What's different about social network data?

Interesting link: Introduction to social network methods

How physics can explain why some countries are rich and others are poor

Published in Slate
Tuesday, August 21, 2007

Milton Friedman, Meet Richard Feynman How physics can explain why some countries are rich and others are poor.By Tim HarfordPosted Saturday, Aug. 18, 2007, at 7:07 AM ET
If economics can tell us something useful about crime, marriage, or carpooling—as I believe it can—then other academic disciplines should have something to tell us about economies. Last month, Science published an example that may turn out to be important. Two physicists, Cesar Hidalgo and Albert-László Barabási, and two economists, Bailey Klinger and Ricardo Hausmann, have been drawing unusual pictures of economic "space" that promise a deeper understanding of the biggest question in economics: why poor countries are poor.
There are many explanations, but some are easier to test than others. One very plausible account of why at least some poor countries are poor is that there is no smooth progression from where they are to where they would be when rich. For instance, to move from drilling oil to making silicon chips might require simultaneous investments in education, transport infrastructure, electricity, and many other things. The gap may be too far for private enterprise to bridge without some sort of coordinating effort from government—a "big push."
That is an old and intuitive idea in economics, but as an informal argument it leaves a lot to be desired. For a start, while plausible, it might not be true. If it is true, it might be far more so for some kinds of economy than for others. And if there is to be a big push, in which direction should it go?

Testing the idea took three steps. First, economists at the National Bureau of Economic Research broke down each country's exports into 775 distinct products. Next, Hausmann and Klinger used that data to measure how similar each product is to each other product. If every major apple exporter also exports pears, and every major pear exporter also exports apples, then the data are demonstrating apples and pears to be similar.
Presumably, both economies would have fertile soil, agronomists, refrigerated packing plants, and ports. For the third step, Hausmann and Klinger called upon Hidalgo and Barabási, who specialize in mapping and analyzing networks. The result was a map of the relationships between different products in an abstract economic space. (And look at more maps here.) Apples and pears are close together; oil production is a long way away from anything else.
The physicists' map shows each economy in this network of products, by highlighting the products each country exported. Over time, economies move across the product map as their export mix changes. Rich countries have larger, more diversified economies, and so produce lots of products—especially products close to the densely connected heart of the network. East Asian economies look very different, with a big cluster around textiles and another around electronics manufacturing, and—contrary to the hype—not much activity in the products produced by rich countries. African countries tend to produce a few products with no great similarity to any others.
That could be a big problem. The network maps show that economies tend to develop through closely related products. A country such as Colombia makes products that are well connected on the network, and so there are plenty of opportunities for private firms to move in to, provided other parts of the business climate allow it. But many of South Africa's current exports—diamonds, for example—are not very similar to anything.
If the country is to develop new products, it will mean making a big leap. The data show that such leaps are unusual.
None of this is proof that other development prescriptions—provide financing, fight corruption, cut red tape, and lower trade barriers—are useless. Nor is it a green light for ham-fisted industrial policy. Klinger warns: "It's easy to take the policy implication too far and start trying to pick and choose where to settle in the product space." But it is a big step forward. Policy-makers should take note, and economists, too.

The doctor who cures corruption

Globes online.
Link here

At 43, after twenty years of relishing the theoretical aspects of economics in academe and at the World Bank in Washington, DC, Dr. Daniel Kaufmann joined the ranks of rebuilders.
It was a time of tremendous drama, when the old was disintegrating far more quickly than the new could emerge. He was among would-be state builders and facilitators, assigned with picking up the pieces of the defunct Soviet Union. These newly-born countries had to be helped onto their feet; and almost overnight, governments and international institutions hastened to open missions and representative offices in back rooms and basements of cities unaccustomed to the attention of foreign diplomats.

Dr. Kaufmann was chosen to lead the World Bank's first permanent delegation in Kiev, just elevated from a provincial Soviet center to the capital of an independent Ukraine. Although it had more than 50 million people, heavy industry with forests of chimneys, renowned coalmines, and a land area larger than that of France, the number Ukraine really excelled in was of government ministries.

Its cabinet room amounted to a parliament: no less than 73 ministers sat around the table, including a minister of vegetables and a minister of real estate.

Kaufmann, a native of Chile, a graduate of the Hebrew University of Jerusalem, with a doctorate from Harvard, went to look for an apartment and an office. In Kiev, there wasn't exactly a free real estate market. Everything was in the state's hands. A more experienced diplomat therefore advised him to turn to the deputy minister of real estate. Like all the ministries, this ministry too was still, unavoidably, a Soviet institution. There was simply no other bureaucracy.
Kaufmann and his interpreter were ushered into the deputy minister's presence. Hot tea was poured, small talk was exchanged, until there was a knock on the door. The Ministry of Real Estate's legal counsel appeared with the necessary papers. There's no problem, the deputy minister of real estate assured the World Bank representative. Our friend the lawyer will give the number of the bank account in Vienna where you must deposit $20,000 so that we can deal with your request. Bank. Account. Vienna. $20,000. "It was an eye-opening moment," Kaufmann recalls in a special interview with "Globes" weekend magazine "G" at his Washington office. "I had never belonged to this world. No-one had ever sought a bribe from me like that, so casually. I got to my feet. I told him that we at the World Bank don't do business that way. The interpreter went as pale as whitewash. I left, and filed an official protest with the Prime Minister's Office."

Later, Kaufmann found out what had resulted from his protest. "The deputy prime minister, a man from the Soviet era of course, summoned the deputy minister of real estate and screamed at him at the top of his voice, 'How the hell could you do a thing like that? Don't you know that you don't ask for bribes from the World Bank?'" And really, how can one work with such amateurish bureaucrats, who can't fleece a rich capitalist without causing a commotion.
Kaufmann spent four wonderfully interesting years in Ukraine. He watched it try to create a rational economy ex nihilo. He saw it regress and become impoverished, divest itself of industrial assets, struggle to feed its population and at the same time spawn a small, very powerful class of nouveaux riches. Very soon they and their like began to be called "oligarchs", because it was assumed that they were pulling the political strings in the former Soviet republic. Some of those oligarchs are still pulling strings, or trying to; some pulled until the strings broke, and they were sent to jail; others lowered their profiles, but continued to get rich and buy foreign soccer clubs; and there are also those who went into exile, whether to evade the reach of vengeful politicians and suspicious courts, or whether to steal pork from children's mouths.

Dark green, light green
Ukraine, apparently unintentionally, not only contributed to Daniel Kaufmann's education; it also contributed to the international effort on behalf of good governance. Once back in the US, Kaufmann returned to his alma mater, Harvard, where he sat for a year and a half and formulated the six "global indicators of good governance." Together with two partners from the World Bank, he presented the indicators for the first time ten years ago. In two weeks' time, the World Bank Institute, of which he is a senior director, will once more rank 205 countries and territories according to these indicators. It will again paint the world map in colors of honor and disgrace. Dark green is the peak of civilization. The darkest green is to be found in Scandinavia (Denmark) and the South Pacific (New Zealand). Mid-green colors North America, apart from Mexico, and Europe from Austria to Ireland and all that lies between. The green begins to become lighter in the Iberian Peninsula and parts of what was once the Hapsburg Empire. Beyond Europe, light green is certainly a flattering color for those that wear it. Israel is decked in it, along with Japan, South Korea, Malaysia, South Africa, Botswana, and Chile, with a few tiny flecks in the Caribbean. All the rest - the vast majority - is yellows and browns.

The World Bank has no monopoly on the quantification of good governance. The non-government organization Transparency International, based in Berlin, publishes an annual corruption index that is intriguing and quotable. Embarrassingly enough, the latest published index showed Israel falling six places, and ranking below Qatar, alongside Taiwan, and above Bahrain. Kaufmann is polite about the competition, and speaks highly of the pioneering spirit of its founders. However, he also points out that Transparency International examines only 163 countries, while the World Bank probes the innards of 205. He also talks with surprising candor about the considerable inaccuracies of this supposedly exact science. He also has words of comfort for the Israelis: his data indicate that Israel is one of the 50 least corrupt countries in the world. That means, he emphasizes, and re-emphasizes, "there are 150 countries below it," including Italy and Greece.

He is quick to add though that Israel certainly doesn't need positive comparison with Sierra Leone (with all due respect to that country). "Israel is below the great majority of OECD countries. For the sake of its future, Israel must reach the middle of the leading group. I'd like to think that Israel will ask itself within ten years why it shouldn't be in the top 25, and what it should do to get there. But let's not lose perspective. Israel is not a corrupt country."

Fragrance of a good vintage
Kaufmann will speak along these lines at the upcoming Caesarea Forum, at which he will be one of the most distinguished guests. His address is entitled "Israel's Position on the World Corruption Chart". Kaufmann's perspective is an empirical one. It is based on a great many trips, a great many conversations, and a fine collection of anecdotes. They will be delivered in correct, idiomatic English, with a slight Latin American accent, and laced, one may guess, with Hebrew expressions. The Hebrew might have a faint whiff of age, but it is the ageing of a good vintage.

Kaufmann attended the Hebrew University between 1971 and 1974, and took a bachelor's degree in economics and statistics. He was one of the students of Dan Patenkin, who earmarked him for a professorship in Jerusalem. Patenkin encouraged him to apply to study for a doctorate at a US university, and even intervened on his behalf at the University of Chicago, the land of Milton Friedman as well as of Jacob Frenkel. Kaufmann was close to being tempted, until a yet more tempting offer came along, from Harvard University. Many years have gone by, but the taste of that choice has not faded, especially when it comes to academic needling, and what needling could be sharper than in the famous rivalry between the "Chicago boys" and the "Harvard boys" in Chile, Kaufmann's birthplace? There, after the military coup of 1973, the Chicago boys tried to drag the afflicted and divided land overnight into the world of economic liberalism (Professor Friedman, one should recall, used to say that Hong Kong was the freest place in the world, and he didn't mean political freedoms). They failed abysmally. Ten years later, the Harvard boys came along and put Chile onto the track of what is more or less accurately described as an "economic miracle". Chile today is the most successful and least corrupt of all the countries of Latin America.

At the end of the 60s of the last century, Kaufmann's father reached the conclusion that Chile would be swept to a political extreme, to the extreme right or to the extreme left. Neither would be good for the Jews, believed Kaufmann senior, who fled from Nazi Germany at the very last minute, in 1939. Kaufmann's mother's family also escaped by the skin of their teeth at the very same time. Since they were Zionists, and sent their children to Jewish schools, the parents had no doubt at all where they should go. They decided to emigrate to Israel. It was in those circumstances that, after a short flirtation with engineering at the Technion, Kaufmann discovered his true love, economics, and bolted to the arms of Professor Patenkin. Incidentally, he never became an Israeli citizen. He was a temporary resident, and his official biography at the World Bank presents him as a citizen of Chile. Should someone someday decide to suggest that he should do a Stanley Fischer, one imagines that it will happen in Santiago, not Jerusalem. "It won't happen," Kaufmann smiles, "I don't have a monetary background." He is, by the way, an old friend of Fischer.

Wolfowitz: The humiliation, the rebellion, the hope
Kaufmann is less bound by discretion that most of his colleagues at the World Bank. He does not belong to the executive division, but to an environment almost equivalent to that of an academic campus. In a formal, starched-collar institution, where jackets and ties are not optional, he greets me in an open-necked white shirt. He doesn't evade any questions, he expresses views even without being asked, he is a man who delights in disagreement and combative debate. Even so, he was not especially delighted at his part in the dramatic uprising that deposed World Bank President Paul Wolfowitz last month. He was one of the signatories on the declaration published in "The Financial Times" in the early stages of the fight. At least in part, the success of the campaign against Wolfowitz can be credited to, or debited against, Kaufmann.
He speaks humbly about those events. They reminded him once more that charity begins at home. There he is at the head of an effort lasting years to instill habits of good governance into the countries of the world, and one day it turns out that such habits have bypassed the bank itself.

The letter published in "The Financial Times" on April 27 was intended for the bank's Board of Directors, "but it leaked out within three minutes," Kaufmann says. The sentence that perhaps tipped the scales against Wolfowitz was the one that read, "The credibility of our front line staff is eroding in the face of legitimate questions from our clients about the Bank’s ability to 'practice what it preaches' on governance. In these circumstances, we cannot credibly implement the GAC strategy." ("GAC" stands for governance and anticorruption).

"As in any scandal, the rotten apples were on show," says Kaufmann, "but one should remember that we have more than ten thousand professionals here, and the overwhelming majority of them, more than 99%, operate in an entirely ethical manner and completely honestly."
The Wolfowitz crisis has not been good for the bank, which occupies three huge buildings near Washington's geometric center. The press has been full of hair-raising revelations about perks at the bank: about a planet whose indulged inhabitants are paid more than senior members of the US government, tax-free, when they are charged with eliminating poverty in all kinds of remote, unenlightened corners of planet Earth. But Kaufmann thinks the cloud has a silver lining. This is the case with any systemic crisis, and the more systemic and dramatic the crisis, the greater the potential for reform. This, incidentally, is the message he sends his Israeli friends. "Who has ever seen, anywhere in the world, a country rush to appoint an investigative committee to examine deficiencies in its government in wartime?" he asks, without waiting for an answer. "This is a manifestation of strength."

Over the years, he has acquired considerable knowledge of the ways of investors, he says. "This is precisely what investors want to know about a country they do business with. They want to know that the justice system works, that the law is prosecuted fully, that they can rely on the independence of judges." When he hears what politicians and journalists in Israel say about the system of justice ("the rule of law gang", for example), he isn't shocked. "It’s better that way," he says. "It's better to hear that the judiciary is controversial because it's accused of excessive activism, and not because it's in the government's pocket and avoids touching the elites."
In the past, Kaufmann has devoted special attention to Kenya. There, he says, "For forty years no-one dared touch the big fish. The small fry suffered, but the big fish kept getting bigger."

"The trick is to estimate the lack of accuracy"
The greatest governance test of a system, any system, is not necessarily the prevention of faults. The great test is uncovering faults and fixing them. This is true of the World Bank, and it's true of every one of the 205 countries that Kaufmann and his people put under their imprecise magnifying glass. Sure it's not precise, he says. The trick is to estimate the imprecision. He shared his thoughts on the unavoidable imprecision of quantifying governance with an Israeli colleague, Professor Shlomo Yitzhaki, who later became head of Israel's Central Bureau of Statistics. "He's not one to mince words," Kaufmann says of Yitzhaki. "When he heard what I was about to say about the imprecision of our findings, he said, 'You'll have big problems; you're exposing yourself to enormous criticism and ridicule."

Yitzhaki reminded Kaufmann of the example of Simon Kuznets, the brilliant Jewish economist who was born in Pinsk, and who, to a large extent, invented the methods of macro-economic calculation in the US government (and won the Nobel Prize for Economics in 1971). Kuznets taught the US Department of Commerce how to calculate gross national product, and then said of the calculation that "its standard deviation is between 5% and 10%." Only Kuznets could have made such an admission and gotten away with it, Kaufmann smiles. "But it was true and it continues to be true of every instance and every number."

It's a little odd, considering that countries announce with glee, or concern, changes of a quarter of a percentage point in the calculation of their quarterly gross national product figures. But Kaufmann isn't concerned at all. On the contrary, the "inherent" imprecision in the governance index makes it easier for him to make reliable use of the information he gathers. "As an analyst, you know what you can tell, and what you can't tell," he says. "The imprecision isn't fatal to useful analysis. It's fatal for those who want to pretend that they're following a tight horse race, and want to say that the US just beat Canada by a nose. That's nonsense. But the data is still extremely useful if it gives contexts, if it helps countries understand what category they belong to, and what category they should aspire to."

One of the most brilliant baits in Kaufmann's knapsack is the bonus method. Ultimately, he is an economist, and what economist doesn't believe in incentives, even if the incentives in question are metaphorical, almost poetic? On the basis of the quantification of their governance, each of the 205 countries receives "dividends". These dividends are an estimate of the economic benefits that will accrue over the long term from good governance. For example, if the index awards a certain country a dividend of 200%, it means that it could double its growth rate. Of course, such a forecast should not persuade any country to borrow on account of future success, because the index will always remain a daring and original experiment, with a margin of error so wide that it could easily contain the exact opposite of the forecast.

Singapore and the sixth indicator
The strength of the index lies chiefly in its power to affect agendas. Kaufmann mentions with particular pleasure the example of Singapore. On the face of it, the prosperous city-state disproves the validity of at least some of the index's components. It may be a shining example of the rule of law and public order, and it is almost clear of corruption, but it makes a mockery of the idea that economic prosperity depends on democracy, an open society, and the ability to punish politicians by not reelecting them. Singapore has no political opposition to speak of, and its press is largely docile. Eighteen months ago, the governance index complimented Singapore on five of the six indicators. In those, it was ranked very close to the top. But in the sixth indicator, the one relating to political freedom, it found itself in the bottom half. The five good indicators gave it a dividend of 300%. A local financial newspaper reported the results proudly, and then added slyly, "Imagine, if we were to take this seriously, and improve the sixth indicator, how rich we could be."
Kaufmann quotes these words from memory. He adds with a broad grin, "To me, that's the power of the data, that's their beauty, to present things as they are, to set things up for debate. Even in dogmatic, self-confident Singapore, the data raise questions. 'Is our growth sustainable? Are we innovative enough?'."
Since the case of Singapore has come up, I ask him about the method of compensation in the public service. Civil servants in the city-state often earn more than their counterparts in the private sector. The prime minister of Singapore is paid much more than the president of the US ("five times more" according to Kaufmann). Is that such a bad idea? "Look," Dr. Kaufmann reminds me once more, "I'm an economist, and ultimately I maintain the view that the incentives structure is the heart of the matter. Issues of morals and ethics are very important of course, but they are the result of our own values and education that we acquire at home or at school, and by the age of 18 we are essentially set up. Training, or a course in good governance, is not going to change that. All the rest is a matter of incentives. People have to survive one way or another. Many people in poor countries who have a lot of integrity, basically moonlight, and they work three jobs. Others may be forced to accept "facilitation payments" and so on.
"So I agree that you have to have a decent salary so that the incentives to look for other ways of subsistence are not there. It has to have some relation to your skills set and what you would make in a competitive environment, i.e. looking at private sector benchmarks. Having said that, there is no evidence that in order to avoid corruption, the income must be equal to or higher than what's paid in the private sector. You can't pay a tenth of private sector salaries, but half or more is certainly reasonable."

Ready for the next battle
Kauffman visits Israel from time to time. He was in Israel three years ago, when he was sent to Ramallah, to give advice on governance to someone who made a considerable impression on him, namely Salam Fayyad, then minister of finance in the Palestinian Authority government. The interview with Kaufmann took place the day Fayyad's appointment as prime minister was announced. When I tell him, he reacts with pleasant surprise. He has no work connections with Israel itself. Israel does not borrow money from the bank, and does not use its technical services. But he has cousins in Israel, and many friends, and he is sure that it won't take him more than a day or two to regain his dormant Hebrew.
This interview was conducted in English, for obvious reasons. But Kaufmann relates that Hebrew came surprisingly easily to him when he immigrated into Israel at the age of 21. He read Hebrew daily "Ma'ariv" every day, from beginning to end. He recalls that someone once remarked to him, when he heard him speak about issues of the day, "You sound like 'Ma'ariv'". But that was many years ago.
Few Israelis today sound like the "Ma'ariv" of 1971. If you hear someone like that in the street, with a shock of white hair and a Chilean accent, it's probably Daniel Kaufmann. Incidentally, he sent me an e-mail message at 2:49 am. The next day, he was supposed to be at work at 7 am. He rode there on his bicycle. I can testify that it's a tough route for people much younger than 57. He, how should I put it, is at full strength, ready for the next battle.

Published by Globes [online], Israel business news - http://www.globes.co.il/ - on June 26, 2007

E Pluribus Unum: Diversity and Community in the Twenty-first Century

The 2006 Johan Skytte Prize Lecture
Robert Putnam

Full text in html and in pdf available here until August 30th, 2007. Then, available here

ABSTRACT

Ethnic diversity is increasing in most advanced countries, driven mostly by sharp increases in immigration. In the long run immigration and diversity are likely to have important cultural, economic, fiscal, and developmental benefits. In the short run, however, immigration and ethnic diversity tend to reduce social solidarity and social capital. New evidence from the US suggests that in ethnically diverse neighbourhoods residents of all races tend to ‘hunker down’. Trust (even of one's own race) is lower, altruism and community cooperation rarer, friends fewer. In the long run, however, successful immigrant societies have overcome such fragmentation by creating new, cross-cutting forms of social solidarity and more encompassing identities. Illustrations of becoming comfortable with diversity are drawn from the US military, religious institutions, and earlier waves of American immigration.

Home Alone

By ERICA GOODE
Published: June 17, 2007
Does ethnic and racial diversity foster social isolation?

For decades, students of American society have offered dueling theories about how encountering racial and ethnic diversity affects the way we live. One says that simple contact -- being tossed into a stew of different cultures, values, languages and styles of dress -- is likely to nourish tolerance and trust. Familiarity, in this view, trumps insularity. Others argue that just throwing people together is rarely enough to breed solidarity: when diversity increases, they assert, people tend to stick to their own groups and distrust those who are different from them.But what if diversity had an even more complex and pervasive effect? What if, at least in the short term, living in a highly diverse city or town led residents to distrust pretty much everybody, even people who looked like them? What if it made people withdraw into themselves, form fewer close friendships, feel unhappy and powerless and stay home watching television in the evening instead of attending a neighborhood barbecue or joining a community project?

This is the unsettling picture that emerges from a huge nationwide telephone survey by the famed Harvard political scientist Robert Putnam and his colleagues. ''Diversity seems to trigger not in-group/out-group division, but anomie or social isolation,'' Putnam writes in the June issue of the journal Scandinavian Political Studies. ''In colloquial language, people living in ethnically diverse settings appear to 'hunker down' -- that is, to pull in like a turtle.''In highly diverse cities and towns like Los Angeles, Houston and Yakima, Wash., the survey found, the residents were about half as likely to trust people of other races as in homogenous places like Fremont, Mich., or rural South Dakota, where, Putnam noted, ''diversity means inviting a few Norwegians to the annual Swedish picnic.'' More significant, they were also half as likely to trust people of their own race. They claimed fewer close friends. They were more apt to agree that ''television is my most important form of entertainment.'' They had less confidence in local government and less confidence in their own ability to exert political influence. They were more likely to join protest marches but less likely to register to vote. They rated their happiness as generally lower. And this diversity effect continued to show up even when a community's population density, average income, crime levels, rates of home ownership and a host of other factors were taken into account.

It was not a result that Putnam, the author of the much-discussed 2000 book ''Bowling Alone,'' was looking for when he sat down six years ago to examine the mass of data he had collected. He was hoping to build on his earlier work, which described a precipitous decline in the nation's ''social capital,'' the formal and informal networks -- bowling leagues, parent-teacher associations, fraternal organizations, pick-up basketball games, youth service groups -- that tie people together, shore up civic engagement and forge bonds of trust and reciprocity.

Now he wanted to find out more about how social capital varied regionally and over time.But the diversity finding was so surprising that Putnam said his first thought was that maybe something was wrong with the data. He and his research team spent five years testing other explanations. Maybe people in more diverse areas had less political clout and thus fewer amenities, like playgrounds and pothole-free streets, putting them in a misanthropic mood; or maybe diversity caused ''hunkering down'' only in people who were older or richer or white or female. But the effect did not go away. When colleagues who heard about the results protested, ''I bet you haven't thought about X'' -- a frequent occurrence, Putnam said -- the researchers went back and looked at X.

The idea that it is diversity (the researchers used the census's standard racial categories to define diversity) that drives social capital down has its critics. Among them is Steven Durlauf, an economist at the University of Wisconsin and a critic of Putnam's past work, who said he thinks some other characteristic, as yet unidentified, explains the lowered trust and social withdrawal of people living in diverse areas. But without clear evidence to the contrary, Putnam says, he has to believe the conclusion is solid. Few would question that it is provocative. The public discourse on diversity runs at a high temperature. Told by one side, the narrative of how different ethnic and racial groups come together in schools, workplaces, churches and shopping centers can sound as if it was lifted from ''Sesame Street.'' Told by the other, it often carries the shrill tones of a recent caller to a radio talk show on immigration reform: ''The school my kid goes to is 45 percent Mexican,'' he said, ''and I don't see this as being a good thing for this country. Do we want to turn into a Latin American country?''Putnam's argument is more nuanced. Diversity has clear benefits, he says, among them economic growth and enhanced creativity -- more top-flight scientists, more entrepreneurs, more artists. But difference is also disconcerting, he maintains, ''and people like me, who are in favor of diversity, don't do ourselves any favors by denying that it takes time to become comfortable,'' Putnam says.

Why that discomfort seems to translate into social isolation and a weakening of civic bonds remains anyone's guess. Studies by Wendy Berry Mendes, a social psychologist at Harvard, and her colleagues find that when research subjects play a cooperative game with someone of another race, they can show physiological signs of distress -- reduced cardiac efficiency and arterial constriction, for example. On a daily basis, this alarmed reaction might make people pull inward. Putnam himself speculates that, with kaleidoscopic changes going on around them, people in diverse communities might experience a kind of system overload, shutting down ''in the presence of confusing or multiple messages from the environment.''

Still, in Putnam's view, the findings are neither cause for despair nor a brief against diversity. If this country's history is any guide, what people perceive as unfamiliar and disturbing -- what they see as ''other'' -- can and does change over time. Seemingly intractable group divisions can give way to a larger, overarching identity. When he was in high school in the 1950s, Putnam notes, he knew the religion of almost every one of the 150 students in his class. At the time, religious intermarriage was uncommon, and knowing whether a potential mate was a Methodist, a Catholic or a Jew was crucial information. Half a century later, for most Americans, the importance of religion as a mating test has dwindled to near irrelevance, ''hardly more important than left- or right-handedness to romance.''The rising marriage rates across racial and ethnic lines in a younger generation, raised in a more diverse world, suggest the current markers of difference can also fade in salience.

In some places, they already have: soldiers have more interracial friendships than civilians, Putnam's research finds, and evangelical churches in the South show high rates of racial integration. ''If you're asking me if, in the long run, I'm optimistic,'' Putnam says, ''the answer is yes.''

The Trouble with Dynasties

By Pamela W. Laird

Why doesn’t George W. Bush fire Attorney General Alberto Gonzales? Like Donald Rumsfeld before him and, more recently, Paul Wolfowitz, Gonzales is causing President Bush political embarrassment and costing him political support. The President’s supporters praise his personal loyalty to subordinates. His critics charge him with arrogance and unwillingness to admit error. But both sides, while recognizing Bush’s loss of political capital, fail to recognize his protection of something he regards as more critical: his social capital.

Full article

Corruption as Betrayal : Experimental Evidence on Corruption Under Delegation

By Nicolas Jacquemet
Working Paper 0506
GATE (Lyon II University) & CIRPEE (Laval University)

ABSTRACT
We consider corruption behavior in a three-players game : Principal, Agent, Corrupter. When the Principal chooses a fair wage, the Agent faces con°icting interests to reciprocate. This delegation effect is expected to lower the level of corruption as compared to what arises in two-players settings. We set up two experiments varying in the exogeneity of the delegation relationship. The experimental evidence supports the delegation effect. This, in turn, could account for the deterrence effect of wage on corruption even in the absence of detection.

Paper pdf version

New litmus test for democracies?

When personal equations and judicious decisions are not in harmony
By ALOK SHEEL
The Financial Express, April 11, 2007

'That democracies have an ambivalent attitude towards friendship, postulated by Mark Vernon in a recent book, The Philosophy of Friendship, might come as a shock.'

Read entire article here

Corruption in Education System in India

School System and Corruption in INDIA
Source: Livemint - The Wall Street Journal

"One of the most frequently used words in India, corruption signifies a range of things. In 2005, Transparency International and Delhi-based Centre for Media Studies, a research firm, undertook the India Corruption Study. The survey covered 14,405 respondents over 20 states and included interviews with service providers & users on the spot. The survey is not based on perception alone; it includes the experience of people in paying bribes. The results, published the same year, showed Indians pay around Rs21,068 crore as bribes while availing one of 11
public services. While some of the highlights of the survey were published, many of the details were not. The study, however, remains the most recent and the most comprehensive report on corruption in India. Apart from calculating the extent of corruption, in Rs crore, it explains the mechanics of it. Over the week, Mint will present details of the CMS study. On Monday, we featured India's public distribution system. Today, we look at the education system."

China's corruption crackdown enters the bedroom

The Guardian Unlimited
April 30, 2007

China's 6.5 million civil servants were warned today they could be fired for keeping a mistress or neglecting elderly relatives, under new ethical guidelines aimed at curbing rampant corruption.

Prime minister Wen Jiabao signed the code of conduct, which will extend deep into the private lives of bureaucrats once it comes into effect in June.

Officials face possible dismissal if they are caught with a prostitute or abusing drugs, according to the People's Daily.

Full Article

Web of friends at heart of power

By IAN JOHNSTON (01/07/2005)

KIRSTY Wark has intimate links with Scottish Labour and many of its senior supporters.
She was a close family friend of the late first minister Donald Dewar and even shared a garden with him when they were neighbours. It was Mr Dewar who appointed her to the panel to choose the design of the Scottish Parliament. She was impressed by Enric Miralles - the eventual winner - and they were said to have become close friends.

Amid mounting claims of "cronyism", it was Ms Wark’s television company, Wark Clements - set up in 1990 with her husband Alan Clements - which was chosen to make a documentary about the building of Holyrood. There was outrage when Ms Wark and the BBC refused to hand over all the film shot during the making of the documentary, called The Gathering Place, to the Fraser inquiry into the handling of the construction. The counsel to the inquiry, John Campbell, QC, who questioned her, was a friend - she had been a bridesmaid at his wedding. Despite this, however, Mr Campbell made his displeasure at her refusal to hand over the tapes abundantly clear.

Ms Wark was backed up by her colleague, then controller of BBC Scotland, John McCormick, who insisted handing over the tapes would clash with the BBC’s policies. Mr McCormick has since left the BBC and recently took up a post as chairman of the Scottish Qualifications Authority, an appointment made by the Executive.

Another friend of Ms Wark, James Boyle, is currently chairman of the Scottish Executive’s cultural commission. He previously worked at the BBC and was also on the board of Wark Clements, when he was paid £21,000 as a consultant, according to company documents from April 2003. He also previously chaired the Scottish Arts Council, which includes Glasgow City Council Lord Provost Elizabeth Cameron on its board.

Jack McConnell’s wife Bridget is Glasgow City Council’s director of cultural and leisure services. She is also a member of the Heritage Lottery Fund (HLF) board in Scotland, chairwoman of Vocal, the influential local government cultural body, a fellow of the Royal Society of Arts and a member of the board of the Royal Scottish Academy of Music and Drama.

She appeared to have a very public falling out with Mr Boyle after commission "sources" said she and council officials should stop interfering in cultural issues. However, Mrs McConnell and Mr Boyle are still thought to be friends and were seen together at a one-man-show by former No 10 spin doctor Alistair Campbell in Glasgow last year.

Another Mr Boyle, John, the former Motherwell FC chairman and millionaire businessman, is another close friend of Ms Wark and Mr Clements, with strong links to the Labour Party. He has a house on Majorca not far from Ms Wark’s holiday home.

Mr Boyle, who is currently in Australia, bought a £1 million share in Wark Clements and was on the board of the company in April 2003, according to the latest accounts filed with Companies House. He has made substantial donations to the Labour Party, including one of £20,000 in 1999. Mr Boyle is close to millionaire businessman Willie Haughey, the boss of City Refrigeration Holidays, who is chairman of Scottish Enterprise Glasgow and a major donor to Labour. In 2003, the former Celtic director gave £330,000 to the party.

He sits on the board of Scottish Enterprise Glasgow with Ms Wark’s husband.

The influence of Wark Clements increased when the firm merged with Muriel Gray’s Ideal World Productions, its leading rival in Scotland, to become IWC Media.

Anti-Corruption Conventions and Initiatives

OECD - Against Bribery of Foreign Public Officials in International Business Transactions
UNCAC - United Nations Convention Against Corruption
World Bank - Public List of Debarred Companies
Private initiatives - Business and NGOs Initiatives

Economic Development Before the Law

By Johannes Jütting and Denis Drechsler, published in Proyect Syndicate 2007

One of the most pervasive and apparently self-evident assumptions of development economics is that sustainable investment and growth requires the rule of law. Without impersonal, general norms and their enforcement by independent judicial authorities, according to this view, little development, if any, is possible, because the risks facing both labor and capital – including corruption, arbitrariness, and rigid traditions – will be too high. But is this conventional wisdom always right?
Consider an admittedly limited but nonetheless revealing counter-example: South Africa’s booming mini-bus taxi industry. The mini-bus taxis developed in response to severe shortcomings in the country’s public transport system, one characterized by high prices, low-quality service, and a chaotic operating network, but they operate entirely outside of formal laws and regulations. What makes the industry work is a commonly agreed informal business “culture” that is flexible, innovative, and keeps operating costs down.
The results are undeniable: at peak times, mini-bus taxis hold 65% of the entire commuter market. The mini-bus taxi industry thus illustrates the importance of informal conventions. Local culture and traditions not only matter, but they are decisive in shaping the behavior of people – all the more so in developing countries, particularly those that are labeled failed or fragile states, where the courts don’t work and regulations, assuming they exist, thus are inadequately enforced. But malfunctioning formal institutions do not mean that there are no functioning structures at all.
In these societies, the social order is predominantly shaped by informal agreements rather than formal laws and regulations. As the South African example shows, such agreements can even promote a country’s development. In many developing countries, village associations that are solely based on trust and peer pressure provide access to credit and insurance, guarantee help in times of distress, and facilitate the construction of public roads and sewage systems. The community-based health insurance schemes that are prospering all over Africa are a good example of this.
Even so, while informal institutions can improve people’s lives, they can also be detrimental to development. The very resources that form the basis of informal security systems – solidarity, social capital, and collective action, for example, can have perverse effects. For example, forced solidarity will oblige any hard-working farmer in Benin who has accumulated some wealth over the years to share the fruit of his labor with his enlarged family, including distant relatives.
In economic terms, the “informal institution of sharing” may become a disincentive to invest and thus result in opportunistic behavior, because there is no obligation to reciprocate. For all of their success, South Africa’s mini-taxis could not escape high accident rates, violent incidents over un-commissioned routes and fare levels, and tax evasion, which imposed high costs on society, prompting the government to regulate the service.
Moreover, some informal institutions based on longstanding cultural traditions lead to discrimination and violation of human rights, while undermining the authority of formal institutions like the judiciary, police, or military. In these cases, women are often the victims. They might be excluded from participation in informal networks, or have limited influence in appropriating the accrued benefits of collective action. The reported abuse of micro-credits to pay dowries is one alarming example. Likewise, the tradition of female circumcision is still a common practice in African countries such as Guinea, Sudan, Mali, Somalia, and Eritrea, where more than 85 % of young women suffer from it.
Abolishing such customs is a moral obligation, but in other instances, the international community often needs to decide which institutions to change and how. Indeed, one of the most difficult tasks for policymakers is to identify correctly those institutions that are conducive to development and those that may be harmful. Even then, successfully changing institutions is easier said than done, as they are rooted in deeply enshrined norms and values.
Neither the “romantic preservationist” nor the “bulldozing modernizer” approach promises an adequate solution. Institutional reform is a delicate affair that needs to be done with caution and sometimes against the conventional reform dogma. In some cases, good intentions may even aggravate the status quo. For example, trying to eliminate corruption in environments with strong patronage-based power and redistribution mechanisms while failing to address the root problems can do more harm than good, and might lead to violent conflicts over new resources.
Reforms need to acknowledge the mindsets of people and the incentive structures that govern their behavior. Thus, those who benefit from reforms may champion the process, but losers must be adequately compensated in order to prevent them from resisting the transformation. Without building public support and providing proper enforcement mechanisms, changing laws alone is bound to be ineffective. Sometimes it might even pose high costs for the alleged beneficiaries.
Given the complexity of institutional reform, striving for what appears to be optimal might not always be the best approach. Reforms must be adapted to the specific context of each country, and be applied within the boundaries of what is possible. Institutional change requires a long, tedious, and modest implementation of multiple small steps, in which the correct sequencing of reform is crucial. To obtain sustainable results, policymakers need to accept that sometimes “good enough is enough.”

Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market

by Asim Ijaz Khwaja and Atif Mian
The Quarterly Journal of Economics, 2005, vol. 120, issue 4, pages 1371-1411

Abstract: Corruption by the politically connected is often blamed for economic ills, particularly in less developed economies. Using a loan-level data set of more than 90,000 firms that represents the universe of corporate lending in Pakistan between 1996 and 2002, we investigate rents to politically connected firms in banking. Classifying a firm as "political" if its director participates in an election, we examine the extent, nature, and economic costs of political rent provision. We find that political firms borrow 45 percent more and have 50 percent higher default rates. Such preferential treatment occurs exclusively in government banks-private banks provide no political favors. Using firm fixed effects and exploiting variation for the same firm across lenders or over time allows for cleaner identification of the political preference result. We also find that political rents increase with the strength of the firm's politician and whether he or his party is in power, and fall with the degree of electoral participation in his constituency. We provide direct evidence against alternative explanations such as socially motivated lending by government banks to politicians. The economy-wide costs of the rents identified are estimated to be 0.3 to 1.9 percent of GDP every year.

Favoritism in the Public Provision of Goods in Developing Countries

By Amitrajeet Batabyal and Peter Nijkamp

Abstract: Goods are often allocated publically by means of queuing processes in developing countries. In such situations, which group of citizens should a corrupt government official favor? In addition, what should be the basis for this favoritism? To the best of our knowledge, these salient questions have received scant attention in the literature. Consequently, we use queuing theory to first demonstrate that when allocating goods publically, a case can be made for favoring a particular group of citizens. Next, we show that the nature of this favoritism depends not only on the bribes received by the corrupt government official but also on the efficiency with which this official discharges his duties.

Paper http://econpapers.repec.org/scripts/redir.pl?u=http%3A%2F%2Fwww.tinbergen.nl%2Fdiscussionpapers%2F04013.pdf;h=repec:dgr:uvatin:20040013

Favoritism Under Social Pressure

By Luis Garicano, Ignacio Palacios-Huerta and Canice Pendergast
The Review of Economics and Statistics, 2005, vol. 87, issue 2, pages 208-216

Abstract: This paper is concerned with the effect of nonmonetary incentives on behavior, in particular with the study of social pressure as a determinant of corruption. We offer empirical evidence that shows how professional soccer referees favor home teams in order to satisfy the crowds in the stadium. Referees have discretion over the addition of extra time at the end of a soccer game to compensate for lost time due to unusual stoppages. We find that referees systematically favor home teams by shortening close games where the home team is ahead, and lengthening close games where the home team is behind. They show no such bias for games that are not close. We further find that when the rewards for winning games increase, referees change their bias accordingly. Lastly, we identify that the mechanism through which bias operates is to satisfy the crowd, by documenting how the size and composition of the crowd affect referee favoritism.

Mediocracy

By Andrea Mattozzi and Antonio Merlo
NBER Working Paper No. 12920

In this paper, we study the initial recruitment of individuals in the political sector. We propose an equilibrium model of political recruitment by a party who faces competition for political talent from the lobbying sector. We show that a political party may deliberately choose to recruit only mediocre politicians, in spite of the fact that it could afford to recruit better individuals who would like to become politicians. We argue that this finding may contribute to explain the observation that in many countries the political class is mostly composed of mediocre people.

paper here

Equilibrium concept: <> (p.4)

Semi-serious research proposal

Cronyism, Corruption and Incompetence: A Network Analysis
by Cosma Shalizi

How likely are close cronies to be named to government positions?
How much influence does position in the network — centrality, say, or distance from the President — have on the likelihood of getting a government job?
How likely are cronies to get jobs for which they are not qualified?
Is position more important for incompetent cronies?
How far are people with positions from the President anyway? (Presumably, when someone talks about thinks like political appointments being more centralized, what they mean is something like the average social distance of appointees from the President being smaller in this administration than previously.)
How far are they from whoever's actually at the center of the network?

Here some ideas

On Trust and Culture

This article appeared sometime ago on Strategy+Business and reviews 5 must read books on Social Networks.

original link: http://www.strategy-business.com/press/16635507/06311

On Trust and Culture, Autumn 2006
by Karen Otazo

The old bromide is truer than ever. It’s not what you know, it’s who you know. And it’s especially who knows you. The emergence and influence of a whole new breed of social networks is a rapidly growing phenomenon. Moreover, a number of people are paying attention to social networks — not just anthropologists, but historians, business leaders, and a host of teenagers.
In large part, we can thank — or blame — the Internet. Despite its vast size and complexity, the Internet has turned out to be a profoundly personal venue. People around the globe are forming connections based on every conceivable common interest, from the serious and practical to the outright silly. In 2005, the 80-million-member networking Web site MySpace, a gathering place where people introduce themselves publicly to friends and strangers, received more page views than Google. And the movement continues to grow.
It was only 40 years ago that the social psychologist Stanley Milgram published the results of his “small world” experiments, demonstrating that a person could be connected to any stranger in the United States by a remarkably short chain of “I-know-someone-who-knows-someone.” Those experiments, which inspired the phrase “six degrees of separation,” were a revelation in the 1960s. By now, general awareness of the density of personal connection has become so entrenched in the culture that the concept is perhaps best known as a pop culture cliché: “six degrees of Kevin Bacon.”
To understand the significance of this concept for individuals and organizations, one must turn to a relatively new field of study: social network analysis (or, as it is sometimes called when applied to structured groups, organizational network analysis). There are many books on this subject, but five stand out as particularly relevant. All five books demonstrate how advances in transparent technology and ubiquitous media have led to an unprecedented shift in the role of networks in human culture. All of our traditional social skills developed from being close to one another physically, not virtually. Now we will need to rely upon trust more than ever before to interact with people on the other side of the world.
The first book of the five, published in 2000, has become a standard: The Tipping Point: How Little Things Can Make a Big Difference, by New Yorker writer Malcolm Gladwell (Little, Brown, 2000). The second is a solid new book: Karen Stephenson’s The Quantum Theory of Trust: The Secret of Mapping and Managing Human Relationships (Financial Times Prentice Hall, 2006). The third book is a groundbreaking but overlooked academic treatise that laid out the methods of network research more than 20 years ago: Structural Models in Anthropology (Cambridge University Press, 1983), by Per Hage and Frank Harary. The fourth is a managerial handbook for applying these techniques in business: Rob Cross and Andrew Parker’s The Hidden Power of Social Networks: Understanding How Work Really Gets Done in Organizations (Harvard Business School Press, 2004). And finally, there’s a recent historical review by Pamela Walker Laird, Pull: Networking and Success since Benjamin Franklin (Harvard University Press, 2006), which tracks the hidden influence of social networking from the American Revolution onward.
Anatomies of Contagion Malcolm Gladwell’s book popularized the useful and now nearly ubiquitous term “the tipping point,” which in epidemiology describes “that one dramatic moment in an epidemic when everything can change all at once,” Mr. Gladwell writes. He examines a similar phenomenon in culture. Small factors, ideas, or behaviors gather momentum and become contagious. When they reach critical mass — a tipping point — they become epidemic. Mr. Gladwell’s experience writing about AIDS for the Washington Post convinced him that change is about the “law of the few.” He realized the disproportionately powerful role that a small group of people can have in moving along any kind of infectious entity: an epidemic, a new way of doing things, the buzz about a new product, or a fad of any kind. Using this model, he shows how the crime rate can drop in a city or how Sesame Street can spread all over the world, with the infectious entity traveling across nothing more than informal communications, one person at a time.
Mr. Gladwell identifies three types of social networkers: Mavens, Connectors, and Salesmen. Mavens love to gather knowledge and pass it on to others: Mr. Gladwell describes one Maven who didn’t just recommend a Volvo to a colleague, he accompanied him when he went to buy one to ensure he got the best deal. The Maven likes to exercise expertise and be helpful.
Connectors seem to know everyone. They can get information where it needs to go because they just love to connect. Paul Revere, best known for rallying Middlesex, Mass., farmers with his cry, “The British are coming!” in the Revolutionary War, was a classic Connector, with a knack for knowing and attracting people. Had the silversmith been less gregarious, argues Mr. Gladwell, then the colonists might have lost.
Salesmen can be great persuaders. They are irresistibly positive; their ideas and attitudes are infectious. In effect, their positive emotions transmit to other people. Mr. Gladwell gives the example of Tom Gau, a financial planner in southern California, who made a ridiculously low bid on a new home, yet persuaded the seller to accept it. When these three types of people interact in the context of a social network, little ideas can turn into big deals with astonishing speed.
Like many bestsellers, The Tipping Point owes its popularity to the fact that it is an entertaining read about a compelling subject that unexpectedly illuminates a hitherto unseen aspect of our world; however, its longevity on the bestseller lists is due to the fact that it points to something both ancient and timely. Mr. Gladwell’s work was not the first of its kind, but, at just the right moment, he hit upon a phenomenon with fundamental importance for anyone who needs to anticipate the behavior of a network of people. His naming of that phenomenon with a short, punchy term from epidemiology was brilliant.
Mr. Gladwell approaches his material in a literary, unscientific way, but in a New Yorker article in December of 2000, he profiled a scholar who examines the same concepts in a more analytical and rigorous fashion. Karen Stephenson, a professor and business consultant, studies social networks within organizations to understand the patterns of information flow and influence in those settings.
Dr. Stephenson began using the techniques of social network analysis in the late 1970s to study ancient trade networks and early primitive organizations. She drew “sociograms,” or diagrams of the individuals in an organization, with each person represented as a dot and the lines between them showing the paths of communication. Later she adapted her analysis for the modern organization and tracked regular contact in meetings, by telephone, and via e-mail. In social systems as diverse as IBM and the network of Chinese philosophers who created the I Ching, the maps revealed important patterns of connectivity outside formal structures — the points of contact not explicitly reflected in the hierarchy.
Why do so many communications take place “off the charts”? This anomaly intrigued Dr. Stephenson. In puzzling through it, she recalled that most early anthropologists believed that in ancient social systems, kinship was determined by biological facts — marriage and reproduction. But then the famous anthropologist W.H.R. Rivers discovered that kinship was made up of both social and biological connections: People simply pretended they were kin when it suited them, and more often than not, the pretense became the reality. In much the same way, in modern organizations, the “real” work often takes place through informal personal connections. Many people pretend that maintaining these connections is part of their “official” job description, even when it is not. Executives had tried for years to “fix” their organization’s culture, or at least unravel its mysteries, by tweaking the flow of decision rights and hierarchical structures, but they had been looking in the wrong place. The tipping point for change could be triggered only in social networks, and, more importantly, in the trust relationships that underlie those networks, because people connect in meaningful ways only with those whom they consider trustworthy. And as Dr. Stephenson showed, a diagram of trust relationships typically looks nothing like the organization chart.
The researcher has used her insights to help companies like IBM and Steelcase create new businesses. She and other social network analysts are bringing cultural relativity into the world of business in the same way Margaret Mead brought the concept to home and hearth a century ago. In her book The Quantum Theory of Trust, Dr. Stephenson shows how organizations are evolving from command-and-control structures, past interim thinking about networks to a strange new world of networked institutions, which she calls “heterarchy.”
Dr. Stephenson has a background in quantum chemistry and mathematics but earned her doctorate in anthropology, first studying social networks among baboons. Her background in four seemingly unrelated fields — biology, anthropology, business, and design — is one of the factors that distinguish her book from others written about social networking. All of these fields, including design, have at their core the study of complex systems, with intricacies that emerge from common sources, invisible to the untrained eye. She connects dots across professional divides, which is a rare thing in academia.
The social networking studies described in The Quantum Theory of Trust revealed that information connects through at least three “archetypes” — network roles that recur regularly in organizations and communities, no matter how different they might be in other ways. In any given organization, there are always some people who play the part of Hubs. Information pathways radiate all around them; they know the most people, and others seek them out because of their charismatic charm and ability to multitask. Dr. Stephenson warns readers that Hubs are consummate jugglers: “Keeping all the balls in the air is not the same thing as directing the flow of information.” So if you want to keep a secret, she says, don’t tell Hubs; they connect naively, not strategically.
Gatekeepers, by contrast, are expert at managing information flow. They know what to tell when, and to whom, in order to achieve their goals. They show up in network diagrams as connected to a few, not many. A department manager who insists on being the only contact point for all of his or her subordinates is a classic Gatekeeper. A well-placed Gatekeeper can facilitate highly efficient communication, and a counterproductive Gatekeeper can hijack momentum.
A less visible, but equally important, archetype is the Pulsetaker. Pulsetakers are keen observers of the people and trends around them and often make excellent mentors and coaches. Niccolo Machiavelli proved himself the ultimate Pulsetaker when he described the ways in which the initiative, attitudes, and strength of a Medici prince tended to influence the mood of the other key people around him, and thus to affect how long he would stay in power. One can imagine a modern-day Machiavelli making similarly perceptive comments in hushed tones to trusted colleagues, about the vice president of marketing or the head of the Asia Pacific region.
One of the first steps in any serious change initiative should be to bring some Pulsetakers on board. As Dr. Stephenson puts it, “Hubs know the most people; Gatekeepers know the right people; and Pulsetakers know the most people who know the right people.”
Roots of Corporate Culture Dr. Stephenson realizes that one rarely recognizes pure mathematical archetypes in real life. She says that on the ground, people usually encounter hybrids, and she assigns Mr. Gladwell’s descriptions of Connectors, Mavens, and Salesmen as naturally occurring hybrids of her mathematical archetypes. For example, she says Mr. Gladwell’s Connectors are Hub–Pulsetakers. They combine the buoyant enthusiasm of Hubs with the finesse of Pulsetakers. Mavens are Gatekeeper–Pulsetakers. They may not know quite as many people, but they are more invested in the people they do know. And Salesmen are Hub–Gatekeepers. They get information across, but also seem to put their listeners under a spell. It is very difficult to say “no” to such a person.
In complex systems, the features of the three archetypes and three hybrids can on occasion converge into one powerful position, the Hub–Gatekeeper–Pulsetaker, or HGP. Dr. Stephenson nicknames these rarities “Strange Attractors.” These individuals are often unaware of the reach of their influence. HGPs work below the radar. Rarely is an HGP the head of a company.
Dr. Stephenson gained her precise perspective from her early scientific training and by working and studying for years with the deeply reflective anthropologist Per Hage and the mathematician Frank Harary. In fact, the textbook Structural Models in Anthropology, written by her two mentors, is the forerunner of graphic social network analysis as we now use it.
Per Hage was an anthropologist who liked to use stories to show relationships, whereas Frank Harary was known for his pioneering research in graph theory — the study of visual representations of networks and grids. Their work moved social network researchers inexorably toward identifying a basic unit of cultural meaning as “the relationship” rather than taking the traditional anthropological view of “kinship” as the basic unit.
The two men also showed how to use graphic techniques to highlight the nature of the relationships among individuals, groups of people, symbols, and cultural stories. “Cultural” clues unearthed this way could include rules for eating, marriage, gift exchange, or warring. The authors showed how, given a few basic symbols or rules, whole systems of meaning could be decoded in the same way that a few rules of syntax can jump-start an elementary understanding of an unfamiliar language.
In their overview of the history of anthropology, Professors Hage and Harary use famous studies from Margaret Mead, the work of Claude Levi-Strauss, and the characters in novels to portray relationships between and among people, food, bodily fluids, rituals, and reciprocity.
When it was first published, this book demonstrated the power of graphic representations of social connections and engendered a new respect for social network analysis, particularly of organizations. Although it is out of print, this brief but dense book is well worth tracking down.
For a more hands-on look at how social networking functions in organizations and how to better manage it, see The Hidden Power of Social Networks, by Rob Cross and Andrew Parker. (Mr. Cross is the coauthor of “The Craft of Connection.”) Their book offers in-the-trenches tips for understanding how social networks, often invisible to management, can save or scuttle an organization.
The authors identify their own set of important networking roles. Their Central Connectors are akin to Mr. Gladwell’s Connectors. The opposite of these central people are the Bottlenecks. They may be ultra-busy managers who travel so much and spend so much time on e-mail and phone calls they don’t have time to connect when others need them. They are similar to Dr. Stephenson’s Gatekeepers; they can hijack or help momentum in getting things done. Information Brokers act like Central Connectors with organizational information. Boundary Spanners may be rare, but could be the kind of people an organization needs to cultivate, to ensure that various departments or groups communicate with one another across functions or regions, and share expertise and knowledge of clients, competitors, and more. The authors give examples of some successful Boundary Spanners, and mention in passing that management can’t dictate that a Boundary Spanner play this role; it’s simply too informal. Management can only provide the permission, recognition, and financial support that allow people who are predisposed to this kind of role to invest themselves in it. Another role in this book is the Peripheral People — including Mavens and experts in the legal, human resources, and technology domains — whom the authors don’t see as being very central to organizational networking.
The Hidden Power of Social Networks is essentially a how-to guide, one of those management books that offer recipes for change in the form of lists of things to do. Using examples from different types of businesses, the authors encourage managers to look past the formal hierarchies and to analyze the social networks that control the flow of power and information in their companies. Rob Cross and Andrew Parker list simple techniques like skill profiling, instant messaging, changing performance evaluation to reward connections, and adjusting organization charts. Their appendices take readers through a step-by-step process for mapping networks through questionnaires and interpreting the information effectively. Although it lacks the breadth and depth of the Gladwell, Stephenson, and Hage/Harary works, this is a practical book with useful appendices, and an especially valuable guide for midlevel managers and first-line supervisors.
Socially Made Men The fifth book looks at social networking from a different viewpoint altogether — that of a historian. Pamela Walker Laird, associate professor at the University of Colorado at Denver, recently wrote a chronicle of two centuries of the “old boy network” and its influence in the United States: Pull: Networking and Success since Benjamin Franklin. Professor Laird destroys the myth of “self-made” men (rarely women), the idea that anyone can achieve fame and fortune if he just works hard enough. This has been a popular idea in America, at least: Worldly success comes to those who demonstrate individual worth in our glorious meritocracy. Even the American cowboy ideal was based on individual merit. Yet in real life, those who are well connected and who look and act the same as those in power tend to get ahead. Andrew Carnegie, for example, promoted himself as a “self-made man,” and he was indeed a gifted investor, manager, and technologist; but he was also a Scotsman who drew heavily in early life upon his connections through his countrymen in Pittsburgh, and, later, on connections forged in the nascent railroad industry and the American Civil War.
Professor Laird substantiates her point by writing about nepotism, the power of inner circles in many organizations, and the nature of legislation against discrimination in the mid-20th century. In many cases, this legislation has been about “push” — pushing people (such as women and minorities) to keep them out of the ranks of senior management, rather than finding ways to draw them in. It’s pull, or social networking, that brings executives through the glass ceiling; hence the importance of mentoring, sponsoring, networking, and connecting with role models in organizations. She adds that the vocabulary of social networking is useful precisely because it groups these other ideas into one conceptual whole. Those who are deemed “different” in organizations need more connections and fair Gatekeepers.
Until the middle of the 20th century, there were no ways to describe social networks other than with terms like family connections, nepotism, or old school ties. But as Professor Laird notes, social networking opportunities are everywhere today: professional associations, neighborhood groups, and even Big Brother or Big Sister organizations. Access to social networks with influence traditionally came through class and connections. People learned how to behave in those networks, and they gained the endorsement of people with clout. Using interesting tales about many well-known names in business, Pamela Walker Laird shows the importance of social networking in business history. Readers who enjoy biographies will enjoy this approach to social networking.
The Networkers of Crotonville In different ways, these five books help explain the complex dynamics of organizational success, and they can be applied to any corporate situation. For example, much has been written about the charismatic leadership of former General Electric CEO Jack Welch; current CEO Jeffrey Immelt is beginning to enjoy the same kind of media attention. But the business media have traditionally tended to overlook GE’s extensive reliance on social networks, which were in place long before Mr. Welch stepped in, and which allowed his changes to take root. Indeed, GE sustains organizational success decade after decade with very different CEOs, thanks in great part to its deliberate use of its networks. Of course, the company didn’t always operate inclusively. In 1954, as Pamela Walker Laird points out, the interview protocol in the GE Handbook included questions about social upbringing. Favorable ratings were assigned to those who were raised in “relatively high socio-economic circumstances.” Now that’s being part of a privileged social network.
GE also thrives because it knows its own culture. The leadership deliberately establishes core values and reinforces them by having leaders who consciously model the right way to do things. These values are nourished and promulgated among incoming generations of employees through informal conversation, training courses, large events, and performance reviews.
Therefore, well-supported new ideas, such as Mr. Immelt’s commitment to Ecomagination, can be engineered to pass a tipping point quickly and efficiently, setting this huge organization in a new direction. Such shifts take place in any organization only when they are reinforced inherently and completely by well-established networks. Dr. Stephenson’s theory elegantly explains how a company like GE could accomplish this. She points out that “networks, more than hierarchy and more than markets, make culture what it is and what it can be.”
GE fosters its social networks through a variety of means, but one important way is its management development curriculum. The company’s more than 60 years of management development programs — including those given at GE’s famous Jack Welch Learning Center at Crotonville, N.Y. — attract the top cadre of people who become the leaders of businesses over time. Casual friendships struck up during courses become the basis of informal networks that last for the length of an individual’s career, and that become indispensable in getting things done. What you become at GE is a function of who you knew when. The transfer of people across divisions and functions has also kept networking alive and robust. Additionally, there is the ritual of the senior management meeting every January in Boca Raton. The value of networking at this major event is well known. And in GE, a big measure of knowing you’ll “make it” is “When do I get to go to Boca Raton?” And the famous “deselection” process at GE, in which managers routinely weed out those who don’t perform or share the corporate values, is a way of ensuring that the people who don’t fit the culture leave while the networks support the rest.
These five books describe how trust fuels networks, which then feed and sustain the expertise and culture of the enterprise. For those interested in institutionalizing something similar at their own company, books may not be enough. Fortunately, a cottage industry has sprung up to offer tools for social network analysis. A regularly updated list of these appears at www.insna.org/INSNA/soft_inf.html. This Web site offers an overview of more than 70 programs, including Dr. Stephenson’s and Mr. Cross’s, of computer algorithms that can help users create two-dimensional graphs and tools to map their organization’s network. The list is a product of INSNA, the International Network for Social Network Analysis. Its Web site has a changing view of social network graphs that provide insight into many types of networks.
Networks can be difficult to see, but once you spot them, you’ll never look at an organization chart — or think of “culture” — the same way again.

Cultures of Corruption: Evidence from Diplomatic Parking Tickets*

By Ray Fisman and Edward Miguel

ABSTRACT: Corruption is believed to be a major factor impeding economic development, but the importance of legal enforcement versus cultural norms in controlling corruption is poorly understood. To disentangle these two factors, we exploit a natural experiment, the stationing of thousands of diplomats from around the world in New York City. Diplomatic immunity means there was essentially zero legal enforcement of diplomatic parking violations, allowing us to examine the role of cultural norms alone. This generates a revealed preference measure of government officials’ corruption based on real-world behavior taking place in the same setting. We find strong persistence in corruption norms: diplomats from high corruption countries (based on existing survey-based indices) have significantly more parking violations, and these differences persist over time. In a second main result, officials from countries that survey evidence indicates have less favorable popular views of the United States commit significantly more parking violations, providing non-laboratory evidence on sentiment in economic decisionmaking. Taken together, factors other than legal enforcement appear to be important
determinants of corruption.

Paper here

Women, Work, and Culture

by Raquel Fernandez

question: "... there exists important variation in the amount that women work across countries... Is this variation mostly a consequence of differences in purely economic variables and institutions or do differences in culture play an important role?" p.3-4

method - epidemiological approach: "
the descendants of immigrants to, say, the US, share by construction the same markets and institutions. They do not necessarily share, however, the same culture. In particular, they may have, to some extent, inherited their parents’ culture, i.e., their preferences and beliefs. Hence by studying work outcomes for women born in one country but whose parents were born in a different country, we may be able to pick up differences in cultural heritages while maintaining constant economic and institutional factors.
The epidemiological strategy has its own set of problems. Immigrants may be subject to many shocks (language, discrimination, greater uncertainty, etc.) which could cause them to deviate from their traditional behavior. Culture, furthermore, is socially constructed: to be replicated, the behavior may require the incentives provided by a larger social body such as a neighborhood, school, or ethnic network. Furthermore, immigrants are unlikely to be a representative sample of their home-country’s population. Their beliefs, preferences, and unobserved differences in their economic circumstances may differ significantly from the country average. Lastly, over time, assimilation to the dominant culture will presumably weaken the force of the original culture. This problem would be more severe for the descendants of immigrants but, on the other hand, the shocks associated with recent immigration should no longer be relevant for this group and this seems like a more important source of concern.

It should be noted that all the factors mentioned above introduce a bias towards finding culture to be insignificant.8 Thus, on the whole, comparisons of behavior or outcomes across different immigrant groups are a very demanding test of the importance of culture. In epidemiology, when differences across groups remain, one must be careful not to conclude that genetics is determinative when the underlying cause may be cultural; in economics, when significant differences are not observed, one must be careful not to rule out cultural forces" p.5

identification strategy: "The argument for using these variables is as follows. Consider, for example, the value of female LFP in a country. This aggregate variable reflects the market work decisions of women and hence depends on individual characteristics (married, with children, etc.), and the economic and institutional environment (e.g., wages, probability of finding a job, or availability of day care). The aggregate variable is also likely to depend on women’s preferences and beliefs, broadly defined, i.e., on culture. In particular, it may depend on how a woman conceives of her role in the household, whether she thinks her children will benefit or suffer from having a working mother, or how she is treated by friends and neighbors as a result of her choice. Now, if cross-country differences in the value of this aggregate variable have explanatory power for why, in the US, women from one ancestry work more than women from another ancestry after controlling for their individual economic attributes, only the cultural contribution to this variable can be responsible. The economic and institutional conditions of the country of ancestry should no longer be relevant for second-generation American women (as neither the country nor even the time period is the same), whereas the preferences and beliefs embodied in these variables may still matter if parents and/or neighborhood transmitted them to the next generation."p.6-7

findings: " ... Individuals whose country of ancestry is more "conservative" tend to work less. This remain true when the woman’s age and education levels are included in the second column as well as when her husband’s education and total income are included in the third column. It is interesting to note that the magnitude of the cultural effect decreases slightly when the husband’s characteristics are included whereas the woman’s education becomes positive and significant. This points to the fact that the spouses’ education levels are positively correlated (and the woman’s education is positively correlated with her husband’s income) so that when the man’s characteristics are not included, the statistically insignificant coefficients on the woman’s education levels reflect the positive effect of her own education on her labor supply as well as the negative effects of her husband’s education and income. This points to the importance of taking into account assortative matching when studying female labor supply during this time period. The cultural proxy becomes less negative since women from more conservative countries of ancestry tend to be married to men who have higher education and income and thus, when we do not control for these characteristics, the impact of the cultural proxy appears stronger." p.17

Link http://papers.nber.org/papers/w12888.pdf

Why social networks are different from other types of networks?

By M. E. J. Newman and Juyong Park

ABSTRACT
We argue that social networks differ from most other types of networks, including technological
and biological networks, in two important ways. First, they have non-trivial clustering or network transitivity, and second, they show positive correlations, also called assortative mixing, between the degrees of adjacent vertices. Social networks are often divided into groups or communities, and it has recently been suggested that this division could account for the observed clustering. We demonstrate that group structure in networks can also account for degree correlations. We show using a simple model that we should expect assortative mixing in such networks whenever there is variation in the sizes of the groups and that the predicted level of assortative mixing compares well with that observed in real-world networks.

Paper here

Assortative model for social networks

By Michele Catanzaro, Guido Caldarelli, and Luciano Pietronero

ABSTRACT: In this Brief Report we present a version of a network growth model, generalized in order to describe the behavior of social networks. The case of study considered is the preprint archive at cul.arxiv.org. Each node corresponds to a scientist, and a link is present whenever two authors wrote a paper together. This graph is a nice example of degree-assortative network, that is, to say a network where sites with similar degree are connected to each other. The model presented is one of the few able to reproduce such behavior, giving some insight on the microscopic dynamics at the basis of the graph structure.

Paper here

Are Randomly Grown Graphs Really Random?

By D. S. Callaway, J. E. Hopcroft, J. M. Kleinberg, M. E. J. Newman, and S. H. Strogatz

Abstract
We analyze a minimal model of a growing network. At each time step, a new vertex is added; then, with probability $\delta$, two vertices are chosen uniformly at random and joined by an undirected edge. This process is repeated for $t$ time steps. In the limit of large $t$, the resulting graph displays surprisingly rich characteristics. In particular, a giant component emerges in an infinite-order phase transition at $\delta = 1/8$. At the transition, the average component size jumps discontinuously but remains finite. In contrast, a static random graph with the same degree distribution exhibits a second-order phase transition at $\delta = 1/4$, and the average component size diverges there. These dramatic differences between grown and static random graphs stem from a positive correlation between the degrees of connected vertices in the grown graph--older vertices tend to have higher degree, and to link with other high-degree vertices, merely by virtue of their age. We conclude that grown graphs, however randomly they are constructed, are fundamentally different from their static random-graph counterparts.

Link here