Understanding Public Policy A Primer Daniel Griswold Cato

“Understanding Public Policy: A Primer” Daniel Griswold Cato University Annapolis, MD July 25, 2011 The Cato Institute Washington, D. C.

What is Public Policy? • Complex and dynamic process – not what you learned in high school civics class • What government does to and for society • Collective action through the government

Public Policies May: • • • Regulate behavior Extract taxes Distribute benefits Organize bureaucracy Make war Some combination of the above

Why Care about Public Policy? “Just because you do not take an interest in politics doesn't mean politics won't take an interest in you. ” – Pericles “The natural progress of things is for liberty to yield, and government to gain ground. " – Thomas Jefferson “I am interested in politics so that one day I will not have to be interested in politics. ” – Ayn Rand

Analyzing Public Policy: a Framework Michael Munger, Duke University, Analyzing Policy: Choices, Conflicts, and Practices (2000) 1. Problem formulation 2. Selection of criteria 3. Comparison of alternatives 4. Political and organizational constraints 5. Implementation and evaluation

Problem Formulation

Selection of Criteria • What do we want to accomplish? • Test of a good policy a. Moral argument b. Incentives c. Constitutionality

Comparison of Alternatives Munger’s Criteria/Alternatives Matrix (CAM)

Political and Organizational Constraints “The Overton Window” • Unthinkable • Radical • Acceptable • Sensible • Popular • Policy

Implementation and Evaluation • • Did the program accomplish its goals? Good intentions not enough. Market outcomes, political acceptance, expert analysis Charles Murray’s Losing Ground; immigration enforcement; government K-12 school spending

Education Spending vs. Performance

How is Public Policy Made? “Laws are like sausages, it is better not to see them being made. ” – attributed to Otto von Bismarck

The Players: Voters Think tanks Politicians Capitol hill Bureaucrats Researchers The courts Consultants Academics Interest groups Administration The media Public opinion Experts Civil servants

Models of Policy Analysis • • Institutionalism Process model Rationalist model: policy as maximum social gain Incrementalism: policy as variations on the past Group theory: policy as a group equilibrium Elite theory: policy as elite preference Public choice theory

Public Choice Theory • • “Politics without romance” Public officials as self-interested actors Rent seeking Concentrated benefits, diffused costs

Arrow’s Impossibility Theorem • A rational individual who prefers Pepsi over Coke, and Coke over Dr. Pepper, will prefer Pepsi over Dr. Pepper. • Arrow showed there is no “fair” voting method for constructing social preferences from arbitrary individual preferences. • Society may not be a “rational chooser”

A ‘Fair’ Voting System 1. Each voter can have any set of rational preferences. This requirement is called “universal admissibility. ” 2. If every voter prefers choice A to choice B, then the group prefers A to B. This is sometimes called the “unanimity” condition. 3. If every voter prefers A to B, then any change in preferences that does not affect this relationship must not affect the group preference for A over B. 4. There are no dictators.

Public Preferences: Trade Policy with China Voter Group Blues Unilateral Trade Free Trade Agreement 1 2 Trade War 3 Reds 2 3 1 Whites 3 1 2 Note: Rank order of preferences for each group

The Outcome: Collective Irrationality Unilateral Free Trade > Trade Agreement > Trade War > Unilateral Free Trade Endless Loop! No transitive preferences.

What You Can Do • • Vote, or not Fund think tanks Write letters to your congressmen Blogging/social media Take a career in ideas Write op-eds and letters to the editor Encourage other people to become engaged

Q&A & Discussion … • • • www. cato. org www. freetrade. org dgriswold@cato. org Facebook Twitter: @Daniel. Griswold • 202 -789 -5260