Adjusting to Reality Beyond 'State Versus Market' in Economic Development
Originally published in 1991, Robert Klitgaard’s classic book addresses questions of enduring relevance in a lively and insightful way. Bribes, tribes, and markets that fail—these are the realities in many developing countries. The usual strategies for reform—be they capitalist or socialist—have failed to address them effectively. What is to be done when economic reforms leave the poor behind or when when new constitutions and elections are undercut by inefficient bureaucracies, overcentralization, and corruption? And what to do about persistent ethnic inequalities within developing countries?
The book provides inspiring examples from around the world, as well as analytical frameworks to guide inclusive policy discussion. Theorists will enjoy the novel uses of industrial economics, the theory of the firm, and the economics of discrimination. The book highlights overlooked causes of underdevelopment: imperfect information and weak information processing in individuals and institutions.
In the preface, the former President of Panama, Dr. Nicolás Ardito Barletta, writes:
"Poverty, Klitgaard argues, is—and should be—a principal concern of development strategists, but policy makers and analysts will continue to run from pillar to post in their search for a cure unless they can adjust their development schemes to reality…."
"The new approach that the author proposes is based on two fundamental principles. One is that the proper choice of economic strategies cannot be determined in the abstract but depends on particular circumstances… The other is that information is at the heart of problems in the real world of the developing countries… Klitgaard offers examples from Bolivia, Brazil, India, Indonesia, Malaysia, Pakistan, Peru, and the Philippines to make his point.
"The author suggests creative ways in which the state and citizens themselves can solve their own ‘inevitably unique problems.’ One of the key tasks, in Klitgaard’s view, is to ensure that environments are rich in information. This volume offers a broad framework for policy analysis that moves us closer to intelligent solutions to the real problems of the real poor in the modern world."
1. Beyond ‘State versus Market’ 2. The Socioeconomic Environment Constrains Market and State 3. Information and Market Institutions 4. Information and Markets: Two Examples 5. Actions by Buyers, Sellers and Governments. Appendix: Improving Market Information – A Framework for Policy Analysis 6. Making Government Institutions Work Better 7. Improving Incentives in the Public Sector 8. Curbing Government Corruption 9. Decentralization and Integration 10. Poverty and Ethnic Groups in Developing Countries 11. Three Strategies for Overcoming Ethnic Inequalities 12. The Evolution, Maintenance and Reduction of Ethnic Inequalities 13. Rethinking Economic Development.
"Robert Klitgaard’s fertile mind and agile pen have produced another winner. He shows brilliantly that well-functioning markets do not go with state minimalism but are public goods...with vivid illustrations from the most unexpected and diverse sources." Paul Streeten formerly of the Institute of Development Studies, Oxford University
"The author draws on his extensive first-hand experience with developing nations in South America, Africa, and Asia—where he has been a friend and advisor to musicians and cabinet officers, children and chieftains—to test and reveal the practical import of his insights. Klitgaard’s rare combination of skills lights up this intellectual adventure." Richard Zeckhauser, Harvard Kennedy School
"Lively and highly readable…goes beyond the abstractions of academia and the slogans of the World Bank to present a step-by-step guide to identifying problems and implementing the recommended policies." Journal of Economic Literature
"Adjusting to Reality is unique in dealing with the social problems that inevitably accompany transitions to market economies… An exemplary book." Donald L. Horowitz, Duke University
"Robert Klitgaard possesses a genuine talent for communicating with broad audiences about serious matters of public policy. As with his previous, highly successful Tropical Gangsters, Adjusting to Reality explores themes of great interest to scholars and policymakers in an engaging and accessible way… Klitgaard goes further than have others to offer specific steps that governments can take so that ‘government failure’ does not merely replace ‘market failure…The skill with which he employs case materials imparts an immediacy and freshness to his work." American Political Science Review
"Students of the developing areas, whatever their discipline, ideology, or country, will profit from reading this perceptive and undoctrinaire study." Mancur Olson
"Klitgaard has done it again… This new book presents a remarkably concise, readable, and well-informed treatment of the key issues confronting the world’s poor countries." Bruce Johnston, Stanford University