Transcript 2. what are the key policy analysis tools/models/options

2.
WHAT ARE THE KEY POLICY
ANALYSIS
TOOLS/MODELS/OPTIONS?
Larry D. Sanders
Fall 2005
Dept. of Ag Economics
Oklahoma State University
INTRODUCTION
Purpose:
gain an awareness &
understanding of the analytical
tools used to evaluate agricultural
public policy
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INTRODUCTION
Learning Objectives:
1. Be familiar with the general economic
concepts related to policy analysis &
the role of economics in public policy.
2. Be aware of various policy analysis
tools.
3. Understand the value of alternatives/
consequences as a method for
objective analysis & outline the
elements of an effective methodology.3
Ancient or Modern Views of Economics?
“…there are two sets of interests, those of producers
& those of consumers. But nothing more markedly affects
the interests of both sides at once than price. Therefore,
price is the great problem for society as a whole.
According to the theory of ______________ (circa ________),
the government should level prices by the adjustment of
demand and supply, in order to guarantee the cost of the
producer and satisfy the wants of the customer.
It’s chief aim is to destroy all monopoly so that the
independent or small producer can be protected on the one
side, and the consumer on the other. It prevents the
middle-man from making large profits, & gives the seller
& buyer full gain. It is the task of the superior man to
adjust demand & supply so as to keep prices on a level.”
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ECONOMIC CONCEPTS
Flow of spending
Supply & Demand


Changes in quantity vs changes in S & D
Price mechanism & Equilibrium
Fallacy of Composition
Capitalization
Economic Justice




Consumer & Producer Surplus
Market Failure (Externalities)
Pareto Optimum
Compensation Principle
Relative Advantage (comparative &
absolute) & Theory of Trade
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Rent, wages, salaries, interest
Land, labor, financial capital
Money payments for goods and services
Financial markets
Banks
Money
Markets
Loans
Business savings
Goods and services
Household savings
HOUSEHOLDS
BUSINESS
Loans
Income and
other taxes
Business taxes
Payments for
goods and services
Depreciation
GOVERNMENT
Understanding the Public Policy Process
Decisions are not
made in a vacuum
Economics not always
an apparent part of
solution
Some interest groups
& decision makers
don’t want to consider
Economics
Some economists don’t
want to consider
Politics
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Expansion of Support
ADVOCATES
Problem
Recognition
Convergence
of interest
Formulation
of Proposal
Identification of
Authorities
Presentation
of Proposal
Reduction of
Opposition
AUTHORITIES
Reduction
of Support
Authoritative
Consideration
DECISION
OPPONENTS
Emergence of
Opposition
Formulation of
Counterproposal
Identification of
Authorities
Presentation of
Counterproposal
Expansion of
Opposition
EVALUATION
IMPLEMENTATION
Power Clusters Surround Issues &
Sets of Common Interests
DEFENSE
WEST
AGRICULTURE
ENVIRONMENT
SENIORS
TRADE
HEALTH
CARE
POVERTY
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Administrative
Agencies
Latent
Public
Legislative
Committee
INFLUENTIALS
Attentive
Public
POWER
CLUSTER
Volunteers
Interest
Groups
Professionals
Kings and Kingmakers Model
& Power Clusters
KingMakers
INFLUENTIALS
Kings
Actives
Interested Citizens
Legislative Committees
Interest Groups
Admin. Agencies
Professionals
Volunteers
Attentive Public
Apathetic Citizens
Latent Public11
The Revolving Door & Agency Capture in
Government—key parts of the “iron triangle”
Fueling the fire of their indignation is the revolving employment door at
USDA, which consistently hires individuals from the ranks of trade and
industry groups, putting one fox after another into a hen house getting damned
short on hens. Although USDA draws from a number of power-mongering
industry organizations, there’s a path worn smooth between USDA and NCBA,
the National Cattlemen’s Beef Association.
It’s impossible not to recognize the uncanny resemblance between the policies
promoted by NCBA and those enacted by USDA. A good detective will tell you
that there’s no such thing as coincidence. So when USDA’s decisions on
controversial issues, which have rolled down the pike one after another,
“coincidentally” mirror NCBA’s press releases, and when NCBA’s daily press
releases routinely give rubber-stamp approval to all of USDA policy, it’s a case
of Agency Capture so blatantly flaunted that it has to be deliberate.
(continued…)
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The Revolving Door & Agency Capture in
Government—key parts of the “iron triangle”
(continued)
The reason I print Alan Guebert’s column every week—quite often moving him
from an inside location to a more prominent spot on the front page—is that he
pulls no punches, takes no bribes, and calls a spade a spade. Let me read a few
lines of what Alan said in a column which ran in my paper last summer:
You can’t swing a dead cat inside USDA without hitting a former NCBA
official… and if NCBA wants to make its views known, do you think it
has any trouble? …
Given the trusting friends and alumni that farm groups, meatpackers, and
agri-businesses have inside USDA, it’s no mystery why producer-driven
policy ideas like country-of-origin labeling are chewed to pieces before
farmers and ranchers even taste their benefits. …
That’s NOT what President Abraham Lincoln had in mind when he
founded USDA in 1862. At its birth, Lincoln christened USDA the ‘
people’s department.’ Today, a far more appropriate name would be the ‘
who-you-know department.’
--Linda Grosskopf, Editor, Agri-News, July 23, 2004,”How Agribusiness Has Hijacked
Regulatory Policy at USDA”, presented to Organization for Competitive Markets
annual conference, Omaha, Nebraska.
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INTEREST GROUPS
•Elects members of the
Congress
•Identifies problems
•Makes proposals
House
committee
CONGRESS
•Develops programs
• Appropriates funds
• Oversees programs and funds
• Assists constituents
THE CONGRESS
Senate
committee
Interest Groups
EXECUTIVE
BRANCH
Producers
Consumers
Agribusiness
Cooperatives
Public Officials
JUDICIAL BRANCH
•Interprets/refines/modifies
law
•Settles disputes
Administrative
Action Agencies
USDA
JUDICIAL
BRANCH
EXECUTIVE BRANCH
•Evaluates proposals
•Prepares legislative
reports, studies, and
proposals
•Executes programs -implementation
•Settles disputes
The Role of Economics
in Public Policy
1. Insight into sources of economic
problems.
2. Stimulate ideas for developing new
proposals.
3. Analyze consequences of policy
objectively.
Limits: Cannot determine “best” choice
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ANALYTICAL TOOLS
Partial Budgeting

A planning procedure listing only items of receipts and
expenses that are affected by a particular change in
procedure or organization for an individual farm or
business; example: what’s the likely impact on my farm
of signing up for a govt. program
Welfare Analysis

Goes beyond evaluating “what is” to evaluate likely benefits/costs
of specific alternatives (may include distributional equity issues) to
show who is made better/worse off; example: what are are the net
benefits of a highway project, and who are the winners/losers
Modeling

Establishing the likely relevant and measurable factors to
quantitatively evaluate a situation (real or potential), such as price
effects of changing commodity policy
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Modeling
Statement of causal relations that
connect alternative policies with their
effects; simplified representation of
some aspect of real world
Functional Form:
Y = f(x)
P(x) = f(Qs(x), Qd(x))
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Modeling (cont.)
Conceptual/Qualitative Models:
clarify thinking, identify key
aspects; help communicate with
others on nature of problem, suggest
explanation for public policy &
predict consequences; often based
on theory
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Public Policy Methodology
Advocacy vs. Objectivity
Alternatives & Consequences
Elements:
 Define problem
 Present Policy Goals/Objectives the public will
use to choose “solution”
 Methods of evaluation
 Alternatives
 Evaluation
 Consequences
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Assignment/References
6 Sep: Review K ch. 2 & handouts
References
Huan-Chang, Chen The Economic Principles of Confucius
and His School. Distributed for the Ganesha Publishing.
1911 Edition. See:
http://www.press.uchicago.edu/cgi-bin/hfs.cgi/00/15410.ctl
Grosskopf, L. Editor, Agri-News, July 23, 2004,”How
Agribusiness Has Hijacked Regulatory Policy at USDA”,
presented to Organization for Competitive Markets annual
conference, Omaha, Nebraska.
Hahn, A. various publications/presentations.
Mattera, P. USDA Inc., 2004.
Williams, Sue & Larry D. Sanders, various publications and
programs.
E.F.Schumacher in Resurgence magazine, 1968
Fortune cookie: Confucius (or Buddhist Economics) say about 500 20
b.c.
Alternate Views on Economics & Markets:
Buddhist Economics
(From an article by the economist E.F.Schumacher in Resurgence
magazine, 1968) "The Buddhist point of view takes the function of work
to be at least threefold: to give a man a chance to utilize and develop
his faculties; to enable him to overcome his ego-centeredness by
joining with other people in a common task; and to bring forth the
goods and services needed for a becoming existence. Again, the
consequences that flow from this view are endless. To organize work in
such a manner that it becomes meaningless, boring, stultifying, or
nerveracking for the worker would be little short of criminal; it would
indicate a greater concern with goods than with people, an evil lack of
compassion and a soul-destroying degree of attachment to the most
primitive side of this worldly existence. Equally, to strive for leisure as
an alternative to work would be considered a complete
misunderstanding of one of the basic truths of human existence,
namely, that work and leisure are complementary parts of the same
living process and cannot be separated without destroying the joy of
work and the bliss of leisure.
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Alternate Views on Economics & Markets:
Buddhist Economics (cont)
From the Buddhist point of view, there are therefore two types of
mechanization which must be clearly distinguished: one that enhances a man's
skill and power and one that turns the work of man over to a mechanical slave.
"The craftsman himself", says Ananda Coomaraswamy, a man equally
competent to talk about the Modern West as the Ancient East, "the craftsman
himself can always, if allowed to, draw the delicate distinction between the
machine and the tool. The carpet loom is a tool, a contrivance for holding warp
threads at a stretch for the pile to be woven round them by the craftsman's
fingers; but the power loom is a machine, and its significance as a destroyer of
culture lies in the fact that it does the essentially human part of the work". It is
clear, therefore, that Buddhist economics must be very different from the
economics of modern materialism, since the Buddhist sees the essence of
civilization not in the multiplication of wants but in the purification of human
character. Character, at the same time, is formed primarily by a man's work.
And work, properly conducted in conditions of human dignity and freedom,
blesses those who do it and equally their products. The Indian philospher and
economist J.C.Kumarappa sums up the matter as follows:
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Alternate Views on Economics & Markets:
Buddhist Economics (cont)
"If the nature of the work is properly appreciated and
applied, it will stand in the same relation to the higher
faculties as food is to the physical body. It nourishes and
enlivens the higher man and urges him to produce the best
he is capable of. It directs his freewill along the proper
course and disciplines the animal in him into progressive
channels. It furnishes an excellent background for man to
display his scale of values and develop his personality."
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