1. Policy Types and Tools: Solutions
Josh Farley

2. What is a Policy?
Birkland: “a statement by government of what it intends to do or not to do, such as a law, regulation, ruling, decision, or order, or a combination of these.”
Not one document, but collection of documents, statements, decisions, etc.
Output of government that shapes and is shaped by political conflict
Legislation  implementation

3. Policy Typologies
Many ways to classify. How we do so depends on what we want to understand.
We want to understand political process

4. Lowi’s typologies in the news
Distributive
Regulatory
Redistributive

5. Distributive Highway bill (e.g. ‘bridge to nowhere’)
Agriculture subsidies
Pork, logrolling

6. Regulatory Competitive Protective FCC FDA and cooperation Clean air
“Healthy Forests”

7. Redistributive Food stamps Medicaid Tax cuts The banking system?
Enclosure of the commons:
Mining law of 1872
Grazing rights?
Oil rights?
ANWR?

8. Wilson’s Cost-Benefit Policy Typology (p. 143 Birkland)
Benefits
Concentrated among very few
Distributed among many people
Costs
Interest group politics, zero sum game.
Entrepreneurial politics, diffuse public interests
Iron triangle
Majoritarian

9. Substantive vs. Procedural
Substantive: what government does
Procedural: how it does it
Energy policy
Freedom of information act

10. Material vs. Symbolic

11. Public vs. Private Goods

12. Excludability Excludable resource regime Non-excludable
One person can prevent another from using the resource
Necessary for markets to exist
Non-excludable
No enforceable property rights due to technology or social institutions
Can’t charge for use
Some resources non-excludable by nature. None are inherently excludable.
Excludability is a product of institutions.

13. Rivalness Rival Goods Non-rival (or non-depletable)
My use leaves less for you to use
All ecosystem goods are rival
Non-rival (or non-depletable)
My use does not leave less for you to use
Marginal cost for additional user = 0
Efficient allocation: Price = marginal cost of production
All non-rival resources are services
Rival or non-rival is an innate characteristic of the good, not a result of institutions

14. Rivalness (cont.) Non-rival but congestible
Non-rival as long as few people use it, becomes rival with excessive use (e.g. golf course)
Empty planet vs. full planet

15. So What? Excludable Non-Excludable Open Access Regime:
Oceanic fisheries, timber etc. from unprotected forests, waste absorption capacity
Market Good: cars, houses, land, oil, timber, waste absorption capacity?
Rival
Tragedy of the non-commons: patented information, e.g. energy efficiency, pollution control tech.
Pure Public Good:
Information, most ecosystem services, e.g. climate stability, coastline protection, life support functions, etc.
Non-rival
Toll Good, club good: Roads, parks, beaches, etc.
Non-rival
congestible
Free Rider Problem

16. “techniques and not ‘isms’ are the kernel of rational social action in the Western World”

17. Conservative vs. Liberal Policies
What is a conservative?
What is a liberal?
What is a Red-Sox fan?

18. Federal deficit

19. Exercise
Apply typologies to the current budget debate

20. Policy Design and Tools
What are tools?
“a tool, or instrument, of public action can be defined as an identifiable method through which collective action is structured to address a public problem.”

21. 4 Dimensions of Policy Tools
“Nature of the activity in which government is engaged”
Outright money payments
Provision of goods and services, including information
Legal protections, such as monopolies or guarantees
Restrictions/penalties

23. “Structure of the delivery system”
Direct
Indirect
To private sector, other levels of government, individuals, etc.
Loan guarantees, research grants, ‘privatization’
Water, prisons, etc.

25. “Degree of centralization”
Subsidiarity
CO2, SO2, Mercury, etc.
Welfare, Medicaid, etc.
“Degree of automaticity”
E.g. tax incentives
What about earned income tax credit?

26. Economic vs. Political Models
Economic: freedom, initiative and rational choice
Taxes
Tradable quotas
Assurance bonds
Property rights
Political: any tool can achieve any end. Less coercion is preferred to more, but will be used when necessary

27. Economic Tools in Depth

31. Policies for the Tragedy of the Commons?

32. Public Goods Free-riding No price signal as feed-back mechanism
Scarcity  price increase  innovation
Lack of Incentives to produce them
Examples
Vaccines and bird flu
Ecosystem services: e.g. wetlands
Defense

33. Policies for Public Goods?

34. Non-rival & Excludable: tragedy of the non-commons
Why do we have patents?
When did patents come about?
1790s in US
1947 international, rarely used before 1980s
How long do they last?

35. Are Patents Equitable? Samuel Slater, “Father of American Industry”
Developed countries own 97% of all patents
Raises costs for research that meets the needs of the poor
“Standing on the shoulders of giants”

36. Are Patents Efficient? Patents are monopolies Information is non-rival
Too many patents may be slowing the progress of science, not increasing it
70 separate patents involved in Golden Rice.
Wave of inventions preceded international patents

37. Policies for Information?

38. Market goods: The theory of Externalities

39. Externalities Definition
“an activity by one agent causes a loss (gain) of welfare to another agent”
“The loss (gain) of welfare is uncompensated”
Completely Internal to the Economic Process. Why?
How are these related to public goods?

40. Examples
Louisiana wetlands
Factory farming
Waste emissions

41. ‘Optimal’ pollution/degradation

42. Policy options Tax Tradable quota Property rights
Set price, let this determine Q at which demand = price
Tradable quota
Set Q, let this determine price
Property rights
Let market figure it out

43. ‘Market’ Option 1: Pigouvian tax

44. Market Option 2: Tradable Quotas

45. Natural Monopolies High fixed costs, low marginal costs
Economies of scale
How do we deal with natural monopolies?
Ideology vs. economics
Water, monopoly and externalities
Energy

46. Does the Government have the final say on Policies?
Long-horn beetles
Turtle Excluder Devices
Cotton subsidies