Cost benefit Analysis (PAGE 235)

·      A way of making decisions for public policy

·      Usually measured in dollars, since the impetus of the analysis puzzle is how to spend money

·      Used to answer questions

o   Is it worth the investing in a major national campaign to reduce high blood pressure?

o   Is it worth requiring automobile manufacturers to equip cars with air bags

·      The analysis tallies up the dollar costs and benefits of the programs or regulations

·      Used when consequences aren’t in dollars but are intangible (deaths, damaged political campaign, decline of a city, destruction of wilderness)

o   They still must be measured

o   Are often left out because there’s no convincing way to measure them

o   Pressure to omit them is a major criticism of the method

·      One of the most controversial areas of cost-benefit analysis is health and safety regulation, where consequences of policy choices are injuries, diseases, and deaths on one side.

o   The other includes health, longevity, and quality of life.

o   Analysts have come up with ways to put a dollar amount to death or permanent physical injury

§  Leads to pronouncements (i.e.) that a life of a construction worker is worth $650,000

§  Safety standard should not be adopted if it will cost more than that for each life than it saves

·      With many policy problems, the consequences are long term

o   This are better analyzed through risk-benefit analysis

§  Drug with side effects

§  New weapons that turns out to be faulty

§  Environmental

§  Safety concerns

§  Uncertainty

o   Like cost benefit analysis, but measures the likelihood of the negative effects and their magnitude

·      From Lecture

o   1980’s—we are losing economically because our kids are not doing well in school compared to other countries

§  One idea is to increase the number of days and hours kids are in school.

§  Three different inputs

ú  More days and hours

ú  Computers in classrooms

ú  Peer tutoring (most economically effective)

Equality-efficiency trade-off (PAGE 84)

·      Often thought of in a zero-sum relationship, the more of one, the less of the other

o   Many policy debates look for the best “mix”

·      Tax and welfare policy are two areas where the trade off is strongest

·      Three reasons for the trade off

o   First (and most common)—is the motivation for the argument. Holds that equality eliminates the differential rewards necessary to motivate people to be productive.

§  Equalization of incomes (may reduce effort)

ú  Welfare grants

ú  Progressive taxation

ú  Restructuring of wages

o   Second— to maintain equality, government must continuously interfere with individual choices about how to use resources, and in doing so, curbs useful experimentation and productive innovation

o   Third—the waste argument. Uses large administrative machinery (tax bureaus, welfare agencies, labor departments) that uses up resources but is not itself productive. “Leaky bucket”

Externalities (PAGE 72, 78-79)

·      Situations in which there are effects on people outside of an exchange or decision

Focusing Event (PAGE 95-100, Kingdon)

·      A crisis or disaster that calls attention to a particular policy problem

o   Transportation crises are much more prominent in political atmosphere

§  Crises are more aggregated in transportation issues

§  When something goes wrong in the patient-provider exchange, it doesn’t really show up as a crisis

·      Variations of Focusing Event

o   Some crises that come along simply bowl lover every other issue on the agenda (I.e., Penn Central railroad collapse)

o   Sometimes varies on the person making the agenda—like biomedical research because many people have had brushes with various health disorders (personal experiences)

o   Shifts in a peaceful symbol (i.e., “Prop 13 mentality)

·      Need to be accompanied by something else (reinforces something “In the back of people’s minds”) Also sometimes serves as an early warning.

Hobson’s Choice (PAGE 246)

·      The author, speaker, or politician offers the audience an apparent choice, wearing all the verbal clothing of a real choice, when in fact the very list of options determines how people will choose by making one option seem like the only reasonable possibility.

o   James Madison’s The Federalist Papers

o   Milton Friedman’s example: Choice A or Choice B

Hortatory Instrument—Facts (LECTURE)

·      Primary Elements

o   Information beliefs and values

·      Policy Problem

o   Information for remedying a problem or making a choiceis incomplete. Some values held so strongly, so beyond the control of just incentives and rule

·      Policy targets and expected effect

o   Targets will mobilize, based on strongly-held values and will act on information. But actions may be diffuse, unpredictable, and varied.

o   Examples—Food labeling, Recycling, Curriculum and testing policies

Individual Mandates (LECTURE)

·      Primary Elements

o   Rules

·      Policy Problems

o   Undesirable behavior or goods being produced. Lack of uniform standards.

·      Policy targets and expected effect

o   Have a capacity to comply; most will do so, though, some shrinking lightly

o   Examples—speed limits, environmental, non-discriminations laws (equal pay for men and women)

§  Variable factors—how much discretion do you give in enforcement

Inducements

·      Primary Elements

o   Money (Procurement)

·      Policy problems

o   Valued goods or services not being produced with desired frequency or at least sufficient levels of quality and innovation

·      Policy Targets and expected effect

o   Have capacity to produce; money will elicit performance, through variability in production levels likely

§  Incentive for people to do the best they can do. Want to produce something great, not stop something bad

§  You want to be “above the standard”

o   Examples—Grants-in-aid to governmental agencies, private sector organization, individuals

Liberty Security Trade-Off (PAGE 121-127)

·      Security creates dependence on the provider of security

o   (opposing view) Insecurity deprives a person of capacity to make truly free choices; security creates true liberty

·      People need to be self-sufficient in order to be truly independent and free

o   (opposing view) The idea of complete self sufficiency is illusory; being able to rely on a community creates a sphere of freedom for individuals, and public policies can protect recipients of aid from domination by providers (including the state itself)

·      If government acts paternalistically, protecting people from harming themselves, it must necessarily limit people’s freedom.

o   (opposing view) Public policies can make honest, nondiscriminatory distinctions between people who are competent to make decisions affecting their well-being and those who are not

Market Failure (LECTURE)

·      Sources of Market Failure

o   Imperfect information

§  Rarely perfect

§  Info is subject to interpretation

§  Sometimes a substantial cost to get good, reliable info

ú  Example—took a lot of time and money to get good info on Foods, like additives, processing, and ingredients

o   Overwhelming market power—Monopoly or Monopsony (where the buyer controls the price)

o   Common problems—Externalities and collective goods

§  Dumping waste from facilities to rivers; effects everybody

§  Externalities are social issues—If you have a great looking house but your neighbor’s is a dump, the value of your house will go down

§  Collective good—Example: national defense

Mixed Public-Private healthcare system (LECTURE)

·      Healthcare Overview

o   American system is expensive (KFF.org)

§  currently consumes 16% of GDP

ú  Increased from 5.2% in 1960

ú  Nearly 3X the international median

ú  131% Premium increase for employers

ú  128% Worker Contribution Increase

o   higher overall per capita costs than in other industrialized countries and higher transaction costs

o   provide fewer services at higher costs

·      The US system is a mixed public-private one with a variety of delivery systems (FFS, HMOs, PPOs)

o   Both the private and public systems have become more bureaucratized and regimented in an effort to control costs

§  Before surgery or procedure, your healthcare provider calls the insurance company to see if its permissible under the plan

·      There is a significant variation in access to and quality of care

o   depends on whether someone has insurance or not

o   also a variation by urbanicity, region, and ethnic groups

·      The US system differs from those in other industrialized countries that cover a much higher proportion of the population—American exceptionalism

o   The US ranks equal to or behind other industrial countries in life expectancy and infant mortality, with considerable variation in health outcomes across ethnic groups

·      Publicly Funded Components of the US Healthcare System

o   Medicare

§  $45 million beneficiaries

ú  Most over the age of 65, but also those under 65 with permanent disabilities

o   $477 billion—total benefit payments (2009)

o   Part A—hospital insurance funded by payroll tax

o   Part B—voluntary insurance program for other medical services, funded by premiums and general tax revenues

o   Part C—Medicare Advantage program, private health plans providing services of Parts A, B, and D

o   Part D—voluntary outpatient prescription drug plan; funded through general revenues, enrollee premiums, and state payments

·      Medicaid

o   Joint federal-state public assistance program funded through general revenues

§  Federal government pays for most, but not all of it

§  2/3 federal, 1/3 state (varies among size of states)

o   59 million enrollees

§  covers about 60% of the poor and near poor; 2/3 of all elderly in nursing homes; 40 percent of all US childbirths; with SCHIP, 25% of all children and half of all low income children

§  People who were formerly middle class—exhaust all those resources when going in to nursing homes and are now on Medicaid

o   $304 billion—total expenditures (2006)

·      State Children’s Health Insurance Program (SCHIP)

o   Complements Medicaid by covering uninsured children with family incomes above Medicaid thresholds. The majority of states cover children up to or above 200% FPL

Modeling the problem-Causality (LECTURE)

·      Identifying causes as a basis for constructing a policy theory that highlights factors with the greatest leverage for policy action, but also assigns responsibility and legitimates particular solutions

o   How it gets interpreted

o   Use of stories and symbols

·      You can’t fix a problem unless you know the cause

·      Most policy problems have multiple causes

o   Think about what’s the “biggest” problem to address

§  Kids declining test scores

ú  Its happening because of texting—they have no control

ú  Hours in school, who teaches them, what is being taught—policy makers have a lot of control and leverage

·      When thinking about modeling and causality, you are assigning responsibility

o   This is very political—who’s to blame?

Opportunity Costs (PAGE 221)

·      The imputed cots of not doing something, of missing an opportunity to use resources in some way other than the one chosen. Thus, they represent potential gain rather than actual costs.

·      The differences between actual costs and opportunity costs, between collective goods and bad’s, is politics.

Perverse Incentives (PAGE 298)

·      Incentives that are unwittingly built into a rule to comply with it in a way that creates new problems or exacerbates the very problems the rule is meant to cure

·      Example; Congress established Medicare payment rules that reimburse hospitals on the basis of the average durations and treatments for categories of diseases (in the old days, hospitals were reimbursed on the basis 

Policy Entrepreneur (PAGE 122-124, Kingdon)

·      Advocates for proposals or for the prominence of an idea. They have a willingness to invest their resources—time, energy, reputation, and sometimes money—in hopes of a future return.

·      Incentives that promote advocacy

o   Promotion of personal interests (bureaucratic turf)

§  Example—American Medical Association advocated a certain version of national health insurance in the 1970’s.

§  Advocacy has electoral benefits

o   People sometimes advocate proposals because they want to promote their values, or affect the shape of public policy

§  Example—the debate of the amount of government involved with national healthcare

o   “Policy Groupies” People who participate and join for “solidarity” incentives. Some just simply enjoy the game

Policy Indicators (PAGE 90-94, Kingdon)

·      A less systematic indicator (not caused by political pressure) that shows that there is a policy problem

·      Such indicators abound in the political world because both governmental and nongovernmental agencies routinely monitor various activities and event (I.e., highway deaths, disease rates, immunization rates, consumer prices, commuter and intercity ridership, costs of entitlement programs, infant mortality rates, and more)

·      The ideas that “float around” before policies come to be

o   Bills introduced and vetoed

o   Speeches made

o   Proposals are drafted

o   Amended in response to reaction  and floated again

·      Policy Communities

o   Community of specialists in a given policy area—health, housing, environmental protection, criminal justice.

§  Scattered inside and outside government

§  Have common interactions

·      Fragmentation

o   Some communities are tight knit, some are diverse and fragmented

§  Health is very tight-knit, while transportation is fragmented

§  Transportation is fragmented: Railroads, Aviation, Urban Mass Transit

o   Consequence of Fragmentation

§  Policy Fragmentation

ú  “Left hand doesn’t know what the right hand is doing”

§  A more closely knit community generates common outlooks, orientations, and ways of thinking

ú  Encourages better communication

§  Fragmentation begets instability

·      Origins lead to Mutations which lead to Recombination

·      Selection Criteria

o   Technical Feasibility

o   Congruence with the values of community members

o   Anticipation of future restraints (including budget)

o   Public acceptability

o   Politician’s receptivity

Positive Liberty (PAGE 128-130)

·      Liberty is the availability of meaningful choice and capacity to exercise it

o   Expanded whenever a person’s control over his or her life is increased

§  Two aspects of this control

ú  Range of issues or problems over which one can exercise control

ú  Resources both material and non-material, that enable one to envision alternatives and carry out one’s will

§  Positive theorists ask  what kinds of resources are necessary or helpful in exercising effective choice

ú  Political Rights (active rights)—voting and participation in decision making of schools, unions, or firms; more defensive rights, such as the protection of free speech and assembly and freedom from unreasonable searches

Procedural Rights (PAGE 327)

·      Spell out a process by which important decisions must be made. A procedural right is a right to have a decision that affects you made in a certain way, but it does not include the right to an outcome of a certain time (say, the employer must hire you)

o   Classic Example

§  The right to a fair hearing or a trial by a jury of one’s peers.

§  Rights against discrimination demanded by blacks, minorities, and the handicapped

Spillovers (PAGE 190, Kingdon)

·      The appearance of a window for one subject often increases the probability that a window will open for another similar subject.

·      Adjacent Areas

o   Once a precedent is established in one area, it can be used to further a similar change in an area that is like the first in some way.

§  I.e., deregulation in aviation practices lead to other branches of transportation to seek deregulation

§  Important to move very quickly. Windows open and close rapidly

o   The passage of the first principle-establishing legislation alters the coalition structure surrounding the policies

Stories of Decline (PAGE 138)

·      “In the beginning, things were pretty good. But they got worse. In fact, right now, they are nearly intolerable. Something must be done.”

o   Almost always begins with a recitation of facts (high crime rates, import penetration in the US markets is greater, environmental quality is worse)

·      Has several variations

o   Stymied progress story

§  “In the beginning things were terrible. Then things got better, thanks to a certain someone. But now somebody or something is interfering with our hero, so things are going to get terrible again.”

§  AMA fighting government cost-containment efforts, reminded us about the days of plagues, TB, etc. and warned of government restrictions.

o   Changes is only an illusion story

§  “You always thought things were getting worse (or better). But you were wrong. Let me show you some evidence that things are actually going in the opposite direction. Decline (or improvement) was just an illusion.”

§  Medical researchers tell us improved survival rates for cancer patients are really an artifact of measurement

System-Changing Instruments (LECTURE)

·      Primary Elements

o   Authority

·      Policy Problem

o   Existing institutional arrangements are not producing desired

·      Policy targets and expected effect

o   New entrants will produce desired result and will motivate established institutions to improve performance. However, new entrants may generate other problems

o   Examples—Vouchers, contracting-out for governmental services

Rationality Project (LECTURE)

·      People need to examine public policy in order to understand their government.

·      Policy analysis as a discipline

o   Scientists came pretty late

o   Even now, public policy isn’t central to Poli Sci

o   Economics dominated