Considering Policy: The polis Considering Policy: The polis vs. the market vs. the market

Stone’s ApproachStone’s Approach

Robert G. FrankRobert G. Frank

HSA 6152HSA 6152

January 2007January 2007

The First 100 Hours and the The First 100 Hours and the PlanePlane

White House defends Pelosi plane request

Prevailing ModelsPrevailing Models

• Rational Decision MakingRational Decision Making– Identify objectivesIdentify objectives– Identify alternative approach leading to Identify alternative approach leading to

the same objectivethe same objective– Predict consequences of alternativesPredict consequences of alternatives– Evaluate consequencesEvaluate consequences– Select the alternative maximizes Select the alternative maximizes

objectivesobjectives

• Inherent to this model is belief Inherent to this model is belief politics reflect the actions of various politics reflect the actions of various marketsmarkets– Markets: social systems individuals Markets: social systems individuals

pursue their own objectives by trade.pursue their own objectives by trade.– Typical model:Typical model:

•Robinson Crusoe societyRobinson Crusoe society

Robinson Crusoe SocietyRobinson Crusoe Society

• Two people on a tropical islandTwo people on a tropical island– Swap coconuts and small game animalsSwap coconuts and small game animals– Trade is not essential to either as both Trade is not essential to either as both

have same resourceshave same resources– Each tries to acquire scare resources at Each tries to acquire scare resources at

the lowest cost and sell their goods at the lowest cost and sell their goods at the highest pricethe highest price

– Models of society are simplisticModels of society are simplistic

MarketsMarkets

• Individuals act to maximize their own Individuals act to maximize their own self-interestself-interest

• May include family/friends/altruistic May include family/friends/altruistic interestsinterests

• Competition driven by each individuals Competition driven by each individuals effort to be resourceful, creative effort to be resourceful, creative

• This chain eventually benefits society This chain eventually benefits society in generalin general

The PolisThe Polis

• CommunitiesCommunities– Public policy is driven by communities Public policy is driven by communities

acting in the common goodacting in the common good– Markets focus on individualsMarkets focus on individuals– Polis assumes collective will and intentionPolis assumes collective will and intention

•Communities are defined by intentionsCommunities are defined by intentions– Democrats wantDemocrats want– Parents needParents need– Farmers mustFarmers must

CommunitiesCommunities

• Membership must be definedMembership must be defined– Determines participationDetermines participation

•NationsNations

•ClubsClubs

•ChurchesChurches

– Most passionate fights are about Most passionate fights are about membershipmembership• Illegal aliensIllegal aliens

CommunitiesCommunities

• Political vs. cultural communitiesPolitical vs. cultural communities– PoliticalPolitical

•Group of people who live under same Group of people who live under same political rules, share common citizenshippolitical rules, share common citizenship

•Can be diverse in USCan be diverse in US– Brings rise to how to merge diverse cultural Brings rise to how to merge diverse cultural

communities into the larger political environmentcommunities into the larger political environment Irish, Chinese, Japanese, BlackIrish, Chinese, Japanese, Black Identity vs. political community Identity vs. political community

The PolisThe Polis

• Model of polisModel of polis– Distinction between political community Distinction between political community

and cultural communityand cultural community• In many nations the political community In many nations the political community

includes diverse cultural communitiesincludes diverse cultural communities

•How do you integrate several cultural How do you integrate several cultural communities into a single political communities into a single political communitycommunity

– France and head scarfFrance and head scarf– UK UK

Public InterestPublic Interest

• Goals for which there is a consensusGoals for which there is a consensus

• Changes with the interests of the Changes with the interests of the peoplepeople

• Communities have an interest in Communities have an interest in preserving the order and safety of the preserving the order and safety of the membersmembers

• Public interest is to Polis what self-Public interest is to Polis what self-interest is to the marketinterest is to the market

Common ProblemsCommon Problems

• How does self-interest combine with How does self-interest combine with public interest?public interest?– Private benefits and collective benefitsPrivate benefits and collective benefits

• When self-interest and public interest When self-interest and public interest work againstwork against each other are each other are common problemscommon problems. .

Common ProblemsCommon Problems

• Two typesTwo types– Actions with private benefits entail social costsActions with private benefits entail social costs

•Overcharging for health servicesOvercharging for health services

•Discharging waste to avoid additional costsDischarging waste to avoid additional costs

– Social benefits necessitate individual Social benefits necessitate individual sacrificessacrifices•Property taxes to fund schoolsProperty taxes to fund schools

•Cross subsidies in health insuranceCross subsidies in health insurance– Social benefits and private costs vs. social costs for Social benefits and private costs vs. social costs for

private benefits differs by perspectiveprivate benefits differs by perspective

Common ProblemsCommon Problems

• Market theory suggests common Market theory suggests common problems are the exceptionproblems are the exception– Most actions in market models do not Most actions in market models do not

have social consequenceshave social consequences– In the polis common problems are In the polis common problems are

question of interestquestion of interest

Common ProblemsCommon Problems

• In the polisIn the polis– Rare for actions to have self-contained Rare for actions to have self-contained

benefits and social consequencesbenefits and social consequences– Policy frequently addresses the side Policy frequently addresses the side

effects, unintended consequences, long effects, unintended consequences, long term effects and ripple effects of actionsterm effects and ripple effects of actions

– Critical issue for policy: how to get Critical issue for policy: how to get people to give primacy to broader people to give primacy to broader consequencesconsequences

InfluenceInfluence

• Gap between self-interest and public Gap between self-interest and public interest is bridged by:interest is bridged by:– InfluenceInfluence– CooperationCooperation– LoyaltyLoyalty

InfluenceInfluence

• Actions and ideas influenced by Actions and ideas influenced by othersothers– Choices are often conditional Choices are often conditional

•May be influence of large groups so called May be influence of large groups so called “bandwagon” effect“bandwagon” effect

•Or may be specific, workers strike if Or may be specific, workers strike if collective bargaining fails collective bargaining fails

CooperationCooperation

• Critical to the polisCritical to the polis– Creation of alliances for strategic Creation of alliances for strategic

purposespurposes think of a group of 3 children think of a group of 3 children playingplaying

– Demonstrates the lack of validity for two Demonstrates the lack of validity for two person economic modelsperson economic models

– Cooperation essential to powerCooperation essential to power•Most effective method form of subordinationMost effective method form of subordination

– More effective than coercionMore effective than coercion

CooperationCooperation

• Market texts ignore cooperationMarket texts ignore cooperation– Described negatively when consideredDescribed negatively when considered

•Collusion, oligarchy, price fixing, insider Collusion, oligarchy, price fixing, insider tradingtrading

• In polis cooperation is critical for powerIn polis cooperation is critical for power– More positive descriptors: coalition, More positive descriptors: coalition,

alliance, union, party suportalliance, union, party suport

LoyaltyLoyalty

• In the ideal market, buyers will In the ideal market, buyers will switch sellers in response to price or switch sellers in response to price or quality changequality change– No glue in buyer/seller relationshipsNo glue in buyer/seller relationships

• Political alliances bind people over Political alliances bind people over timetime– More like choosing a spouse than More like choosing a spouse than

shopping in a five and ten cent storeshopping in a five and ten cent store

LoyaltyLoyalty

•Language reflects market vs. polis approach– Market: buyers/sellers– Polis: friend/enemy, supporter/

opponent

• In polis history is important

–

GroupsGroups

• Policy is based on solving group Policy is based on solving group problemsproblems– Group formation, splitting, reformation Group formation, splitting, reformation

is criticalis critical

• Decisions in the polis are collectiveDecisions in the polis are collective– Voting, administrative rule making, Voting, administrative rule making,

bargaining, courts, legislatures, bargaining, courts, legislatures, committeescommittees

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InformationInformation

• 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

• Political activity is an effort to influence is an effort to influence information interpretationinformation interpretation

• Information is not equally accessible or Information is not equally accessible or complete in the poliscomplete in the polis

PassionPassion

• Passion feeds upon itselfPassion feeds upon itself– The abortion/right to life battleThe abortion/right to life battle– The whole is greater than the sum of the The whole is greater than the sum of the

partsparts– Things can mean more than one thing at Things can mean more than one thing at

once. once. •Expansion of health care spending is Expansion of health care spending is

positive to providers, a deficit to budgeterspositive to providers, a deficit to budgeters

PolisPolis

• A community, or many communities with A community, or many communities with ideas, images will and effort distinct from ideas, images will and effort distinct from the individualthe individual

• Has a public interestHas a public interest

• Most policy problems are common Most policy problems are common problemsproblems

• Influence is pervasiveInfluence is pervasive– Boundary between interest and coercion is Boundary between interest and coercion is

debateddebated

PolisPolis

• Cooperation is importantCooperation is important

• Loyalty is the normLoyalty is the norm

• Groups and organizations are the Groups and organizations are the foundationfoundation

• Information is interpretative, Information is interpretative, incompleteincomplete

• Governed by laws of passion as well as Governed by laws of passion as well as mattermatter

GoalsGoals

Stone describes five concepts that Stone describes five concepts that dominate the language of policy dominate the language of policy discourse:discourse:– EquityEquity– EfficiencyEfficiency– SecuritySecurity– LibertyLiberty– CommunityCommunity

EquityEquity Political SciencePolitical Science

– The study of “who gets what, when and how”The study of “who gets what, when and how” All policy conversations center upon the All policy conversations center upon the

distribution of resources:distribution of resources:– GoodsGoods– ServicesServices– WealthWealth– IncomeIncome– HealthHealth– illnessillness

EquityEquity Consider the following case:Consider the following case:

– The United States has a budget surplus. The United States has a budget surplus. The president announces a new plan to The president announces a new plan to provide additional health benefits to provide additional health benefits to Americans. You are the Senate majority Americans. You are the Senate majority leaderleaderYou want to create equal opportunity to You want to create equal opportunity to

health care. You propose giving every health care. You propose giving every person with medical expenses last year a person with medical expenses last year a cash benefit of $1000.cash benefit of $1000.

EquityEquity

As Senate majority leader, you want As Senate majority leader, you want each person to share in the bounty each person to share in the bounty equallyequally

EquityEquity

– What concerns might be expressed What concerns might be expressed about this approach?about this approach?

– Immediately, some other senators say:Immediately, some other senators say:Not everyone needs a portion. Some people Not everyone needs a portion. Some people

had no expenses last year. had no expenses last year.

EquityEquity

People have differing medical People have differing medical expenses; give a portion to each expenses; give a portion to each person with medical expenses person with medical expenses meeting a certain criterionmeeting a certain criterion– Those with no medical expenses Those with no medical expenses

are neglectedare neglected– Equal portions but unequal Equal portions but unequal

invitationsinvitations

EquityEquity

Government support should benefit the Government support should benefit the most needy while recognizing all cases: most needy while recognizing all cases: high spenders -- higher amounts, lower high spenders -- higher amounts, lower spenders lower amounts spenders lower amounts – Divide reimbursement according to Divide reimbursement according to

spending with highest spenders getting spending with highest spenders getting more than moderate who receive more more than moderate who receive more than lowthan low

– Unequal portions for unequal ranks, but Unequal portions for unequal ranks, but equal portions for equal ranksequal portions for equal ranks

EquityEquity

Poor constitute 2/3 of voters, but Poor constitute 2/3 of voters, but receive only 1/3 of paymentsreceive only 1/3 of payments– Divide poor from middle and wealthy Divide poor from middle and wealthy

classes with equal portions to the two classes with equal portions to the two groupsgroups

– Unequal portions but equal blocksUnequal portions but equal blocks

EquityEquity

Many people have health insurance, Many people have health insurance, but pay high co-pays and but pay high co-pays and deductibles.deductibles.– Solution: provide the uninsured and Solution: provide the uninsured and

those with high co-pays larger paymentsthose with high co-pays larger payments– Unequal portions, but equal coverage Unequal portions, but equal coverage

EquityEquity

Many view other problems (housing, Many view other problems (housing, transportation) as more pressing transportation) as more pressing than health carethan health care– Allow individuals to have vouchers that Allow individuals to have vouchers that

can be redeemed for higher levels of can be redeemed for higher levels of health care, but significant levels of health care, but significant levels of other servicesother services

– Unequal portions, but equal value to Unequal portions, but equal value to recipientsrecipients

EquityEquity

Some argue there should be no Some argue there should be no formulaformula– Let everyone, rich, poor, sick and well Let everyone, rich, poor, sick and well

have equal opportunity (the economist have equal opportunity (the economist approach), use a lottery.approach), use a lottery.

– Unequal portions, but equal statistical Unequal portions, but equal statistical chanceschances

EquityEquity

As in Stone’s cake example, we As in Stone’s cake example, we started with premise of equal started with premise of equal portions for all. portions for all. – Equity is clearly in the “eyes of the Equity is clearly in the “eyes of the

beholder”beholder”– Equity may mean inequityEquity may mean inequity

EquityEquity

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

decided?)decided?)

EquityEquity

Simple prescriptions for equity: Simple prescriptions for equity: “equal opportunity for all” tend to be “equal opportunity for all” tend to be superficialsuperficial– Need to analyze: Need to analyze:

Recipients (who gets something?)Recipients (who gets something?) Items (what does a person receive?)Items (what does a person receive?)Process (how is distribution to be decided?)Process (how is distribution to be decided?)

EquityEquity

The stance one adopts is influenced The stance one adopts is influenced by world view as much as specifics of by world view as much as specifics of the issue.the issue.– Nozick: distribution of goods is just if Nozick: distribution of goods is just if

derived from a voluntary fair process.derived from a voluntary fair process.Newly created process (inventions) or Newly created process (inventions) or

processes (taxi or air routes) processes (taxi or air routes) Acquired by transfer (Historical record of Acquired by transfer (Historical record of

ownership)ownership)

Nozick’s Process View of EquityNozick’s Process View of Equity

This perspective of equity argues This perspective of equity argues against policies to redistribute against policies to redistribute directly, even when the system is directly, even when the system is unfairunfair– Proponents of this approach would want Proponents of this approach would want

to change the to change the processprocess

Nozick’s Process View of EquityNozick’s Process View of Equity

If market rules favor large playersIf market rules favor large players– Limit large firms in the marketLimit large firms in the market

Antitrust lawsAntitrust laws

EquityEquity

Contrast to Rawls’ approachContrast to Rawls’ approach Seeks universal standard not dependent Seeks universal standard not dependent

upon norms of particular societiesupon norms of particular societies– Relevant class of recipients as all citizens and Relevant class of recipients as all citizens and

relevant items as social primary goodsrelevant items as social primary goods Social primary goods are things important to peopleSocial primary goods are things important to people

– Shaped, created by social structures and political Shaped, created by social structures and political institutions --- power, opportunity, wealth, income, civil institutions --- power, opportunity, wealth, income, civil rights, and civil rights.rights, and civil rights.

Rawls EquityRawls Equity

RawlsRawls– Justice is attribute of rules and Justice is attribute of rules and

regulations that govern societyregulations that govern society– Secondarily, as an attribute of the rules Secondarily, as an attribute of the rules

resulting from distributionsresulting from distributions– For Rawls: Justice is fairnessFor Rawls: Justice is fairness

Rawls: End-result countsRawls: End-result counts

People who favor an end result of People who favor an end result of equityequity– Favor redistributionFavor redistribution

Requires ability to define recipients and Requires ability to define recipients and itemsitems

– Prescription for redistribution must be clearPrescription for redistribution must be clear This is hard to achieveThis is hard to achieve

Equity and LibertyEquity and Liberty

To achieve equity, must tolerate To achieve equity, must tolerate inference with liberty.inference with liberty.– Liberty is freedom from constraintsLiberty is freedom from constraints– Liberty is freedom to pursue the course Liberty is freedom to pursue the course

one wantsone wants

Equity and LibertyEquity and Liberty

Process equity model: freedom to use Process equity model: freedom to use and dispose of one’s resourcesand dispose of one’s resources– Reluctant to sanction government Reluctant to sanction government

interventionintervention End point End point

– What resources are needed for What resources are needed for individual to choose from desire rather individual to choose from desire rather than necessitythan necessityWhat are basic human needs?What are basic human needs?

Social conservatismSocial conservatism

Beliefs in distributive justice as fair Beliefs in distributive justice as fair acquisitionsacquisitions

Liberty as freedom to dispose of Liberty as freedom to dispose of one’s propertyone’s property

Property as an individual creationProperty as an individual creation Work is motivated financial needWork is motivated financial need

Social conservatismSocial conservatism

Justification of income redistribution Justification of income redistribution necessary to show individuals do not necessary to show individuals do not have just title to income they earnedhave just title to income they earned

Social LiberalismSocial Liberalism

Distributive justice as fair shares of Distributive justice as fair shares of basic resourcesbasic resources

Liberty as freedom from dire Liberty as freedom from dire necessitynecessity

Property as a social creationProperty as a social creation Productivity simulated by securityProductivity simulated by security

Social LiberalismSocial Liberalism

Equity of distribution of some Equity of distribution of some resources is the normresources is the norm

““all social values-liberty and all social values-liberty and opportunity, income and wealth and opportunity, income and wealth and the basis of self respect– are to be the basis of self respect– are to be distributed equally unless unequal distributed equally unless unequal distribution of any or all, of these distribution of any or all, of these values is to everyone’s advantage”values is to everyone’s advantage”

Nozick’s EquityNozick’s Equity

How does he handle “fairness” for How does he handle “fairness” for original acquisitions and transfersoriginal acquisitions and transfers– SlaverySlavery– Everything a single woman owned Everything a single woman owned

belonged to her husband. belonged to her husband.