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Public Policy: Objectives and Principles Roger Kerr.

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Presentation on theme: "Public Policy: Objectives and Principles Roger Kerr."— Presentation transcript:

1 Public Policy: Objectives and Principles Roger Kerr

2 What is public policy?

3 “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.”


5 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

6 The government’s role is whatever the government defines it to be. Helen Clark, 2003

7 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?

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

9 … more issues Markets vs government - not that simple/accurate - markets require rules Regulation vs common law All arrangements are imperfect

10 A better starting point for thinking about public policy

11 Market exchanges Politics/collective choice Voluntary cooperation

12 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 can’t run a large society that way

13 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

14 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

15 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?

16 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)

17 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)

18 ….other problems with government Safety net can create dependency Bureaucracy and judiciary – will they do what’s intended? Deadweight costs of taxation

19 Upshot? No ideal yardstick Political/government failures routine, not exceptional Must compare real-world alternatives

20 In choosing among real world alternatives Focus on incentives Bias in favour of economic freedom Implies limited government

21 How do we constrain government ? Separation of powers - Legislature - Executive - Judiciary - Central/local

22 How do we constrain government ? Economic constitutions Sound processes Regulatory Responsibility Bill Taxpayer/Ratepayer Bills of Rights

23 Public policy and business management A country is not a company National central planning doesn’t work Different skill requirements Problems with DIY economics

24 Conclusions Good public policy: institutions that promote human flourishing There is a significant role for government, but  individuals need protection from government abuse  governments don’t necessarily act in the public interest  remedy of government intervention sometimes makes things worse

25 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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