1. Evidence on Governance and Development: making sense of the indicators By Morten Jerven Norwegian University of Life Sciences www.mortenjerven.com

2. Outline 1.Defining governance 2.Measuring governance 3.Narratives of governance and development

3. Poor Numbers 1. What Do We Know about Income and Growth in Africa? 2. Measuring African Wealth and Progress 3. Facts, Assumptions, and Controversy: Lessons from the Datasets 4. Data for Development: Using and Improving African Statistics

4. Africa: Why Economists Get It Wrong Introduction 1.Misunderstanding economic growth in Africa 2.Trapped in history? 3.African growth recurring 4. Africa’s statistical tragedy? Conclusion

5. Governance, Policy and Evidence Policy: ‘A course or principle of action adopted or proposed by an organization or individual’ Governance is the measure of whether such rules are followed. Evidence based policy: a ‘policy’ that is based on a factual statement about the world.

6. What is governance? Descriptive definition - Following the rules Normative -‘Behaving well’ Is the country adopting economic norms of good behaviour? Is the country adopting political norms of good behaviour?

7. How do we measure governance? By counting outcomes: murders, inflation rates, elections… By evaluating the rules… By subjective evaluation through surveys… By an ‘expert’ panel…

8. The problem of measuring governance ‘Governance’ as such does not exist… – Measuring ‘inflation’ versus measuring ‘the weather’ Measuring by proxy, by indicator and by ‘as if’. The practice of observing or measuring changes behaviour Measuring by proxy: the measure gradually replaces the phenomenon itself Problems of ‘indicators’: only contains a signal, but little actionable knowledge Governance by indicators tend to strengthen dominant prejudice

9. Some Governance Indicators Ease of Doing Business Index Transparency International Corruption Perceptions Index Freedom House’s Freedom in the World Mo Ibrahim Foundation And many many more…see Global Benchmarking DatabaseGlobal Benchmarking Database

10. How to lie with indices

11. The rise of governance indicators Why do they exist? – Advocacy advantage for the organization – Source of knowledge? – Symptoms or enablers of global markets Why do some get more influence than others? – Expertise – Trust – Real sticks and carrots How do we judge whether the indicators are doing what they should do?

12. How do governance indicators work?

13. Knowledge – Legibility: Sorting, simplifying, reducing, translating complex information or making up for missing information. Governance – Naming and shaming, outsourcing accountabilty, allows for ‘as if’ ruled based governance. Unintended consequences – Gaming, Policy Based Evidence, perverse behavioural effects.

14. Governance and development: Causality? Institutions Growth Policy

15. The evidence for governance and growth in Africa

16. Coherence with growth pattern Rapid Growth 1960-1974 Shock 1974-1981 Decline 1981-1994 Stagnation 1994-2001 Africa Rising? Source: WDI 2003

17. Coherence with growth pattern Source: WDI 2003

18. Coherence with growth pattern Initial Conditions? Source: WDI 2003

19. Coherence with growth pattern Openness? CLOSED

20. Coherence with growth pattern Openness? Structural Adjustment Programmes from 1979 CLOSEDOPEN

21. Coherence with growth pattern Institutional Quality Black Market Premium Public Services High Aid Dependence (and indebtedness)

22. Coherence with growth pattern Low Institutional Quality High Black Market Premium Deficient Public Services High Aid Dependence (and indebtedness) All post shock phenomena

23. From: Why has Africa grown slowly? To: Why Africa failed 1 st Generation growth literature: Q: Why has Africa grown slowly? A: Growth inhibiting policies were adopted. 2 nd Generation Growth literature Q: Why were growth inhibiting policies adopted? A: Special ‘African characteristics’ in the initial conditions

24. From thinking about economic growth to explaining outcomes today A grand leap of faith: Low income today must be the result of slow growth yesterday – which event put the ‘bad governance’ in place? Geography, Colonialism or ….?

26. Thinking about causality Correlation versus Causality Correlation does not imply causality In principle effect cannot precede cause – Big empirical question: when did the big divergence occur? 0, 1500, 1750, 1950….? Causal Mechanisms – Geography → Underdevelopment – Geography →Institutions → Underdevelopment – Colonization→ Underdevelopment Or any other variation…. Does systematic variation in cause match with systematic variation in effect? Must be guided by theory

27. Conclusions Biggest deficiency of this literature – beyond the limits of quantification – often imposing a global standard of ‘policies’, ‘institutions’ and generally strategies of development. Upside: History Matter, Institutions Matter.. The policy implications of presenting the countries as a ranking from 1 to 10. Penguins versus Camels