Post on 16-Dec-2015
Public Policy: Objectives and Principles
Roger Kerr
What is public policy?
“The framework of institutions, laws and programmes laid down by the arms of government (parliament, the executive and the judiciary) that regulate the economy and wider social interactions.”
SINGAPORESINGAPORE
IRELANDIRELAND
HONG KONGHONG KONG
If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In forming a government which is to be administered by men over men, the great difficulty lies in this: you must first enable government to control the governed; and in the next place oblige it to control itself.
James Madison, 1788
The government’s role is whatever the government defines it to be.
Helen Clark, 2003
Objective of public policy
Human flourishing
- not just about economy, monetary values, efficiency
- encompasses fairness, environmental quality, freedom
What do we mean by human flourishing?
‘Human flourishing’
People have different preferences know own interests best are rational are opportunistic never have total information have to work through agents
… more issues
Markets vs government- not that simple/accurate- markets require rules
Regulation vs common law
All arrangements are imperfectAll arrangements are imperfect
A better starting point for thinking
about
public policy
Market exchanges
Politics/collective choice
Voluntary cooperation
Voluntary cooperation
Dominant means of getting what we want
Norm in families, small groups
Also clubs, associations, charities
Involves redistribution within families and through altruism
Works best in ‘face to face’ settings
But can’t run a large society that wayBut can’t run a large society that way
Market exchanges
Essential for society at large
Gains from specialisation and trade
Prices- transmit information- coordinate plans
- markets continuously adjust
Consumers’ interests paramount
But - market failuresBut - market failures
Politics
Voting mechanism is imprecise - candidates, parties, electoral systems, accountability
Coercion - not mutual benefits, as with markets & voluntary cooperation
Tyrannies of majorities and minorities
We won, you lost, eat that!
Political market failuesPolitical market failues
Failures in private markets
Public goods eg street lights
not worth producing privately
Externalities eg pollution
ubiquitous; many private solutions
Monopoly eg air traffic control
Test to apply: will government intervention improve things?Test to apply: will government intervention improve things?
Failures in political markets
Self-interest also present
Decisions based on political benefits, not public benefits
Short-termism
Information problems
Costs of mobilising in the public interest
(farmers = farm subsidies)
Other problems with government
Policy errors
Monopoly (statutory or de facto)
Rent-seeking
Tendencies to over-spend and over-regulate
Failures in core roles (personal security, infrastructure)
….other problems with government
Safety net can create dependency
Bureaucracy and judiciary – will they do what’s intended?
Deadweight costs of taxation
Upshot?
No ideal yardstick
Political/government failures routine, not exceptional
Must compare real-world alternatives
In choosing among real world alternatives
Focus on incentives
Bias in favour of economic freedom
Implies limited governmentImplies limited government
How do we constrain government ?
Separation of powers
- Legislature
- Executive
- Judiciary
- Central/local
How do we constrain government ?
Economic constitutions
Sound processes
Regulatory Responsibility Bill
Taxpayer/Ratepayer Bills of Rights
Public policy and business management
A country is not a company
National central planning doesn’t work
Different skill requirements
Problems with DIY economics
Conclusions
Good public policy: institutions that promote human flourishing
There is a significant role for government,
but
individuals need protection from government abuse
governments don’t necessarily act in the public
interest
remedy of government intervention sometimes
makes things worse
The biggest public policy mistake:
to expect too much of government
The challenge:
how to restrain government to what it does well