Lant PritchettUniversidad Diego Portales

Instituto de Políticas PúblicasOctober 11, 2011

“Development” is a four-fold transformation of ‘rules-systems’ (with complex interacting pieces)

• ADMINISTRATION

• Rational, professional organizations

• SOCIETY• Equal social

rights, opportunities

• POLITY• Accurate

preference aggregation

• ECONOMY• Enhanced

productivity

Transforming Rules

Systems

Figure 1: Development as a four-fold modernization process

Chile has been one of few complete development successesOnly 10 countries in the

post WWII period that have managed to have:

Extended episode of rapid economic growth (>4 ppa in GDP per capita)

Electoral Democracy (high POLITY rating)

Capable Bureaucracy (high BQ, low corruption)

Country Region

Japan East Asia

South Korea East Asia

Spain Europe

Portugal Europe

Ireland Europe

Israel ?

Austria Europe

France Europe

Finland Europe

Chile South America

Source: Pritchett and Werker 2011

A much more common experience is failure in at least one dimension of the “development” process

Economic stagnation

Lack effective polity so that citizens do not control the state (even with elections)

Failure of a transformation to national identity and social cohesion/basic equal rights

Failure of the state to acquire the institutional and organizational capability to implement policy

At the launch of an institute of public policy, an important question is what is “public policy?”

Realized States of the World

(Ω)Actions by agents

of the state(A)

Intended Outcomes

EE(Everything

else)

Official or de jure public policy isa mapping from states of theworld to actions by an authorized agent of the state with intended outcomes

Outline of my talk:Failures in Policy Implementation

Gap between “policy” and “policy”: the de jure-de facto gap

“Capability traps” as slow progress in the acquisition of the capability for effective policy implementation

Escaping “baby ontology”

The camouflage of “isomorphic mimicry”

Sabotaging the natural camouflage with:

Performance measurement

Authorization of positive deviation

Disruptive innovation as the path to OECD

“Looking like a state” in India: Nobody is there but no one is absent either

Super whiz-bang program to improve nurses with better technology, better incentives, civil society engagement, failed completely as physical attendance was 30 percent.

The state cannot control the mapping “If its Monday be at work”

Both treatment and control present on ‘monitored’ days about a third the time

Source: Banerjee, Duflo, Glennerster, 2008 ( figure 2)

0%

20%

40%

60%

80%

100%

Feb-

06

Mar-

06

Apr-

06

May-

06

Jun-

06

Jul-

06

Aug-

06

Sep-

06

Oct-

06

Nov-

06

Dec-

06

Jan-

07

Feb-

07

Mar-

07

Apr-

07

May-

07

Month

Present

Half day

Absent

Exempted days

Machine problems

Source: Duflo presentation

The initiative changed the juridical or official reality from “absence” to “exemption” without transforming actual policy implementation—presence was unchanged

De facto or “realized” policy is driven by agent choice, which is an endogenous outcome of a system and de jure “policy” is only one element—and “realized” policy matters to outcomes

Realized States of the World

De jure Policy

Actions by agents of the state

(A)

IntendedOutcomes

EE(Everything

else)

(Publicly authorized)

Agents

Realized (de facto)

Policy

Comparing what “legal compliance” would take versus what firms say they actually do

Comparing “legal time for compliance” and actual firm responses—no correlation, consistently less

Source: Hallward-Driemeier and Pritchett 2010

Huge gaps in what firms report: for instance, of 191 firms in Chile where the DB reports 155 days to get construction permit…

10th: 7 days 25th: 20 days

75th: 120 days

90th: 360 days

What is “administrative capability of the state”? Organizations of the state able to induce behavior of

implementing agents consistent with carrying out the stated objectives of the organization Perhaps a narrow gap between de jure and de facto policy, or

Location of country in the gap in outcomes between optimal actions of agents of the state versus outcomes with purely selfish objective function maximizing actions by agents of the state (allowing for “street level bureaucrats” actually doing better than de jure)

Somehow aggregated across the organizations of the state (e.g. tax, police, education, regulation, health, infrastructure)

“Capability Traps” are when there is stagnation in the pace of acquisition of state capability for policy implementation: How long till Haiti reaches Singapore?

Been independent for 200 yearsand is only this far about Somalia(complete anarchy)

At that pace Haiti reachesSingapore in 2,000 years

Using available time series from ICRG to extrapolate scenarios of progress—current progress is slow

Country Bureaucratic Quality Corruption

Current

Level

(scale 0 to

4)

Years to Singapore (4) at: Current

Level

(scale 0 to

6)

Years to Singapore

(4.5)

Own past

pace,

1985-2009

Average

country

pace

Pace of

fastest 20

improvers

Own past

pace,

1985-2009

Pace of

fastest 20

improvers

0.0080 0.075 0.061

Haiti 0 Infinity 503 53 1 84 57

Nigeria 1 Infinity 377 40 1.5 Infinity 49

Sudan 1 72 377 40 1 Infinity 57

Iraq 1.5 120 314 33 1.3 Infinity 52

Nicaragua 1 Infinity 377 40 2.5 Infinity 33

How (not “why”) are capability traps sustained?

What are the techniques of successful failure?

How do organizations manage to sustain a lack of progress while maintaining legitimacy, surviving as an organization, and even attracting more and more resources?

How is the gap between rhetoric and performance sustained?

The camouflage of isomorphic mimicry

(Remember: Red and black, friend of Jack, Red and Yellow, Kill a Fellow

An expertise in public policy avoids explanations that rely on baby ontology

Babies understand the world in terms of

Agents: things with “will” that actteleologically

Stuff: things that are acted upon byagents

Which is why they laugh at balloons, asthey are baby ontologically weird

Most of us, nearly all of the time, operate in the world successfully with“baby ontology”—outcomes are explained because some agents wanted iror the properties of the natural world

But systems are an ontological third category that explain outcomes without teleology.

Space fornovelty

(E)Valuation ofnovelty

Organization Goal:Legitimation

(growth, resources)

Leadership

Front-line worker Choices

Open

Functionality

Demonstrated Success

Value Creation

Act with ConcernedFlexibility

Closed

Agenda Conformity

IsomorphicMimicry

(mimetic or normative)

OrganizationalPerpetuationAgents

(leaders, managers,Front-line workers

Organizations (firms, ministries, NGOs) choose strategies

System Characteristics(Context, Environment

for Organizations)

Evolutionary ecosystem: Agents, organizations, systems

Compliance

Space fornovelty

(E)Valuation ofnovelty

Organization Goal:Legitimation

(growth, resources)

Leadership

Front-line worker Choices

Open

Functionality

Demonstrated Success

Value Creation

Act with ConcernedFlexibility

Closed

Agenda Conformity

IsomorphicMimicry

(mimetic or normative)

OrganizationalPerpetuationAgents

(leaders, managers,Front-line workers

Organizations (firms, ministries, NGOs) choose strategies

System Characteristics(Context, Environment

for Organizations)

Why economists love markets like we do when we do: Good markets are a system that leads to

ecological learning

Compliance only

Firms can enter

Consumers vote with

their feet/dollars

Mo

tivates inn

ovatio

n an

d

“creative destru

ction

”

Space fornovelty

(E)Valuation ofnovelty

Organization Goal:Legitimation

(growth, resources)

Leadership

Front-line worker Choices

Open

Functionality

Demonstrated Success

Value Creation

Act with ConcernedFlexibility

Closed

Agenda Conformity

IsomorphicMimicry

(mimetic or normative)

OrganizationalPerpetuation

The dangers of public systems: it can align on isomorphism as an optimal strategy

Compliance

Monopoly providers (as users of public

resources) risk averse

“more of the same (alignment of political interests) but better”

Mo

tivates isom

orp

hic

mim

icry as an

org

anizatio

nal strateg

y, w

eal leadersh

ip, fro

nt-lin

e m

alaise

Chile’s problem?

Chile has successfully avoided the problems of Afghanistan, Somalia (complete state failure) or even of India, or other Latin American states of a “flailing” state with weak capability to implement policy and hence slippage (e.g. corruption, ineffectiveness)

But… in making the final push to its legitimate aspirations as an OECD country, what are the dangers of isomorphic mimicry?

To catch the OECD Chile has to do it better than the OECD…it cannot win a race of “more of the same”

This way be (fiscal)Dragons…imitating otherOECD systems leads to highcost isomorphic mimicry….

“We’ll have OECD performancewhen we have OECD inputs”

Education for instance: “normative isomorphic mimicry” is not a strategy for OECD performance

Empirical illustrations from Mexico or Brazil that expanding spending, at existingassociations of spending with learning outcomes leads to very little gain—even atFIVE TIMES higher absolute spending only 20 points of the gap is closed (or at Denmark’s ratio of spending to GDP only about 20 points gain)

Source: Pritchett (forthcoming), chapter 4

Can Isomorphic mimicry camouflage be sabotaged?

How can the space for innovation be created for scalable ideas?

How can performance measures get real traction over behavior of organizations?

De-legitimization of “looking like a state” or merely looking like success

Authorization of directed positive deviation: swap freedom to innovate for higher performance accountability

Mixture of “orthodoxy”—foundations in“compliance”—but need “positive deviations”to be authorized and evaluated

Mark Morris dancing the female lead in Dido and Aenas—classic tradition—Greek myth, Baroqueopera but with innovation

Design policy based on global “best practice”

Implement according to local constraints

LowerOutcome

OutcomeHigher

Outcome

Rent Seekers Bureaucrats Innovators

Organizations & Agencies

Policy Makers

Space forAchievable

Practice

Policies include process

barriers to prevent

malfeasance

Process controls

also prevent potentially

useful process

deviations

Design water/sanitation program on local “Best Fit ”

Typical Practice

Internal authorization of positive deviation

Standard outcomes

Lower outcomes

Rent Seekers Bureaucrats Innovators

Policy Makers

Space forAchievable

Practice

Po

licy Deviatio

n

Feedback on Outcomes

Better outcomes

Cap

abil

ity

AffordabilityLow High

High

Low

Pursuit of “Best Fit”

Weak processes or technology

“Modern” State,Weberian Ideal,Appropriate for “high-end” users

21st Century State,Context specific,Appropriate for

most users

“Disruptive technology,

Appropriate for “low-end” users

Disruptive innovation (Christensen 2007)—surpass leaders from below—not head to head

Summary Successful outcomes from policy depend on policy

implementation not just policy Policy implementation is determined by the structures of

systems—not the will of agents Isomorphic mimicry—the imitation of the trappings of

functional systems without their drive for performance is a constant risk in public systems

Sabotage of camouflage is de-legitimation of just “looking like a state” and creating space and evaluation of scalable systemic innovations—performance measurement and positive deviation

Disruptive innovation—jumping past best practice rather than imitating one’s way to success

My work drawn on Andrews, Pritchett, Woolcock, 2010, “Capability Traps? The

Mechanisms of Persistent Implementation Failure” http://www.cgdev.org/content/publications/detail/1424651/

Spartans, Paper Tigers and Keystone Cops: The Financial Crisis of 2008 and Organizational Capability for Policy Implementation

Hallward-Driemeier and Pritchett, 2011, “Doing Business and How Business is Done: Measuring the investment climate when firms have climate control”

The Rebirth of Modern Education (chapters available at http://www.hks.harvard.edu/fs/lpritch/