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April 22, 2011

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Simon Lester

If you have time at some point, I'd love to see your parable extended to GATT-like negotiations among the villages.

Simon Lester

To follow-up, the reason is that I'd like to get a better sense of what you think the GATT/WTO should like. I've read the book, but it left me with some questions.

Alan Beattie

Ditto read book, ditto still have questions, esp about this parable. I can understand why the optimal toll ceiling negotiated under the World Tolls Organisation could be non-zero, but it's not clear to me why a cooperative solution is likely to emerge spontaneously, absent some improbably helpful forms of village-level political decision-making.

Montwithin.wordpress.com

I filled in the blanks when I read the parable. When the fishing village unilaterally setup a toll booth, the inland village would respond in a similar way (the social problems of the inland village are missing in this fable) and that would reduce benefits for both villages. Recognising the problem, the shamen from the two villages met with each other and discussed an optimal solution.

Alan Beattie

Plausible with two villages, but would a spontaneous cooperative solution emerge with 155?

Montwithin.wordpress.com

What I don't understand is why are you so hung up on "spontaneous cooperative solution", as far as I know nothing is spontaneous, not in this parable. If one village setup a toll, the other could respond in kind, so you have tariffs that limit trade, and only then the shamen will realize the problem and setup a metting, or even an inland-coastal-village-cooperative. That's how a "village-level political decision-making" process or global governance begin to emerge. The point being, Rodrik seems to say, is that global governance should not govern for the sake of governance (or ideals of governance); rather it should govern according to the problems occurring in the villages, and if global governance does not provide a good solution to the problems, the villages would simply withdraw, not enter into the cooperative, and/or not play by the rules (like China and India).

To extend the point, it is rather meaningless to have 155 nations in one place talking about what is the best free trade regime when free trade does not adress national problems (on occasion exacerbating them). Sometimes it make sense to have unilateral or bilateral actions.

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The most appropriate comparison with the parable is the challenge facing African and some Latin American economies as they grapple with massive Chinese economic activities and labor migration in them.

I have blogged about them here

http://gulzar05.blogspot.com/2011/04/where-are-dani-rodriks-shamans-and.html

Even assuming a second-best approach, the challenge still remains of formulating inclusive and reasonable policies that accommodate the interests of all sides, and then mobilizing the political support and commitment to implement them. In the absence of policies that can manange a "reasonable compromise", the fishing stocks will decline, fishermen will refuse to pay up their share for the monthly feast, and xenophobic sentiment against outsiders "stealing our jobs" will grow and explode. Does Africa have wise shamans and enlightened political elders who can prevent such damaging outcomes?

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there might be a lot of issues that needs to be elaborated here, I am with you in this idea of "spontaneous cooperative solution," if this matter does not exist, then why not give it a try, in this economy that were facing we have to understand everything about diversion and possible solutions that might help.

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Organisation could be non-zero, but it's not clear to me why a cooperative solution is likely to emerge spontaneously

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Well there is monetary inflation and price inflation. They are not the same thing, although one often leads to the other. In the Keynsian model they seem rely on the hope that the goods and services produced in the economy will rise to counterbalance monetary inflation, keeping demand high and thus checking price inflation.

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