Abstract

From the point of view of institutional economics, growth is related to the implementation and enforcement of property rights. The system that emits, and enforces those rights needs to have very low transactions costs leading to the least possible frictions. The lowest the transactions costs the highest the level of security of investment, as well as the benefits of direct and indirect socioeconomic impacts. However, traditional economic development models do not focus on transactions costs and property rights systems, both of which seem to be the suspects for low productivity, slow growth, and informality. Many developing countries suffer from systems of property rights that are unpredictable because they are inundated with overwhelming bureaucracy, difficult to follow, track, and measure. The speaker has developed a methodology to best diagnose the reasons why a country has such high transactions costs and how to reduce them systematically. This diagnostic method is called Reality Check Analysis (RCA) and its outcomes allow for the best design of policy reforms and strategic application. The presentation will focus on the theoretical definition of the problem, the analysis of Reality Check Analysis, its application and important results measured through a socioeconomic 3,000 household survey. This survey presented the direct benefits of applying a simple property rights system to investment, savings, property values, trust, child labor, to mention a few.

Speaker Bio

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Recent experimental evidence finds that the decision maker in a collective decision making entity with proposal power attracts a disproportionate amount of the blame or reward by those materially affected by these decisions. In the case of coalition governments evidence suggests that voters have heuristics for assigning responsibility for economic outcomes to individual parties and that they tend to disproportionately direct the economic vote toward the Prime Minister party. This essay demonstrates that voters also identify the Finance Minister party as an agenda setter on economic issues depending on whether the coalition context exaggerates or mutes its perceived agenda power. We define cabinet context as the extent to which coalition parties take issue ownership for particular policy areas. We find that when decision making is compartmentalized, voters perceive the finance minister as having agenda power and hence it receives a relatively larger economic vote; in more “diffuse” cabinet contexts it is the PM Party that is attributed responsibility for the economy.

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He draws on theory, experiments and public opinion analysis to understand how citizens solve decision-making challenges. This includes looking at how citizens use information shortcuts to make decisions. For example in ‘Context and Economic Expectations: When Do Voters get it Right?’ (British Journal of Political Science, 2010), he demonstrates how information shortcuts result in quite accurate expectations regarding price fluctuations in 12 European countries. One of his current areas of interest is the micro-foundations of cheating and unethical behaviour. He has run real effort tax compliance experiments designed to understand who cheats at taxes, the results of which are summarized in ‘Why We Cheat?’ (currently under review). An extension of this project examines tax compliance in different tax regimes.

Ray has served as Associate Editor of the American Journal of Political Science and the Journal of Experimental Political Science. He is one of the founders of the European Political Science Association and the International Meeting on Behavioural Science (IMESBESS), and he is currently Vice President of the Midwest Political Science Association. In 2015, Ray was selected as a member of the UK Cabinet Office Cross-Whitehall Trial Advice Panel to offer Whitehall departments technical support in designing and implementing controlled experiments to assess policy effectiveness. He was recently nominated to the Evidence in Governance and Politics network.

This event is co-sponsored by the Hoover Institution.

Romain Wacziarg is a professor of economics at the UCLA Anderson School of Management and a research associate at the National Bureau of Economic Research (NBER). The paper that he will be presenting is co-authored by Guillaume Blanc, Brown University.

This talk is part of the Economic History Seminar Series, and is co-sponsored by The Europe Center.