The fourth section in Stone's book deals with solutions to policy problems. Stone lists five possible solutions: inducements, rules, facts, rights, and powers. Sometimes we refer to these solutions as policy instruments or policy tools. They serve as the mechanisms through which government or the community exerts its power on individuals to change their behavior. I chose to assign chapter 11 on inducements rather than one of the other chapters because inducements tend to be our preferred tool in American public policy.
Inducements are the common strategy of rewarding preferred behaviors and penalizing undesired actions. Sanctions and incentives are two-sides of the same coin. They allow the individual to choose his or her behavior but seek to alter the anticipated rewards or penalties for carrying out that behavior. The removal a sanction for good behavior or an incentive for bad behavior illustrates the inter-related nature of sanctions and incentives. This is especially true when we consider research in behavioral economics. Studies have shown that we feel a loss much more sharply than we feel a lack of gain. In other words, you would feel worse about a salary reduction of $300 a month than you would feel about not getting a raise of $300 a month even though they are numerically equivalent.
Inducements are based on the understanding of human behavior characteristic of economics. It assumes that individuals are rational, that they know what will make them happy, and that they act to maximize their happiness. In order for inducements to work individuals must have control over their behavior, they must know about the possible penalty or reward, and they must be able to change their course of action. When inducements are used to act on a group or another collective entity, these assumptions usually fail. At the vary least, it makes the rational decision-making process more difficult. Inducements must be designed differently in these cases to account for the processes of group decision-making in a particular context.
Inducements are also affected by time. It is rare for an incentive or sanction to be delivered immediately after a good or bad action occurs. Even when we can deliver such an inducement, it always occurs after the act. Individuals or groups must be able to anticipate such inducements before they carry out a behavior. Many of our financial incentives and sanctions are delivered through the tax code. This creates a gap in time of up to a year from when the behavior occurs to when the inducement is delivered. If individuals or groups do not believe they will personally have to deal with long-term penalties or receive long-term benefits, then the inducement will be ineffective.
Inducements tend to imply purposeful action. They may try to alter actions with either intentional or inadvertent causes, but they do little to alter mechanical or accidental causes over which individuals have no control. This is why causal stories can be very important. If you want to benefit or burden a group using inducements you have to be able to tell a story about purposeful actions. Although not assigned for this class, the documentary and book, Freakonomics tells a story about the use of monetary inducements to encourage students in a high school to improve their grades. The program seems to work for some students but does not for most of them. This is a common story in public policy. Any time we use a policy tool, particularly inducements to alter behavior we have three groups. We have a group who will always do the desired behavior, a group that will never do the desired behavior, and a group that will change its behavior in response to the right inducement. This group is called the marginal group. Designing a good inducement is difficult because we have to decide the correct value of the inducement and target it to the changeable group. This can bring up a tension between efficiency and equity. It would be more equitable to ensure that everyone who performs a good behavior is rewarded with an incentive, but it is not efficient to reward the group who would perform a good behavior without an incentive.
Although positive and negative inducements are two-sides of the same coin, they can have different effects in the polis. Positive inducements help communities to build trust, goodwill, and cooperation while negative inducements can create conflicts and divisions. Rewards build upon a shared sacrifice. The giver gives up the reward and the receiver gives up his or her desired behavior. Sanctions result in one or both parties experiencing a cost or loss. Of course, we must remember that whether rewards or sanctions are offered, they are both based on an unequal power relationship where one group or individual is able to change the behavior of another.
The design of inducements in the polis is an art. Large positive incentives can lead to excessive competition and even cheating. Large negative sanctions can lead to a reluctance to enforce them. Sanctions or rewards that require a lot of effort on behalf of the giver are often not carried out. Incentives and sanctions can easily become guarantees when the giver is perceived as having little will or power to remove them. When the giver and receiver are very different, there may be a misunderstanding about what type of incentive or sanction will change behavior. Symbolic understandings of need come into play because behaviors that are tied to identity are often impossible to change.
Of course, no inducement operates in isolation. Individuals and groups are motivated by their own desires, but also by inducements imposed by government, business, friends, family, colleagues etc. Even if we accept the assumption that humans are calculating and weigh costs and benefits before they act, an inducement instituted through the policy process is only one small influence on behavior. This is especially true when individuals can adapt their behavior to strategically avoid the consequences of a sanction or reap the rewards of an incentive when it is not really deserved. Going back to the Freakonomics example, if we targeted our incentive only to those students who were able to bring their grades up from a D or F to an A or B, we may see a group of formerly A or B students whose grades drop significantly so they can later receive the incentive for bringing their grades back up to A's or B's. We often refer to this as a perverse incentive, but it is really a consequence of individual rational choice and adaptability.
Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts
Tuesday, November 8, 2011
Tuesday, October 25, 2011
My Thoughts on Economic Policy
Given the current economic climate, I anticipate that this will be a busy week for discussions. I think that the materials provided for this week - the chapter from Peters, the Planet Money podcast, and the documentary - illustrate how broadly the government can intervene in the economy, how important the economy is to the political prospects of the President, and ultimately how little control the government actually has over what happens in the economy.
Although scholars agree that the government has little actual control over the economy, there is still some debate over the degree to which the government can or should intervene. If you have not already seen this "music video" explaining the difference between the Keynesian and Hayek-ian perspective, I highly recommend it.
Here we see both an Austrian school (laissez-faire) and a Keynesian (interventionist) perspective on what and how much government should do to address economic downturns. During the debt ceiling debate, Senator Dick Durbin stated that the debt ceiling bill "Put [Keynes] to his final rest", signaling a huge turning point in American macroeconomic policy and a return to a more laissez-faire approach to the economy. Of course, we have since seen President Obama present the American Jobs Act, which includes a vast array of Keynesian based proposals (government investment in infrastructure and public service and subsidized employment programs).
The video does not discuss the current prominent understanding of economics, the Chicago School neo-classical perspective associated with Milton Friedman and George Stigler. These economists prefer a laissez-faire form of capitalism similar to Hayek, but arrive at that recommendation through different assumptions and methodologies. Despite Obama's portrayal by some on the right as a "socialist", many of Obama's economic advisers follow the Chicago School approach to the economy, perhaps explaining some of his recent tax and budget compromises. Despite its popularity in conservative political circles, supply-side economics is rarely discussed as a serious theoretical approach to macroeconomic policy. Even when the Laffer curve is invoked, we often ignore the fact that there are two sides to the curve, one side where government revenue rises concurrent with taxation and another where it falls in response to higher taxation.
Perhaps the biggest disagreement among economists and politicians appears to be the mechanism through which government should act on the economy. As the podcast, How Do You Create a Job? illustrates, government can create conditions that are likely to create jobs either through reducing restrictions and taxation of business or through taxing and providing more services. We see this trade-off when localities attempt to attract business, as well. The key is finding the balance that fosters the creation of good jobs and provides services that government can deliver well. As this statement from the former CEO of Intel illustrates, low-taxes alone are not a good economic development strategy.
At this point in time, the future of the economy and government's role as a regulator and participant remains uncertain. We have seen a Keynesian approach with the stimulus package, a more supply-side approach with the extension of the Bush tax-cuts, and a Corporatist approach with the bailouts. Prior to the summer, the economy appeared to be on an upswing, although it was a comparatively anemic upswing in terms of job creation and unemployment. The manufactured debt ceiling crisis (itself a lesson in agenda-setting) seems to have stalled recovery due to uncertainty and anxiety about the American political process. Suddenly, we find ourselves in the midst of a likely double-dip recession with consumer confidence at a low-point and anger from both the political left and right coming to a head. The so-called super-committee is currently in negotiations to prevent another showdown similar to the debt ceiling crisis of the summer, but early reports seem to indicate that compromise will be difficult to achieve. The President has embarked on a "jobs tour" and is making job creation his current policy priority, but as we have seen, Congress appears unwilling to pass the American Jobs Act as it is written. In response, Obama has shifted his focus to the regulatory and implementation process to implement mortgage reform and other programs that his administration believes will stimulate the economy (If you need any further evidence that the policy stages process is not as neat and tidy as theory suggests, just look at how economic policy is currently progressing). Perhaps the biggest issue with our economy at the moment is inequality; with African Americans, Latinos, low-skilled workers, and the young facing extremely high unemployment and the erosion of wealth accumulated prior to the economic collapse. It is impossible to tell what the next few months will bring, but I can almost guarantee that discussion of the economy will dominate the 2012 elections.
Although scholars agree that the government has little actual control over the economy, there is still some debate over the degree to which the government can or should intervene. If you have not already seen this "music video" explaining the difference between the Keynesian and Hayek-ian perspective, I highly recommend it.
Here we see both an Austrian school (laissez-faire) and a Keynesian (interventionist) perspective on what and how much government should do to address economic downturns. During the debt ceiling debate, Senator Dick Durbin stated that the debt ceiling bill "Put [Keynes] to his final rest", signaling a huge turning point in American macroeconomic policy and a return to a more laissez-faire approach to the economy. Of course, we have since seen President Obama present the American Jobs Act, which includes a vast array of Keynesian based proposals (government investment in infrastructure and public service and subsidized employment programs).
The video does not discuss the current prominent understanding of economics, the Chicago School neo-classical perspective associated with Milton Friedman and George Stigler. These economists prefer a laissez-faire form of capitalism similar to Hayek, but arrive at that recommendation through different assumptions and methodologies. Despite Obama's portrayal by some on the right as a "socialist", many of Obama's economic advisers follow the Chicago School approach to the economy, perhaps explaining some of his recent tax and budget compromises. Despite its popularity in conservative political circles, supply-side economics is rarely discussed as a serious theoretical approach to macroeconomic policy. Even when the Laffer curve is invoked, we often ignore the fact that there are two sides to the curve, one side where government revenue rises concurrent with taxation and another where it falls in response to higher taxation.
Perhaps the biggest disagreement among economists and politicians appears to be the mechanism through which government should act on the economy. As the podcast, How Do You Create a Job? illustrates, government can create conditions that are likely to create jobs either through reducing restrictions and taxation of business or through taxing and providing more services. We see this trade-off when localities attempt to attract business, as well. The key is finding the balance that fosters the creation of good jobs and provides services that government can deliver well. As this statement from the former CEO of Intel illustrates, low-taxes alone are not a good economic development strategy.
At this point in time, the future of the economy and government's role as a regulator and participant remains uncertain. We have seen a Keynesian approach with the stimulus package, a more supply-side approach with the extension of the Bush tax-cuts, and a Corporatist approach with the bailouts. Prior to the summer, the economy appeared to be on an upswing, although it was a comparatively anemic upswing in terms of job creation and unemployment. The manufactured debt ceiling crisis (itself a lesson in agenda-setting) seems to have stalled recovery due to uncertainty and anxiety about the American political process. Suddenly, we find ourselves in the midst of a likely double-dip recession with consumer confidence at a low-point and anger from both the political left and right coming to a head. The so-called super-committee is currently in negotiations to prevent another showdown similar to the debt ceiling crisis of the summer, but early reports seem to indicate that compromise will be difficult to achieve. The President has embarked on a "jobs tour" and is making job creation his current policy priority, but as we have seen, Congress appears unwilling to pass the American Jobs Act as it is written. In response, Obama has shifted his focus to the regulatory and implementation process to implement mortgage reform and other programs that his administration believes will stimulate the economy (If you need any further evidence that the policy stages process is not as neat and tidy as theory suggests, just look at how economic policy is currently progressing). Perhaps the biggest issue with our economy at the moment is inequality; with African Americans, Latinos, low-skilled workers, and the young facing extremely high unemployment and the erosion of wealth accumulated prior to the economic collapse. It is impossible to tell what the next few months will bring, but I can almost guarantee that discussion of the economy will dominate the 2012 elections.
Tuesday, September 27, 2011
Do We Live in the Market or the Polis?
This week we switch gears to Deborah Stone's perspective on policymaking. Deborah Stone is a post-modern and interpretive policy scholar. This can be a difficult perspective for some people to grasp. It assumes that policy is really about story-telling, ideas, and argument. Policy analysts, policymakers, and citizens are not as concerned with trying to create efficient policies, but are instead using metaphors to try and make issues seem like one thing rather than another thing. The choice of these metaphors is strategic and meant to reinforce the worldview of the analyst, citizen, or policymaker.
Let's step back for a minute. What is Stone's book arguing against? She is arguing against the predominant view of policy choice as rational choice. The rational model stems from the market-based model of society. We have talked a little about this previously. In the rational model, the decision-maker goes through logical steps to make her decision. First she identifies the objectives or goals she wants to achieve, then she identifies alternative courses of action and the possible consequences of all the alternatives. She evaluates these possible consequences and selects the best alternatives. This should sound like the decision analysis process that Peters presented in chapter 4 (p. 89). Stone argues that this process is "missing the point" because politics is everything. Even in the rational model, decisions are ultimately political with the steps serving as rationalizations for the preferred choice.
In chapter one, Stone emphasizes the difference between the market model of society and the political model of society, which she calls the polis. Polis is the Greek word for city-state and she will use this term throughout the book to describe the model that she believes is closest to how the policy process really works.
We have talked a little bit about market failure in this class (see the notes on health insurance). Market failure occurs when individuals cannot use the rational decision-making process or when using the rational decision-making process does not lead to optimal societal outcomes. Some forms of market failure are commons problems, imperfect information, and externalities. These situations are seen as rare problems in the market model. In the polis, these are facts of life. This is because community is the major unit of analysis in the polis, not the individual. Everything we do has effects on the community and individuals think about both their self-interest and their community (or more appropriately communities) in their decision-making process. Tying the community interest to the self-interest of community members is the major policy issue in the polis. Information is never perfect in the polis by design. It is strategically manipulated and withheld by everyone. (Think about the last time you applied for a job, asked your professor for an extension, experienced a conflict with a loved one. My guess is that you strategically withheld certain information in these cases, as did the other party. It is socially expected to do so.)
There are two other major differences between the market and the polis. In the market, all resources are scarce and competition is the means of success. In the polis, many resources like social connections and advocacy skills grow with use. Stone calls this the law of passion. Stone published the first edition of her book in 1988, and we have since seen the introduction of these types of "anti-rivalrous" goods into market models. Open source software is the common example in the market because as more people use it, it becomes better and expands. The market also assumes that all individuals have equal power in transactions. In the polis, power is derived from all of the other components. Stone explains this much better than I can on page 32, "I save power for last because it is derived by all the other elements. Power cannot be defined without reference to them. It is a phenomenon of communities. Its purpose is always to subordinate individual self-interest to other interests - sometimes to other individual or group interests, sometimes to the public interest. It operates through influences, cooperation, and loyalty. It is based also on the strategic control of information. And finally, it is a resource that obeys the laws of passion rather than the laws of matter."
In summary:
The characteristics of the market model of society are:
Individuals are rationally self-interested utility maximizers. They make exchanges when trade is mutually beneficial Trading is not a necessity but a net benefit\ Competition for scarce resources They try to minimize costs and maximize benefits Competition leads to better outcomes for society.
The characteristics of the polis model of society are (from Stone p. 32):
Community is the major unit of composition with ideas, wills, goals etc. outside of the individual. There is a public interest beyond individual interests. Most policy problems are commons problems. Influence sometimes verging on coercion, cooperation, and loyalty are the major forms of interaction. Groups and organizations are the building blocks of the community. Information is never perfect. Some resources are scarce and rivalrous, but many are anti-rivalrous and abundant.
Stone believes that the polis model more closely represents the way we make and understand public policy.
It is important to keep these two models of society in mind as we continue with Stone. She uses a lot of examples from social policy - most notably, welfare and affirmative action - because of her background and interests as a scholar, but also because we can see the differences between these two models very clearly in the social policy arena. That does not mean that we cannot apply Stone to other substantive policy areas, and we will do just that as the course progresses.
So far, what do you think? Is this all just "touchy-feely" stuff or is Stone onto something? Do you think we are living in the market, the polis, or do you see evidence of both? Can you think of areas of policymaking where we rely on the polis model rather than the market model? Have you heard any politicians or scholars (aside from Stone) reference ideas from the polis model?
Let's step back for a minute. What is Stone's book arguing against? She is arguing against the predominant view of policy choice as rational choice. The rational model stems from the market-based model of society. We have talked a little about this previously. In the rational model, the decision-maker goes through logical steps to make her decision. First she identifies the objectives or goals she wants to achieve, then she identifies alternative courses of action and the possible consequences of all the alternatives. She evaluates these possible consequences and selects the best alternatives. This should sound like the decision analysis process that Peters presented in chapter 4 (p. 89). Stone argues that this process is "missing the point" because politics is everything. Even in the rational model, decisions are ultimately political with the steps serving as rationalizations for the preferred choice.
In chapter one, Stone emphasizes the difference between the market model of society and the political model of society, which she calls the polis. Polis is the Greek word for city-state and she will use this term throughout the book to describe the model that she believes is closest to how the policy process really works.
We have talked a little bit about market failure in this class (see the notes on health insurance). Market failure occurs when individuals cannot use the rational decision-making process or when using the rational decision-making process does not lead to optimal societal outcomes. Some forms of market failure are commons problems, imperfect information, and externalities. These situations are seen as rare problems in the market model. In the polis, these are facts of life. This is because community is the major unit of analysis in the polis, not the individual. Everything we do has effects on the community and individuals think about both their self-interest and their community (or more appropriately communities) in their decision-making process. Tying the community interest to the self-interest of community members is the major policy issue in the polis. Information is never perfect in the polis by design. It is strategically manipulated and withheld by everyone. (Think about the last time you applied for a job, asked your professor for an extension, experienced a conflict with a loved one. My guess is that you strategically withheld certain information in these cases, as did the other party. It is socially expected to do so.)
There are two other major differences between the market and the polis. In the market, all resources are scarce and competition is the means of success. In the polis, many resources like social connections and advocacy skills grow with use. Stone calls this the law of passion. Stone published the first edition of her book in 1988, and we have since seen the introduction of these types of "anti-rivalrous" goods into market models. Open source software is the common example in the market because as more people use it, it becomes better and expands. The market also assumes that all individuals have equal power in transactions. In the polis, power is derived from all of the other components. Stone explains this much better than I can on page 32, "I save power for last because it is derived by all the other elements. Power cannot be defined without reference to them. It is a phenomenon of communities. Its purpose is always to subordinate individual self-interest to other interests - sometimes to other individual or group interests, sometimes to the public interest. It operates through influences, cooperation, and loyalty. It is based also on the strategic control of information. And finally, it is a resource that obeys the laws of passion rather than the laws of matter."
In summary:
The characteristics of the market model of society are:
Individuals are rationally self-interested utility maximizers. They make exchanges when trade is mutually beneficial Trading is not a necessity but a net benefit\ Competition for scarce resources They try to minimize costs and maximize benefits Competition leads to better outcomes for society.
The characteristics of the polis model of society are (from Stone p. 32):
Community is the major unit of composition with ideas, wills, goals etc. outside of the individual. There is a public interest beyond individual interests. Most policy problems are commons problems. Influence sometimes verging on coercion, cooperation, and loyalty are the major forms of interaction. Groups and organizations are the building blocks of the community. Information is never perfect. Some resources are scarce and rivalrous, but many are anti-rivalrous and abundant.
Stone believes that the polis model more closely represents the way we make and understand public policy.
It is important to keep these two models of society in mind as we continue with Stone. She uses a lot of examples from social policy - most notably, welfare and affirmative action - because of her background and interests as a scholar, but also because we can see the differences between these two models very clearly in the social policy arena. That does not mean that we cannot apply Stone to other substantive policy areas, and we will do just that as the course progresses.
So far, what do you think? Is this all just "touchy-feely" stuff or is Stone onto something? Do you think we are living in the market, the polis, or do you see evidence of both? Can you think of areas of policymaking where we rely on the polis model rather than the market model? Have you heard any politicians or scholars (aside from Stone) reference ideas from the polis model?
Wednesday, September 7, 2011
Immigration Policy
The chapter on immigration policy provides a good overview of the history of our policies toward immigration and the current status of our federal immigration laws. Immigration is an issue that has been on the systemic agenda of the United States since the mid-19th century. During times of recession, depression, war, or turmoil immigration policy is moved to the institutional agenda, often as a scapegoat for economic and security fears. Immigration policy has historically only been on either agenda at the federal level, but for the past 15 years, immigration policy has been placed on an even more active agenda in many state legislatures. For this reason, I decided to match immigration policy with the theoretical chapter on agenda-setting.
Despite the fact that immigration policy has been on the institutional agendas at both the state and federal-levels since at least September 11th, 2001, it may have surprised you that the core of our immigration policy was created by the 1965 Immigration and Nationality Act. The law has been modified by the 1990 Immigration Act and the 1996 Illegal Immigration Reform and Immigrant Responsibility Act, but many of the provisions set forth in 1965 are still active. Did this surprise you at all?
Another thing that may have surprised you from the reading is that we place preferences and restrictions on immigration that make it easier for some immigrants to come through legal channels than others. We have tended to give preference to European immigrants over other nationalities, skilled workers over unskilled workers, and the extremely wealthy over all others. Refugees and members of current immigrants' immediate families also receive preferences. Did any of these preferences surprise you or seem unfair?
Since the mid-1990s, we have increasingly been concerned with the problem of illegal or undocumented immigration. I think that this chapter gives a nice balanced overview of the concerns of those on both sides of the debate. It makes clear that increased immigration, particularly illegal or undocumented immigration, may cause problems such as straining the education and public health systems. It may also create benefits through contributions to social security by young temporary immigrants and creating a supply for both extremely high and low-skilled jobs that Americans are either unwilling or unable to fill. Less obvious in the readings are the human rights concerns associated with a highly demanded underclass supply of labor. Certainly, immigration is a complex issue and one thing that both sides agree on is the need for reform.
One of the strongest parts of the chapter comes in the conclusion of the article. On page 420, Cochran et al. (2011) state:
The arguments over immigration often appear to be driven by anxieties that have nothing to do with immigrants. Immigration is easy to exploit as the cause of many of the nation's problems because immigrants are an easily identifiable and usually relatively powerless element of society. The nativist arguments resonate with people who fear what they do not know or understand. Those who suffer economic dislocation or fear poverty and crime find an easy target in immigrants. Immigrant rights groups often oversimplify the issues and see immigrants as victims in every effort to gain some control over the problems related to immigration. Most observers of immigration policy recognize that some regulation of the flow of immigration is desirable. How to achieve that regulation and how to ensure fairness and humane considerations are at the root of the controversies over immigration policies.
This paragraph perfectly illustrates the difficulty of passing compromise legislation on this issue. One side of the debate is driven by anxiety and the other by a sense of justice. The rational economic man we discussed last week is rarely seen on either side, and policies that appeal to rationality tend to be lobbied against by advocates and activists on both sides of the issue. It is no accident that the only immigration policies we have seen pass recently are highly partisan policies in states with legislatures dominated by a single political party; for example the anti-immigrant SB1070 and Act 2011-535 in Arizona and Alabama, and the pro-immigrant DREAM Act in CA. Of course, the Supreme Court will likely be asked to weigh in on the constitutionality of many of these propositions in the new future. What do you think about the authors' statement? Do you agree? Do you think any of the policies enacted by states will successfully address the problems associated with immigration? Will they ultimately be upheld by the Supreme Court? What policies do you think might help address the issues?
Despite the fact that immigration policy has been on the institutional agendas at both the state and federal-levels since at least September 11th, 2001, it may have surprised you that the core of our immigration policy was created by the 1965 Immigration and Nationality Act. The law has been modified by the 1990 Immigration Act and the 1996 Illegal Immigration Reform and Immigrant Responsibility Act, but many of the provisions set forth in 1965 are still active. Did this surprise you at all?
Another thing that may have surprised you from the reading is that we place preferences and restrictions on immigration that make it easier for some immigrants to come through legal channels than others. We have tended to give preference to European immigrants over other nationalities, skilled workers over unskilled workers, and the extremely wealthy over all others. Refugees and members of current immigrants' immediate families also receive preferences. Did any of these preferences surprise you or seem unfair?
Since the mid-1990s, we have increasingly been concerned with the problem of illegal or undocumented immigration. I think that this chapter gives a nice balanced overview of the concerns of those on both sides of the debate. It makes clear that increased immigration, particularly illegal or undocumented immigration, may cause problems such as straining the education and public health systems. It may also create benefits through contributions to social security by young temporary immigrants and creating a supply for both extremely high and low-skilled jobs that Americans are either unwilling or unable to fill. Less obvious in the readings are the human rights concerns associated with a highly demanded underclass supply of labor. Certainly, immigration is a complex issue and one thing that both sides agree on is the need for reform.
One of the strongest parts of the chapter comes in the conclusion of the article. On page 420, Cochran et al. (2011) state:
The arguments over immigration often appear to be driven by anxieties that have nothing to do with immigrants. Immigration is easy to exploit as the cause of many of the nation's problems because immigrants are an easily identifiable and usually relatively powerless element of society. The nativist arguments resonate with people who fear what they do not know or understand. Those who suffer economic dislocation or fear poverty and crime find an easy target in immigrants. Immigrant rights groups often oversimplify the issues and see immigrants as victims in every effort to gain some control over the problems related to immigration. Most observers of immigration policy recognize that some regulation of the flow of immigration is desirable. How to achieve that regulation and how to ensure fairness and humane considerations are at the root of the controversies over immigration policies.
This paragraph perfectly illustrates the difficulty of passing compromise legislation on this issue. One side of the debate is driven by anxiety and the other by a sense of justice. The rational economic man we discussed last week is rarely seen on either side, and policies that appeal to rationality tend to be lobbied against by advocates and activists on both sides of the issue. It is no accident that the only immigration policies we have seen pass recently are highly partisan policies in states with legislatures dominated by a single political party; for example the anti-immigrant SB1070 and Act 2011-535 in Arizona and Alabama, and the pro-immigrant DREAM Act in CA. Of course, the Supreme Court will likely be asked to weigh in on the constitutionality of many of these propositions in the new future. What do you think about the authors' statement? Do you agree? Do you think any of the policies enacted by states will successfully address the problems associated with immigration? Will they ultimately be upheld by the Supreme Court? What policies do you think might help address the issues?
Policy Stages - Agenda Setting
This is the first of our chapters on the policy stages. In this chapter Peters covers the "first" two stages of the policy process (remember, stages theory is a tool to help us think about policies, and in reality the stages aren't so neat and orderly). Agenda setting is commonly thought of as the first stage of the policy process. The ability to place items on the agenda for consideration and keep other items off is one of the most important powers in the policy process. This is why party control of the House and Senate can be so important. Think about how different some of the issues considered by the Republican House are from some of the issues being considered by the Democratic Senate (this difference becomes even greater when we look at the bills coming out of committees in one house versus the other).
Peters talks about two types of agendas: systemic and institutional. Systemic agendas are broader and more stable over time. They include any issue that has been deemed appropriate for consideration by the public sector. Institutional agendas are much more variable and only include those issues that are under active consideration at the time. While some advocacy groups are trying to move their issues onto the systemic agenda, most are attempting to move their issues from the systemic agenda to the institutional agenda. As you can imagine, at any given time most issues are on the systemic agenda with relatively few issues on the institutional agenda.
A lot of debate in political science and public policy studies concern who sets the agenda. The study of public policy really originated with Robert Dahl's Who Governs, a work that takes a pluralist perspective on policymaking. Pluralism emphasizes a marketplace of ideas. Pluralist theory argues that society is made up of different interest group with many divergent ideas, with government acting as the primary mediator between these groups. Individuals join the groups that advocate for things they care about and act as bystanders on other issues. Policies are ultimately decided by competition, and in the marketplace of ideas the best idea wins.
While pluralism assumes that all groups have equal power in the marketplace of ideas, elitist theory assumes that policy is primarily made by the wealthy and powerful. C. Wright Mills' The Power Elite is often considered the classic of elite theory, and argues that business owners, politicians, and military leaders all engage in the same circles and work together in their various sectors to distribute power and wealth among themselves. Keeping and increasing the power of those who are already powerful is an important aspect of public policy, from the perspective of elite theory (of course elite theorists generally see this as a problem in democratic societies).Other scholars like E.E. Schattschneider point to the difficulties that the poor have in organizing into interest groups and understanding the public sector.
The State-Centric approach tends to center agenda setting with government actors rather than interest groups or other outside actors. Congressional committees and bureaucratic agencies become the key actors in deciding what government should consider at any given time.
Once we have established who can set the agenda, we move to the question of how issues make it onto the agenda. Of course, this will have a lot to do with the political ideologies, personal values, and rational self-interest of those with the power to set the agenda. Emergencies, life or death issues, issues concentrated in districts of powerful policymakers, and visible issues will all likely be included on the agenda. Mancur Olsen's The Logic of Collective Action discusses how the dispersion of costs and benefits across the population influences which issues are included in the agenda and ultimately passed. Where benefits are concentrated and excludable and costs are dispersed, policies will generally be placed on the agenda and passed. Where benefits are dispersed and costs are concentrated policies will generally be kept off the agenda. Further, where issues can be tied to older issues, national symbols, and existing solutions, they will often be added to the agenda.
From an economic perspective, government should intervene where we find market failure. The private sector will not provide the optimal level of public goods because there is no way to exclude those who do not pay for the good. Public goods are those goods that are non-rival (my consumption will not limit your consumption) and non-excludable (there is no way to exclude those who do not pay for the good). We can think of our Fourth of July fireworks as public goods (within a certain range). The private sector would be unlikely to provide the optimal amount of fireworks because there is no way to exclude those who do not pay to see the fireworks from viewing them. Market failure also exists in the case of externalities. Externalities exist when either the full cost or full benefit of a good cannot be privatized. For example, an economist would likely argue that the lightrail should be subsidized by government (ideally from a road toll or tax on driving fuel inefficient vehicles) because the benefits of reduced traffic and emissions cannot be fully privatized. In this day and age, it is hard to think about goods that are entirely private goods and without any external costs or benefits.
Once an item is placed on the agenda, the second stage of the policy process begins. Government needs to determine how the issue will be solved through policy formulation. As Peters points out, sometimes this is based more on habit and analogy than theory or scientific evaluation. The bureaucracy, think tanks, interest groups, and legislators all participate in policy formulation (often legislators participate much less than you would assume). Two tools are often used in the United States to formulate policy, Cost Benefit Analysis and Decision Analysis. Both of these tools should be covered in an advanced policy analysis class. Briefly, Cost Benefit Analysis is based on the premise that all actions and goods can be converted into a monetary value, and government should choose the policy with the highest ratio of benefits to costs. Decision analysis takes cost benefit analysis and adds uncertainty. Using decision analysis, the action that is the most profitable or the least costly, given the likelihood that a specific event will occur, should be taken.
Tuesday, August 30, 2011
Theories Explaining Policy Choices
Often when we discuss the study of public policy, we are actually talking about two types of analysis. For the sake of simplicity we usually separate studies where policy is treated as an outcome of political and social causes, and studies where policy is treated as a cause of some social outcome. Of course, the world is not so simple and policy is is caused by and causes politics, society, and culture simultaneously; but for the purposes of discussion and academic research it is much easier to divide the field in this way. In this class, we are primarily focused on policy as an outcome. While the substantive chapters touch on the effects of policy, we will not be doing policy evaluation in this class. We will leave that to PAF 471-Public Policy Analysis.
In this class, we are primarily concerned with studying the policy process. How do policies get passed? Why are some policies passed and not others? Why do policies persist? Chapter three introduces us to some of the major theories for understanding the policy process. We will spend all next few weeks on the policy stages heuristic (I hope you all looked up this word) so I will skip over that for now and discuss some of the other perspectives. Remember, public policy is an interdisciplinary field so you will see theories here that are based in political science, economics, and sociology.
Currently, the study of public policy in the United States is dominated by economic thinking. If you went to the annual APPAM (Association of Public Policy and Management) conference, you would, for the most part, see presentations of papers using market-based theories or institutional models to explain policy choice. The easiest assumption to make about human behavior in public policy analysis is that individuals act on their rational self-interest, but sometimes that interest is constrained by organizational culture, history, or social norms. We may also think of them as making decisions based on "bounded rationality", not only are they constrained by outside factors, they are also constrained by limited cognitive capacity. We tend to assume that they "satisfice" or choose an option that works, or seems the best, out of limited options. This may seem like the obvious way to think about human behavior, but it's not the only alternative. Think about how different our policies would be if we adopted the assumptions of psychoanalysis, that individuals acted largely based on irrational urges and passions.
Peters also offers us theories that explain policy choice based on who advocated for specific policies. The Advocacy Coalition Framework and policy networks perspectives try to explain policy choices using this logic. Both of these perspectives tell us who is working together to pass a policy and who they are working against. They can also help to explain why problems are defined in certain ways or how relevant groups change alliances over time. There's an adage that "politics makes strange bedfellows", and both ACF and policy networks analysis can help us parse out occasionally strange alliances.
Peters talks about other perspectives too. Lowi's idea that policy causes politics has been very influential in explaining why we see strong interest groups in some policy discussions and not in others. Many have used his theory in conjunction with constructivism and economic theories to understand differential power relationships, particularly in the context of redistributive and regulatory policy areas. The constructivist approach is more popular in Europe and really delves into the role that social control and stratification play in the policy process (in other words examining how race, gender, class, able-bodiedness, sexuality etc. influence policy decisions.)
I hope that you will keep these various theories for explaining policy choice in mind when we read the substantive chapters. Often, we look at policies from one single perspective and assume we have the right answer, when other perspectives can shed an interesting light on a particular substantive area. If you think about healthcare policy, constructivism might help explain why there is more support for Medicare than Medicaid even though they serve many of the same people (so-called dual-eligibles) because we perceive the recipients as two different groups; seniors and the disabled who deserve our help and poor people who do not. On the other hand, historical institutional models might explain the evolution of a public healthcare system that covers the elderly, the destitute, and veterans but not others. The optimal design perspective would explain why the market cannot provide sufficient healthcare to these groups, in particular.
What do you think of the theories that Peters discusses in this chapter were there any that sounded particularly interesting? Were there any that you just "didn't get"? Do you think that public policy experts should assume recipients are "rational actors" when designing policies? Are there better ways to explain human behavior that we should consider?
In this class, we are primarily concerned with studying the policy process. How do policies get passed? Why are some policies passed and not others? Why do policies persist? Chapter three introduces us to some of the major theories for understanding the policy process. We will spend all next few weeks on the policy stages heuristic (I hope you all looked up this word) so I will skip over that for now and discuss some of the other perspectives. Remember, public policy is an interdisciplinary field so you will see theories here that are based in political science, economics, and sociology.
Currently, the study of public policy in the United States is dominated by economic thinking. If you went to the annual APPAM (Association of Public Policy and Management) conference, you would, for the most part, see presentations of papers using market-based theories or institutional models to explain policy choice. The easiest assumption to make about human behavior in public policy analysis is that individuals act on their rational self-interest, but sometimes that interest is constrained by organizational culture, history, or social norms. We may also think of them as making decisions based on "bounded rationality", not only are they constrained by outside factors, they are also constrained by limited cognitive capacity. We tend to assume that they "satisfice" or choose an option that works, or seems the best, out of limited options. This may seem like the obvious way to think about human behavior, but it's not the only alternative. Think about how different our policies would be if we adopted the assumptions of psychoanalysis, that individuals acted largely based on irrational urges and passions.
Peters also offers us theories that explain policy choice based on who advocated for specific policies. The Advocacy Coalition Framework and policy networks perspectives try to explain policy choices using this logic. Both of these perspectives tell us who is working together to pass a policy and who they are working against. They can also help to explain why problems are defined in certain ways or how relevant groups change alliances over time. There's an adage that "politics makes strange bedfellows", and both ACF and policy networks analysis can help us parse out occasionally strange alliances.
Peters talks about other perspectives too. Lowi's idea that policy causes politics has been very influential in explaining why we see strong interest groups in some policy discussions and not in others. Many have used his theory in conjunction with constructivism and economic theories to understand differential power relationships, particularly in the context of redistributive and regulatory policy areas. The constructivist approach is more popular in Europe and really delves into the role that social control and stratification play in the policy process (in other words examining how race, gender, class, able-bodiedness, sexuality etc. influence policy decisions.)
I hope that you will keep these various theories for explaining policy choice in mind when we read the substantive chapters. Often, we look at policies from one single perspective and assume we have the right answer, when other perspectives can shed an interesting light on a particular substantive area. If you think about healthcare policy, constructivism might help explain why there is more support for Medicare than Medicaid even though they serve many of the same people (so-called dual-eligibles) because we perceive the recipients as two different groups; seniors and the disabled who deserve our help and poor people who do not. On the other hand, historical institutional models might explain the evolution of a public healthcare system that covers the elderly, the destitute, and veterans but not others. The optimal design perspective would explain why the market cannot provide sufficient healthcare to these groups, in particular.
What do you think of the theories that Peters discusses in this chapter were there any that sounded particularly interesting? Were there any that you just "didn't get"? Do you think that public policy experts should assume recipients are "rational actors" when designing policies? Are there better ways to explain human behavior that we should consider?
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