Sunday, March 1, 2009

Derrill of Arabia 3

(Note for readers: The first paragraph by each picture is a description of the pic. The second will be part of an ongoing description of the conference topics and some thoughts about possible future research topics. So if you don't care about the economics, just read the first paragraphs.)

Oh, yes, not only did I sleep and eat, I did attend an actual important conference. They occasionally put video of the participants on the large screen, and I happened to notice a familiar looking goateed person or two in the picture. One of them surreptitiously (I can't believe I spelled that right on the first attempt) snapped a picture of them. This is a zoom in on yours truly.

The topic of the Global Development Network conference this year was natural resource management. Per and I took this to mean the interaction of agriculture and the environment. The vast majority of the conference, though, was focused on what to do with extractable natural resources like ... let's see, we're in Kuwait, so it must be ... OIL. Copper and minerals got some honorable mentions, but the real discussion was on how oil revenues affect development and political economy.

As you walk in the door to the Arab Organization building where we met, they had this beautiful mosaic waterfall and reflection pool on the left.

One effect of oil revenues is clearly the ability to build amazingly plush, opulent meeting rooms. I mentioned to Per that it might be interesting to study the effect of 5-star hotels on development. Is it positive because they create jobs and encourage development people to come hold seminars there so they study the problems of your country, or is it negative because the money could be used elsewhere to better effect? What difference does private vs. public ownership make? Per chucklingly surmised that I would enjoy the field research.....

Mosaics and carved wood ceilings everywhere. This was a side room where we discussed African development.

An Arabian version of the Tree of Life, also in the entryway.

One of the speakers proposed a political economy model with fascinating results, but which relied on the assumption that people are willing to trade off safety/security (military, economic, etc) for political freedom (voice and democracy in government). The discussant for that round correctly pointed out that the notion that these are substitute goods (I'm willing to give up safety for freedom or vice versa) is by no means certain. They could be complementary (the more economically secure I am, the more political freedom I demand) or completely unrelated.

It reminded me strongly of Ben Franklin's quote "Those who would give up Essential Liberty to purchase a little Temporary Safety deserve neither Liberty nor Safety." At other times, he added, "and will lose both."

On the floor with the lunch buffet. In addition to furniture and paintings, they had several small birdcages. The decorative holes in that wall look down into the conference room.

Another view from the lunch room, this one straight up. All the sides of the large atrium are filled with potted plants of many different varieties, not to mention fountains and works of art.

One of the more entertaining moments was when a woman came forward to remind all of us that she and the more poli-sci oriented folks had been discussing these questions since the 1980s and she was delighted that economists were finally getting on board. We had been following our own models at the time and she referred to a number of the advances that had been made since that time in the other literatures. I had a fairly long conversation with her later.

This picture deserves to be clicked on to see it up close. Delicately carved gold decorations.

Another side room. I should mention that they had attendants EVERYwhere. Not only the two guys who opened the front door for us and the security people everywhere, they had bathroom attendants who mopped the floor every time it emptied!

The main conference room before things begin.

Given the chapter I wrote on good governance, her comments got me thinking about an interesting idea. One of the complaints about aid and various natural resources is that they reduce government accountability to taxpayers. The question is: what about governance in the US? Alaska, Texas, Nevada and maybe a few other state governments receive most of their funds from the sale of natural resources or a mild tax on only one industry. How does this affect governance? Do they have worse governance (participation, accountability, transparency, lack of corruption, etc.) than California or NY with their perpetual budget battles or Illinois? She was vehemently in the affirmative. Question is, does anyone have governance measures within the states?

Another side meeting room upstairs. The wood carvings throughout the room were most impressive.

Tapestry in the main conference room.

The other research type question the conference made me ponder had to do with government expectations. The old Keynesian model believed people have "adaptive" expectations -- they look to the past and make a guess about today based on the past. This allows policy makers to trick them with unexpectedly high inflation, producing perpetually low unemployment. The 1970s critique introduce "rational" expectations and the notion that people look forward so that the government might be able to trick people once, but people would anticipate further tricks and so neutralize the government.

The research presented at the conference indicated, though, that some of the governments were behaving AS IF they had very perverse expectations, as if they confused long-term trends and short-term trends. That is, they spent money as if it will always be there and ignore long-term trends in lower prices as if they were here today and gone tomorrow. Both adaptive and rational expectations people would have done better at investing the money than government did.

I fooled around with a a handful of explanations and talked to the presenters. They all seemed to settle on a lobbying answer in one form or another: the oil/mineral/whatzit industry gains political influence when its price is high and turns this into long-term political favors. If this is a semi-permanent feature of the political landscape, it is poorly understood and it ought to be possible to devise a set of institutions (to be determined since I haven't done the research yet and it'll be several years before I could get to it) to anticipate this and work around it.

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