Political Settlements and the Design of Technology Policy

Technology policies have a dual character. They are technical instruments for addressing important contracting failures affecting technology acquisition and at the same time they are interventions that inevitably create new sources of incomes or rents. These two aspects of technology policies are closely related because the intensity and effectiveness of the rent-seeking strategies of different organizations can explain why particular technology policies are effective or ineffective. One of the puzzles in global comparisons of the performance of technology policies is that policies that worked well in one context fared less well in others, and policies with apparently inferior design characteristics worked better in some contexts compared to policies that were more straightforward. We can make sense of these paradoxes by examining the policies in question in the context of the organizations affected by the policy. The “political settlement” is our shorthand for describing the distribution of bargaining power and technical capabilities across the relevant organizations in that society. A specific technology policy generates rents across different organizations and requires these rents to be allocated and managed in particular ways to achieve the desired outcomes. The political settlement describing the relative power of different organizations can therefore help to explain why the outcomes of similar policies can vary significantly across contexts. This analysis can also help to design better policies in countries in Africa and Asia that have had mixed experiences with technology policies in the past.