1. Considering Policy: The polis vs. the market Stone’s Approach Robert G. Frank HSA 6152 January 2007

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3. Prevailing Models Rational Decision Making Rational Decision Making –Identify objectives –Identify alternative approach leading to the same objective –Predict consequences of alternatives –Evaluate consequences –Select the alternative maximizes objectives

4. Inherent to this model is belief politics reflect the actions of various markets Inherent to this model is belief politics reflect the actions of various markets –Markets: social systems individuals pursue their own objectives by trade. –Typical model: Robinson Crusoe society Robinson Crusoe society

5. Robinson Crusoe Society Two people on a tropical island Two people on a tropical island –Swap coconuts and small game animals –Trade is not essential to either as both have same resources –Each tries to acquire scare resources at the lowest cost and sell their goods at the highest price –Models of society are simplistic

6. Markets Individuals act to maximize their own self- interest Individuals act to maximize their own self- interest May include family/friends/altruistic interests May include family/friends/altruistic interests Competition driven by each individuals effort to be resourceful, creative Competition driven by each individuals effort to be resourceful, creative This chain eventually benefits society in general This chain eventually benefits society in general

7. The Polis Communities Communities –Public policy is driven by communities acting in the common good –Markets focus on individuals –Polis assumes collective will and intention Communities are defined by intentions Communities are defined by intentions –Democrats want –Parents need –Farmers must

8. Communities Membership must be defined Membership must be defined –Determines participation Nations Nations Clubs Clubs Churches Churches –Most passionate fights are about membership Illegal aliens Illegal aliens

9. Communities Political vs. cultural communities Political vs. cultural communities –Political Group of people who live under same political rules, share common citizenship Group of people who live under same political rules, share common citizenship Can be diverse in US Can be diverse in US –Brings rise to how to merge diverse cultural communities into the larger political environment  Irish, Chinese, Japanese, Black  Identity vs. political community

10. The Polis Model of polis Model of polis –Distinction between political community and cultural community In many nations the political community includes diverse cultural communities In many nations the political community includes diverse cultural communities How do you integrate several cultural communities into a single political community How do you integrate several cultural communities into a single political community –France and head scarf –UK

11. Public Interest Goals for which there is a consensus Goals for which there is a consensus Changes with the interests of the people Changes with the interests of the people Communities have an interest in preserving the order and safety of the members Communities have an interest in preserving the order and safety of the members Public interest is to Polis what self-interest is to the market Public interest is to Polis what self-interest is to the market

12. Common Problems How does self-interest combine with public interest? How does self-interest combine with public interest? –Private benefits and collective benefits When self-interest and public interest work against each other are common problems. When self-interest and public interest work against each other are common problems.

13. Common Problems Two types Two types –Actions with private benefits entail social costs Overcharging for health services Overcharging for health services Discharging waste to avoid additional costs Discharging waste to avoid additional costs –Social benefits necessitate individual sacrifices Property taxes to fund schools Property taxes to fund schools Cross subsidies in health insurance Cross subsidies in health insurance –Social benefits and private costs vs. social costs for private benefits differs by perspective

14. Common Problems Market theory suggests common problems are the exception Market theory suggests common problems are the exception –Most actions in market models do not have social consequences –In the polis common problems are question of interest

15. Common Problems In the polis In the polis –Rare for actions to have self-contained benefits and social consequences –Policy frequently addresses the side effects, unintended consequences, long term effects and ripple effects of actions –Critical issue for policy: how to get people to give primacy to broader consequences

16. Influence Gap between self-interest and public interest is bridged by: Gap between self-interest and public interest is bridged by: –Influence –Cooperation –Loyalty

17. Influence Actions and ideas influenced by others Actions and ideas influenced by others –Choices are often conditional May be influence of large groups so called “bandwagon” effect May be influence of large groups so called “bandwagon” effect Or may be specific, workers strike if collective bargaining fails Or may be specific, workers strike if collective bargaining fails

18. Cooperation Critical to the polis Critical to the polis –Creation of alliances for strategic purposes think of a group of 3 children playing –Demonstrates the lack of validity for two person economic models –Cooperation essential to power Most effective method form of subordination Most effective method form of subordination –More effective than coercion

19. Cooperation Market texts ignore cooperation Market texts ignore cooperation –Described negatively when considered Collusion, oligarchy, price fixing, insider trading Collusion, oligarchy, price fixing, insider trading In polis cooperation is critical for power In polis cooperation is critical for power –More positive descriptors: coalition, alliance, union, party suport

20. Loyalty In the ideal market, buyers will switch sellers in response to price or quality change In the ideal market, buyers will switch sellers in response to price or quality change –No glue in buyer/seller relationships Political alliances bind people over time Political alliances bind people over time –More like choosing a spouse than shopping in a five and ten cent store

21. Loyalty Language reflects market vs. polis approach – –Market: buyers/sellers – –Polis: friend/enemy, supporter/ opponent In polis history is important –

22. Groups Policy is based on solving group problems Policy is based on solving group problems –Group formation, splitting, reformation is critical Decisions in the polis are collective Decisions in the polis are collective –Voting, administrative rule making, bargaining, courts, legislatures, committees

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24. Information In markets, the information is perfect In politics, it is what people make of information – –Perception of politicians, their views, news information critical to outcomes is an effort to influence information interpretation Political activity is an effort to influence information interpretation Information is not equally accessible or complete in the polis Information is not equally accessible or complete in the polis

25. Passion Passion feeds upon itself Passion feeds upon itself –The abortion/right to life battle –The whole is greater than the sum of the parts –Things can mean more than one thing at once. Expansion of health care spending is positive to providers, a deficit to budgeters Expansion of health care spending is positive to providers, a deficit to budgeters

26. Polis A community, or many communities with ideas, images will and effort distinct from the individual A community, or many communities with ideas, images will and effort distinct from the individual Has a public interest Has a public interest Most policy problems are common problems Most policy problems are common problems Influence is pervasive Influence is pervasive –Boundary between interest and coercion is debated

27. Polis Cooperation is important Cooperation is important Loyalty is the norm Loyalty is the norm Groups and organizations are the foundation Groups and organizations are the foundation Information is interpretative, incomplete Information is interpretative, incomplete Governed by laws of passion as well as matter Governed by laws of passion as well as matter

28. Goals  Stone describes five concepts that dominate the language of policy discourse: –Equity –Efficiency –Security –Liberty –Community

29. Equity  Political Science –The study of “who gets what, when and how”  All policy conversations center upon the distribution of resources: –Goods –Services –Wealth –Income –Health –illness

30. Equity  Consider the following case: –The United States has a budget surplus. The president announces a new plan to provide additional health benefits to Americans. You are the Senate majority leader  You want to create equal opportunity to health care. You propose giving every person with medical expenses last year a cash benefit of $1000.

31. Equity  As Senate majority leader, you want each person to share in the bounty equally

32. Equity –What concerns might be expressed about this approach? –Immediately, some other senators say:  Not everyone needs a portion. Some people had no expenses last year.

33. Equity  People have differing medical expenses; give a portion to each person with medical expenses meeting a certain criterion –Those with no medical expenses are neglected – Equal portions but unequal invitations

34. Equity  Government support should benefit the most needy while recognizing all cases: high spenders -- higher amounts, lower spenders lower amounts –Divide reimbursement according to spending with highest spenders getting more than moderate who receive more than low –Unequal portions for unequal ranks, but equal portions for equal ranks

35. Equity  Poor constitute 2/3 of voters, but receive only 1/3 of payments –Divide poor from middle and wealthy classes with equal portions to the two groups –Unequal portions but equal blocks

36. Equity  Many people have health insurance, but pay high co-pays and deductibles. –Solution: provide the uninsured and those with high co-pays larger payments –Unequal portions, but equal coverage

37. Equity  Many view other problems (housing, transportation) as more pressing than health care –Allow individuals to have vouchers that can be redeemed for higher levels of health care, but significant levels of other services –Unequal portions, but equal value to recipients

38. Equity  Some argue there should be no formula –Let everyone, rich, poor, sick and well have equal opportunity (the economist approach), use a lottery. –Unequal portions, but equal statistical chances

39. Equity  As in Stone’s cake example, we started with premise of equal portions for all. –Equity is clearly in the “eyes of the beholder” –Equity may mean inequity

40. Equity  Three key principles: –Recipients (who gets something?) –Items (what does a person receive?) –Process (how is distribution to be decided?)

41. Equity  Simple prescriptions for equity: “equal opportunity for all” tend to be superficial –Need to analyze:  Recipients (who gets something?)  Items (what does a person receive?)  Process (how is distribution to be decided?)

42. Equity  The stance one adopts is influenced by world view as much as specifics of the issue. –Nozick: distribution of goods is just if derived from a voluntary fair process.  Newly created process (inventions) or processes (taxi or air routes)  Acquired by transfer (Historical record of ownership)

43. Nozick’s Process View of Equity  This perspective of equity argues against policies to redistribute directly, even when the system is unfair –Proponents of this approach would want to change the process

44. Nozick’s Process View of Equity  If market rules favor large players –Limit large firms in the market  Antitrust laws

45. Equity  Contrast to Rawls’ approach  Seeks universal standard not dependent upon norms of particular societies –Relevant class of recipients as all citizens and relevant items as social primary goods  Social primary goods are things important to people –Shaped, created by social structures and political institutions --- power, opportunity, wealth, income, civil rights, and civil rights.

46. Rawls Equity  Rawls –Justice is attribute of rules and regulations that govern society –Secondarily, as an attribute of the rules resulting from distributions –For Rawls: Justice is fairness

47. Rawls: End-result counts  People who favor an end result of equity –Favor redistribution  Requires ability to define recipients and items –Prescription for redistribution must be clear  This is hard to achieve

48. Equity and Liberty  To achieve equity, must tolerate inference with liberty. –Liberty is freedom from constraints –Liberty is freedom to pursue the course one wants

49. Equity and Liberty  Process equity model: freedom to use and dispose of one’s resources –Reluctant to sanction government intervention  End point –What resources are needed for individual to choose from desire rather than necessity  What are basic human needs?

50. Social conservatism  Beliefs in distributive justice as fair acquisitions  Liberty as freedom to dispose of one’s property  Property as an individual creation  Work is motivated financial need

51. Social conservatism  Justification of income redistribution necessary to show individuals do not have just title to income they earned

52. Social Liberalism  Distributive justice as fair shares of basic resources  Liberty as freedom from dire necessity  Property as a social creation  Productivity simulated by security

53. Social Liberalism  Equity of distribution of some resources is the norm  “all social values-liberty and opportunity, income and wealth and the basis of self respect– are to be distributed equally unless unequal distribution of any or all, of these values is to everyone’s advantage”

54. Nozick’s Equity  How does he handle “fairness” for original acquisitions and transfers –Slavery –Everything a single woman owned belonged to her husband.