Law and Economics

Commentary / Development / Economics / Law and Economics — No Comments
17
May 13

Spoken Like a True Development Economist

I remember there was this fascination with the idea of the informal economy about 10 years ago. Stewart Brand was talking about how brilliant it is that people get by in slums on an informal economy. He’s a friend so I don’t want to rag on him too much. But he was talking about how wonderful it is to live in an informal economy and how beautiful trust is and all that.

And you know, that’s all kind of true when you’re young and if you’re not sick, but if you look at the infant mortality rate and the life expectancy and the education of the people who live in those slums, you really see what the benefit of the formal economy is if you’re a person in the West, in the developed world. And then meanwhile this loss, or this shift in the line from what’s formal to what’s informal, doesn’t mean that we’re abandoning what’s formal. I mean, if it was uniform, and we were all entering a socialist utopia or something, that would be one thing, but the formal benefits are accruing at this fantastic rate, at this global record rate to the people who own the biggest computer that’s connecting all the people.

So Kodak had 140,000 really good middle-class employees, and Instagram has 13 employees, period.

That’s computer scientist Jaron Lanier, who coined the term “virtual reality,” explaining his view that the Internet has destroyed the middle class, in an article on Slate.

Though I’m not sure that the argument that “great stagnation” arguments of the type made by Lanier, which posit that technological change brings increased unemployment, hold much water (thousands of years of technological change seem to indicate otherwise), Lanier’s comment about informal economies is spot on.

Development economists and law-and-economics scholars know the serious inefficiencies that go hand-in-hand with informal economies all too well. Here is one of my favorite articles on those so-called flea-market economies, by Fafchamps and Minten. Here is a whole book by Marcel Fafchamps about the difficulties posed by trying to conduct business in an environment characterized by informality.

Africa / Agriculture / Development / Economics / Land / Law and Economics / Policy — 2 Comments
15
May 13

Yes to Land Rights, but Land Titles Are No Silver Bullet

Some economists argue that ensuring people have titles to their land can ensure a feeling of security and boost production. … The greatest proponent of the argument is Hernando de Soto, a development economist who has managed to win praise from the likes of Bill Clinton and the libertarian Cato Institute.

There is plenty of evidence that land rights are connected to productivity, but new research out of Madagascar shows that it is not always the case.

Duke University researcher Marc F. Bellemare tested whether the land rights component of a $100 million Millennium Challenge Corporation (MCC) compact with the government of Madagascar. He found that the provision of formal land rights, meaning land titles, had not measurable impact on productivity when comparing farmers that did and did not benefit from the MCC compact.

Holding a land title is not sufficient if structures are not in place to enforce land ownership and dole it out.

From a very nice article by Tom Murphy on Humanosphere, which discusses the policy implications of my forthcoming Land Economics article on land rights in Madagascar. Continue reading →

Africa / Development / Economics / Law and Economics / Politics — Comments Off
01
Apr 13

More on British vs. French Colonial Institutions

An email from Chuhang Yin, a former student of mine:

I just read your newest blog post and I am fascinated by this topic. I found a recent [Quarterly Journal of Political Science] paper by Alexander Lee and Kenneth Schultz at Stanford titled “Comparing British and French Colonial Legacies: A Discontinuity Analysis of Cameroon” and think it might be relevant. Their focus is on public goods and individual wealth, but not on land productivity. The abstract is here:

“Colonial institutions are thought to be an important determinate of post-independence levels of political stability, economic growth, and public goods provision. In particular, many scholars have suggested that British institutional and cultural legacies are more conducive to growth than those of France or other colonizers. Systematic tests of this hypothesis are complicated by unobserved heterogeneity among nations due to variable pre- and post-colonial histories. We focus on the West African nation of Cameroon, which includes regions colonized by both Britain and France, and use the artificial former colonial boundary as a discontinuity within a national demographic survey. We show that rural areas on the British side of discontinuity have higher levels of household wealth and local public provision of piped water. Results for urban areas and centrally-provided public goods show no such effect, suggesting that post-independence policies also play a role in shaping outcomes.”

Specifically about results:

“Using data from the 2004 Demographic and Health Survey of Cameroon, we compare communities near the former colonial border using both a regression discontinuity research design and a comparison of neighboring villages that straddle the boundary. We show that rural households on the British side have higher levels of wealth and are more likely to have access to piped water, a locally provided public good. These results do not hold for urban areas or for centrally-provided public goods like roads and education, suggesting that the effect of colonial-era differences can be attenuated by post-colonial policies.”

I also found a paper published in 2000 in Comparative Politics titled “Institutions, Context, and Outcomes: Explaining French and British Rule in West Africa” which might also be useful:

“I seek to solve this puzzle by tracing the origin of class formation in Ivory Coast’s and Ghana’s rural areas. Specifically, French and British colonial institutions generated different property rights and landholding patterns, forming the basis for different patterns of class formation.”

On page 258 to 260 the author discusses the differences of British and French institutions.

Africa / Agriculture / Development / Economics / Law and Economics / Policy — 3 Comments
28
Mar 13

Not Worth the Paper They Are Printed On

LandEconomicsLand Economics has now published my article on the productivity impacts of land rights in Madagascar, which is creatively titled “The Productivity Impacts of Formal and Informal Land Rights: Evidence from Madagascar.”

Here’s the abstract:

This paper studies the relationship between land rights and agricultural productivity. Whereas previous studies used proxies for soil quality and instrumental variables to control for the endogeneity of land titles, the data used here include precise soil quality measurements, which in principle allow controlling for the unobserved heterogeneity between plots. Empirical results suggest that formal land rights (i.e., land titles) have no impact on productivity, but that informal land rights (i.e., landowners’ subjective perceptions of what they can and cannot do with their plots) have heterogeneous impacts on productivity.

In other words, what I find is that no matter how you slice the data, land rights do not appear to have the beneficial effect many people seem to think they have. The emphasis is mine, for reasons that are perhaps best explained in the last paragraph of the paper:

[T]he US government’s Millennium Challenge Corporation signed a $110 million, four-year compact with the government of Madagascar in 2005 which included an important land tenure component, and whose goal was to “increase land titling,” and thus land security (Millennium Challenge Corporation 2010). But in a context where land titles do not seem to have improved agricultural productivity, the finding that land titles do not have such an impact is highly relevant for policy in that it helps knowing where to allocate aid dollars at the margin. Here, it looks as though aid might be better allocated to a reform of the legal framework within which agriculture takes place. Policy should be based on empirical evidence — not theoretical beliefs.

At the end of the day, the land titles in those data appear to be worth no more than the paper they are printed on.

What’s interesting to me about these findings, in light of my evolving research interests, is that many others find that land rights have beneficial effects on productivity. Generally speaking, however, it looks as though those beneficial effects of land titles are found in former British colonies in Africa. In former French colonies such as Madagascar, however, it looks as though land titles have no impact. This brings to mind a passage from Herbst’s States and Power in Africa:

France was notable for its unusually unsuccessful efforts to disrupt customary tenure during the colonial period, despite its sweeping laws that theoretically made wholesale changes in land tenure (…) France relied on administrative fiat to try to change customary tenure procedures.

Does anyone know of a study looking at the differential approaches to or impacts of British vs. French colonial institutions dealing with land tenure issues? I think there would be a neat paper to be written on that.

Commentary / Law and Economics / Miscellaneous — 5 Comments
25
Oct 12

A Modest Proposal to Curb Bullying

I spent all of last week in Canada, where the suicide of 15 year-old Amanda Todd due to bullying was the cause of a great deal of media hubbub.

Here is the Globe and Mail‘s initial article on the teenager’s suicide (the Globe is Canada’s newspaper of record, and Toronto’s response to the New York Times). In a nutshell, Amanda committed suicide because someone whom she had been corresponding with online and whom she had sent a picture of her breasts to thought it would be funny to harass Amanda by sending that picture to her friends and family.

Before anything, I would just like to say that my heart goes out to Amanda’s loved ones. I don’t have children, but I know firsthand what it’s like to lose someone you love to suicide, and it must be even worse

A Modest Proposal to Curb Bullying

Most discussions of bullying evolve sooner or later into a discussion of what can be done to curb bullying, so the policy options to do so were on my mind most of last week. What follows is my suggestion.

Please bear in mind, however, that I am not a lawyer, and that I have no legal training beyond what I have learned in the context of teaching law and economics. I am posting this to get some sort of discussion going that is neither the touchy-feely not fueled by a thirst for revenge. If you are a lawyer, please comment below on the validity of the approach I suggest.

One of the concepts that always causes a great deal of discussion in my law and economics seminar is the legal doctrine of respondeat superior which, according to Wikipedia:

states that, in many circumstances, an employer is responsible for the actions of employees performed within the course of their employment. This rule is also called the “Master-Servant Rule”, recognized in both common law and civil law jurisdictions.

Here, I am considering bullying between underage minors, so that the bully cannot be treated as an adult in court.

If a child is being bullied by another, could we not invoke the legal doctrine of respondeat superior by making the bully’s parents responsible for the actions of their child?

In other words, it should in principle be possible to redefine the relationship between a bully and his parents as a principal-agent relationship (after all, underage minors are already the responsibility of their parents in so many other spheres of intervention) so as to shift the burden of responsibility on the parents.

This would be similar to how courts often intervene to ensure that externalities are internalized. And though I agree that it might be difficult for parents to perfectly enforce good behavior on the part of their children, they are nevertheless the ones who are in the best position to do so since, in law and economics parlance, they are the least cost avoider.

Again, I don’t have any formal legal training, so I encourage actual lawyers to comment below.

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