PUP3003 0001 AUGUST 28 2014 1 Public Policy a What the government does or does not do about public problems i How to government decides on how to or how not to approach these problems b Public policy is when the government replaces individual choice with collective choice c Tension in public policy Individual liberty versus collective choice In anarchy Hobbes says life is solitary poor nasty brutish and short i ii iii How do we decide the appropriate level of government involvement 2 Normative Statement a Expresses a value judgment about whether something is desirable something that cannot be verified i Subjective an opinion ii Uses words like should 1 Not falsifiable a EX people should not pay high taxes 3 Empirical Statement a Expresses a fact about the state of the worlds i Objective a statement of fact ii Often posed as if then statements 1 Hypothesis falsifiable 2 Be careful some empirical statements are not true a EX If the government raises taxes then companies will hire fewer workers b Differences in Opinion c Empirically based d Value based i What does the science say ii We can test these i Values not universal ii Multiple values involved iii Which are important to you 4 Types of values Individual liberty a b Communitarianism c Civic duty patriotism d Effectiveness e Efficiency f Equity g Feasibility technical and political 5 Policy Science a Can we study public policy scientifically b What is science A B C people often unwilling to compromise on these i A list of empirical data either qualitative or quantitative statements ii A method 1 Theory 2 Hypothesis 3 Empirical Test 4 Conclusion 5 Revise Theory c Logic and Policy Preferences i Preferences about policy are usually articulated as normative statements what should shouldn t the government do in situation X ii A logical argument 1 Connects a normative statement with an empirical statement 2 Reaches a conclusion about preference for a policy a EX i Normative Teenagers should make informal sexual decisions ii Empirical If should adopt comprehensive sexual education then teenagers are more likely to make informed sexual decisions iii Policy preference based on logical arguments Therefore schools should provide comprehensive sexual education d Limits of Policy Science i We can identify if policies 1 Promote liberty communitarianism or patriotism 2 Achieve efficiency equity effectiveness or are feasible ii We cannot identify which of these values should be prioritized 1 You must decide what you value iii A note about this class 1 Emphasizes empirical statements 2 Respect others values September 2 nd 2014 1 Market Efficiency a Scarcity implies the need to ration goods and services i There are many ways to do this ii Goods are efficiently providing to the extent that they provide the maximum net benefits to society 1 Net benefits benefits cost 2 Benefits to consumers when you buy an apple you benefit from eating that apple 3 Costs to producers the cost of producing the apple with having the orchard iii 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 b Market economies allocate goods through the price mechanism i Assertion 1 open and competitive markets efficiently provide goods and services 1 Competition lowers cost of production and therefor lowers prices for consumers 2 Caveat certain conditions must be met there cannot be market failures a EX What would happen is an orchard used expensive labor paid its workers 20 per hour to pick apples i Their apple prices would be higher than other orchards ii Grocery stores would buy apples from the cheaper orchards iii The orchard would have to use cheaper labor or go out of business c Planned Economies i Isn t there a lot of waste in market economies 1 Planned economy a committee decides how goods and services will be allocated 2 What information does the committee have access to 3 Generally not as efficient as market economies a Starting a restaurant i You want to serve salad ii Suppose you were on the restaurant committee in a planned economy 1 What would you have to plan EX where to get lettuce iii Suppose you are in a market economy and want to start a restaurant 1 What would you have to plan 2 Equity a That goods are allocated according to need or some other criteria b Does everyone who needs a salad have a salad i Assertion 2 Markets are often inequitable 1 Caveat here we re talking about equity in outcomes not in terms of process a Instances when free markets produces an inefficient allocation of resources i i e we could produce the good or service more cheaply or that provide more benefits 3 Market Failure 1 Monopolies a Exist when a single business provides a good for which there are no close substitutes i No competition ii Consequences b Antitrust laws c Also not oligopolies d Natural Monopolies i A single business can supply a good or service to the entire market at a smaller cost than could two or more businesses ii EX Utilities in Tallahassee iii Regulations a The uncompensated impact of one person s actions on the well being of a bystander b Two types i Negative externality external cost ii Positive externality external benefit one person s actions impost costs on a bystander One person s actions impose benefits on a 2 Externalities bystander 3 Information Asymmetries a One person in a market transaction has more information than another i Incomplete information for consumers to make good decisions EX a mechanic craigslist insurance companies ii Not a problem for certain items e g food 1 Not complex items we can understand their purchase 2 We consume them frequently can adjust behavior 3 No big costs if we get it wrong iii We can make really bad decisions 4 a b c d 5 Collective Action Problems Information Asymmetry Problems Health insurance College loans Home purchases Care purchase repair a Doing what is in your own self interest is not in the interest of the larger group society i Cooperation problems ii If everyone cooperated we would all be better off but each of us has an incentive to be uncooperative September 4 2014 1 Policy Gridlock a A situation where it is difficult to advance new policy or change existing policy Incrementalism policies usually only change gradually incrementally i b Gridlock is by design i Federalism separates policy between states central government ii Separation of powers separates policy between legislative executive and
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