Wednesday, December 7, 2016

Public-private partnerships without public-public partnerships?

Some conservatives are delighted to support an agenda of private involvement in infrastructure financing and operation, usually in the form of so-called Public-Private Partnerships. The academic literature, well summarized in a book by Chilean authors Engel, Galetovic and Fischer, stresses that for these partnerships to achieve good social results, they must be accompanied by a robust regulatory system and by an institutional framework that guarantees public control and accountability at all the stages of a project. Something that is missing in most analyses (perhaps because Chile is a centralized democracy behind the Andes) is the public-public dimension of such control and accountability mechanisms. Many of the operators involved in PPPs are multinational corporations, and many of the PPP projects go beyond traditional administrative boundaries: they cross state lines in federal countries, or they cross national boundaries in continents that make an effort to integrate their economies, or they cross old municipal boundaries to integrate metropolitan areas. Many conservatives are less comfortable with this part of the deal. Some progressives also seem to live in a simple but no longer realistic world where they believe that by switching from some form of ownership to another at the purely local level is going to change the world. They would all like to work in a simpler world with public-private partnerships or pure public operation without public-public partnerships. But we live in an interconnected world. A key dimension of the public-public partnerships that are required for a good regulation of public-private partnerships is the checks and balances provided by multi-layered government, as many in the USA are discovering as a way to avoid becoming a huge banana republic under Donald Trump.

Tuesday, December 6, 2016

A populist: "I am not a populist"

Minutes after conceding defeat against his progressive rival in Austria, the person that everybody else calls a far right populist leader, Norbert Hofer, was trying to distance himself from the wave of populism that is sweeping democracies the world over. By populism I understand an appeal to the popular classes proposing simplistic solutions to complex problems using demagoguery and making an opportunistic use of democracy. Using a very polite style, he was claiming that he was a very respectful politician. The same day, the dethroned (but not retired) leader of the Catalan secessionists, Artur Mas, wrote an article in the main newspaper of the Catalan bourgeoisie claiming that his sovereignism was not populist, but based on objective grievances. Of course, all these leaders have differences among themselves. Not all of them are open xenophobes or sexual predators like Donald Trump. Not all of them are openly europhobic like Marine Le Pen. But all of them administer a clever recipe of scapegoating (against Muslim people, immigrants, or bureaucrats in a supposedly distant capital) and disdain for the restraint and social norms that used to accompany good democratic practices and the respect for the letter and the spirit of the law. It is social conventions, which are different from place to place, that mostly constrain them to still respect some written and non-written rules. I have been reading a report in The New Yorker  about the Philippino leader, Rodrigo Duterte, about his apparent changes of opinion, his contradictions, his constant playing with legality, his permanent postponement of all his plans blaming his delays on the scapegoats and extending the times that become permanently extraordinary (similarly to Mr. Mas, whose political party holds regional political power since 2010 with a very poor record beyond the secessionist rhetoric). In all these places, these leaders are supported by some decent people, and their rise is also the responsibility of many in the left that have not been wise enough at channelling the frustations of many people. But they pose a threat to democracy and fraternity by making identities salient and undermining cooperative efforts at finding solutions. I've heard Le Pen, Farage, Wilders, the Northern League in Italy and many others distancing themselves from each other. This is just another thing they have in common.

Saturday, December 3, 2016

Understanding Italy

When I lived in Italy, the then leader of the party of the left that had inherited the structure of the Italian Communist Party and that had occupied the space of the Socialist Party after the corruption scandals of the 1980s, Massimo Dalema, wrote a book under the title "Per un Paese Normale" (for a normal country). For good and for bad, however, Italy is still a very special country. Tomorrow, the Italians will vote in a referendum that has atrracted the attention of the global media. I am not sure that the coverage has done a good job at facilitating the understanding of what is happening. A Constitutional reform to increase centralization and diminish the role of the Senate has become a plebiscite about the Prime Minister, Matteo Renzi. According to The Economist, the reform does not deserve a Yes vote, but the political beneficiaries of a No victory would probably be the Five Star movement, which is led by a eurosceptic comedian. To be honest, I don't know what would I vote, I don't like Matteo Renzi, but I dislike the most likely alternative even more. I would like Italy to be dominated by the modernized left that seemed to be advancing in the mid ninenties when I was there. But I have missed a lot since then, although I read La Repubblica every Sunday. Europe needs a reformed Italy, not any more of its clowns and charismatic leaders. Not more miracles, please.

Tuesday, November 29, 2016

Evolutionary managers

David Sumpter in his book Soccermatics simulates an process of tactical evolution in soccer. Teams in a 20 club league are initially equally divided by the use of four different styles of play. The last six teams in each season are replaced by teams with the same style of play of those that finished in the top six spots the season before. Over time, some styles disappear, but for more than 40 simulated seasons at least two styles survive: it is an example of polymorphism. In evolutionary processes, agents do not consciously decide, but they are one type or another, and the most successful types expand in the population. European soccer has lived its own evolutionary process. FC Barcelona started to import Dutch managers in the 1970s because they were successful in Europe. Rinus Michels, Johan Cruyff, Louis Van Gaal and Frank Rijkard tinkered with a similar model, total football (which had roots in several European traditions), following a trial and error process. Rijkard, not a particularly gifted manager, introduced perhaps by chance (a mutation?) a key innovation: replacing the offensive, short and technical central midfielder of Cruyff and Van Gaal by a more defensive player (Davids, Cocu), and sending Xavi Hernández closer to the penalty box. Then Guardiola found the perfect player for the position of defensive midfielder, Sergio Busquets, and had Xavi and Iniesta in the other two positions in the midfield at their best ages, accompanied by a young and energetic Messi. Now Xavi is no longer there, and Iniesta is ageing. The team is too dependent on three fantastic forwards, and somehow the rich total football game based on short passes and small spaces is being left behind. But not for long, if Xavi Hernández completes his training as a manager (please, no need to sack Luis Enrique before) and we soon recover the evolutionary thread that started in the Netherlands in the 1960s, arrived in Barcelona a few years later, and marvelled the world in the first decades of the European Champions League.

Sunday, November 27, 2016

The real choice of California

I have a group of very nice American students in my course on the economics of soccer in Barcelona. I try to make my course interesting not only by talking about soccer, but also using soccer as an excuse to talk about other interesting issues. In our last class we discussed the implications of Brexit and secessionist debates for the future of  sports leagues and institutions. They seemed intrigued by the debate in the United Kingdom and the debates in other parts of the world that have nationalist tensions. I suggested that to think about the implications (not very important in my view, as sports borders should not be necessarily related to administrative borders) they should just wait and see about what will happen in California if secessionist voices keep getting louder. Most of my students started to laugh, as if believing that the demands of Californian independence after the last US presidential election are nothing more than a joke. I was relieved by that, but at the same time I wished that they don't have to suffer a humiliation like the one suffered by the members of the European Parliament when they had to listen to Nigel Farage after the Brexit referendum saying "You're not laughing anymore, are you?" To prevent that from happening, they'd better stay alert and do everything they can to help Californians make the right choice. I don't mean the choice between being independent or not, which is not something they have to decide in a meaningful way in the immediate future, but the choice between even starting such a campaign or devoting their immense resources to more productive uses. Perhaps one day they will really have to choose between being an initially rich isolated node, or being part of a cooperative decentralized network (that is what rich societies should be). But now what they have to choose is whether they start descending through the slippery slope of a debate on independence that divides their society and gives the front pages to the worst characters and their low instincts. Please don't do that, we need the best from California.

Friday, November 25, 2016

Water regulation in times of climate change

I participated yesterday in Madrid in a very interesting forum about the economics of water. The keynote speech was given by Gro Harlem Brundtland, former prime minister of Norway and UN leader on a number of initiatives related to public health, development and climate change. There were also several experts from a diversity of countries and perspectives. In the roundtable in which I participated I argued that a key issue was to have a robust system of regulation with the optimal degree of independence. I tried to explain that the ideas of authors such as Ostrom, Spiller and Akerloff are important in the field, for different reasons. Elinor Ostrom emphasized in her work the need for community owned solutions that are taylored to the specific problems, and one of the historical examples he gave was that of the river basin organizations in Spain. Pablo Spiller stressed the importance of mechanisms that are well adapted to the instititutional endowment (which is different for different times and places) that facilitate credible regulatory commitments that make sunk investments posible. Akerloff in his recent books on behavioral economics argues that narratives that convince the public of what is in their common interest must play an important role in public policies. In water, in these times of climate change where there will be geographically localized shocks in water supply and demand, it is more important than ever to have regulatory packages that are well adapted to the physical and geographic nature of the resource, taking into account the whole water cycle. Tayloring to geographic characteristics and to local preferences may be an argument in favor of functional jurisdictions similar to the water districts in the USA, but being aware that citizens face a fixed cost of monitoring and following the realities of too many authorities. Water is a typical sector in which several levels of government will need to intervene and do intervene, but must do so in a common framework and in a spirit of cooperative federalism. Agencies with a degree of independence are a key input in a robust regulatory system, taking into account the advantages (credible commitment, expert knowledge) but also the disadvantages (lack of coordination and political leadership) of expert insulated agencies. Independent regulators do not fully solve, but relocate, the commitment problem, which with independent agencies becomes a problem of the government and the political "principals" to commit to respect the independence of the regulator. There is no shortcut to the need to engage citizen/voters and their political representatives and convince them that water is a resource that must be managed efficiently and shared (while the effort is coordinated with efforts to fight poverty and environmental challenges) if we want to preserve life in our planet.

Sunday, November 20, 2016

A world of "free" nations stumbling in the dark

The utter confusion and chaos that prevail in the UK after the Brexit referendum is just a taste of what may follow if the politics of nationalism and identity keeps making advances in the public opinion. The first thing we should worry about is the use of the referendum as a privileged tool of democratic decision making. National-populists love referendums both when they win and when they lose. Referendums are not bad per se. It was through plebiscites that Spain advanced to democracy in the 1970s and that Chile defeated Pinochet in the late 1980s. But it was also through plebiscites that Hitler cemented his monopoly of power in Germany. His 1933 referendum wad the last one in Germany, and not even German reunification in 1989 was approved or ratified in a popular direct vote. In Scotland, although the nationalists lost the vote in 2014, they used it to mobilize and to basically eradicate the left from the political landscape (as the nationalists have done in Ireland and Israel), so that they could have a huge victory in the next general election. In the UK, if Brexit had narrowly lost, they would also have achieved the great political objective of mobilizing and making their preferred issues prevalent in the public mind. Perhaps they would even have preferred to lose the referendum, given the mess in which their country has plunged subsequently. The second thing we should worry about is the thought that the relevant unit of freedom and democracy is the nation, or the nation-state. These are obsolete categories that only work in the mind of human individuals, but that are ill-adapted to solve the problems of today's world. A planet of communities dominated by people who believe that they belong to somehow "free" nations would be a planet that would not solve problems like climate change, fiscal havens, financial instability, Internet regulation or global migrations.