The Study of Public Policy !Public PolicyWhat the government does or does not do about public problemsPublic policy is when the government replaces individual choice with collectivechoiceConstitutional JustificationPreambleTension in Public PolicyIndividual Liberty versus Collective ChoiceIn anarchy, Thomas Hobbes says life is “solitary, poor, nasty, brutish, andshort”How do we decide the appropriate level of government involvement Normative StatementExpresses a value judgment about whether something is desirableSubjectiveUses words like “should”Not falsifiableEmpirical StatementExpresses a fact about the state of the worldObjective: a statement of factOften posed as “if…then…” statementsHypothesis; falsifiableBe careful… some empirical statements are not true Logical ArgumentPreferences about policy Deontological EthicsMoral imperatives; things that must be done, regardless of the consequences;dutiesDifferences are hard to overcome Teleological EthicsOnly do something if the consequence of the action is desirable; actions areseen as instrument to achieve some goal; utilitarianism Values in Public Policy Analysis1)2)3)a)4)a)b)c)1)2)3)a)1)b)c)i)ii)1)1)2)1)Values in Public Policy AnalysisDeontologicalIndividual libertyCommunitarianismRespect for all human lifeCivic duty / patriotismTeleologicalEffectivenessEfficiencyEquitySustainabilityFeasibility (technical and political) Market EfficiencyScarcity implies the need to ration goods and servicesThere are many ways to do thisGoods are efficiently providing to the extent that they provide themaximum net benefits to societyNet benefits = (benefits - cost)Benefits to consumersCosts to producersPut differently, there is no way, given the current technology, that the goodcan be produced at less cost and still provide the same amount of benefits tosocietyMarket economies allocate goods through the price mechanismAssertion 1: free markets efficiently provide goods and servicesCompetition lowers costs of production and therefore lowers prices forconsumersCaveat: certain conditions must be metPlanned EconomiesIsn’t there a lot of waste in open market economies?Planned Economy: A committee decides how goods and services will beallocatedWhat information does the committee have access to?Generally not as efficient as market economies EquityGoods are allocated according to need (or some other criteria)Markets are often inequitableCaveat: Equity in outcome not in terms of process Market Failure1)b)c)d)e)2)a)b)c)d)e)1)b)c)i)ii)iii)2)3)4)a)b)5)a)i)ii)b)1)2)a)Market FailureInstances when free markets produce an inefficient allocation of resourcesWe could produce the goods or service more cheaply or that provide morebenefits MonopoliesExists when a single business provides a good for which there are no closesubstitutesNo competitionAntitrust lawsAlso, note, oligopoliesNatural MonopolyA single business can supply a good or service to the entire market at asmaller cost than could two or more businessRegulations ExternalitiesThe uncompensated impact if one person’s actions on the well-being of abystanderTwo typesNegative (external cost): one person’s actions impose costs on abystanderMy actions hurt someone elseNot only inequitable, but inefficientFrom a social point of view I don’t consider other people’s costs inmy behaviorPositive (external benefit): one person’s actions impose benefits on abystanderMy actions help someone elseInefficient, because I don’t consider all the benefits I give to others Information AsymmetriesOne person in a market transaction has more information than anotherIncomplete information for consumers to make good decisions on their ownNot a problem for certain itemsNot complex items, we can understand their purchaseWe consume them frequently, we can adjust behaviorNo big costs if we get it wrongWe can make really bad decisions Collective Action ProblemsDoing what is in your own self-interest is not in the interest of the larger1)b)1)b)2)3)4)a)5)1)2)a)i)ii)(1)b)i)ii)1)2)3)a)b)c)4)1)Doing what is in your own self-interest is not in the interest of the largergroup (society)Cooperation problemsIF everyone cooperated, we would all be better off, but each of us has anincentive to be uncooperative Government FailureWhen public policy causes a more inefficient allocation of goods and servicesthan would occur without the policyJust because the market fails, does not mean that the policy solution willsomehow automatically fix the problemNo need to be dogmatic,; sometimes the market fails and sometimes thegovernment fails Median Voter TheoremCongressional DistrictsMembers of Congress move towards the center within their districtSome district highly conservative; some highly liberalIncreasingly more polarized in last few yearsInterest of the country or interest of their district?Trade favors with others - logrollingIncentives of VotersVotingCost/benefitsDoes it matter if you vote?Does it matter which population gets elected?Limitations of votingCannot express intensity of preferenceVotes for “bundles” rather than specificPolitical involvementIgnorance about policy Common-Pool ResourcesA resource for which it is difficult to exclude other people from accessing,and for which there is no joint consumption (users consume resource unitsseparately) Incentives of Special Interest GroupsLobbyingSeek policies for which they benefitPolicies can provide enormous monetary benefitsUsually special favors outweigh costs of lobbying1)b)c)1)b)c)1)b)i)ii)c)i)2)a)i)(1)(2)ii)(1)(2)b)c)1)1)b)i)ii)Usually special favors outweigh costs of lobbyingSociety as a whole pays the costs of these favorsVoters are inattentiveInefficient policies Incentives for there BureaucracyNot usually lazyConstricted by the incentivesOversightThe public, special interests, congress, presidentPulled in many directionsWant larger budgetsTo help address the problems they deal with Policy AdviceTwo types of public policy to solve the tragedy of the commonsHave the government assign private property rightsPrivate landHave the government manage the commonsNational ParksThe cure can be worse than the problem TermsCollective GoodThe general good of all people in a community, state, or nationCommon Pool ResourcesResources that are shared by a society and available to all to consume,such as oceans, lakes, rivers, and public lands. Also represents a type ofmarket failure in which is good is defined by its ability not to be jointlyconsumed and for which
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