ECONOMIC GOVERNANCE

Institutions are sets of rules that govern human interaction. The main purpose of many institutions is to facilitate production and exchange. Examples of institutions that affect human prosperity by enabling production and exchange include laws, business organizations and political government. Economic governance research seeks to understand the nature of such institutions in light of the underlying economic problems they handle. One important class of institutions is the legal rules and enforcement mechanisms that protect property rights and enable the trade of property, that is, the rules of the market. Another class of institutions supports production and exchange outside markets. For example, many transactions take place inside business firms. Likewise, governments frequently play a major role in funding pure public goods, such as national defense and maintenance of public spaces. Key questions are therefore: which mode of governance is best suited for what type of transaction, and to what extent can the modes of governance that we observe be explained by their relative efficiency? This year's prize is awarded to two scholars who have made major contributions to our understanding of economic governance, Elinor Ostrom and Oliver Williamson . In a series of papers and books from 1971 onwards, Oliver Williamson (1971, 1975, 1985) has argued that markets and firms should be seen as alternative governance structures, which differ in how they resolve conflicts of interest. The drawback of markets is that negotiations invite haggling and disagreement; in firms, these problems are smaller because conflicts can be resolved through the use of authority. The drawback of firms is that authority can be abused. In markets with many similar sellers and buyers, conflicts are usually tolerable since both sellers and buyers can find other trading partners in case of disagreement. One prediction of Williamson's theory is therefore that the greater their mutual dependence, the more likely people are to conduct their transactions inside the boundary of a firm. The degree of mutual dependence in turn is largely determined by the extent to which assets can be redeployed outside the relationship. For example, a coal mine and a nearby electric generating plant are more likely to be jointly incorporated the greater the distance to other mines and plants. Elinor Ostrom (1990) has challenged the conventional wisdom that common property is poorly managed and should be completely privatized or regulated by central authorities. Based on numerous studies of user-managed fish stocks, pastures, woods, lakes, and groundwater basins, Ostrom concluded that the outcomes are often better than predicted by standard theories. The perspective of these theories was too static to capture the sophisticated institutions for decision- making and rule enforcement that have emerged to handle conflicts of interest in user-managed common pools around the world. By turning to more recent theories that take dynamics into account, Ostrom found that some of the observed institutions could be well understood as equilibrium outcomes of repeated games. However, other rules and types of behavior are difficult to reconcile with this theory, at least under the common assumption that players are selfish materialists who only punish others when it is their own interest. In field studies and laboratory experiments individuals' willingness to punish defectors appears greater than predicted by such a model. These observations are important not only to the study of natural resource management, but also to the study of human cooperation more generally.download

Children in times of economic crisis: Past lessons, future policies

H ow do economic shocks, in particular the current economic downturn, affect the wellbeing of children? What can be done to mitigate harm? This paper explores these questions, presents a framework for analysing the impact of shocks on children in different contexts and suggests initial policy implications. New estimates from the World Bank (Blomquist et al., 2009) suggest that slower economic growth owing to the current economic crisis will trap 46 million more people than expected on less than US$1.25 a day; an extra 53 million will be pushed into $2-a-day poverty. This is over and above the 130-155 million people pushed into poverty in 2008 because of soaring food and fuel prices. The downturn is no longer limited to developed countries: economic forecasts for developing countries are rapidly being revised downwards. Given experience from previous crises, all countries need to consider the impacts on children. Increases in child mortality and morbidity, child labour, child exploitation, violence against children and women and other forms of abuse, alongside declines in school attendance and the quality of education, nurture, care and emotional wellbeing, can all be traced to times of economic crisis. It is importance to recognise the following: •*We*know*women,*children*and*young*people*suffer* disproportionately. Parents try to protect their children from the worst impacts of crisis, but there are often limits to how much they can do, especially the poorest. • Vulnerabilities depend on both gender and age, and are multidimensional. Women are the first to lose jobs, having to work harder to seek additional income, spending less time on nurture and care. Youth recover from the impact of lost job opportunities slowly or not at all. Girls often experience higher levels of nutrition and educational deprivation then boys, with long term wellbeing implications for themselves and their own children. And many women, youth and children (to varying degrees) lack voice and power which, among other effects, contributes to abuse and exploitation. • It is essential to focus on major irreversabilities: if children are severely malnourished, pulled out of school, subject to neglect or violence and/or pushed into work, they live with the consequences for their whole life, sometimes passing the consequences onto their own children (Harper, 2005). This implies much greater future poverty, probably higher inequality and lower prospects for economic growth. • Policy should not underestimate the agency of households, including children, in responding to crisis. The challenge is to support constructive coping mechanisms and seek to discourage unconstructive ones.download

Economic Development & Environmental Protection: Achieving a Balance

Muskoka Watershed Council seeks to preserve and enhance the air, water and terrestrial ecosystems of the watersheds in Muskoka, for their environmental, health, economic, spiritual and intrinsic values. Council believes that the most effective way to sustain healthy watersheds is through cooperative approaches to watershed management, based on sound research that informs thoughtful and defensible policy positions. Council believes in working cooperatively with a cross-section of stakeholders in pursuit of sustainable development and environmental best practices. This position paper is the sixth in a series published by Council since 2003. Council supports taking a „green economic‟ approach to economic development. Green Economics establishes the interdependency between economics and ecology. Unlike traditional economics that focuses solely on the financial outcome, green economics presents a broader approach and is characterized by considering the physical and biological contexts of an activity and has a focus on long-term environmental sustainability. We are committed to the enhancement of the health and sustainability of those watersheds lying partially or totally in the District Municipality of Muskoka. While this paper will reference Muskoka for the sake of clarity and simplicity, we believe its conclusions are equally valid for adjacent municipalities within the larger geographic area encompassing those shared watersheds. A healthy and sustainable watershed has been defined as a watershed where economic, socio-cultural and environmental attributes are in balance: there are fulfilling and well paid jobs; the social structure is strong and supportive; and the natural environment is healthy and not under stress. The natural environment is the foundation of a sustainable Muskoka. Our lakes and natural areas provide our drinking water, sustain plants and animals, moderate climate and clean our air. They are the essential elements of the scenic beauty that attracts visitors, provides the foundation of our tourism industry and underlies much of our recreation. Large natural areas and their ecosystems are the base of our economy. They are critical to retaining watershed health and water quality. They are fundamental to the quality of life that Muskoka residents value. As reported in the 2004 and 2007 Report Cards, Muskoka Watershed Council has always approached watershed health as a balance of environmental, socio-cultural and economic interests and believes firmly that a healthy environment and a vibrant economy are synonymous. If we are to protect these values, hard decisions are needed now to limit urban development to urban areas, and to protect the large rural and waterfront areas for future generations. We need to define and encourage sustainable economic development. We must avoid development that offers short-term benefits while eroding our natural resources. Strengthening nature‟s capacity to cope with change is the overarching message of the 2007 Watersheds Report Card. Sustainable economic development in Muskoka must adhere to this principle. Through the late 19th century and the 20th century, Muskoka‟s economy evolved through lumbering, steamboats, tanneries, boat building, grand resorts, the cottage industry and manufacturing. The strength of Muskoka has been its ability to look forward, accommodate change and still maintain its environmental roots. As we begin the 21st century, our permanent population, tourism, seasonal residents and retirees will drive the retail, construction and services sector to form the underpinnings of Muskoka‟s evolving economy. A review of the Business Retention and Expansion reports of Bracebridge, Gravenhurst and Huntsville confirm the trend. Approximately 43% of the labour force in Muskoka is employed in the Tourism and Service sector. The tourism labour force in the three urban municipalities (Bracebridge, Gravenhurst and Huntsville) ranges from 39% to 44% while in the three primarily rural municipalities (Georgian Bay, Lake of Bays and Muskoka Lakes) it ranges from 46% to 50%.download