SocSc 13: Quiz 3

for October 27, 2026

Questions asked by political institutions

• Who has power? What constrains them?

Questions asked by economic institutions

• What economic opportunities, rights, and incentives do people face?

Inclusive Institutions

• Enforce property rights, create a level playing field, and provide incentives to invest, innovate, and participate in economic activity

• Political power is broadly distributed, with sufficient state authority to uphold law and order

• Create a self-reinforcing cycle that preserves and deepens inclusion over time.

Extractive Institutions

• Extract resources and opportunities from the many for the benefit of the few, weakening incentives for broad participation and investment

• Political power is concentrated, allowing those in power to shape economic institutions for their own benefit and maintain their control.

• Create self-reinforcing cycle that preserves and deepens exclusion over time

Spain’s Colonization of Mexico

1. Capture indigenous leader

2. Accumulate wealth (e.g. gold, food, resources)

3. Set themselves as new elite — through taxation, tributes, forced labor (e.g. enconmienda system)

British Colonization of North America

1. Incentivize more people to settle — English settlers were given houses and property rights to land

2. Incentivize this colony to improve productivity — provide incentives for settlers to want to work

Virtuous Cycle(s)

• A self-reinforcing cycle that preserves inclusive institutions in the face of threats, and sets in motion forces that lead to even greater inclusiveness

Virtuous Cycles: The Case of Britain

1. Inclusive politics — power was decentralized

2. Rule of law — enforcement of the law was decentralized

3. Inclusive society — the concerns of the masses were no longer repressed

REPEAT CYCLE

Virtuous cycles: why do inclusive institutions reinforce themselves?

• broader political participation - gives more groups a say and makes it harder for a small elite to dominate decision-making.

• broader economic opportunities - spread resources and influence across society, giving more groups the ability to defend inclusive institutions.

Virtuous Cycles: The Case of Sierra Leone

1. Extractive politics — power is centralized to a small group

2. Weak rule of law — the enforcement of law only benefits those in power

3. Extractive markets — unequal opportunities (jobs, education, etc.)

Why do cycles reinforce themselves?

• because of complementarities

Complementaries

• An action taken by an individual or organization that increases the incentives for other agents to take similar actions

  • My best choice depends partly on what other people are doing.

• Can reinforce either a good or a bad equilibrium:

  • Virtuous - if more people comply with rules, compliance becomes easier and more worthwhile for others

  • Vicious - if bribery becomes widespread, refusing to participate can become costly or disadvantageous

Are Filipinos “Undisciplined” or Responding to Incentives Around Them?: for Pedestrians

1. More pedestrians cross on red

2. Drivers begin expecting unpredictable crossings

3. Ignoring the signal feels safer and more normal

REPEAT

Are Filipinos Undisciplined or Responding to Incentives Aroung Them?: for Traffic

1. More drivers cut into lanes

2. Other drivers expect cutting and become more defensive

3. Orderly merging becomes harder

REPEAT

Coordination Failure

• When everyone may prefer and is aware of a better outcome, but changing behavior individually alone may be costly, risky, or put them at a disadvantage.

• So everyone keeps doing what they are already doing, and society remains stuck in a worse equilibrium.

• It is possible for most to be fully aware of a better alternative but it is individually suboptimal to deviate from the current equilibrium

• The problem is not that people cannot imagine a better system. The problem is that the better system requires many people

Critical Junctures

• major events that disrupt the existing political and economic balance and open new institutional possibilities.

• they create opportunities for change, but do not guarantee a more inclusive outcome.

• what happens next depends on existing institutions and who holds power.

  • examples: Colonization, the Glorious Revolution, Martial Law, People Power, wars, economic crises, revolutions.

What helps a critical juncture lead to more inclusive institutions?

• Broad-based empowerment: change involves a wide cross-section of society, not simply replacing one elite with another. (Pluralism, free media) can shift societies from extractive to inclusive paths but there is no copy-paste formula.

• Pluralism: political power becomes shared among multiple groups rather than concentrated in a few hands.

How can broad-based empowerment be encouraged?

• There is no single formula that works across all societies.

• Change depends on the specific institutions, power structures, and opportunities present.

• But some conditions can make collective action and broader participation easier

• Media plays a transformative role in the process of empowerment

• Information about economic or political abuses by those in power helps facilitate and coordinate the empowerment of society.

• Authoritarian regimes are often aware of the importance of a free media and do their best to fight it.

Development paradigms

• shape how we understand progress - whether through economic growth, social equity, or environmental sustainability

Ecosystem Services

• Benefits people obtain from ecosystems (Millenium Ecosystem Assessment, 2005)

• Reminds us of the benefits that the environment provides

• The benefits can be grouped into 4 main categories:

  • Provisioning

  • Regulating

  • Supporting

  • Cultural

Provisioning Services

• Material benefits directly taken from nature

  • Food (vegetables, fruits)

  • Water (drinking water, irrigation)

  • Raw materials (wood, fiber, cotton)

  • Energy sources (fossil fuels, biofuels)

Regulating Services

• Processes that keep the environment regulated

  • Air quality control (Trees absorb CO₂)

  • Soil fertility & erosion control (Forests)

  • Pollination (Bees and butterflies helping crops grow)

  • Disaster prevention (Sierra Madre against typhoons)

Cultural Services

• Non-material benefits that enrich our lives

  • Recreation & tourism (Beaches, hiking trails, parks, photography)

  • Cultural identity & heritage (Sacred sites, indigenous traditions)

Supporting Services

• Processes that make all other services possible

  • Nutrient cycling (decomposers recycling nutrients)

  • Water cycle (evaporation, precipitation, groundwater)

  • Biodiversity & habitats (coral reefs, rainforests)

How do we address the problem of environmental degradation?

• through Green Technology

How can Green Technology solve the problem of environmental degradation?

• Sustainable energy (solar, wind) to replace fossil fuels.

  • Electric vehicles (EVs) to reduce emissions.

  • Smart grids & energy efficiency for lower consumption.

• Green technologies help reduce the overall impact on the environment.

What are the blindsides of going green?

Negative Externalities

• Harmful effects from production that do not directly affect the producers of green technology

Negative Production Effect

• The production of green technologies may cause unintended negative externalities that harm the environment or society in other ways

Negative Production Effect example: Solar Panels

Benefits:

• Renewable energy from the sun

• No carbon emissions during use

Costs:

• NF3 is a potent greenhouse gas used in solar panel manufacturing

• It has a global-warming potential 17,000 times greater than CO2 and lingers in the atmosphere for about 550 years

Negative Production Effect example: Biofuel

Benefits:

• Renewable energy from organic materials such as crops

• Less carbon emissions - Plants absorb CO2 during their growth, and when biofuels are burned, they release roughly the same amount of CO2

Costs:

• Decrease in food supply → increase in food prices

• Reappropriating rainforests for sugarcane plantations → Deforestation

Jevon’s Paradox

• Efficiency-increasing technology has counterintuitive effects

• Cheaper Technology → Demand Increase

  • Shift from coal to steam

  • Shift from fluorescent to LED

  • Shift from regular to inverter ACs

• Increased efficiency, while beneficial for reducing immediate costs and energy usage per mile, can unintentionally lead to increased overall energy consumption if the efficiency leads to greater usage.

Green Conscience Phenomenon: The Problem with Green Technology (Zehner, 2012)

• The presence of environmental technological solutions may lead onto the belief that technological advancement is a cure-all

• Only and overly relying on technology is an illusion that makes us believe we can live free and unchanged without any consequences to the environment

Green technology: how do we cover our blindsides?

• Recognize the hidden unintended challenges of green technology

• Technology aids, but cannot be our cure-all. It must be combined with behavior changes, and policies

Risk

• The probability of an adverse event that negatively impacts individuals, households, or communities.

Types of Risks

• Idiosyncratic Risks

  • Affect individuals or households

  • Examples - illness, job loss

• Covariate Risks

  • Affect entire populations or economies

  • Examples - economic crisis, natural disaster

Risk Management Mechanisms

• Prevention - reduce the probability of risk occurring

• Mitigation - reduce the potential impact of risk if it were to occur

• Coping - relieves the impact of risk once it has occurred

Examples of prevention as a risk management mechanism

• pursuing education, getting vaccinated, building infrastructure protection from floods

Examples of mitigation as a risk management mechanism

• Diversifying investments, Investing in social capital/relationships, Acquiring insurance

Examples of coping as a risk management mechanism

• borrowing, selling assets, migration, child labor, relief goods

Risk Management Arrangements

• Informal

• Market-based

• Public

Risk Management Arrangements: Informal

• Self-protection through informal/personal arrangements

• Sidesteps information and coordination problems

• May be limited in effectiveness and expensive in terms of direct and opportunity costs

Risk Management Arrangements: Market-based

• Use of market-based institutions (banks, money, insurance companies, etc.)

• Requires well-functioning financial markets and some degree of financial literacy

Risk Management Arrangements: Public

• Useful when informal and market-based strategies are non-existent or are dysfunctional

• Coverage in developing countries are typically low

Examples of Public Arrangement mechanisms

• SSS - Provides financial benefits in cases of retirement, disability, sickness, maternity, and death.

• PAG IBIG - Members can borrow at lower interest rates for home loans

• Philhealth - Beneficiaries can get discounts on hospital bills and access free health services for certain conditions (e.g., dialysis, chemotherapy)

• 4Ps, SocPen - Conditional cash transfers

Participatory Development

• Emphasizes the active involvement of all stakeholders, particularly the intended beneficiaries

• Necessity of the people’s participation in the development process and in defining development goals

Participatory Development: Empowerment

• Increasing the capacity of the community to make decisions

• Examples – capacity building (education, training), providing necessary resources and information to community members

Participatory Development: Devolution

• Transferring decision-making resources and responsibilities to local communities or local government bodies

• Examples – Transferring decision making-authority from central government to local government and community, allowing local entities to control financial and material resources