A Response to Professor Ochoa
I’m grateful to Professor Ochoa for her thoughtful contribution. By way of reply to her post, I want to mention a couple of issues that I think are difficult puzzles for those of us who write in this area.
First, I particularly like Professor Ochoa’s suggestion that I include information about corruption and governance when assessing whether a SWF should be permitted to invest abroad. Doing this would help sharpen my point nicely. This comment—and the weakness in my paper that the comment helps to address—shows the problem with work, like mine, that makes use of empirical studies and other data-driven approaches without actually doing empirical work. So for me the puzzle is how to make the strongest possible case based on evidence that is suggestive but not conclusive. Professor Ochoa’s post points to why this is important. In my paper, I included Chile on the list of states that simultaneously accept development assistance and maintain substantial sovereign wealth funds. The inference I drew from this anomaly is that regimes in need of so much assistance even when holding large currency reserves might be insufficiently accountable to their people. Professor Ochoa’s post showed one way to sharpen my analysis by suggesting other measures of accountability. But even with her contribution, I’m still not sure how strong an inference I should draw from my own statistics. Put another way, when is it acceptable to use a coincidental relationship as evidence—even with the appropriate disclaimers—in scholarship?
The second puzzle is more closely related to the substance of my paper and Professor Ochoa’s post. In my work on globalization and human rights, I have often cited the salutary effects of transparency on reducing official corruption and enhancing public accountability. But I’m no longer sure why I and others are so certain that transparency is beneficial. Other things equal it’s surely better to be transparent than not. But how large an effect does transparency have? The current financial crisis suggests that raw data isn’t enough to provide useful guidance to sophisticated investors. How big a role should transparency play in any attempt to reduce corruption or increase accountability?