The Study of Public Policy Public Policy 1 2 3 4 Preamble What the government does or does not do about public problems Public policy is when the government replaces individual choice with collective choice Constitutional Justification a Tension in Public Policy a b Individual Liberty versus Collective Choice In anarchy Thomas Hobbes says life is solitary poor nasty brutish and short How do we decide the appropriate level of government involvement c Normative Statement 1 2 3 Expresses a value judgment about whether something is desirable Subjective Uses words like should a Not falsifiable Empirical Statement 1 Expresses a fact about the state of the world b c Objective a statement of fact Often posed as if then statements i ii Hypothesis falsifiable Be careful some empirical statements are not true Logical Argument 1 Preferences about policy Deontological Ethics 1 2 Teleological Ethics 1 Moral imperatives things that must be done regardless of the consequences duties Differences are hard to overcome Only do something if the consequence of the action is desirable actions are seen as instrument to achieve some goal utilitarianism Values in Public Policy Analysis 2 2 3 4 5 Values in Public Policy Analysis 1 Deontological b c d e Teleological a b c d e Individual liberty Communitarianism Respect for all human life Civic duty patriotism Effectiveness Efficiency Equity Sustainability Feasibility technical and political Market Efficiency 1 Scarcity implies the need to ration goods and services b c There are many ways to do this Goods are efficiently providing to the extent that they provide the maximum net benefits to society i ii iii Net benefits benefits cost Benefits to consumers Costs to producers Put differently there is no way given the current technology that the good can be produced at less cost and still provide the same amount of benefits to society Market economies allocate goods through the price mechanism Assertion 1 free markets efficiently provide goods and services a Competition lowers costs of production and therefore lowers prices for consumers Caveat certain conditions must be met Isn t there a lot of waste in open market economies i Planned Economy A committee decides how goods and services will be allocated What information does the committee have access to ii Generally not as efficient as market economies Goods are allocated according to need or some other criteria Markets are often inequitable a Caveat Equity in outcome not in terms of process b Planned Economies a b Equity 1 2 Market Failure Instances when free markets produce an inefficient allocation of resources b We could produce the goods or service more cheaply or that provide more benefits No competition Exists when a single business provides a good for which there are no close substitutes b Antitrust laws Also note oligopolies Natural Monopoly a A single business can supply a good or service to the entire market at a smaller cost than could two or more business Market Failure 1 Monopolies 1 2 3 4 5 2 Regulations Externalities 1 The uncompensated impact if one person s actions on the well being of a bystander Two types a Negative external cost one person s actions impose costs on a bystander i ii My actions hurt someone else Not only inequitable but inefficient 1 From a social point of view I don t consider other people s costs in my behavior b Positive external benefit one person s actions impose benefits on a bystander i ii My actions help someone else Inefficient because I don t consider all the benefits I give to others Information Asymmetries 1 2 3 One person in a market transaction has more information than another Incomplete information for consumers to make good decisions on their own Not a problem for certain items a Not complex items we can understand their purchase b We consume them frequently we can adjust behavior c No big costs if we get it wrong We can make really bad decisions 4 Collective Action Problems 1 Doing what is in your own self interest is not in the interest of the larger 1 Doing what is in your own self interest is not in the interest of the larger group society b c Cooperation problems IF everyone cooperated we would all be better off but each of us has an incentive to be uncooperative Government Failure 1 When public policy causes a more inefficient allocation of goods and services than would occur without the policy b Just because the market fails does not mean that the policy solution will somehow automatically fix the problem No need to be dogmatic sometimes the market fails and sometimes the government fails c Median Voter Theorem 1 Congressional Districts b Members of Congress move towards the center within their district i Some district highly conservative some highly liberal ii Increasingly more polarized in last few years Interest of the country or interest of their district i Trade favors with others logrolling c 2 Incentives of Voters a Voting i Cost benefits 1 2 Limitations of voting 1 2 ii b c Political involvement Ignorance about policy Does it matter if you vote Does it matter which population gets elected Cannot express intensity of preference Votes for bundles rather than specific Common Pool Resources 1 A resource for which it is difficult to exclude other people from accessing and for which there is no joint consumption users consume resource units separately Incentives of Special Interest Groups 1 Lobbying b Seek policies for which they benefit i ii Policies can provide enormous monetary benefits Usually special favors outweigh costs of lobbying c Usually special favors outweigh costs of lobbying ii Society as a whole pays the costs of these favors i Voters are inattentive Inefficient policies 2 Incentives for there Bureaucracy 1 2 Not usually lazy Constricted by the incentives a The public special interests congress president Pulled in many directions To help address the problems they deal with Oversight i ii Want larger budgets i b Policy Advice 1 Two types of public policy to solve the tragedy of the commons b Private land Have the government assign private property rights i Have the government manage the commons i National Parks c The cure can be worse than the problem Terms 1 2 2 Collective Good b Common Pool Resources a The general good of all people in a community state or nation Resources that are shared by a society and available to all to consume such as oceans lakes rivers and public lands Also represents a type of market failure in which is
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