One of the arguments in the last chapter was that some social networks can overcome particular information and motivation problems of joint action: “It takes a village” can be true for issues at a local level. To achieve broader development goals, however, generally requires collective-action institutions at a higher level of social organization. Work in the new institutional economics has begun to provide theory and empirical evidence demonstrating that clearer property rights, better-functioning courts, more accountable governance, and more transparent economic systems generate more productive outcomes over time (Martens et al. 2002). These institutions require decisions to be made at the collective-choice—or policy—level. In aid-recipient countries, however, such institutions are often missing, weak, or bad. This chapter shifts the focus from the operational-level challenges of development aid to the collective-choice level, where individuals make decisions about these crucial institutions.
The collective-choice level presents obstacles both similar and different to the operational level. Similar to the operational level, motivational and information problems haunt the efforts of policy-making bodies at the collective-choice level. In addition to these problems, policymakers also have relationships with the public at the operational level, which can allow officials to impose costs (corruption, poor policy, etc.) on citizens. Changing the rules (institutions) at the policy-making level may potentially improve joint outcomes substantially. However, perverse incentive structures at this level can just as well throw up sizeable barriers to solving the collective-action problems of development. Depending on their actions, international development agencies can exacerbate these obstacles or help to reduce them.
In this chapter, we explore the obstacles and possibilities for development at the collective-choice level. In Section 3.2 , we discuss the collective-choice level and the difficulties most likely to thwart efforts to solve collective-action situations in recipient countries. Section 3.3 examines how the reality of weak, bad, or missing institutions hampers development efforts. We unpack the particular challenges arising at the