Public Policy: Objectives and Principles

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Public Policy Objectives and Principles
Roger Kerr
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What is public policy?
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• 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.

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IRELAND
HONG KONG
SINGAPORE
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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

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The governments role is whatever the
government defines it to be. Helen Clark,
2003

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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?

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• Human flourishing
• People
• have different preferences
• know own interests best
• are rational
• are opportunistic
• never have total information
• have to work through agents

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more issues

• Markets vs government
• - not that simple/accurate
• - markets require rules
• Regulation vs common law

All arrangements are imperfect
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A better starting point for thinking about
public policy
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Voluntary cooperation
Market exchanges
Politics/collective choice
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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 cant run a large society that way
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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 failures
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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 failues
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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?
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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)

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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)

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.other problems with government

• Safety net can create dependency
• Bureaucracy and judiciary will they do whats
  intended?
• Deadweight costs of taxation

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Upshot?
Must compare real-world alternatives

• No ideal yardstick
• Political/government failures routine, not
  exceptional

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In choosing among real world alternatives

• Focus on incentives
• Bias in favour of economic freedom

Implies limited government
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How do we constrain government ?

• Separation of powers
• - Legislature
• - Executive
• - Judiciary
• - Central/local

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How do we constrain government ?

• Economic constitutions
• Sound processes

• Regulatory Responsibility Bill
• Taxpayer/Ratepayer Bills of Rights

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Public policy and business management

• A country is not a company
• National central planning doesnt work
• Different skill requirements
• Problems with DIY economics

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Conclusions

• Good public policy institutions that promote
  human flourishing

• There is a significant role for government,
• but
• individuals need protection from government
  abuse
• governments dont necessarily act in the public
  interest
• remedy of government intervention sometimes
  makes things worse

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• The biggest public policy mistake

to expect too much of government
The challenge
how to restrain government to what it does well
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