Policy Paradox The Art of Political Decision Making

1
Policy ParadoxThe Art of Political Decision
Making

• Chapter 3
• Efficiency
• Eileen McCabe

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The BIG Idea

• Simple definition of efficiency is getting the
  most out of a given output at the lowest cost
• The cost resulting in the benefit
• Getting things done with the least amount of
  waste, duplication or expenditure of resources
• Voluntary exchanges result in efficiency because
  it results in a higher value of the original
  market

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Conflicts of Efficiency

• One must bear the burden of determining the
  policy
• The mode of organizing the human activity must be
  determined to yield the most efficient results
• The values and the cost of the policy must
  outweigh the effort needed to implement the
  policy

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What is Efficiency?

• At the societal level it is an ideal mean to
  guide society on how to spend its money and
  allocate its resources
• The ultimate goal is the get the most value for
  the money
• It is a contestable idea because it is difficult
  to determine who and what counts as important.

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Markets and Efficiency

• Arguments ensue about the best mode of organizing
  society to achieve the greatest social welfare
• One idea is voluntary exchanges barter economy
  (simplistic) to contract society (paper-laden)
• Contract society leads us to another function of
  government- ownership

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Ownership

• The legal rules of ownership define what is
  ownable, by whom and how.
• Examples of ownership people, land, houses,
  even air.
• Government attempts to define ownability of
  assets, but people engage in forbidden uses of
  ownership. i.e. prostitution, surrogacy renting
  of a body, stolen goods.

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Commonalities of Ownership

• The rules are defined before any exchange about
  what the ownership means
• The exchanges are voluntary and the resources
  move in a direction that make people better off.
• BIG IDEA The end result leads to the goal of
  allocative efficiency-one person is better off
  and no one is worse off

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Voluntary Exchanges Efficiency

• 1. Someone expects to be better off after the
  exchange
• 2. With the conversion of market values come a
  higher subjective value
• 3. If exchanges make peoples better off as
  individuals than the society as a whole will be
  better off
• Challenges to VE are that some accept the basic
  premise and others do not

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Changes From The Market

• Unconstrained markets do not always work as they
  should
• Some conditions of the market model do not
  pertain to certain situations
• Numerous need for buyers and sellers, which when
  not available causes monopolies
• Full information is needed about the available
  alternatives

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Challenges from the Polis

• Voluntary exchanges are criticized on the basis
  that welfare, happiness, and satisfaction are not
  atypical
• More extrinsic rewardsdecrease motivation to
  work and learn
• Organizing activities as market exchanges
  decreases human productivity and net social
  welfare

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VolunteerismSelfless Act??

• Thin line between volunteerism and coercion
• Pressure to act by peers, family, historical
  traditions, public opinion, political alliance
  all undermines the act of volunteering
• Loyalty and long-term relationships add a
  coercive element to exchanges

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Skeptics of Market Mechanisms and Efficiency

• Advocates argue that exchange is efficient when
  it maximizes welfare at the present moment- but
  the long range consequences are unknown
• It is argued that markets are the best way to
  organize society but efficiency is objectively
  undeterminable

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The Equality-Efficiency Trade-Off

• Considered a zero-sum relationship
• The more we have of one, the less of the other
• Trade off for three reasons motivation,
  inference and suppression, and waste