Chapter 8

Two types of public policy:

1. Economic policy 2. Social policy

Two types of regulation:

1. Economic regulation 2.

Elements of public policy:

1. Public policy inputs 2. Public policy goals 3. Public policy tools 4. Public policy effects

Cost-benefit analysis

A systematic method of calculating the costs and benefits of a project or activity that is intended to produce benefits. Government hopes that the benefits arising from regulation outweigh the costs. For example, controlling environmental pollution and protecting worker and consumer safety benefit citizens.

Public policy inputs

Are external pressures that shape a government's policy decisions and strategies to address problems. For example, texting while driving has enforced many state and local governments to ban or regulate driving.

Social regulation

Are goals to protect consumers and the environment by providing workers with safe and healthy working conditions. Equal opportunity, protection of pension benefits, and health care for citizens are other important areas of social regulation. These concerns apply to all businesses; all relevant businesses producing and selling consumer goods.

Public policy effects

Are the outcomes arising from government regulation. Such policies may have an intended and unintended effect on many people, organizations, and other interests. For example, when health ricks to pregnant women were associated with exposure to lead in the work-place, some companies removed women from those jobs. This action was seen as a form of discrimination against women that conflicted with the goal of equal employment opportunity. The unintended effect (discrimination) of one policy action (protecting employees) conflicted head-on with public policy goal of equal opportunity.

*Negative externalities

Are unplanned or unintended costs (economic, physical, or psychological) borne by consumers, competitors, neighboring communities, or other business stakeholders. To control or reverse these costs, government may step in to regulate business action.

*Regulations

Established rules for citizens and organizations. Is a primary way of accomplishing public policy.

Public policy

Is a plan of action undertaken by government officials to achieve some broad purpose affecting a substantial segment of a nation's citizens. Is the basic set of goals, plans, and actions that each national government follows in achieving its purpose.

Economic regulation

Is aimed to modify the normal operation of the free market and the forces of supply and demand. Economic regulations include those that control prices or wages, allocate public resources, establish service territories, set the number of participants, and ration resources. The Federal Trade Commission (FTC) make decisions to prevent anticompetitive business practices. The Dodd-Frank Act was established to oversee and supervise financial institutions.

Reregulation

Is the increase or expansion of government regulation, especially in areas where the regulatory activities had previously been reduced. Example: Stakeholder groups sought for reregulation of the securities and financial services industries after the 2008 financial crisis.

*Deregulation

Is the removal or scaling down of regulatory authority and regulatory activities of government (typically harder to come back from). When the 1933 Glass-Steagall Act was repealed in 1999 by the passage of the Financial Modernization Act, the lack of regulatory controls over the banking and securities industries led to the serious financial problems causing economic recession that began circa 2007.

Public policy tools

Is to achieve goals. A combination of incentives and penalties that government uses to prompt citizens, including businesses, to act in ways that achieve policy goals.

Social assistance policies (social policy)

Key areas include health care and education. Health care has been the focus for concern on the international front and national and state lawmakers. The U.S. government has wrestled with the need for better health care for its citizens and the challenge of how to pay for this care.

Natural monoplies

Occurs when companies are dominate in its industry (i.e., cable companies). They can raise prices as much as it wishes because there is no competition. Government can come in to regulate prices and access.

Market failure

Occurs when the marketplace fails to adjust prices for the true costs of a firm's behavior. For example, a company may not spend money on pollution control equipment if customers do not demand it. In this situation, government can use regulation to force all competitors in the industry to adopt a minimum antipollution standard.

Antitrust laws (type of economic regulation)

Prohibits unfair, anticompetitive practices by business. For example, if a group of companies agreed among themselves to set prices at a particular level, this would generally be an antitrust violation.

Public policy goals

Refers to equal opportunity for all. For example. texting while driving is for the safety of the entire community (public interest). This example of public policy goals is is prevent harm to others, such as saving lives, reducing injuries, and eliminate health care costs.

Fiscal policy (economic policy)

Refers to patterns of government collecting and spending funds that are intended to stimulate or support the economy. For example, The U.S. government temporary reduced Social Security payroll deductions to stimulate the economy by putting more money in people's wallets.

Monetary policy (economic policy)

Refers to policies that affect the supply, demand, and value of a nation's currency. For example, the Federal Reserve Bank has the power to rise or lower interest rates to stimulate the economy. Which also affects the country's ability to borrow money from other nations and to attract private capital.

*Regulation vs. public policy

Regulations are established, typically, after a negative event has occurred. These rules are implemented by the government or governing body, unlike public policy. Public policies are principals more than regulations. They are administered by laws and regulations. They are not regulations quite yet.

Predatory pricing

The practice of selling below cost to drive rivals out of business.