 Now, before assuming his present position as vice-centralor, Ernest was the director of ISER, a well-known institution, the Institute of Statistical, Social, and Economic Research at the University of Ghana. And he is the head of the African Gross Initiative at the Bokun Institute. Ernest, can you get us started on discussion? Thank you. Thank you very much, Betty. Let me also thank Fin and Tony and others for inviting me to this year's conference, UNU-Wider. I like very much the, how many minutes do I have? Five, seven minutes. That's easy. The theme of institutional reforms for transformation, inclusion, sustainability, is clearly one that is very relevant to our times and one that we should be paying a lot of attention to. Kashi just spoke about the institution's law and development. One of the things I picked from his talk that I really liked was the whole idea of laws create expectations and induce certain types of behavior. That's what the law is supposed to do. We also know that economic policy is meant to do of both similar things. We put in place economic policies to induce particular behaviors in people, take particular decisions that would enhance our welfare, take particular decisions that would enhance growth in an economy. The challenge for many developing countries, there are hardly any structures that bring the making of economic policies and the making of laws together. There are hardly any countries in the developing world that do that. And that's where really the problem is. The problem is basically the law making and economic policy making are done by two different people or two different sets of people with different incentives. So how do we breathe a gap? How do we solve the problem that you find in many, many places? In a typical development economy, there's a colonial history. In that colonial history, you find that the laws were made to prohibit certain types of behavior. So most laws tell you what you cannot do. Most laws tell you where you cannot build, what business you cannot do, what kind of vacation you cannot take, how to behave towards the colonial governments. That's how most laws were written. Unfortunately for many of these economies in the several years of post-independence, they haven't made much effort to change the law from being one that prohibits behavior to one that induces a certain kind of behavior that supports development. And that's how I've seen this play out in many countries. So Kashi gave us the examples of the Indian labor laws. There are many similar laws in many different countries that basically tell you what you cannot do and what you can do only if you obtain the permission of somebody, some political body. But we also know that laws in all of these settings are based on interest. Laws are made, let's say labor laws. Labor laws are made because there are interest groups that make representations. They may be organized labor. They may be employers. Each of the parties coming to the table for a discussion of the labor law are incentive to have the law made in a particular way. And so as a result of that, the bigger issue of how do we use law to support development does not get discussed because it doesn't anybody's particular or personal interest to discuss transformation, to discuss sustainability, to discuss development. So the issues of development then gets ignored in discussions of the law. In my own country, I often get into these confrontations with lawyers and I accuse them of always trying to use the law to stifle initiative. It may not be, I created, it may not be the entire truth. I've seen too many situations where you cannot do this. You cannot do that. And all you are trying to do is bring an improvement into the lives of people. And lawyers spend their time on why you cannot do it. As opposed to how can we use the law to facilitate a certain change in behavior. So moving forward, my view, it's time. Developing countries thought about law supporting behavior that is more widespread as opposed to behavior that is confined to narrow segments of society. I've seen in Ghana how over the years a failure to transform many of the social norms and practices that govern people's lives. I've not been chained as a result in a much faster growing modern world, behavior, stifles growth, behavior, stifles transformation. I give you one example. Let's take the environment. In the traditional society of Ghana, most behaviors were governed by taboos and by various edicts from a chief and so on. So a chief said, we don't want you to go fishing on Tuesdays in the lagoon. So everybody stayed away from it. And the only reason given is that gods are opposed to it. The gods are opposed to it. But we know from studies of various histories and so on that the main reason for saying no fishing on Tuesdays is to ensure that the fisherman got some rest and the fish in the sea also got some time to breed. And there were several other reasons. With time, as more and more people moved into these villages, it became difficult to use the taboo of noble fishing in this village on Tuesdays for the simple fact that the gods are opposed to it. Many of the new migrants don't believe in this taboo and so are willing to defy it. But there's a very good reason for having that edict that said no fishing on Tuesdays. Why haven't we, over the years, developed new laws that prevent fishing or poaching or whatever? That's the way African economists have responded over time. We have not made laws that will support development. We have seen law making and economic policy making as very different things. It's time that we brought these together. Of course, that would mean changes in the kind of institution that we have. That would mean changes in the way parliaments throughout Africa, throughout the developing world make laws. It shouldn't be a simple factor of individuals with different interests meeting to negotiate their interests. There might be a broader agenda for law making. Law making must be decided to support development. And until we do that, we are not going to have the institutions that will facilitate transformation. Until we do that, there will be so many things happening in the developing world that cannot support transformation. That cannot support sustainability. And doing that means having people accept that the law and economics go together. For far too long, we've seen them as being very, very different things. I could give you several examples showing how the pursuit of different agendas by law makers and economic policy makers have had development in many countries. And that's how it is, but it got to change. Thank you. Thanks very much. I'll sort of mimic what Koshik did, which was to reveal our colonial roots and quote George Bernard Shaw, who said, I believe, sorry, he wrote a letter to a friend and he said, sorry, I didn't have time to write a shorter letter. That is why my letter is so long. And in a sense, listening to Koshik's incredible thoughts, I just made a laundry list of responses and didn't have the time to actually shorten it. So in doing so, I'll try and keep to the time limit, but reflect on three broad areas. One is around labor regulation, the second on corruption, and then thirdly on this interaction around law and economics. In terms of labor regulation, I found it interesting in the spirit of Finn and Tony's introduction about bringing ideas from around the world and then taking them away from here. It was interesting that the Industrial Disputes Act reference is to a size exclusion. So larger firms then have to buy into the restrictions of the law around firing and hiring and so on, in particular around firing costs. But often, and in my own country in South Africa, the exclusion runs the other way around. So you often find that small and medium enterprises are actually not excluded from the legislation. And so by fiat, by a regulatory norm, what you've created is increased firing and hiring costs for and hiring and firing rigidity in general for small and medium enterprises. So often one can find that country experiences in terms of regulatory norms around labor regulation in particular can be heterogeneous across countries. And then the question really is, and here I sort of lean on the WDR, I see Martin Ramos here, one needs to think about what is the appropriate plateau, regulatory plateau for an economy to be in. So in one economy, like in India, making sure that the, if you like, the top end size exclusion doesn't exist is really important to allow large firms to fire at will. But in another country like South Africa, a bottom end exclusion restriction needs to apply so that you can allow small and medium enterprises to thrive. So to some extent, the value add from the WDR, but perhaps taking slightly further is that each country has its own regulatory plateau in terms of labor regulation, which may, which will in fact defer across countries. And I think to some extent that deserves closer attention. So often one of the dangers of the doing business survey, for example, the World Bank's cost of doing business, when they used to estimate labor regulation, is that not only were these regulatory measures, but they were average effects. So often you'd see many countries quite happy with their average score on labor rigidity, but in fact, they were binding constraints in terms of, if you like, micro-regulatory stipulations that had huge effects, like the small business exclusion. So I think the general point I have is one can find average effects in labor regulation, but they're often detailed sort of legislative examples where you can have disemployment effects from very specific regulatory inclusions or exclusions. And I think the broader point linking to Koshik's input is the need for economists to actually work with lawyers. The strangest discussion I've had is with lawyers for two hours in South Africa talking about probation law and the impact of probation, the probation stipulation in labor law that prevents hiring. And I think it's that kind of detail that we do need to get stuck into as economists. Just a final point on labor regulation. I think the consequences of labor regulation are really, really important to understand. Again, India and South Africa are particularly interesting examples. The work we did for the WDR on jobs was around the rise of temporary employment service providers. So often what you see as a consequence of the labor regulatory regime is really important. So employers voting with their feet outside of permanent employment. And I think there's a general story here globally around differing forms of employment and work arrangements that are arising as a consequence of labor regulation. And I think that's really worth looking at in more detail. So on corruption, my first instinct is to say I do like the, I call it the Bribe and the Bribe model. It makes a lot of sense in the case of petty corruption, but maybe because of just a few reflections in the African context with an earnest, and of course reflecting this and many others in the audience, institutionalized corruption is really the binding constraint. So in the case of principally licensed-based industries, so whether it's mining, telecoms, gas industry, the media often, licensed-based industries are ripe for institutionalized corruption. And I was wondering more, and I know Koshik referred to it, particularly in the case of petty corruption, but I was wondering how the one can extend the penalty model in the case of institutionalized corruption because there'd be sort of two or three issues here. One is that the giver or the Bribe is a corporate often. If it's a corporate entity, surely we would not want their fee to be lower or zero, right? And so in what context does one find a way in which to build a penalty model where the Bribe is actually a corporate? Continuing with the institutionalized corruption, often the Bribe is part of a chain of command, right? So the person taking the immediate transfer, if you like, of funds is not the ultimate beneficiary or is not the only beneficiary. And so there's an entire chain of command, and this may be true in petty corruption as well. And so to what extent and how then does one sort of deal with networked orders and instructions across the chain of command from the source Bribe as it were? And so to some extent that for me is the real binding constraint in terms of how corruption affects economic growth and development in the, at least in the African context. And I think it has a particular form and content in resource-based industries, resource-based economies. Just one last point on corruption is that there is of course the Bribe and the Bribe, there's the giver and the taker, but of course there's an entire industry of associated personnel, namely banks, right? In the case of illicit financial flows and foreign governments, usually in the North. And so how one deals with that is really, really important. I would have thought that if we stick with petty corruption, for me, the biggest constraint, and it links actually to your third set of comments Cauchy-Coron Enforcement, is how do you actually enforce the rule? Because these events are so disparate, right? Whether it's the traffic officer or the toll gate as the case may be. These are disparate events. How does one enforce the rule when there's no observation of the breaking of the law? And so I was just interested in terms of the penalty structure, it seems reasonable in the case of petty corruption, but enforcement of the penalty structure seems a real challenge. Then finally on corruption, there seems to me other means of fighting corruption, right? The policy solutions I thought would have the penalty issues, but surely on the WDR side, there are these behavioral responses that are really interesting. So we see, for example, I think I may have seen it in Accra, stickers on taxis saying we don't accept corruption or I don't pay corrupt officials and so on. And so one can imagine how behavioral responses where paying the traffic officer a bribe instead of paying the fine, if you're sitting in a car which has a sticker, bumper sticker which says I do not pay bribes, would be an important sort of mechanism to get a behavioral response that mitigates against corrupt activities. Of course, the fake notes in India is a classic example, fake bank notes in terms of bribes. Modern media is really crucial for fighting corruption so petty corruption in all forms whether it's Twitter and Facebook and so on have become really, really important means, right? Of spreading the word and having civil society and so on engage against corruption. So very quickly on to law and economics. I thought this was really fascinating because and I have Ravi Kanbu with me and the back of the audience here. Ravi and I and a colleague of mine from South Africa working on the impact of minimum wages in agriculture in the South African context. And one of the things we're really interested in is taking almost the canonical model in labor economics around enforcement is this notion of the probability of being caught is conditional on the penalty structure and there is this thing, what did you call it, Kochic? The standard view is this notion that you're thinking of this penalty structure and there's some probability of you being caught and that's the behavioral response. So here's an early example of what's happened in the South African context. We have a minimum wage in agriculture where the probability of being caught is incredibly low because the enforcement agency is really weak. They're very few inspectors on the ground, farms are far out and so on. So the probability of being caught is very low. What has happened though in response to the minimum wage is not no change in wages. So in response to the minimum wage despite this low probability of being caught what should happen is nobody should change their wages. But in fact what's happened is two things either farms and farm owners have moved up to the minimum wage or, and this is the crucial thing, they've closed the gap between existing pre-minim wage laws and the minimum wage. And so the gap between the minimum wage and pre-minim wage laws is actually narrowed. And so what that means is that something else is going on and this is exactly what Koshik has been arguing is that you've got social norms. You've got this notion of what we call at least in the minimum wage discussion peer effects and neighborhood effects while my neighbor is paying the minimum wage maybe I should. Well this seems ethically like the right thing to do perhaps I'll try and pay it. So there, but there are two things going on. One is yes you will respond to the law despite the probability of being caught being zero. But you may also partially respond to the law. And that's an interesting result that we didn't expect that there's somehow, at least in the context of minimum wage laws, farmers or owners or employers are partially responding to the law in some sort of, if you like, nod to the minimum wage. And I think that does talk to how concepts of fairness and even focal points I think can exist and let me stop there. Thanks very much.