institutions for effective business-government collaboration: micro mechanisms and macro politics...

they may be considering taking jobs in the private sector after leaving government. Lastly, if business representatives are technical staff, they may be less motivated by rent seeking than business owners (see Appendix B on technology policy in Korea).

Monitoring is made difficult by both the cost of information and the asymmetry.

Information is less costly in policies designed to promote easily measurable outcomes like increased production or exports, but gets far more costly in policies designed to promote upgrading, innovation, or R&D. Moreover, business has the information as well as incentives to use it to their advantage. In principle, councils can vastly reduce the cost and asymmetry problems, but the cost reductions are less likely to result from clever institutional design than from the reiterated exchanges necessary to build credibility and trust. Ideally, trust lowers barriers to information sharing, which in turn provides the basis for evaluating what worked and what did not, and engage in collective problem solving to devise better industrial policies.

In sum, the institutional engineering of councils to maximize the benefits of dialogue while minimizing the risks of rent seeking is delicate, complex, and risky. There are many ways for councils to degenerate, collapse, or vegetate. Some of the causes of dysfunction seem readily apparent, as in forums that are too large, diverse, or politicized, or councils that meet infrequently or suffer high turnover among members. Overall, it is not surprising that so few councils live up to expectations. The next section reviews a range of councils that have, for the most part, helped improve policymaking.

2.3. Scope, Function, and Benefits of Councils: Some Empirics A fundamental distinction, noted earlier, revolves around the difference between councils designed to change the activities of government (passive policy) and councils intended to alter the behavior of business (active industrial policy). The former are often characterized as competitiveness councils or PPD and generally aim to reduce the cost of doing business by reforming what governments do. These passive policies are easier to negotiate and do not require monitoring or sanctioning of business, and so are not covered much in this section. The second kind of policy and council aims to change the private sector, the realm of active industrial policy.

This conceptual distinction is crucial because the expectations of private-public interaction differ so much. However, in practice some of the specific instruments and measures may look similar (e.g., port reform). The mostly successful examples summarized in this section are a small 15