Consensus Versus Incentives: A Skeptical Look at Regulatory Negotiation

Some recommendations are designed to improve the efficiency of public regulation. Incentive-based systems, for example, can make government policies more cost-effective. Other recommendations are disembodied law reforms, espoused without much concern for the substantive problems to which they might apply. This Comment contrasts one of these recommendations - regulatory negotiation - with incentive-based proposals

The Role of the World Bank in Controlling Corruption

In 1997, Professor of Law and Political Science, Susan Rose-Ackerman of Yale University, delivered the Georgetown Law Center’s seventeenth Annual Philip A. Hart Memorial Lecture: The World Bank’s Role in Controlling Corruption. Susan Rose-Ackerman is Henry R. Luce Professor of Law and Political Science, Yale University, and Co-director of the Law School’s Center for Law, Economics, and Public Policy. She holds a Ph.D. in economics from Yale University and has held fellowships from the Guggenheim Foundation and the Fullbright Commission. She was a visiting Research Fellow at the World Bank in 1995-96 where she did research on corruption and economic development. She is the author of Corruption and Government Causes, Consequences and Reform (1999), Controlling Environmental Policy: The Limits of Public Law in Germany and the United States (1995); Rethinking the Progressive Agenda: The Reform of the American Regulatory State (1992); and Corruption: A Study in Political Economy (1978); and joint author of The Uncertain Search for Environmental Quality (1974) and The Nonprofit Enterprise in Market Economies (1986). She has published widely in law, economics, and policy journals. Her research interests include comparative regulatory law and policy, the political economy of corruption, public policy and administrative law, and law and economics. In this essay Professor Rose-Ackerman discuses how widespread corruption is a symptom that the state is functioning poorly. Ineffective states can retard and misdirect economic growth. International aid and lending organizations have begun to focus on corruption control as part of a general rethinking of their role in the post-Cold War world. Both James Wolfensohn, the President of the World Bank (Bank), and Michel Camdessus, the head of the International Monetary Fund (IMF), have put the control of corruption on their institutions\u27 agendas. Nevertheless, some argue that corruption is a political issue and is, therefore, outside the purview of the World Bank. Corruption, however, has fundamental economic impacts and is thus an appropriate area for World Bank and IMF concern. Bribes represent illegal user fees, taxes, or access charges paid to public agents. These payments influence economic decisions ranging from the size and character of public investment projects to the level of compliance with business regulations. It is difficult to see how a concern for the economic costs of corruption can be responsibly excluded from World Bank lending criteria

High-level rent-seeking and corruption in African regimes : theory and cases

One explanation for Africa's failure to develop is the weakness of its public institutions. The authors consider one aspect of that weakness: rent-seeking and corruption at the top of government. Under the conditions of their model, and autocrat who seeks to maximize personal financial return favors an inefficiently large public sector and distorts other public sector priorities more than does an autocrat who seeks to maximize national income. However, if civil servants and public officials are also venal, the ruler will not favor so large a government. To show how African regimes operate, the authors present four cases illustrating issues raised by their theoretical model. Among their observations about the relationship between the motivations of top officials and policies to control corruption and other types of rent-seeking are these: A kleptocrat whose decision variable is the level of government intervention in the economy will select an excessive level of interventions, in which national income is less than optimal. Like all monopolies, the kleptocrat seeks productive efficiency except where inefficiency creates extra rents. Facing a kleptocrat, citizens prefer a smaller than optimal-sized government but get one that is too big. A kleptocrat may need to permit lower-level officials to share in corrupt gains thus introducing additional costs. He or she will then favor a smaller government than if subordinates could be perfectly controlled. Dropping the assumption of a single dimension of government intervention, the kleptocrat will favor a different mixture of tax, spending, and regulatory programs than will a benevolent autocrat. Dropping the assumption that rulers are writing on a clean slate, decisions to privatize or nationalize firms can differ across autocratic regimes. In particular, although kleptocrats will often be reluctant to privatize, they may in some cases support privatization that a benevolent ruler would oppose. Investment in countries with kleptocratic rules may have an overly short-run orientation. When rent-seeking at top levels is pervasive, both natural resources and foreign aid under state control may hamper, not encourage, growth.Decentralization,Economic Theory&Research,Environmental Economics&Policies,Payment Systems&Infrastructure,Labor Policies,Economic Theory&Research,National Governance,Environmental Economics&Policies,Governance Indicators,Health Economics&Finance

Foreign Direct Investment and the Business Environment in Developing Countries: the Impact of Bilateral Investment Treaties

Bilateral Investment Treaty’s effects on FDI and the domestic business environment remain unexplored despite the proliferation of treaties over the past several years. This paper asks whether BITs stimulate FDI flows to host countries, and if the treaties have any impact on the environment for domestic private investment. We find a weak relationship between BITs and FDI. However, for risky countries, BITs attract greater amounts of FDI. We also find a weak relationship between BITs and the domestic investment environment. Thus, while BITs may not alter the domestic investment environment, they also may not be fulfilling their primary objective.

Corruption: Greed, Culture, and the State

To lawyers, corruption is mainly a problem of law enforcement. Bribes and other types of corrupt dealings are hard to observe and to prosecute if both sides gain from the transaction, because even clear losers may risk retaliation if they report a transaction. The economic analysis of bribery frequently views it only as a special case of the economic analysis of criminal behavior more generally

Corruption and Post-Conflict Peace-Building

States emerging from conflict generally have very weak institutions and an influx of outside funds. These two conditions provide incentives for officials to make corrupt deals for personal gain. Outsiders who are brought in to monitor and manage the transition are also at risk of becoming corrupt. The prior conflict is likely to have fostered a culture of secrecy and impunity where self-dealing is easy to conceal. The end of the conflict may not encourage the development of a transparent and accountable government, especially if those who gained financially from the conflict are in power and seek both to preserve past gains and to benefit from the rebuilding effort. Thus, although incentives for corruption exist in all societies, the incidence and scale of corruption may be especially high and destructive in post-conflict situations. Political leaders buy-off powerful private actors with patronage, including criminal groups and wealthy business interests. Those powerful private actors also buy off weak politicians with money or promises of future jobs and business ventures. The post-conflict political system may be in a corruption trap where payoffs build in expectation of future payoffs, resulting in a vicious spiral

Against Ad Hocery: A Comment on Michelman

Frank Michelman believes that the Supreme Court is moving noticeably towards a reformalization of regulatory-takings doctrine. He criticizes this development, believing that the Court should instead engage in balancing. To him balancing-or, better, the judicial practice of situated judgment or practical reason-is not law\u27s antithesis but a part of law\u27s essence. I argue in this Article that Michelman is wrong on both counts. Part I demonstrates that the Court does not appear to be articulating consistent formal principles in the takings area. Part II argues that it should try to do just that. Whatever the merits of ad hoc balancing in other areas of law, it has special difficulties in the takings area because of the important role of investment-backed expectations. Nonetheless, Michelman is correct in saying that the formal pattern he discerns is an undesirable one. Thus, Part III suggests a way to think about the takings question that unifies physical and regulatory takings and provides a way to distinguish between government actions that require compensation and those that do not. Nevertheless, even a very imperfect, but clearly articulated, formal takings doctrine is likely to be superior to open-ended balancing