Comments on

1
Comments on How (Not) to Measure Institutions
by Professor Stefan VoigtPhilip
KeeferDevelopment Research Group, The World Bank
2
Key points

• SV
• Measures of institutions should
• Capture de jure and de facto institutions
  (or,equivalently(?), formal and informal
  institutions).
• be objective.
• be disaggregated.
• PK
• These are important, desirable standards.
• But application to two key questions is not
  clear.
• How do we measure the security of property
  rights no opportunistic behavior by government?
• How do we measure the determinants of secure
  property rights?

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Security of property rights?

• Lots of smoke in the literature.
• Rule of law is hard to define.
• Subjective is worse than objective.
• Aggregated is worse than disaggregated.
• ALL TRUE!
• But ceteris is not paribus
• no objective, disaggregated measures of threat of
  opportunistic behavior.
• And yet theory and qualitative evidence indicate
  this is a first order concern in development.
• Hence scholarly and policy communities (more or
  less) embrace subjective indicators.

4
Measuring threats of govt. opportunism

• Subjective measures variously labeled risk of
  expropriation, rule of law , etc.
• Problems
• Noise low opportunism countries can be rated as
  high opportunism.
• Misattribution they pick up other unobserved,
  growth-damaging features of countries
• Appropriate response throw out bath water, not
  baby
• Ignore differences between Thailand and Malaysia,
  Canada and the US, or Brazil and Mexico. (bath
  water)
• DONT ignore conclusions based on comparisons
  across many countries. (baby)

5
Measures of Institutions

• Attempts to use institutional measures as proxies
  for threat of opportunistic behavior.
  Problematic.
• Assumes that institutions are the main drivers of
  opportunistic behavior.
• Assumes that the institutions we measure are the
  most important.
• Both may be incorrect.
• Exposes, instead, an important research agenda
• under what conditions do governments refrain from
  opportunistic behavior?
• Institutional debate REINFORCES dependence on
  subjective measures of opportunism!

6
Institutional measures and opportunism

• Presumed institutional determinants of
  opportunism
• Tail wagging the dog constraints on political
  opportunism
• Judicial independence
• Central Bank Independence (opportunistic behavior
  in monetary policy)
• Problem agency independence is a function of
  politics (Keefer/Stasavage and many others)
• Political institutions
• Political checks and balances (Subjective
  Polity Objective Henisz or Database of
  Political Institutions)/
• Democracy (Subjective Polity Objective DPI,
  Przeworski, et al.)
• Problem No controls for political incentives

7
Missing the politics of opportunistic behavior

• Institutional puzzle of opportunistic behavior
• Some democracies/non-democracies restrain
  opportunism - many dont.
• Some parliaments check abusive behavior by
  executive many dont.
• Democracy and checks measures dont capture these
  distinctions.

Poor non-democ-racies Poor democ-racies Rich democ-racies
Corruption (0 6, least corrupt 6), 1997 2.7 2.9 4.1
Bureaucratic quality (0 6, 6 highest quality), 2000 2.3 2.4 4.6
Rule of law (0 6, 6 highest quality), 2000 3.7 2.9 4.6
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Need more thought/evidence on political
incentives to secure property rights

• Secure property rights public good.
• Opportunistic behavior reduces growth, hurting
  everyone.
• So pursue indicators of government incentives to
  provide public goods that vary within
  dems/non-dems (e.g., of political market
  imperfections).

9
Putting the politics into institutions

• Within dems
• Types of electoral institutions (PR, list)
• Measures of credibility of political promises
• Types of political parties (programmatic/not)
• Age of democracy
• Within non-dems intra-ruling party
  characteristics? Can leaders make credible
  promises to party members?
• Age of party?
• Internal checks on leaders?
• Information distributed to members?
• Sources? Unfinished agenda. But Database of
  Political Institutions (WB) Cline Center for
  Democracy (U. Ill, Champaign).

10
Need more nuanced institutional data

• Within dems
• Budget process, Exec Parliament
• Intra-parliamentary decision making
• Rules for candidate selection
• Sources few, now, but Cline Center for
  Democracy. . .

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In sum. . .

• The world needs a better mousetrap to measure
  threat of opportunistic behavior. . .
• . . . but an objective indicator not on the
  horizon.
• Better place to put resources improving
  empirical basis for investigating determinants of
  opportunistic behavior.
• Measuring political incentives
• Measuring public sector characteristics (pub. sec
  fin. mgt civil service judiciary etc) at
  least as intermediate determinants of opportunism.