Jun 08 2009

institutions of trust in piracy and terrorism

by at 8:05 pm

We can transpose Greif’s comparative analysis of disparate economic groups to look at two of the emerging models for economic activity among the bottom billion. The two groups I have in mind are Al Qaeda and the Somali pirates. Although, at a first glance, these two networks may appear to be motivated more by destruction than by production and distribution, I would argue that we take a closer look, at the cultural grounds of each collection of actors. We may find that by comparing the structures and behaviors of each group, we can shed a great deal of light on the growth of economic institutions today. But first, we should generally characterize the cultural background of each group. Continue Reading »

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Jun 08 2009

American culture run amok

by at 2:30 pm

Where Douglass North argues the centrality of institutions in checking behavior and reducing uncertainty, Avner Greif takes the argument into the cultural realm by laying out how those institutions are steeped in cultural values and beliefs. Culture too plays an undeniable role in the current U.S. (and global) financial mess.

Piggies pay the piper for overspending

It is not only freewheeling spending and credit addiction that caused the economic downturn, though both are at fault and arguably became part of the American economic culture. Also at fault is the approach to regulation, which helped lead to poor lending standards and overspending. Rather than cut the problem off at the pass as it became apparent a market break down was on the horizon, we reacted afterward, especially with talk of more regulation. Is this our culture at work? I think so.

Let’s use a Greifian approach to look at historical economic challenges in the U.S. An NPR story reminded me of American responses to financial troubles. The Great Depression gave rise to a slew of new regulations and regulatory bodies, such as the FDIC. Trouble in the early 1900s led to the Federal Reserve. One legacy of the savings and loan crisis is the Office of Thrift Supervision. Now talking heads and politicians are bleating about more regulation. What about smarter regulation?

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Jun 02 2009

Riding the Bus: a lesson in institutional adaptation

by at 4:03 pm

Riding the bus to class is perhaps the not best way to observe people, but it is a good way to look at institutions. Institutions in the sense that all people have formal, informal and transitional views which shape other institutions. On the bus, people act certain ways depending on whether they are willing to share the seat next to them, talk or even approve or disapprove of another bus patron’s behavior.

DC Metro Bus

DC Metro Bus

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Jun 02 2009

Limited Time Offer!

by at 3:21 pm

Patterns of socio-economic behavior repeat themselves, regardless of the “shocks” to networks that come through political upheaval or environmental hazards. These patterns become subsequently more and more difficult to break, whether they are positive or negative. Consequently, both formal and informal institutions with agendas for development need to be careful how they insert themselves into the fabric of the global environment now, especially because the effects may be – to borrow a phrase from Stride gum’s marketing slogan – “ridiculously long lasting.”

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Jun 01 2009

the hunger

by at 4:52 pm

The agent of change is the individual entrepreneur responding to the incentives embodied in the institutional framework. – North, p 83

When a child goes hungry inside of a developed region, like in Southeast Washington, DC, they might find alternative sources of food, such as government-subsidized after-school programs. In areas like ours, when hunger becomes a problem, we can flex the dense ties of our urban networks and redistribute some public funding to provide, say, more food subsidies to those after-school programs. We might just as easily find community support for shifting school lunches to slightly later in the day, or even the funds to add a snack period for older grades late in the afternoon. In these ways, the vast safety-net of the dense, developed urban network provides resources by which the problem of food insecurity can be addressed for relatively large groups of children. For the rest of their families, more drastic measures can be taken, such as establishing community farms and grocery cooperatives.

The entrepreneurs who can be induced to invest in these enterprises will likely do so on the basis of their secure niche in an emerging market. The capital flows that support continued operations of these food security programs will originate at first largely from government subsidies, but they can be established to work towards more private and collective ownership over time by means of profit-sharing or by providing the initial capital as loans to individuals or small groups. These groups will, in turn, have high incentives for contributing their labor and expertise to the development of these organizations because of their close ties to one another, those which inform their collective identity, as residents within a particular neighborhood with a particular character, set of ideals, and other cultural markers which each of them shares.

Such initiatives are grounded in deeply implicit, or tacit, knowledge bases. Those who propose such projects for the poor areas of their own cities tend to have had some common experiences with those experiencing hunger. The arguments that are made in these developed urban centers on behalf of those experiencing hunger because of war, famine, and epidemic diseases in other regions of the world, however, are grounded in a very different kind of experience. Perhaps there is a connection between the current strategies for dealing with food crises in other parts of the world are also too deeply entrenched in modes of thinking that rely on media coverage, government funding, and the privilege of recourse to fast food. In this way, our mentalities about truly effective and sustainable food sources are too closely linked to our experiences with food service. I would argue that those with life experience in the heartland and country, those who have lived and word among farmers, would be the best experts to call upon when strategies for food source development are in question. When faced with a famine, one question a farmer might ask that a lobbyist might not is, “what can you grow here?”. The answers to this simple inquiry can provide a wealth of insight as to what strategies to pursue for getting a region back on track to self-sufficiency.

Simply put, there will be a marked difference between organizations of food producers who grow corn, for example, and organizations of producers of soybeans. There will also be a clear distinction between organizations that produce a variety of food, and organizations that produce one cash crop. The labor forces for each kind of group will specialize differently, their land (and tasks) will be divided very differently, and their long-term effects on local, regional, and global food markets will radically diverge. Thus, in order to deal with a food crisis, we must begin quite literally “from the ground up” as we develop solutions. The first step, at any rate, is to feed the hunger, both literal and metaphorical, of those whose lives are most likely to change radically in the short-term on account of these solutions, and to do so without compromising the longer-term direction that such strategies will take.

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