Public Policy

Lecture 8

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Goals and tradeoffs:

policy paradox

Multiple interests - multiple goals

• A rational decision depends on the goals of the decision maker
• Thinking rationally = means to keep attention on real goals
• Multiple goals can lead to a conflict of interest

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What goals are meant?

People's interests, people’s goals

“People talk about their main goals, but they pursue other, different ones.”

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Professional goals

Personal goals

Goals of member of society, of family

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Person - a student, a child, a future parent, a friend, a professional, a worker, a sport player, a social activist ...

What is the most important goal or role to focus on?

Society and culture push us to choose one.

Should we choose? Or is it possible to combine them somehow?

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Nash equilibrium - mixed strategies

• In case of conflicting interests you cannot choose one specific strategy (alternative), so the problem is solved in mixed strategies: the solution is a mixture of different options in a certain proportion, depending on their "weight" or information.

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Compromise is always possible, needed, and can always be achieved.

Triangle of sacrifices in DM

You can pick only two

The balance point shifts towards the most important goal.

Deborah Stone, professor of Political science, specializes in analyzing the politics of policymaking in advanced industrial states as well as developing countries. She is most known for her textbook on the topic, Policy Paradox: The Art of Political Decision Making, which has had four editions over 25 years and has been translated into five languages.

Goals of Public Policy

1. Equity (justice) and Equality
2. Efficiency
3. Security
4. Liberty

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Model

Market

Poor society?

person – community – region – country ?

Person as a part of community

We usually generalize the problem to the whole community, and we believe that all policy will work both on a small scale and on a large scale.

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Community

• is “a group of people living in the same place or having a particular characteristic in common”.
• What are the differences between political and cultural communities (are they the same?)
• Much more complex than a simplified “Robinson Crusoe” society.
• Who is a community member?
• working people (taxpayers)
• retared people
• unemployed
• Illegal immigrant
• Young people who could go to war but not vote.

Features of a Community

• Common goals - Is it a sum of individual goals?
• Many people believe in public interest – what is this? (well-being of the general public -> "veil of ignorance")
• Common Problems
• Actions with private benefits that involve social costs (pensions)
• Social benefits that require private sacrifices (Tax payments for education and army)
• The challenge: to ask people to give up some benefits or make some sacrifice for the common good.
• Influence
• People are subject to influence and manipulation, are not just utility-maximizing actors
• community can in influential
• The challenge is to create a system that allows for influence but doesn’t become mandatory in the most negative sense. (Advertising! )

Features of a Community

• Cooperation. People have to cooperate to achieve the common goals
• However: Markets don’t require cooperation: they rely on voluntary exchange relationships that come and go.
• Loyalty. In the market, each transaction is assumed to be a unique, one-shot event.
• Contrast: Community involves friends, commitments, longer term relationships between people and groups.
• Information: Market, assumed to be “perfect” and open.
• The community should not be open - groups are trying to find and discredit one information, while profiting from other information. -> “traditions”, “history”, tendencies “because the fathers did it”….

Where can people, as part of a community, fulfil their goals?

Market. A social system in which individuals pursue their own welfare by exchanging things with others whenever trades are mutually beneficial .

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What are the assumptions of a market system

a) Individual interest and benefit

b) One to one exchanges

c) Perfect information

d) Mutual benefit (not a zero sum game)

Problems with the market model

a) Markets are not about the public interest

b) Policy making is often not voluntary

c) In politics (or, in fact, in the markets) there is rarely useful information available to everyone

d) the community is not needed for market exchanges, but for the community, society, politics is an absolute necessity.

The opposite of the market is Polis.

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Polis is from the Greek word for "city-state" (which is also the root of our words "politics" and "policy"), used to refer to a relatively small political community, but the results and conclusions should work for the whole society.

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Deborah Stone “Policy Paradox”

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The real Polis

• The Multifunction Polis (MFP) was a scheme for a planned community in Australia proposed in 1987 and abandoned in 1998.
• It was imagined as a place where work and leisure, lifetime education and intercultural exchange, research and manufacturing would be uniquely integrated.
• The MFP was intended to have an initial population of 100,000, though some modelling was done on the assumption of a population up to 250,000.
• Futuristic infrastructure and modern communications were expected to help attract high-tech industries. Asian investors were targeted as an important source of funds (mostly from Japan).
• Several possible locations were put forward and in 1990 a site at Gillman, north of Adelaide, was selected. The proposal generated noisy opposition in Australia, with some critics claiming it would open the way for a Japanese settlement on Australian soil. But the MFP, at least as originally pictured, never happen.

Concepts of society: Market vs Police

Unit of analysis

Motivation

Conflict

Source of ideas

Nature of activity

Criteria for DM

Block of social action

Information

Law

Sources of change

Individual

Self-interest

Self-interest vs Self-interest

Self-generation

Competition

Max self-interest, min cost

Individuals

Accurate, complete, available

laws as limitations

Material exchange

Community

Public interest

Self-interest vs Public int.

From outside

Cooperation

Loyalty, public interest

Groups and organizations

Incomplete, manipulated

laws of passion

Ideas, alliances, persuasion

Where can people, as part of a community, fulfil their goals?

The opposite of a market economy is a planned economy, also called a command economy. Socialism

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• a political and economic theory of social organization which advocates that the means of production,

distribution, and exchange should be owned or

regulated by the community as a whole.

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Socialism = Total government

Control = government monopoly

Deborah Stone's four goals of public policy

1. Equity (justice) or Equality
2. Efficiency
3. Security
4. Liberty

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Are these goals obvious?

Can they be reached at the same time?

1. Equity

• “Every policy involves the distribution of something.”
• A distributive conflict is any conflict where equity is the goal.

The paradox of distributive problems:

• “Equality may in fact mean inequality; equal treatment may require unequal treatment;
• The same distribution may be seen as equal or unequal, depending on one’s point of view.”
• Equality = uniformity in distribution, sameness
• Equity = “distributions regarded as fair, even though they contain both equalities and inequalities”

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Equity and justice �

• Gender & IDA: Fostering gender equality and empowerment (World Bank) 3 min
• Innovative public policy for improving social mobility in developing countries 1min

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There are different kinds of equality

• These are based on
• The recipients of a public good
• The item that is being distributed
• And the process by which the thing is distributed

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Equality means

• rights
• opportunities

Equity = who gets what, when and how

• D. Stone lists at least eight different ways one can use equity language to distribute a good, often in ways that you would consider to be unequal.
• By recipients:

1. Membership unequal invitations/ equal slices

2. Rank-based distribution equal ranks/equal slices, unequal ranks/unequal slices

3. Group-based distribution equal blocs/unequal slices

• By items:

4. Boundaries of the item equal meals/unequal slices

5. Value of the item equal value/unequal slices

• By process:

6. Competition equal forks/unequal slices

7. Lottery equal chances/unequal slices

8. Voting equal votes/unequal slices

The Equity is fairness

• Equity is a Rule of game

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• The recipients
• The item
• The process

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Equity is what you think is fair in this particular case

2. Efficiency. What is efficiency?

• It is a ratio between inputs and outputs
• It is very difficult to measure efficiency in the public policy sector

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• Why? What are the inputs?
• Labor
• Materials
• Expertise
• Other intangibles
• What are the outputs?
• Products
• Services
• Values The Problem with Foreign Aid

• “Getting the most output for a given input”
• “Achieving an objective for the lowest cost”
• “Efficiency is not a goal itself, but it is a means to an end”.

Efficiency is not a goal!

• Efficiency is an idea, measure of judging.

• The market is often considered a model of efficiency, but the market is about making a profit.
• Government regulation Market failures reduce market efficiency

3. Security = need

Need – things that should be available because they are essential

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Needs are difficult to define in objective and countable terms when you consider symbolic meanings (e.g. food and its ritual significance).

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A need is not necessarily a biological issue, but a social, cultural or political one.

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Public needs are always have to be distributed

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4. Liberty

Liberty – the state of being free within society from oppressive restrictions imposed by authority on one's way of life, behavior, or political views.

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• People are free to unless their actions cause some sort of harm to others

This is Mill's liberty principle (also known as the harm principle) is the idea that each individual has the right to act as he/she wants, as long as these actions do not harm others (J.S. Mill, “On Liberty”1860)

This liberty is a negative liberty, it is freedom from other people's interference. "Having no masters"

• Positive liberty is the possession of the capacity to act upon one's free will, as opposed to negative liberty, which is freedom from external restraint on one's actions. "Allow individuals to become their OWN masters".

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Understanding Liberty in the Context of Public Policy.

• Obligations to the community
• Structural harms: damage to the ability of the community to function as a community
• Accumulative harms: harms if everybody starts doing it, like cutting across lawns, sewage dumping, jaywalking
• Harms to a group that result from harms to individuals: racial and gender discrimination, for example.

Liberty = Responsibility

Liberty – is it a universal idea?

• Russian dictionary:
• Freedom (or liberty) is the state of the individual in which he/she is the determining cause of his/her actions, that is, they are not directly caused by other factors, including natural, social, interpersonal, communicative and individual
• Anarchy - ”lack of leadership; non-controllability; independence"
• English “Liberty is the power or scope to act as one pleases” = anarchy
• Anarchy refers to the state of a society being without authorities or a governing body

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Why this is so important

• The idea "I am my own master”(positive) is opposite to “I am slave to no man ”(negative) – is the central in Social liberalism (or modern liberalism in the United States) – a political ideology that endorses a regulated market economy and the expansion of civil and political rights.
• A social liberal government is expected to address economic and social issues such as poverty, health care, education and the climate change using government intervention with a focus on individual rights and autonomy.

The way how the society interprets the liberty dictates the goals, methods and implications of PP in the country

Tradeoffs between liberty and security: �

• If we value security, we granted greater powers to government (and society) to make us secure
• If we provide economic security to the poor and the unemployed, do we grant them security at the cost of their liberty (i.e., their freedom of action)?
• If we value liberty, we place security in the hands of the family or household, thereby eliminating government intrusion

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What do vulnerable members of society prefer:

freedom or security?

People in need should be treated differently

Goals are universal but require compromise

Summary

• Any public policy pursues several goals. They can contradict each other, so you always have to find a compromise that suits all parties.
• The solution is ALWAYS tradeoff between the goals, so the information about importance of those goals are crucial.
• The way how the society interprets the liberty dictates the goals, methods and implications of PP in the country
• Market model can not serve the community goals.
• Government is not a market participant. If it is, sooner or later it will lead to government monopoly, which is equal to socialism.

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