Public Policy Midterm!!!

Problem Identification

- Difference between institutional and systemic agenda - Iron triangle

Rational self-interest vs. selfishness and greed

- NOT the same thing - An individual who is injured in an accident and seeks medical attention is acting in their self-interest, but we would not accuse the individual as being selfish. - By same token, obeying the law may be in one's self-interest, but it is not selfish conduct. - does not deny altruism (selfless concern for the well being of others), however, the altruistic behavior of individuals will be affected by changing perception of costs and benefits.

Marginal cost

the increase in total costs from doing it once more

is anti- inflation policies good for the poor? should we worry more about inflation?

(only worried about price increases you might be harming the people that need you the most, b/c you might have higher unemployment which is not usually evenly distributed. First fired are usually the less educated, poor, immigrants. Question of fairness. Taming prices at the cost of higher unemployment.)Or Policy making Process two big theoretical issues how does macroeconomic policy making work? policy making process in THE US, at state level or federal level. Logical steps and categories that are followed.

Subsidies

- An incentive (Patronage Policy) - is a form of financial assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry. - E.g., loans, land grants, cash for merchants, shipbuilders, airlines etc.

Policy Analysis

- Analyst weighs the possibilities, process of understanding social problems and choosing the best solution for that problem. Coming up with recommendations that speak to question of problems we are facing or helps with them. - Study of how policy actors make decisions - Study of what causes social problems - Provision of information that's useful for decision-makers - describes the investigations that produce accurate and useful information for decision-makers. - You're doing both descriptive and normative analysis (Even though there is an analytical distinction between positive/normative but in practice the line that defines them blurs because in many instances you are doing both)

Pluralism

- Axioms - Democratic View - Public Policy is the product of competition and negotiation between groups in society - Individuals act in self-interest by engaging in political action to obtain benefits (gov) - Groups reflect individual's shared self- interest - Notion that there are different interest groups formed because there are different problems/issues that individuals face (multiple groups, centers of power compete to shape policy) - Power in America is fluid and diffuse across groups - Decentralization guarantees group access to power- equal access - Public policy, therefore, is equilibrium achieved among competing groups * Where legislature acts as referee of group competition * Records victories of various groups through statues ( resulting policies reflect preferences of society) - Government is therefore umpire (referee) of competing groups, interprets and regulates preferences

Scarcity

- Basic challenge confronting public policy (ever-present aspect of human condition) - Limited resources where human wants may be limitless Key: Insufficient resources to satisfy all wants? The big question: How do we allocate scare resources? • There are constraints on resources- We want to maximize people's well being. - Because of scarcity there is a need for governmental orgs (such as departments of Education, Energy, Defense, Health and Human services) - Poverty and Scarcity are not synonymous. Scarcity exists because there are insufficient resources to satisfy all wants. If poverty eliminated, scarcity remains.

Ideology

- Beliefs, Values, ideas about the Nature of People and Society. - Public Policy- affected by ideologies (set of values you have that shape your world view), affects how we interpret information and negotiate through those values. Also what we get from everything. - Governance- how you manage society. Question is, how do you organize governance? Its a question of the values of society and the overall view of everyone. - important in providing the cohesive force holding party coalitions together.

Systemic Agenda

- Made up of issues perceived by the political community as meriting public attention and resolution. - the systemic agendas of national and state governments are largely symbolic in nature (e.g., issues often controversial like some believing "right to bear arms" is guaranteed by constitution and should be beyond authority of congress or states, therefore the issue of gun control remained until recently on the systemic agenda of federal gov and most state govs.)

Market Failure

- Market does not allocate resources efficiently - Market problems that result in inefficient outcomes. - Examples of Market Failure: A. Externalities B. Excessive Market Power C. Public Goods - Economy may be represented as a pie. Market failures (inefficiencies) mean that there is potential for the gov to step in and increase the size of the pie. - Market ensures inequality - the goal of many public policies is to provide a system that is closer to our ideas of social justice than capitalism provides.

John Maynard Kenyes

- Market leads to economic chaos, monopoly - Need for government intervention - advocated the use of fiscal and monetary measures to mitigate the adverse effects of economic recessions and depressions.

Confront the tradeoffs

- evaluating the benefits and costs, if the benefits outweigh the cost, do it. If not, then don't do it.

Rational Choice

- study of collective decisions by groups of individuals through the political process to maximize own self-interest -positive analysis of the what's and how's in public behavior

Classicalists

1) Adam Smith 2)

Edmund Burke

- What of individual rights in society of unequal groups with interests - institutions exist (for a reason) and therefore must be preserved, though imperfect - Change will bring chaos - Government's role is to protect tradition - Fundamental beliefs in inequality as fact ( as in pursuit of property) - advocated the use of fiscal and monetary measures to mitigate the adverse effects of economic recessions and depressions.

Paradigm

- World Views about the Essence and nature of people and society 3 we should know: 1) Liberalism 2) Conservatism 3) Classical liberalism (Both believe in the rights of individuals- but how you protect that individual freedom is the question.)

Keynesians

1. Markets or Capitalism is inherently unstable 2. Problems with effective Demand in Markets Unemployment equilibrium- high level of unemployment and building of inventories and excess 3. No self-correcting mechanisms to return economy to full employment 4. Justifies Government intervention into economy a. Fiscal Policy b. Monetary Policy GNP = C (monetary) +I + G (fiscal) + (E-I)

Implementation

Making the policy work, Carrying out the policy hard thinking of implementation during policy design - Implementation improves if: *policy is clearly stated *designed appropriately *consistent with other policy objectives

Logrolling

Vote trading based on intensity of preferences (Pork-barreling -trading votes allows people to register how strongly they feel about issues - can lead to increase or decrease in government efficiency

Agenda

- List of issues or subjects to which governmental officials are paying serious attention - some items may get on the policy agenda only to disappear by the crush of other issues, the resurface later in slightly modified forms. - May be thought of as consisting of systemic agenda and institutional agenda.

Incentives (Patronage policies)

- Carrots, Rewards- for individuals or corporations to undertake activities they would only reluctantly undertake without the promise of a reward. Promotional technique can be classified in three types: 1) Subsidies 2) Contracting 3) Licensing (also can be regulatory) - lure you and provide incentive to change behavior. - people always want more. If you provide incentive people are likely to respond. * cognitive disonance- people who don't respond to incentive. No matter how much you tell them the truth they ignore it. - E.g. Tax cut (changes percentage, tax rate that you pay. You reduce amount of income you pay)is an incentive, Tax credit (you are credited a certain amount of the tax that you owe),Tax rebate, own hybrate you can use carpool lane (time is costly)

Thomas Malthus

- Classicalist 1) Strict Doctrine of Laissez Faire- Markets best resolve economic problems 2) Iron Law of Wages Market relations force others to subsistence levels -ex. poor family whose income rises forces pressure family back to poverty - challenged Smiths concern for the poor and suggested a resolution within a market economy framework. Believed problem of poverty to be moral in nature and not susceptible to resolution by government policy. 3. No Government Intervention- Eliminate Poor Laws: futile b/c of natural law of wages

Redistributive

- Control people by managing the economy as a whole. - Techniques of control involve: fiscal (tax) and monetary (supply of money) policies. - They tend to benefit one group at the expense of other groups through the reallocation of wealth. E.g., changing the income tax laws form 2001 to 2003 significantly reduced the taxes of upper-income groups compared to other income groups in society. The result was decline in middle class. - tries to have some equality - progressive- marginal tax on rich goes up -regressive- the poor pay more and the wealthy subsidise from that taxation.

Cost-Benefit Analysis

- Finds and compares the total costs and benefits to society of providing a public good. - When several options are being considered for adoption, the one with the greatest benefit after considering the costs should be selected. - Basically, the benefits of a proposed public project are compared to the value of the private goods given up (through taxes) to produce it. - costs and benefits should be identified ad converted into monetary units covering the life of the proposed project. - Ideally, an attempt is made to consider the negative externalities resulting from the program such as the roadside businesses that will be lost due to the construction of a new limited-access highway. - ex. cost-benefit analysis could be used to determine policy alternatives in health care such as whether funds would be more efficiently spent on prenatal care for pregnant women who are indigent, on AIDS research, or on a screening and preventive med program to reduce mortality rates from cardiovascular disease. - make decisions based on costs and benefits. Choose where benefits are greater than costs where net benefits are greatest

Excessive Market Power

- Form of Market Failure - Misallocation of resources - No price competition Ex. Monopolies, oligopolies - If everyone in a town needs water, but only one homeowner has a well with potable water, the owner of the well has a monopoly that is not subject to competition from any other source of drinking water.

Public goods

- Have two characteristics: 1. Nonrival consumption/Nonexclusive Goods- another person's consumption does not affect your opportunity to also consume the good. Ex. Roads, Air, Parks, Natural Wonders 2. Private good- a good or service whose benefits are confined to a single consumer and whose consumption excludes consumption by others. If a private good is shared, more for one must mean less for another. - no one can be excluded from the use of a public good. - Must be provided by collective decisions - Impure public good- satisfy the two public good conditions of nonrival and nonexcludability, though they do not meet the criteria as clearly (police protection and education) - FREE RIDER: Benefits from public good, but pays none for it

Imperfect Information

- Information is needed for decision-making, most people do not have adequate information to make rational decisions. - But, developing or finding the information has a significant opportunity cost associated with it (few people have the resources or time to do a complete research job) * Information can then be considered a Public good (or god with positive externality) - Nonexclusive (when information is provided, it can be shared by any number of people) * Can't prevent others from using it once in public domain - The mandatory labels (e.g., cigarette) attempt to mend omissions in the market system by introducing info so individuals can make better choices. - once people have been provided with the info they should make their own choices. - Only if the risks extend beyond the user- negative externalities exist involving third parties- may there be an argument for expanding role of government (e.g., smoke-free work environement)

Kingdom, incrementalism, and agenda setting

- Kingdom - comes up with completely different view from that of pluralist and elitist. -view is more of a set of opportunities that present themselve in a particular historical time. -if you observe history, one charac that is true is that change is incremental. Incrementalism is the approach. So the status quo is incremental, at any one point in time there are 3 things going on in the body of politics. There is a problem definition, people offering solutions and then there are politics (the big archs of change in the value system that provides opportunity and unique opp for solutions) We're always thinking about solutions- for kingdom when you get all these moments of big change, you can turn your eyes to problems and look at previous solutions

Thomas Jefferson

- Less government is better government - Belief in Democratic government - Market preferred mechanism of regulation -protect property and maintain order

John Stuart Mill

- Liberalism- Limiting centralized Power (conception of liberty justified the freedom of the individual in opposition to unlimited state control) - Liberty to sanction wealth is not enough - Wanted moral progress as well - Need for government to correct market failures - harm principle- holds that each individual has the right to act as he wants, so long as these actions do not harm others. If the action is self-regarding, that is, if it only directly affects the person undertaking the action, then society has no right to intervene, even if it feels the actor is harming himself. - Mill was to put limits on the ruler's power so that he would not be able to use his power on his own wishes and make every kind of decision which could harm society; in other words, people should have the right to have a say in the government's decisions. He said that social liberty was "the nature and limits of the power which can be legitimately exercised by society over the individual".

Public Policy

- Not only field of Inquiry but also a Practice. - Applied field with set of normative concerns. Includes question of values that guides what we should do "what do we ought to do" - Study of government decisions aimed at dealing with issues of public concern - goal is to understand how issues get on the policy agenda, what determines how policy choices are made, and how we are to understand the proper role of government in the policy process. - driving forces behind it it are scarcity and rational self-interest. - essentially: Why does government engage in some policy activities and avoid others? • WHAT ARE OUR SOCIAL AND POLITICALLY DEFINED NEEDS. - Allocation of scarce resources to socially defined ends and how do we maximize well being given that conclusion. - Public policy- when where and how- politics is involved.

Recession

- Occurs when the equilibrium level of actual output is less than the level necessary to maintain full employment. - basic characteristic of a recession or depression is a decline in aggregate demand or purchasing power by consumers, business, and government. The result is an economic downturn caused by a reduction in production and the consequent increase in unemployment as employers react to reduce their costs. - claims that there is no self-correcting property in the market system to return a stagnant economy to growth and full employment.

Republicans

- Party that stands for timeless principles of lower taxes and smaller government. - favored larger tax cuts for the affluent - opposed unions and minimum-wage laws as interfering with the working of the free market economy while democrats are more supportive of both

Elitist Arguments

- Political systems have inherent biases concerning who can access them. - Most government decisions are made by a minority elite that has enormous power - Elites govern all societies - Elites more likely to influence masses than masses will influence elites - people who are not elite should now affect the agenda setting process. - There are cases in which people who are not the elite do set the agenda. Part of the social movement in the US is a reflection of that e.g., civil rights movement, end of slavery, women's right to vote. All of that was a result of people who were not part of the elite.

Policy Formulation

- Setting goals, listing and selecting alternatives. a. Rational Analysis b. incrementalism- policy change at the margins by decision makers changes to existing programs rather than complete re-thought of policies c. Satisficing - how do we address the problem? -influenced by how we define the problem - two ways to define the problem: punitive (intended as punishment) or fact of life

Pareto Improvement

- Society is improved when some people's preferences can be satisfied without making other people worse off

Regulatory Policies

- Sticks, disincentives - Penalties (monetary, restrictions) - The extreme. Characterizing what people perceived as the negative approach. Rather than a benefit you put a cost out there. The cost is what is likely to change your behavior. - Penalties: taxes, criminal law, gasoline, tobacco, regulatory states, higher the fine more likely to change behavior. - Disonance: - Intended to change behavior and limit the behavior that is causing crisis. Provides revenue to fund state inter-prices. Sin taxes. - Allow government to exert control over the conduct of certain activities. - Negative form of control

Define the Problem

- The problem and how you define it is both what you observe empirically, economically, safety, environment, international conflict etc. E.g., What defines obesity. - Gives both reason for ding all the work necessary to complete the project and a sense of direction for your evidence-gathering activity - "Why is this a problem? What are the consequences of NOT addressing this problem? It is important to describe consequences of inaction on those who the problem directly affects"

Liberalism

- To reform, progress, push boundaries, to extend what institutions can and should do. - Bad things happen to people through no fault of their own and they should be helped, so we need a referee. You protect through civil liberties, through the reform of institutions. -Democrats -belief in the importance of individual liberty and equal rights. - Liberal democracy (elections should be free and fair), human rights, capitalism(means of production are privately owned and operated for a private profit; decisions regarding supply, demand, price, distribution, and investments are made by private actors in the market rather than by central planning by the government; profit is distributed to owners who invest in businesses, and wages are paid to workers employed by businesses and companies) , free trade, and the separation of church and state. - dominant variants are classical liberalism, and social liberalism - believe in government action to achieve equal opportunity and equality for all. It is the duty of the government to alleviate social ills and to protect civil liberties and individual and human rights. Believe the role of the government should be to guarantee that no one is in need. Liberal policies generally emphasize the need for the government to solve problems.

Normative Analysis

- Value-laden analysis - Policy analysis that is Prescriptive - What something OUGHT TO BE - a view toward resolving public issues is perspective rather than descriptive because it recommends action to be taken rather than merely describing policy process. - Expresses a judgment about whether a situation is desirable or undesirable. "The world would be a better place if the moon were made of green cheese" is a normative statement because it expresses a judgment about "what ought to be." Notice that there is no way of disproving this statement. If you disagree with it, you have no sure way of convincing someone who believes the statement that he is wrong.

Equity and Morality Considerations

- Values, Morals and Public Sentiment Dictate Government Should Intervene - Redistribution of income to reduce inequities falls under theory of public goods b/c it adds to public security - leaving inequalities of wealth solely to market mechanisms would produce the phenomenon of free rider again - Society is therefore forced to confront tradeoffs between the inefficiencies of the market system and views of justice and equity. - The political process by which any society governs itself must ultimately decide what constitutes an acceptable inequality of wealth and income.

Voting as a Rational Self- interest

- Voters vote in self-interest. Candidates act to maximize self- interest

Classic Liberalism

- Would be understood as a conservative view today. - advocated the right of individuals to be free from overwhelming, arbitrary, and often malevolent governmental power. - All the basic tenets (main principles) of modern conservatism flowed from the opposition to government's power. -involving gov in political or econ controversies should occur only as a last resort. - private sector more efficient so it should be preferred over gov solutions. -Great depression challenged the assumptions of the classical model of economics. - Less government - a political ideology - It was committed to the ideal of limited government and liberty of individuals including freedom of religion, speech, press, assembly, and free markets. It drew on the economics of Adam Smith, a psychological understanding of individual liberty, natural law and utilitarianism, and a belief in progress. Classical liberals established political parties that were called "liberal", although in the United States classical liberalism came to dominate both existing major political parties.

Positive Analysis

- aka Value-neutral analysis/Value-Free policy analysis -Descriptive - describes relationships as they are - concerned with understanding how policy process works through rational analysis - tries to pursue truth through testing hypotheses - by narrowing focus to empirical studies- reduces relevance of policy analysis for policy makers - reduces the importance of values in policy debates by shifting the discussion to cost-benefit analysis or the appropriate way to test a hypothesis -a statement about "what is" and that contains no indication of approval or disapproval. Notice that a positive statement can be wrong. "The moon is made of green cheese" is incorrect, but it is a positive statement because it is a statement about what exists. - E.g., The price of milk has risen from $3 a gallon to $5 a gallon in the past five years

Contracting

- also important means of promoting particular policies - can be used to encourage corporations to adopt certain behaviors, such as equal employment opportunity, which they might otherwise find burdensome.

Surplus Value

- argued that exploited labor generates profits, which are squeezed out through the capitalist ownership of machinery. - Marx shared Smith's distrust of entrepreneurs to seize every opportunity to use the state to enhance their power at the expense of the workers - he emphasized the importance of economic and social instability resulting from the tension between opposing demands of capital and labor.

Adam Smith

- called to improve the conditions of humanity, especially the poor. - challenged the notion that econ trade was zero-sum exchange in which , if some were better off, others must necessarily be worse off. If Jim wants something from Kevin that Jim cannot make himself, he must produce something that Kevin wants in order for them to agree on an exchange in which both "better their condition." They both benefit because they agree to give up something that has less value to themselves personally than the products they receive. Thus the total welfare has been enhanced. - in free competitive markets, exchange can have positive-sum results where both parties are better off than before the exchange. 1) according to his theory, self-interest and competition will eliminate two kinds of waste: unrealized trades and inefficient production encouraging mutually beneficial trades and efficient production. - benefits of trade and economy can self-adjust 2) Limits to unfettered Markets- poor usually harmed. Preferred markets to gov intervention 3) Role for Gov intervention National defense (public god) Administration of justice Provide services not provided by private markets (public goods)

Licensing

- can also be regulatory - Through licenses, governments can grant the privilege of carrying on a particular activity. - Allows corporations or individuals to conduct a business or engage in a profession (e.g., a licensed pilot) that, without the license, is illegal. - Allows government to regulate various sectors of the population and, indirectly, the economy

Agenda Setting & Politics

- competition and shifting of values, morals, beliefs -changes in Administration, shifts in ideological balances in congress, etc., shifts in national mood, or interest group pressure. - Political parties have shared values and/or interests - Accomplished by the setting of Public Policy Agenda - Tendency for political parties to moderate core view, values, and beliefs because they want to win elections and thus they must have broad support - party representation is uneven in democratic societies -participation, elections require money so money-landed dominate

E.g., Unemployment insurance- fed gov prog that ensures that if you lose your job for conditions that have to do for anything besides being fired, gov will pay you a certain amount. A social safety net.

- conservative view- not important, people need to improve themselves and get back on their feet through individual effort. Argument- worst sort of resources, we're giving people money for not doing anything, so more people will refuse to work. If we provide incentive then people will follow it and find reasons to get out of work without being fire, just to get the benefit. Comes from core view of what's that human behavior.

Externalities

- form of Market Failure - Costs external to private market transaction. They are borne by the individuals external to the transaction that cause them. (Market mechanism works well as long as an exchange between a buyer and a seller does not affect a bystander, or third party. But all too often a third party is affected) Ex. pollution, pesticides, etc.

Marginal benefit

- from taking certain action, it is the increase in total benefit from doing it once more

Institutional Agenda

- items that receive the powerful and earnest attention of decision makers - include issues that are actively pursued through the various institutions of government. - items might shift from systemic to institutional agenda.

Monetary policy

- manipulation of interest rates, expanding or contracting money supplies by manipulating interest. - refers to the use of money and credit controls to shift aggregate demand in the direction needed to attain economic growth with stable prices, such as actions taken by a central bank to control the money supply. - These actions in turn control the volume of lending and borrowing by commercial banks and, ultimately, by investors and consumers. In a depression, the gov should increase the money suply to keep interest rates down.

Adam Smith

- markets are the best tool to allocate resources. You don't need monarchs to do that, you have indv. - Freedom, less gov. - In his 'Wealth of Nations' Smith addressed the motivation for economic activity, the causes of prices and the distribution of wealth, and the policies the state should follow in order to maximize wealth. - Smith saw self-interest, rather than altruism, as the motivation for the production of goods and services. An "invisible hand" directed the tradesman to work toward the public good. This provided a moral justification for the accumulation of wealth, which had previously been viewed as sinful -To him the value of any good or service was determined by the labour required to produce it. -His main emphasis was on the benefit of free internal and international trade, which he thought could increase wealth through specialization in production.

Democrats

- often favor raising tax cuts on top-income earners. - liberals - Today, Democrats advocate more social freedoms, affirmative action, balanced budget, and a free enterprise system tempered by government intervention (mixed economy).

Rational Self-Interest

- people are motivated to engage in goal-directed actions to satisfy their needs. - means that individuals are not motivated solely by the pursuit of materials goods, they can be motivated by love, justice, power. -makes an assumption about the way people ACTUALLY behave and it is NOT a judgment about how they SHOULD behave. Rational doesn't imply approval or disapproval of goal itself. - Each individual has a unique set of needs that are influenced by his or her own history, including gender, age, ethnicity etc. -means that individuals have preferences. People INTEND to act in such a way to achieve those preferences when the expected benefits exceed the costs of available choices. - Since people try to make decisions by comparing costs and benefits, their behavior may change if the cost or benefits they face change. - behavior is rational as long as its marginal benefit is equal to its marginal cost. - A rational actor is expected to chose the action that will maximize expected benefits - may cause ambivalence b/c it evokes images of reason and informed decision making on the one hand, but it can also suggest a sophisticated self-centered behavior. - Not the same as selfishness or greed - choices consumer believes will maximize personal satisfaction - Means individuals have preferences - does not mean individuals make absolute best choice, but best choice given constraints - Limitations- ex. tragedy of the commons -Point- Rational self-interest may lead to sub-optimal allocations in long run

Solutions (proposals) for Agenda

- people have solutions but no real problems identified - ideas, proposals float- attempt to hook solution to problem - to work, proposals must be technically feasible, reasonable cost, acceptable to mass public

Problems with Agenda setting

- people identify problems, but provide no concrete solutions - Observe objective conditions, but issue of interpretation, i.e., framing - condition becomes problem when in conflict with prevailing values ex. welfare- social justice or moral bankruptcy (value of work)

Rational Analysis

- plan for achieving government efficiency through a comprehensive review of all the policy options and an examination of their consequences. -Selects the option and maximizes utility - much of the animosity surrounding the budgetary process is claimed to result from its lack of rationality.

Iron Triangles

- policy agendas are determined by tightly knit groups that dominate policy making in particular subject areas. - reciprocal bonds that evolve between congressional committees and their staffs, special interest groups, and bureaucratic agencies in the executive branch. Three sides made up of: 1) congressional committees 2) special interest groups 3) Bureaucracies of federal agencies Responses based mainly on two different approaches: 1)Elite theory: critical of iron triangles, pointing to their power as proof of the victory of greedy special interest groups over the general welfare. 2) Pluralism: conclude that such triangles developed to promote policies in a diverse nation whose subgroups have different interests.

Keynes continued

- provided new framework for macroeconomic analysis which provided a way out of Great depression. - he challenged basic postulates of Marx's pessimistic conclusions regarding the inevitable collapse of the market system. - dedicated to the preservation of the capitalist economic system and the position of those who were most favored by it. - Market system could reach a position of "underemployment" in which the economy could have a high level of unemployment and idle industrial equipment. - stressed "aggregate demand" as immediate determinant of national income, output, and employment. Demand is the sum of consumption, investment, government expenditures, and net exports. - significance- Claimed there is no self-correcting property in the market system to return a stagnant economy to growth and full employment. - if demand was established at levels so low that unemployment would remain high and businesses would not be willing to undertake new investments, the situation would remain indefinitely in that depressed state unless some variable in the economic equation was changed. - government should intervene through fiscal and monetary policies to promote full employment, stable prices, and econ growth - useful gov action agaisnt recession came down to fiscal and monetary measures designed to expand consumer and investment spending. - his public policy solution was one in which business and gov would act as partners in running the economy. - saw government acting as a positive instrument for individual freedom by, for ex, funding programs such as edu that would help individuals as well as society. - almost the opposite of Smith

Adam smith's view on prices

- said that greed, self-interest, and competition are the driving forces of production - All goods have two prices: natural and market price.

incrementalism and its relation to agenda setting

- small steps, change at margin, incremental change - an approach to decision making in which policy makers change policy at the margins. That is, they begin with the current set of circumstances and consider changing things in only a small way. Particularly in budgeting. - The best predictor of what next year's federal budget allocations will be is this year's allocations. - Assumes that public policy decisions will usually involve only modest changes to the status quo and not require a thorough inspection of all the available options. - also assumes the rational self-interest approach of individuals and groups. - Since individual and group interests usually conflict, compromise will be required in which everyone will have to settle for less than they hoped for. - This also results in relatively small changes in existing policy. - The budgetary process is thus simplified into a task that assumes each existing program will continue to be funded at its existing level b/c this level is perceived as fair. If the budget is growing, each program gets approx the same percentage increase, with those programs having strong support getting a slightly larger increase and those waning support receiving slightly less. These new funding levels become the bases for the next year's budget.

Capitalism

- the means of production are privately owned and operated for a private profit; decisions regarding supply, demand, price, distribution, and investments are made by private actors in the market rather than by central planning by the government; profit is distributed to owners who invest in businesses, and wages are paid to workers employed by businesses and companies.

natural price

- the price that would have to be realized to cover the costs of production, with a small amount left over for a profit

Rational Choice

- tool used by political scientists in the study of behavior of voters, politicians, and government officials as self-interest actors. - Sometimes called public choice, it is the study of the collective decisions made by groups of individuals through the political process to maximize their own self-interest. - it assumes that individuals are just as rational and self-interested in the political sector as they are in the economic market place. - originally looked upon as being a value-free explanation of society as it is (positive analysis). But the theory may also suggest how to increase voting among low-income groups to force politicians to be more attentive to the needs of low-income constituents (normative analysis)

Fiscal Techniques

- under Redistributive policies - use tax rates and government spending to affect total or aggregate demand. - Each particular approach to taxing or spending can have a different impact on the overall economy, so political entrepreneurs often propose or initiate policies with the goal of achieving specific impacts. E.g., Bush faced with sluggish economy in election year, proposed policy of stimulating economy by cutting taxes to increase demand (and, thereby, employment) - He also proposed cutting taxes on capital gains, a policy that would have benefited primarily higher-income people, with the claim that it would encourage real investment. - Gov taxes to get revenue. Has stimulative effects on regulatory on the economy. Sometimes has a multiplier effects (the amount of times the dollar turns over, the more the better) What the gov spends through budgeting policy and tax revenues - debate now on debt is on Fiscal b/c there is little money they have on monetary policy 0% interest rate

Select the Criteria

- what is it? If you want to base it on what is a good policy? It there a fiscal constraint? Yes, we don't have the resources, there is a physical and tech constraint. Meaning that there are not unlimited sources that limits what we can do. The criteria is what constrains what we can and cannot do. The political, econ, environmental, and administrative CONSTRAINTS of your options. Fiscal is your budget, the cost to your program - The analytical and evaluative. Facts and value judgment. - Primarily the evaluative plotline. Most important step for introducing values and philosophy into the policy analysis, because some possible "criteria" are evaluative standards used to judge the goodness of the projected policy outcomes that are associated with each of the alternatives e.g. Efficiency- imposes a moral check

Iron Law of Wages

- you shouldn't provide additional wages for people even if production goes up (the amount of output they provide for unit of labor) usually when productivity goes up you compensate - natural law of wages that tends toward the minimum necessary to sustain life b/c any increase in wages above subsistence results in workers procreating, and more mouths to feed means their wages in effect all back to a subsistence level. On the other hand, if the price of food rises, workers then will force their wage rates up to pay for the necessities of their existence, thus maintaining the subsistence level.

Agenda Setting

-What issues get on the Agenda and who puts them there? There the pluralist and elitist perspective to determine how to prioritize certain items that become issues that society turns their attention to. -Congress and legislative powers are the referee of all these groups and they only turn to the ones that have the most voice. - the desire for policies to provide for individual needs is insatiable while room on agenda is scarce. - this rises the question as to why some issues get on the agenda, but others do not. - They dynamics of a changing political environment, new political players, policy entrepreneurs, and new windows of opportunity are major elements in new issues gaining a place on the agenda. * e.g., Great Depression- provided the opportunity for legislation that ushered in various policies such as Social Security and minimum-wage laws. The conservative reaction that swept Ronald Reagan to the presidency provided window of opportunity for the reduction of social welfare legislation and the introduction of supply-side economics on the agenda. - Once on the policy agenda, many hurdles remain before issue is adopted as policy. (e.g., health care reform languished on policy agenda for years until President Obama proclaimed it would be a major policy initiative of his administration. - First step in policy making process is prerequisite for all the steps that follow. So even though getting on the policy agenda provides no assurance that an issue will go further, failure to get on guarantees ti won't go anywhere.

Conservatism- Less Government (Key player)

1) Edmund Burke- Reflections in France

Classical Liberalism (key players, less government)

1) John Locke 2) Adam Smith (Both argue that the best way to protect liberty and individual freedom was to protect individual freedoms?) 3) Thomas Jefferson

Liberalism- more government (Key players)

1) John Stuart Mill- Prin of Pol. Econ. 2) John Maynard Keyes

The Eight Step Path of Policy Analysis

1. Define the Problem 2. Assemble some Evidence 3. Construct the Alternatives 4. Select the Criteria 5. Project the Outcomes 6. Confront the Tradeoffs 7. Decide 8. Tell your story

Describe three ways that the government intervenes

1. Incentives - Carrots, Rewards 2. Regulatory - Sticks, disincentives 3. Redistributive - Reallocate resources => favors one group over the other - Fiscal Policy - adjusting tax rates, government spending a. politics in who policy favors - Monetary Policy - Manipulate Money Supply a. politics in who's affected by policy

What are four justifications for government intervention in the marketplace?

1. Market Failure - Externalities - Excessive Market Power - Public Goods 2. Imperfect information 3. Equity and Morality Considerations 4. Government Failure

Karl Marx

1. Politics and Economics are interrelated 2. Tendency of Capitalism to Generate inequality 3. Workers and Capitalist in class war over surplus value. Inevitable collapse of market based system Government controlled by those with capitalist interest, therefore, government intervention suspect - Definitive Normative views of what should be done - he would agree that there was a market and demand, you need a capital whther private or not in order to generate goods and services • his issue was "who is going to get the reward? Who ought to?" (from the goods and services) • Why should the owners get it? They provide the means, but there are the workers, why shouldn't they receive a reward. Why cant they have some access to profits generated • system is not a divine entity, it is an idea, a political idea • who own capital, and who should get profits of the production • The market place is not a divine idea but a political design/mechanism and there are several ways in which you can allocate surplus • for Marx the market place is a political playing field and the surplus generated and its size is a reflection is of owners and capital o you should see bigger surplus b/c labor is bigger than capital - disagreed with the capitalist assumption that politics and economics could be separated - The real purpose of the state is to serve the interests of the wealthy owners of capital. - believed that the class struggle between capitalists and workers over profits and wages would ultimately lead to the end of capitalism. - unlike Smith, he saw the potential for instability and chaos in the laissez-faire market economy. - theory of Surplus value

Policy Making process- Agenda Setting

1. Problem Identification 2. Policy formulation A. Rational Analysis B. Incrementalism C. Satisficing 3. Adoption 4. Implementation 5. Evaluation 6. Exceptions

Satisficing

Adopting a policy acceptable from all viewpoints rather than choosing "best" possible solution, because it might prove unacceptable to so many decisionmakers that it would be voted down if proposed - result of incrementalism

Elitism

Axioms (statement or proposition that is regarded as being established, accepted, or self evidently true) - Power is not decentralized, concentrated in hands of Elites ( business, financial, government, etc.) - Elites control powerful institutions - Elites use resources as their disposal, act in their own interests- status quo *consensus of sanctity of private property, virtues of capitalism, limitations of government - Societies are hierarchical and unequal - elites: definition a bit loose (e.g., professionals, scientists, corporate managers, CEOs, journalists, the super rich) - their interest is to maintain the status quo and if it's not conserved then their position in society is at risk, so they want to protect status quo from being moved.

Stagflation

Increasing unemployment and inflation - inflation: occurs when there is an increase in the average level of prices for goods and services (not a change in the price of any specific good or service) - Inflation redistributes income and wealth. Thus, while inflation will make some worse off, it must make others better off. - Acts like a tax in which money is redistributed from one group to another. - since it's an increase in average prices, not all prices rise at the same rate. Therefore, not everyone benefits or suffers equally from inflation. A. Expansionary Fiscal and Monetary Policy- created higher inflation without reducing unemployment B. Expectations- Expect full employment economy, make decisions accordingly (business and individuals making wage, price and consumer decisions)

Majority Voting

Choice is approved on simply majority (50% + 1) vote -Problem: Places minority rights at risk -does not measure intensity of preference - Thus, could lead to sub-optimal allocations

Adoption

Debate over issue of policy compromise, negotiation redefinition or altering of policy (design)

Construct the Alternatives

E.g., is food fresh system only alternative? No, access ability, physical activity. - What policy can governor pursue that addresses/fixes the problem that legislators care about AND that will be politically and economically feasible. - "policy options," or "alternative courses of action" or "alternative strategies of intervention to solve or mitigate the problem." - doesn't mean policy options are mutually exclusive

Voting Paradox

May not generate a transitive group decision - Thus, majority voting can produce inconsistent and arbitrary social choices

Evaluation

Referendum process - assessment of how a program achieves its intended goals. - All the earlier stages of the policy process look toward a future goal to be achieved; evaluation looks backward -primary purpose is to appraise the operation of a program and provide feedback to those involved in the earlier stages. - This feedback permits modifications in the policy to improve its efficiency and effectiveness -can be used to evaluate expenditure of funds to see that they were spent according to terms or law or grant

Opportunity Costs

The most highly valued opportunity forfeited by a choice Implies Tradeoffs (give something to get something) The cost of foregoing some other decision Production Possibilities Frontier Curve - When the unlimited wants of individuals or society press against our limited resources, some wants must go unsatisfied.

Philips Curve

The unemployment/inflation tradeoff -always controversy whether gov should stimulate economy or worry about inflation (rising prices). o The unemployment/inflation Trade-Off o rising cost of tuition- is it inflation? Why do we worry about inflation? We need to make sure our currency has value, and the money we buy has the same consumer value. Amount of stuff we can buy with our dollar is less with inflation. o inflation can drive to unemployment. o relationship is less strong now

John Locke

The way you get liberty/individual freedom is through minimal gov intervention. - Different makes it liberal, but if you look at it now it looks like what conservatives of the modern era would say. - Central to classical liberal ideology was their interpretation of John Locke's Second treatise of government and "A letter concerning toleration" - he envisioned individuals in the state of nature as being free and equal. The individual, rather than the community or institutions, was the point of reference. Locke believed that individuals had given consent to government and therefore authority derived from the people rather than from above. This belief would influence later revolutionary movements.

Monetary techniques

Used by the Federal Reserve Board, also try to regulate the economy by changig the rate of growth of the money supply or manipulating interest rates. - only federal gov involved, how much money they are putting in the economy. Affects consumer behavior, things like interest rates.

Unanimity

Voting by consensus (everyone must agree) -Problem- each voter has veto power. If made worse, will veto - Also, incentive to hide true preferences bribes to get consensus

Pareto optimality

When re-allocation of resources makes a least one person worse off without anyone being made better off

Conservative

World view- minimal government, less intervention in markets, no gray areas (everything is black or white) - What's the gut? Trying to keep the status quo (to keep the things the way they presently are). Orthogonal to change b/c instability might bring something unwanted. - Because of idea- there is something intrinsically wrong about human beings and if left with own devices there would be chaos. - Individuals are responsible for their actions and they should pay consequences. - we have institutions to regulate human behaviors, and if we change it we won't understand. "better to know the devil that you know than the one you don't know" - Republicans? - political and social philosophy that promotes the maintenance of traditional institutions and supports minimal and gradual change in society. Some conservatives seek to preserve things as they are, emphasizing stability and continuity, while others oppose modernism and seek a return to "the way things were." - believe in personal responsibility, limited government, free markets, individual liberty, traditional American values and a strong national defense. Believe the role of government should be to provide people the freedom necessary to pursue their own goals. Conservative policies generally emphasize empowerment of the individual to solve problems.

Assemble some Evidence

empirical- child obesity rates going up- there are consequences. How is it impacting negatively? Is it impacting society negatively? (does society have to pay?) - present data statistics from research and suggest some initial conclusions on your argument/position regarding the problem. - Is there a particular trend in how your problem is developing? who is affected? how are they affected? what are the societal costs?

Project the Outcomes

for each object you've chosen, what are the benefits and the costs? What are all the benefits and costs associated with that policy option. How many trucks do we need? People? Food? If benefits outweigh the costs then its recommended option. Understanding problem systematically. - for each of the alternatives on your current list, project all the outcomes (or impacts) that you or other interested parties might reasonably care about.

Fiscal policy

gov spending, direct consumption by gov, we are changing income too.

Affirmative action

policies that take factors including "race, color, religion, sex or national origin" into consideration in order to benefit an underrepresented group, usually as a means to counter the effects of a history of discrimination. The focus of such policies ranges from employment and education to public contracting and health programs. "Affirmative action" is action taken to increase the representation of women and minorities in areas of employment, education, and business from which they have been historically excluded.

Market price

price the product actually brings in the marketplace. whenever the market price deviates from the natural price, it will be driven back in the direction of the natural price as if by an invisible hand. -every entrepreneur attempting to accumulate profits in their own self-interest is held in check by other competitors who are also trying to attain profits. This competition drives down good prices and reduces revenue earned by each seller - In market unrestrained by gov, competition between entrepreneurs erases excessive profits, employers are forced to compete for the best workers, workers compete for the best jobs, and consumers compete to consume products. -results in general economic equality.