The Barton Lecture Series on Law and Economics- Economic Perspectives at the SEC

Michael Piwowar, Commissioner of the US Securities and Exchange Commissioner lectures as part of the Center for Humanities in an Urban Environment Lecture Series. Lecture held on October 21, 2014.

Xinjiang and Central Asia: Ethno-religious, political, and economic interactions

The neighboring regions of Xinjiang and Central Asia, linked historically on the famous Silk Road, later developed separately as a result of the incorporation of the former into China and the latter into the Russian Empire and Soviet Union. Thus, interaction between Xinjiang and Central Asia has been constrained by the nature of the Sino-Russian or Sino-Soviet relationship. However, the demise of the Soviet Union--which resulted in the independence of five Central Asian states--and the recent economic reforms in the People's Republic of China suggest dramatic new possibilities for interregional cooperation.^ In this thesis, an historical and comparative approach is employed to study Chinese policies in Xinjiang and Soviet policies in Central Asia, and concludes that despite several decades of separate development, the common ethnic and religious origins of the indigenous peoples and their former ties will facilitate greater interaction between the two regions. ^

An exergy based engineering and economic analysis of sustainable building

To achieve the goal of sustainable development, the building energy system was evaluated from both the first and second law of thermodynamics point of view. The relationship between exergy destruction and sustainable development were discussed at first, followed by the description of the resource abundance model, the life cycle analysis model and the economic investment effectiveness model. By combining the forgoing models, a new sustainable index was proposed. Several green building case studies in U.S. and China were presented. The influences of building function, geographic location, climate pattern, the regional energy structure, and the technology improvement potential of renewable energy in the future were discussed. The building’s envelope, HVAC system, on-site renewable energy system life cycle analysis from energy, exergy, environmental and economic perspective were compared. It was found that climate pattern had a dramatic influence on the life cycle investment effectiveness of the building envelope. The building HVAC system energy performance was much better than its exergy performance. To further increase the exergy efficiency, renewable energy rather than fossil fuel should be used as the primary energy. A building life cycle cost and exergy consumption regression model was set up. The optimal building insulation level could be affected by either cost minimization or exergy consumption minimization approach. The exergy approach would cause better insulation than cost approach. The influence of energy price on the system selection strategy was discussed. Two photovoltaics (PV) systems—stand alone and grid tied system were compared by the life cycle assessment method. The superiority of the latter one was quite obvious. The analysis also showed that during its life span PV technology was less attractive economically because the electricity price in U.S. and China did not fully reflect the environmental burden associated with it. However if future energy price surges and PV system cost reductions were considered, the technology could be very promising for sustainable buildings in the future.

Rio and the Reds: The Comando Vermelho, Organized Crime and Brazil’s Economic Ascent [Student’s Paper Series]

Brazil’s growing status as a potential world power cannot obscure the characteristics of its other reality: that of a country with vast inequalities and high crime rates. The Comando Vermelho, the most prominent organized crime syndicate in Rio de Janeiro, besieges the beauty and charm that attracts tourists to this city. The CV arose not only as a product of the political dictatorship of the seventies, but also of the disenfranchised urban poor crammed into Rio’s favela slums. Today, the CV presents a powerful challenge to the State’s control of parts of Rio territory. As Brazil’s soft power projection grows, it is seriously challenged by its capacity to eliminate organized crime. Economic growth is not sufficient to destroy a deeply embedded organization like the CV. In fact, Brazil’s success may yet further retrench the CV’s activities. Culpability for organized crime cannot be merely limited to the gangs, but must also be shared among the willing consumers, among whom can be found educated and elite members of society, as well as the impoverished and desperate. The Brazilian government needs a top-down response addressing the schism between rich and poor. However, Brazil’s citizens must also take responsibility and forge a bottom-up response to the drug- and corruption-riddled elements of its most respected members of society. Brazil must target reform across public health, housing, education and above all, law enforcement. Without such changes, Brazil will remain a two-track democracy. Rio’s wealthy will still be able to revel in the city’s beauty albeit from behind armored cars and fortified mansions, while the city’s poor will yield – either as victims or perpetrators – to the desperate measures of organized crime.

Innovating from the War Economy: Formal, Informal, and Illicit Economic Activities of the Military in Colombia

Over the last decade, the Colombian military has successfully rolled back insurgent groups, cleared and secured conflict zones, and enabled the extraction of oil and other key commodity exports. As a result, official policies of both the Uribe and Santos governments have promoted the armed forces to participate to an unprecedented extent in economic activities intended to consolidate the gains of the 2000s. These include formal involvement in the economy, streamlined in a consortium of military enterprises and social foundations that are intended to put the Colombian defense sector “on the map” nationally and internationally, and informal involvement expanded mainly through new civic action development projects intended to consolidate the security gains of the 2000s. However, failure to roll back paramilitary groups other than through the voluntary amnesty program of 2005 has facilitated the persistence of illicit collusion by military forces with reconstituted “neoparamilitary” drug trafficking groups. It is therefore crucially important to enhance oversight mechanisms and create substantial penalties for collusion with illegal armed groups. This is particularly important if Colombia intends to continue its new practice of exporting its security model to other countries in the region. The Santos government has initiated several promising reforms to enhance state capacity, institutional transparence, and accountability of public officials to the rule of law, which are crucial to locking in security gains and revitalizing democratic politics. Efforts to diminish opportunities for illicit association between the armed forces and criminal groups should complement that agenda, including the following: Champion breaking existing ties between the military and paramilitary successor groups through creative policies involving a mixture of punishments and rewards directed at the military; Investigation and extradition proceedings of drug traffickers, probe all possible ties, including as a matter of course the possibility of Colombian military collaboration. Doing so rigorously may have an important effect deterring military collusion with criminal groups. Establish and enforce zero-tolerance policies at all military ranks regarding collusion with criminal groups; Reward military units that are effective and also avoid corruption and criminal ties by providing them with enhanced resources and recognition; Rely on the military for civic action and development assistance as minimally as possible in order to build long-term civilian public sector capacity and to reduce opportunities for routine exposure of military forces to criminal groups circulating in local populations.

Essays in economic growth, political economy and institutions

This dissertation analyzes the effects of political and economic institutions on economic development and growth.^ The first essay develops an overlapping-generations political economy model to analyze the incentives of various social groups to finance human capital accumulation through public education expenditures. The contribution of this study to the literature is that it helps explain the observed differences in the economic growth performance of natural resource-abundant countries. The results suggest that the preferred tax rates of the manufacturers on one hand and the political coalition of manufacturers and landowners, on the other hand, are equal to the socially optimal tax rate. However, we show that owners of natural resources prefer an excessively high tax rate, which suppresses aggregate output to a suboptimal level.^ The second essay examines the relationship between the political influence of different social classes and public education spending in panel data estimation. The novel contribution of this paper to the literature is that I proxy the political power and influence of the natural resource owners, manufacturers, and landowners with macroeconomic indicators. The motivation behind this modeling choice is to substantiate the definition of the political power of social classes with economic fundamentals. I use different governance indicators in the estimations to find out how different institutions mediate the overall impact of the political influence of various social classes on public education spending. The results suggest that political stability and absence of violence and rule of law are the important governance indicators.^ The third essay develops a counter argument to Acemoglu et al. (2010) where the thesis is that French institutions and economic reforms fostered economic progress in those German regions invaded by the Napoleonic armies. By providing historical data on urbanization rates used as proxies for economic growth, I demonstrate that similar different rates of economic growth were observed in the regions of France in the post-Napoleonic period as well. The existence of different economic growth rates makes it hard to argue that the differences in economic performance in the German regions that were invaded by the French and those that were spared a similar fate follow from regional differences in economic institutions.^

Essays on the political economy of trade policy and economic *development

This dissertation studies the political economy of trade policy in a developing country, namely Turkey, under different economic and political regimes. The research analyzes the effects of these different regimes on the import structure, the trade policy and the industrialization process in Turkey and derives implications for aggregate welfare. ^ In the second chapter, the effects of trade liberalization policies on import demand are examined. Using disaggregated industry-level data, import demand elasticities for various sectors have been computed, analyzed under different economic regimes, and compared with those of developed countries. The results are statistically significant and reliable, and conform to the predictions of economic theory. Estimation of these elasticities is also a necessary ingredient for the third chapter of the dissertation. ^ The third chapter examines the predictions of the state-of-the-art “Protection For Sale” model of Grossman and Helpman (1994). Employing advanced econometric methods and a unique data set, strong support is found for the fundamental predictions of the model in the context of Turkey. Specifically, the government is found to attach a much higher weight to social welfare than to political contributions. This weight is higher under the democratic regime than under the dictatorship, a result potentially of interest to all researchers in the area of political economy. ^ The fourth chapter looks at the effects of industry concentration and import price shocks on protection, promotion and the choice of policy instruments in Turkey. In this context, it examines and finds support for the predictions of some well-known models in the literature. ^

An Exergy Based Engineering and Economic Analysis of Sustainable Building

To achieve the goal of sustainable development, the building energy system was evaluated from both the first and second law of thermodynamics point of view. The relationship between exergy destruction and sustainable development were discussed at first, followed by the description of the resource abundance model, the life cycle analysis model and the economic investment effectiveness model. By combining the forgoing models, a new sustainable index was proposed. Several green building case studies in U.S. and China were presented. The influences of building function, geographic location, climate pattern, the regional energy structure, and the technology improvement potential of renewable energy in the future were discussed. The building’s envelope, HVAC system, on-site renewable energy system life cycle analysis from energy, exergy, environmental and economic perspective were compared. It was found that climate pattern had a dramatic influence on the life cycle investment effectiveness of the building envelope. The building HVAC system energy performance was much better than its exergy performance. To further increase the exergy efficiency, renewable energy rather than fossil fuel should be used as the primary energy. A building life cycle cost and exergy consumption regression model was set up. The optimal building insulation level could be affected by either cost minimization or exergy consumption minimization approach. The exergy approach would cause better insulation than cost approach. The influence of energy price on the system selection strategy was discussed. Two photovoltaics (PV) systems – stand alone and grid tied system were compared by the life cycle assessment method. The superiority of the latter one was quite obvious. The analysis also showed that during its life span PV technology was less attractive economically because the electricity price in U.S. and China did not fully reflect the environmental burden associated with it. However if future energy price surges and PV system cost reductions were considered, the technology could be very promising for sustainable buildings in the future.