a 1 per cent fall in the value of the Thai baht - something that can happen on any perfectly normal trading day.

19 September 2006

'Fooled by Randomness'

From Fooled by Randomness, by Nassim Taleb (page 38):

[I]t is … a scientific fact, and a shocking one, that both risk detection and risk avoidance are not mediated in the ‘thinking’ part of the brain but largely in the emotional one…. The consequences are not trivial: It means that rational thinking has little, very little, to do with risk avoidance. Much of what rational thinking seems to do is rationalize one’s actions by fitting some logic to them. In that sense the description coming from journalism is certainly not just an unrealistic representation of the world but rather the one that can fool you the most by grabbing your attention via your emotional apparatus….

Exactly right; and since policymaking is very much driven by media reporting, it’s a crucial point. The media are focused on the short term, on the visual and on the emotions. What gets lost are the crises that are long term, not telegenic, nor creating an immediate emotional impact. A Social Policy Bond regime, by stipulating outcomes, would help avoid such biases, by making them explicit. So, for instance, a policy that aimed to raise longevity (however defined) would have to be impartial as to causes of early death. A bond regime would not, as current policy appears to be doing, target such emotional but statistically marginal causes of death as terrorism, at the expense of road deaths.

16 September 2006

What's a couple of rainforests?

There's been some discussion in the letters section of the Economist about whether it's 'morally appropriate' to convert food crops into fuel. This week, a correspondent points out that 'clearing rainforests to increase the cultivation of palm oil will bring ecological destruction to Indonesia and Malaysia.' I wish I could believe that pointing out this fact would change anything. But let's face it: our car madness already kills hundreds of thousands of people every year, disables several millions more, helps poison our atmosphere, paves over thousands of hectares of land, and destroys wildlife on a massive scale. We shall need stronger arguments than saving the rainforest if sanity is to prevail. In the same journal we read that a Japanese body supposed to rein in the corrupt alliance of bureaucrats, politicians and the construction industry (and, I interpolate, organised crime) has voted to build another 9000 km of expressways....

(This is an interesting paper describing how road deaths affect the poor more than the rich in the developing countries.)

14 September 2006

Social Policy Bonds and complexity

One of the the bonds' main pluses is that it doesn't specify how a particular policy objective shall be achieved. So when the relationship between cause and effect is obscure, and when there are a multiplicity of possible solutions to a problem, a Social Policy Bond approach might be preferable. As society grows ever more complex, I expect such policy areas to increase in number. I have argued at length about the need for outcome-based policy to deal with climate change. I also think that something like Social Policy Bonds could be issued to eliminate violent political conflict, whose causes vary wildly and are extremely difficult to anticipate and close down.

Less grandly, I am also interested in literacy in the developing countries. In Bangladesh something like 20000 non-governmental organisations operate, many of them supplementing the Bangladeshi Government's literacy initiatives with their own. With literacy-raising, most methods will be well-tried and tested, but at a country level there is scope for diversity and experimentation. Social Policy Bonds, unlike centrally directed projects, would encourage such adaptive approaches because of their inextricable linking of rewards to efficiency. They could lead to a mosaic of different approaches over a whole country, each precisely targeting the local circumstances in which they operate. Something like that his happening now in Bangladesh, but unfortunately (as I see it) with little orientation toward a national objective. Thus, many of the non-governmental organisations, principally those financed by Islamic institutions, favour the teaching of boys over girls, and literacy in Urdu (which is the language of Pakistan), rather than Bengali.

A Social Policy Bond regime would have a single, unifying, literacy objective, and this would be quite compatible with diversity of approach - if such diversity were found the most efficient way of achieving it.

08 September 2006

Why I go on and on about farm subsidies

From today's Economist:
The [US] federal government spent over $20 billion on farm subsidies last year: much less than the European Union lavishes on its mollycoddled farmers, but more than Washington spent on foreign aid and almost twice what it spends on subsidising college for poor children. ... Over half the subsidies go to large commercial farms. Uncle Sam's teat Economist, 9 September

07 September 2006

The public interest

A couple of interesting excerpts from the Oxfam Report, In the Public Interest – Health, Education, and Water and Sanitation for All:

The World Bank promotes the private provision of basic services through interlocking conditions on aid and debt relief to poor countries. This appears to be driven more by the Bank’s internal targets than by evidence of what works in each country — for example, the Bank’s Private Sector Development Strategy aims for private sector participation in 40 per cent of its loans to the poorest countries. (page 9)
Why 40 per cent? Why not 60 per cent, or 77.77 per cent? This is what happens when you get Mickey Mouse micro-targets. It probably took at least 10 minutes to think of 40 per cent. Probably the person who did so just looked up the current percentage, and added something plausible to it to come up with something nice and round. And why not? If anybody bothered monitoring the results of World Bank policies the meaninglessness of such figures might be challenged… but this is project management subordinated to ideology, not outcomes.

Later, discussing the rich countries’ recruitment of health workers from developing countries:

With the cost of training a general practice doctor [in Africa] estimated at $60 000 and that of training a medical auxiliary at $12 000, the African Union estimates that low-income countries subsidise high-income countries to the tune of $500 million a year through the loss of their health workers. (page 67)
The rich countries put up import barriers to the few goods – agricultural, textiles, clothing and footwear – that offer the developing countries their best chance for prosperity. This helps impoverish people in Africa (or even kill them). But we then freely import their most valuable personnel to prop up our own health services. This is a destructive and self-reinforcing trend. The worse we make life for people in the third world, the more desperate they become to escape to the west. If successful, they become reluctant migrants; leaving their cultures and, in many cases, their families behind. The only long-term beneficiaries of these absurd policies are the people who are paid to make and administer them.

05 September 2006

An Inconvenient Truth

I saw the movie An Inconvenient Truth today. Well worth seeing, I think, as Al Gore presents the evidence from different angles. One telling point for me was his comparison of the number of peer-reviewed articles in scientific articles that believe we are experiencing climate change, 928 articles, or 100 per cent, and the number of popular media articles that doubt this: 53 per cent of the several hundred (I think) surveyed. Gore appears fairly optimistic about the prospects of reducing global emissions to 1970s levels by efficiency gains and application of existing technologies (not nuclear). But he didn’t say what even such large cutbacks would mean for the climate. I suspect the answer is not very much. Climate Stability Bonds were not mentioned.

I don’t go much for party politics, but the man appeared impressive, human and coherent in this movie, and I couldn’t help wishing he were in the White House now. One passing comment was that he had presented his slide show on climate change at least 1000 times.

02 September 2006

Oxfam: almost right

Key conclusions of an Oxfam report published yesterday are:

  • Governments must take responsibility for providing essential services that are free or heavily subsidised for poor people and geared to the needs of all citizens.

  • Civil society organisations and private companies can play a crucial role but they must be properly regulated and integrated into strong public systems, and not seen as substitutes for them. Only governments have the capacity to deliver on the scale required.

I haven’t read the full report, and may be in touch with Oxfam when I have, but I’d just make a subtle change to the wording of the conclusions. I should much prefer that the conclusions were:

  • Governments must take responsibility for ensuring that essential services are free or heavily subsidised for poor people and geared to the needs of all citizens.

  • Civil society organisations and private companies can play a crucial role but they must be properly regulated and integrated into strong public systems, and not seen as substitutes for them. Only governments have the capacity to ensure delivery on the scale required.

A Social Policy Bond regime would not mean that government ducks its responsibilities to its citizens. It would still set a country’s health and education objectives, and it would still raise the finance to achieve them. But it need not necessarily provide the services itself. With the proper regulatory environment that Oxfam rightly sees as necessary, the whole process of service provision for poor citizens might be much better handled by a motivated private sector. Yes, government should ensure that the services are there; yes, government should ensure that they are delivered on the scale required; yes, government should ensure that they are free or subsidised for poor people; but no, government does not need to provide them itself.