Tag Archives: Basilicata

Do no harm: when well-meaning public policies hurt society

Just as I prepare for Policy Making 2.0, I wonder if we are not missing something important there. I am as fond of technology, science-based modeling and data-powered approaches as the next guy. And yet, the technology, the modeling and the data crunching are just the glazing of the policy making cake. The dough beneath it, orienting the deployment of our technological wizardry, is the policy maker’s world view – and that is in bad need of an overhaul.

Let me explain. I find that the vast majority of policy makers – regardless of their political preferences – subscribe to a linear model of policy. An issue is detected; it works its way into the political discourse; an approach is found to tackle it and validated by democratic vote; leaders make it into regulation; such regulation is then enacted by the executive branch, to the desired effect. The linear model may sound reasonable end even “evidence based” if the process leading to crafting the response includes data processing. But it holds only if society is like a machine: relatively simple and tractable, with no second-order effects. If you believe this to be an acceptable approximation of reality, you’ll like the linear model just fine. Traditional economics does: I have sat in classes where optimal policy is computed by maximizing a social welfare function, itself the result of aggregating each individual’s utility function. If your economy is not at the maximum, you should (and you can, in principle) push it there by manipulating the price system (through taxes and subsidies), the level of economic activity (through tweaking taxes and spending) and financial constraints on economic agents (through interest rate fixing, quantitative easing, reserve requirements etc.) and regulation (like standard setting).

If you, like me, believe you are living in a highly nonlinear world, resembling an ecosystem much more than a machine, and better understood by a complex systems approach, then the linear model will not work for you. Neither will its tools – taxes, subsidies, spending, monetary policy, regulation – be reliable.

It’s not a just a matter of not working. I am becoming convinced that deploying these tools can be downright harmful. In trying to correct for a perceived distortion, the state applies some pressure to try to offset the distortion. But, all too often, the economy reorganizes as individuals try to take advantage of the state’s intervention. An example with regulation: to contrast the proliferation of short-term employment, a government might make it more expensive to hire on a temporary basis. And companies might respond more or less forcing would-be employees to start one-man businesses, so as to transform employees into suppliers. Result: even more insecurity for the people in question. Another example, this one with spending: a government decides to encourage R&D spending by funding joint research projects between companies and universities. Problem is, when companies see a business opportunity, they will typically not wait for public funding, but just go ahead with the project. Later, they might apply for funding to pay what they have already done – shifting the burden of paying for the R&D to the taxpayer while not generating any additional new product. Final result: much application forms writing, many projects (with high overhead) funded, but very few new products.

Both these things – give or take some important technicalities – have happened in Italy. The distortion of a local economy by massive public spending is visible to the naked eye: you talk to smart, entrepreneurial young people in Italy’s Mezzogiorno, and chances are they will be aware of the main programmes funded by the European Social Fund, the European Regional Development Fund and their national counterparts. A discouraging amount of their time goes into second-guessing funding agencies and writing applications with all the right buzzwords. And why not? It’s the biggest game in town. Italy’s Strategic National Framework allocates 125 billion euro to economic development over the 2007-2013 period (source, p. 236). That’s a lot of money. To give you a benchmark, World Bank lending commitments worldwide for the same period amount to less than 200 billion euro (source – the page, as I can’t seem to reference the graph directly).

Of these, 101 are concentrated in four regions in the Mezzogiorno (rightly) perceived as lagging behind. Regions are the main spending agencies in Italy: this allocation of resources means that the four regions in question need to juggle the administrative workload of funding, in an accountable way, an average of 3.5 billion euro per year on regional development projects alone – whereas the remaining 15 regions “only” allocate an average of 200+ million per year to the same end. Since money This results in chronic underspending by the least developed regions, who struggle to manage this flood of money.

This accounts for the distortion in incentives I mentioned above. While a great majority of public spending ends up going through traditional channels – incumbents and old boys networks, like everywhere – many of the best and brightest people in Italy’s Mezzogiorno end up spending a lot of time thinking on how to get a piece of the action. Recently, my friend Tiago Dias Miranda spent some time in Basilicata and reported:

[…] one of the first things that struck me was the fact everyone kept on talking about bandi, which at first I thought it had to do with music bands. Little did I know bandi means “competitions” [public sector tenders and calls for proposals]. […] unless there is an elephant in the room that I haven’t seen­­— this territory is highly subsidised, just like developing country receiving donations from the wealthy families.

Most people, within government and without, are aware of this effect of spending, but see it as a necessary evil. “We have to do something for lagging regions – they say – This way of doing things may be inefficient, but it does move things in the right direction, bringing about more work and opportunities.” But here’s the catch: this argument only holds if you accept the linear model. If the economy is complex enough, self-organizing effects begin to show. People on the ground try different things (in Basilicata many people have been exploring tourism services, for example), tinkering with their lives and economic activities. Some selection mechanism functionally similar to natural selection for evolution rewards the successful strategies and eradicates the unsuccessful ones. The former get imitated by more and more people, while the latter go extinct. This gives the system a measure of self-healing, of bouncing back – unless, that is, an injection of public spending keeps the attention of innovators on goals set by the funding agencies and off the tinkering-then-selecting activity.

Tiago’s observation that “everyone is talking about tenders” in Basilicata implies that, in a different situation, the same people would be talking about something else. Maybe they would start companies; maybe they would migrate; maybe they would squat abandoned buildings. But they are not doing those things, and this is actively harming the local economy and society, pushing it into a spiral of dependency. In medicine, this would be called iatrogenics; physician’s actions that harm the patient, despite the best intentions.

Per se, these observations are not new – Dambisa Moyo and others have eloquently argued that too much public spending – no matter how well meaning – can hurt a local economy. But they are counterintuitive, and they never made it into the mainstream. In Italy, certainly, the political discourse is all about how much money you can amass behind which goal; so, the point bears repeating.

More interestingly, I am thinking hard about ways to do two things to operationalize these ideas:

  1. diagnose when it is that local economies are complex enough to find an adaptive path towards improvements. This is harder than it sounds, because you have to choose an appropriate level for the analysis, and whichever level you choose you will likely have winners and losers within that level. For example, Italy is definitely big and complex enough to do interesting stuff, but historically it has tended to concentrate the action in the north, with southern regions lagging behind. If you look at the level of a small region, you are almost sure to find, again, areas that are quite dynamic and areas that are not.
  2. suggest tools that lend themselves well to a “do no harm” approach, that assumes you are doing public policy on a complex adaptive system, not on inert matter or on a simple machine.

These will be the subject of forthcoming posts.

Seeds that take roots: the long march of Visioni Urbane


Sorry, this post in Italian only. I review the medium term fallout from a generative regional policy I worked on in 2007-2009, wearing a Ministry of Economic development hat. The policy in question seems to have spawned quite a lot of interesting stuff. My tentative conclusion is that the ingredients of this success have very little to do with the amount of funding allocated, and are basically a function of an initial investment of attention for details, time, and freedom to explore alternative paths. Feel free to use automated translation if you are interested, and to get in touch with me if you want to learn more.

Era il 2007 quando ho iniziato a lavorare a Visioni Urbane, un progetto della Regione Basilicata che si proponeva di realizzare alcuni spazi per la cultura. Nel gruppo di lavoro rappresentavo il Ministero dello sviluppo economico; il mio compito era di spingere il progetto nella direzione di investire molto sulle competenze creative e imprenditoriali invece che nella costruzione di edifici.

I risultati di Visioni Urbane hanno superato le migliori previsioni. Il progetto – almeno per ora – ha avuto successo: la scena creativa lucana, in precedenza divisa da una cultura di sospetto reciproco, ha collaborato con generosità e competenza con la Regione per progettare una rete di nuovi centri per la cultura. Quattro di questi sono stati anche realizzati, non costruendo nuovi edifici ma recuperando edifici pubblici esistenti ma in decadenza e non utilizzati (in questo modo, circa 3 milioni di euro di nuovi investimenti in mattoni hanno messo a valore 10 milioni di euro di investimenti pubblici già effettuati), mentre un quinto, a causa di problemi strutturali insanabili, ha dovuto essere demolito ed è attualmente in corso di ricostruzione. La gestione di tutti e quattro i centri completati è stata messa a bando; in tre casi è già stata assegnata, mentre il quarto bando scade a gennaio. Due dei tre bandi già assegnati sono stati vinti da consorzi di associazioni e piccole imprese della comunità di creativi raccolta intorno al progetto.

Questi sono già ottimi risultati. Ma ancora più notevole è il fallout di Visioni Urbane: il piccolo gruppo di funzionari che lo ha condotto, e che risponde direttamente al Presidente della Regione, ha esteso l’approccio del progetto ad altre policies, parzialmente integrate con VU stesso. A quanto ne so io:

  • la rete di coordinamento tra i centri immaginata per Visioni Urbane si è evoluta in una fondazione di comunità, partecipata dalle associazioni e le imprese della comunità creativa, da diversi enti locali e dalla Fondazione per il Sud (che funziona da acceleratore, perché raddoppia la dotazione finanziaria raccolta dagli altri soci). La comunità appoggia energicamente questa operazione.
  • la linea di apertura a collaborazioni nazionali e internazionali di VU ha attecchito; i bandi per lo startup dei centri saranno aperti anche a soggetti esterni al territorio.
  • il gruppo di VU è stato protagonista nel lanciare la candidatura di Matera a capitale europea della cultura nel 2019. La responsabile del progetto e il direttore vengono entrambi dall’esperienza di Visioni Urbane.
  • la Basilicata ha costituito una film commission negli ultimi mesi del 2011. La comunità creativa ha chiesto più volte che il metodo molto partecipato di Visioni Urbane venisse applicato anche in quel caso. Non sono sicuro, però, che questo sia effettivamente accaduto.

Visioni Urbane è stato un progetto generativo. Nei primi tempi è stato necessario fare un investimento iniziale di attenzione, tempo e libertà. Attenzione ai dettagli, per imparare a fare fruttare al massimo ogni occasione e ogni euro di denaro pubblico; e tempo e libertà di azione per crescere, esplorare le alternative a disposizione, rimettere in discussione il proprio modo di pensare la policy (ne ho parlato nel mio libro). Questo ha ridotto, inizialmente, l’efficienza amministrativa misurata in velocità di spesa (ci abbiamo messo diversi anni a spendere quattro milioni di euro), ma ha lasciato all’amministrazione nuovi strumenti per analizzare e per fare. In tempi di crisi e di risorse calanti, è un pensiero che mi dà speranza.

The practical economist: Visioni urbane delivers the goods (with a side of Wikicracy)

Economists are commonly deemed to be more prone to abstract reasoning than to concrete action. There must be a grain of truth in this, because it is quite common to hear economists jokes in Economics Departments. This one, for example:

After a shipwreck, an economist ends up stranded on a desert island. He looks around and sees a wooden box, washed upon the shore by the waves. He opens it: it is full of canned food, nutritious and long-lasting! However, he does not have any tools to open the cans: is he doomed to starve amidst abundance? The economist does not lose his cool, and he tackles the problem the way his profession tas taught to to: “Assume I have a can-opener…”

Many of us yearn for concreteness. This is why I am so happy to fly to Potenza on Friday 4th: in May 2007 the Ministry of Economic Development asked me to help the Basilicata regional administration in designing a policy to build creative spaces, and now the first space (called Cecilia) is here, and the other four will follow in a matter of months. Not only have they been designed chiefly by the local creatives that are going to use them; they also come with clear guidelines for being turned over to private sector– and third sector entities or running them, which the competent local authorities have signed off to; and are integrated with a pretty advanced governance model of the Region’s cultural policy.

The project is called Visioni Urbane. I have dealt with it before. I’m told it’s becoming some sort of flagship project for the regional adiministration; the “Visioni Urbane method” is being demanded on tackling other policies (for example setting up a regional Film Commission), and the administration itself is building upon the partnership with the creatives created within Visioni Urbane to launch Matera’s bid for European Culture Capital 2019. It is no coincidence that the person in charge of Visioni Urbane, Rossella Tarantino, has been appointed as coordinator of that bid; and another Visioni veteran, Paolo Verri, is serving as scientific director.

My book Wikicrazia contains a lot of Visioni Urbane war stories, and the grandopening of Cecilia will include a book presentation. But what I’m really looking forward to is the joy of witnessing a policy that I helped to develop go live, live and so concrete that I can actually sit and listen to a concert in it. For an economist, this is a thrill, alas, all too rare.