The Cato Institute Washington, D.C.

1. “Understanding Public Policy: A Primer”Daniel GriswoldCato UniversityAnnapolis, MDJuly 25, 2011 The Cato Institute Washington, D.C.

2. What is Public Policy? • Complex and dynamic process – not what you learned in high school civics class • What government does to and for society • Collective action through the government

3. Public Policies May: • Regulate behavior • Extract taxes • Distribute benefits • Organize bureaucracy • Make war • Some combination of the above

4. Why Care about Public Policy? “Just because you do not take an interest in politics doesn't mean politics won't take an interest in you.” – Pericles “The natural progress of things is for liberty to yield, and government to gain ground." – Thomas Jefferson “I am interested in politics so that one day I will not have to be interested in politics.” – Ayn Rand

5. Analyzing Public Policy: a Framework Michael Munger, Duke University, Analyzing Policy: Choices, Conflicts, and Practices (2000) • Problem formulation • Selection of criteria • Comparison of alternatives • Political and organizational constraints • Implementation and evaluation

6. Problem Formulation

7. Selection of Criteria • What do we want to accomplish? • Test of a good policy • Moral argument • Incentives • Constitutionality

8. Comparison of Alternatives Munger’s Criteria/Alternatives Matrix (CAM)

9. Political and Organizational Constraints “The Overton Window” • Unthinkable • Radical • Acceptable • Sensible • Popular • Policy

10. Implementation and Evaluation • Did the program accomplish its goals? • Good intentions not enough. • Market outcomes, political acceptance, expert analysis • Charles Murray’s Losing Ground; immigration enforcement; government K-12 school spending

11. Education Spending vs. Performance

12. How is Public Policy Made? “Laws are like sausages, it is better not to see them being made.” – attributed to Otto von Bismarck

13. The Players: Voters Politicians Think tanks Capitol hill Bureaucrats The courts Researchers Consultants Academics Interestgroups Administration The media Experts Public opinion Civil servants

14. Models of Policy Analysis • Institutionalism • Process model • Rationalist model: policy as maximum social gain • Incrementalism: policy as variations on the past • Group theory: policy as a group equilibrium • Elite theory: policy as elite preference • Public choice theory

15. Public Choice Theory • “Politics without romance” • Public officials as self-interested actors • Rent seeking • Concentrated benefits, diffused costs

16. Arrow’s Impossibility Theorem • A rational individual who prefers Pepsi over Coke, and Coke over Dr. Pepper, will prefer Pepsi over Dr. Pepper. • Arrow showed there is no “fair” voting method for constructing social preferences from arbitrary individual preferences. • Society may not be a “rational chooser”

17. A ‘Fair’ Voting System • Each voter can have any set of rational preferences. This requirement is called “universal admissibility.” • If every voter prefers choice A to choice B, then the group prefers A to B. This is sometimes called the “unanimity” condition. • If every voter prefers A to B, then any change in preferences that does not affect this relationship must not affect the group preference for A over B. • There are no dictators.

18. Public Preferences: Trade Policy with China Note: Rank order of preferences for each group

19. The Outcome: Collective Irrationality Unilateral Free Trade > Trade Agreement Trade Agreement > Trade War Trade War > Unilateral Free Trade Endless Loop! No transitive preferences.

20. What You Can Do • Vote, or not • Fund think tanks • Write letters to your congressmen • Blogging/social media • Take a career in ideas • Write op-eds and letters to the editor • Encourage other people to become engaged

21. Q&A & Discussion … • www.cato.org • www.freetrade.org • dgriswold@cato.org • Facebook • Twitter: @DanielGriswold • 202-789-5260