In the late 2000s, the fatal-accident rates of Chinese airlines were lower than those of airlines in Europe and the United States, even as Chinese carriers spent more and more hours in the sky. The culture of safety in China’s skies did not come from centuries of Confucian culture and respect for authority. It came from a decisive intervention that overhauled China’s aviation sector inside of a decade.
During the 1990s, China’s aviation rules failed to keep pace with the rapid growth and technical change in its airline industry. Travel within and abroad became more accessible but a lack of effective rules led to a series of fatal crashes between 1990 and 2002, leaving Chinese airlines with a reputation as some of the most dangerous in the world. China’s air-safety turnaround after 2002 illustrates the power of copying and implementing good rules.
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Managers consider a fishery collapsed in a given year if the harvest from that year is less than 10 percent of the maximum recorded harvest. In 2003, roughly 27% of the world’s fisheries were collapsed. Should fisheries mismanagement continue apace, the collapsed share of world fisheries will grow even larger. One estimate from the journal Science suggests universal collapse as early as 2048.
A combination of improvements in fishing technology and unchecked access to fisheries led to this unfortunate outcome. Collapsed fisheries highlight the fact that sustainable growth and development rely on something more than just the power of technology. The ideas behind fishing nets and trawlers fit nicely into the category of technology, but there’s another category of ideas needed to ensure a sustainable catch: rules.
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Because the conventional economic analysis of crime treats norms as exogenous, it may be missing much of the action on the front lines. Creative enforcement strategies — like those employed in Bogotá, New Dehli, and New York — don’t just change behavior. They change norms.
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Rules are ideas about how people interact with each other. They are the formal laws and social norms that govern daily life. The legitimacy of formal laws often depends on their compatibility with social norms. Social norms can complement formal laws and, in some cases, stand in when formal legal enforcement is absent or inefficient. In a guest post for the Freakonomics blog, Kal Raustiala and Chris Sprigman write about social norms among stand-up comedians.
Comics that steal jokes rarely face formal legal action. But comedians often enforce an informal rule against joke theft by sanctioning the offending comic. A joke thief can expect to be bad mouthed and ostracized by comedians who are willing to incur a cost to punish unacceptable behavior. Raustiala and Sprigman argue that informal enforcement allows comedians to “assert ownership of jokes, regulate their use and transfer, impose sanctions on joke-thieves, and maintain substantial incentives to invest in new material.”
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Jamaica could let its diaspora vote in its next election. Doing so may be its best hope for a healthier form of political competition then, and therefore for better policy now. It may be its only hope for moving away from the unstable trajectory created by bad policy and out-migration of its well educated citizens.
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The laws that govern the ownership, sale, and collateralization of property are a classic example of rules that are important to economic and human development. The story of property reform in Peru illustrates the harm that can come from bad rules, the benefits that come from improving the rules, and the difficulties reformers face when they try to change the rules.
Like many developing countries in the 1990s, Peru undertook structural adjustment programs (taming hyperinflation, privatizing inefficient government enterprises, opening up to foreign trade and investment) as part of lending agreements with the IMF and World Bank. Unlike most developing countries, Peru also made a meaningful institutional overhaul of its property rights system. This deep institutional reform helps to explain Peru’s development strength in relation to its peers.
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A working economy requires good formal and informal rules as well as an effective system of enforcement. The effective enforcement of laws and regulations feeds off of good informal rules, particularly the norm of lawful compliance even when the threat of punishment is not imminent. The absence of effective enforcement can erode this norm of compliance, leading to lawlessness. In this situation, the leaders of the lawless nation may be able to quickly turn things around if they are willing to partner with other governments.
In a recent working paper for the Center for Global Development, Stanford PhD candidate Aila Matanock analyzes several cases of shared governance in Melanesia. In particular, her analysis of the Solomon Islands illustrates the challenges and opportunities for shared governance.
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Bjorn Harsman and John Quigley describe the success of Stockholm’s congestion pricing referendum in a recent paper. The adoption of congestion pricing there offers an interesting example of a meta-rule: a mechanism for innovation in the space of rules. To change traffic rules there, city officials employed a meta-rule based on the “try before you buy” strategy that firms use to enhance the credibility of their product claims. Instead of committing everyone to a big and permanent change, the officials let residents sample the new traffic rules for themselves during a finite trial period. By giving people a chance to try the new rules the officials won majority support for a previously unpopular idea.
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Bob Haywood is the former head of the World Economic Processing Zones Association and the current executive director of the One Earth Future foundation. He wrote in with an interesting example: a recent treaty between two countries that specified the charter for a city.
In 1984, China and the UK signed a treaty called the Sino-British Joint Declaration. It specified the charter under which Hong Kong would operate for 50 years after the handover to China in 1997. The Declaration, together with the Basic Law passed by the Chinese to implement its provisions, specified in great detail what the existing rules were in Hong Kong and how they would be maintained.
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