Teaching Tools: How to make public planning decisions, divisibility of public goods and “imperfect” decision making
Teaching Tools: How to make public planning decisions, divisibility of public goods and “imperfect” decision making
Blog Post
Political Economy by Heidi Smith
- Global comparison
First, we need to understand and compare the economic development of Nation States as per capita gross national income GNI. Gross National Income (GNI) per capita is the dollar value of a country’s final income in a year divided by its population. The Gross domestic product (GDP) is the monetary value of all finished goods and services made within a country during a specific period. It is known as the snapshot of a country, economist use it to estimate the size of an economy and the rate of its growth overtime. The GDP can be calculated in three ways, using expenditures, production, or incomes of individuals.
In order to better understand how growth affects individuals’ incomes, we need to evaluate the exchange rates and calculate how living standards are able to reflect the purchasing powers of an individual using the national currency within a country. Purchasing power party (PPP) is based on exchange rates to determine what can be bought in a local economy similarly to buy in another domestic market. Similar to Big Mac index compares 2.75 euros vs. 2.65 would be 2.75/2.65 =1.0377ppp
Next to study inequality, students must learn how the Gini coefficient is measured within a nation state (or country). The Gini coefficient, is known as the Gini index or Gini ratio, is a measure of statistical dispersion intended to represent the income inequality or the wealth inequality within a nation among social groups. By dispersion we mean process of distributing incomes between people over time within an area like a country, a city or geographically specified location. The Gini coefficient measures the difference among people’s wealth or their income levels, over times across different areas of a country. A Gini coefficient of 0 expresses perfect equality, where all values are the same, while a Gini coefficient of 1 (or 100%) expresses maximal inequality among values. Some countries have more income inequality between rural and urban populations and semi urban spaces, while others see income inequality between social groups of the population whether they may be ethnically different, come from a different caste or social economic status or level.
The Gini is typically measured by income levels, which can be data gathered by tax returns by the national tax registry, but these values change overtime and are can be inconsistent to evaluate the inequities over a series of generations. French economist Thomas Piketty[i] wanted to measure the wealth inequality of the United States, and included existing wealth of individuals before they applied their tax returns. For him and his collaborators[ii], the difference between the bottom line (wage income) and the top line (total income) is accounted for by income from capital—dividends, interest payments, and capital gains. Because an individual may own property, but they may not pay taxes on increased wealth production. They may have a lot of wealth but it’s not reflected in the national tax returns or wealth production for a Nation-State. For example, the one-per-centers of the United States receive a lot of their income in this form.
In the past 20 years’ income inequality has become a major issue for many developed economies, in particular within the United States (US) where a significant income gap has occurred.[iii] “This is exemplified by the US Gini index (GI), a measure of income inequality, which has risen from 43 in 1990 to around 47 in 2010 and is continuing to trend upward (David Moss, 2011).” From 2010-2021, this number has more than quadrupled. https://inequality.org/facts/wealth-inequality/
“According to Institute for Policy Studies analysis of Forbes data, the combined wealth of all U.S. billionaires increased by $2.071 trillion (70.3 percent) between March 18, 2020 and October 15, 2021, from approximately $2.947 trillion to $5.019 trillion. Of the more than 700 U.S. billionaires, the richest five (Jeff Bezos, Bill Gates, Mark Zuckerberg, Larry Page, and Elon Musk) saw and 123 percent increase in their combined wealth during this period, from $349 billion to $779 billion.”[iv]
Therefore, because of the vast increase in the dispersing of wealth among people living in the same country, some economists have tried to evaluate how to countries can improve their economic development based on the countries existing populations while the inequality within the richest states constant. What political scientists have found when evaluating developing nations is that high level Gini coefficients, the wider gap between the rich and the poor, can lead to less quality public institutions, electoral gains are typically for populist leaders, and administrative structure for policing, public security, the environment, legal processes and healthcare suffers (CITATIONS ARE NEEDED HERE). (Click here for reading resources from the New York Times that describes the various types of inequality[v])
Therefore, many economists have evaluated not only the income of a country but its human development of its people as countries grow, they also seek to improve their populations wellbeing. Human development index (HDI) measures social as well as economic development through three dimensions: long life measure by life expectancy; knowledge measured by adult literacy and school enrolments; and decent standard of life measured by PPP adjusted per capita GNI.
Yet the GNI can be skewed. For example, the Organization of the Petroleum Exporting Countries (OPEC) often has a high GNI but a low HDI. This is because of something called the resource curse, which means that government with national resources like oil, metals or peruse goods to sell, may be able to export them globally and redistribute them within the country. Therefore, they may have a high GNI but also high GINI, depending on weather the country is able to make the distribution fairly or not.
According to Cohn, the Least Developed Countries (LDC) grew out of list compiled by UN in 1971 of 24 countries now has 48, need part debt relief but also many subsisted on less than 1.25 US a day and have low production of export bases, high transport costs, lack of infrastructure, and greater vulnerability to shocks such as economic crisis, natural disasters and spread of disease. Example Ebola virus in Guinea, Liberia, and Sierra Leone. United Nations Conference on Trade and Development, which gives priorities to LDCs. Its list changes annually and can be access online here.[vi]
Dan Rodrick[vii] in the early 2000s pondered this question: if the average income levels in the world were differ by a factor of more than 100 (GDP per capita) whereas poor Sierra Leone per capita income is $490 and wealthy Luxembourg is $50,061. Growth theory has traditionally focused on physical, human capital, and technological accumulation. What can we do to reduce these differences? He and his team of researchers proposed these three-alternative hypotheses as factors to improve the growth rates: 1) Geography or the main channels through geography influences the economy, 2) an Integrated economy which includes the trade flows or the height of trade barriers or 3) the Institutional Quality or the indicators that include institutions such as Property Rights and the Rule of Law. He found the quality of a country’s institutions trumps everything else even more than trade which was the predominate theory of the time.
Defining how inequality looks across time and within countries is just one way to evaluate how people live in comparison to others. There are other measures beyond the GINI to evaluate the quality of life of individual. For example, the Global Multidimensional Poverty Index (MPI) published in the UNDP‟s Human Development Reports. The 2021 report sought to evaluate disparities by ethnicity, caste and gender, which goes beyond the GINI. Here is a list of items which can be used to evaluate the multidimensions of inequality.[viii] Here is a critic by some economist for the way in which these measures skew the results to the poor.[ix]
- Relationship of inequality to public policy
Many political economists that highlight that increased inequality makes governments harder to reach public policies decisions that find a consensus and are able to manage their economies. For example, Hallerod’s[x] research on democratization and quality of government (QoG) has highlighted the impact of poor governance on people’s living conditions. Simultaneously we have gained knowledge about global child poverty. Here these two strands of research are brought together. We use survey micro-data from 68 low- and middle-income countries (N=2,120,734) measuring deprivation of seven basic human needs (safe water, food, sanitation, shelter, education, health care, and information) among children.
So, there are many types of public policies that deal with inequality. Public policies are a set of actions that governments decide to take (or not take) when approaching a problem that affects society as a group, rather than on an individual level. Simply put, public policy refers to policies that the government makes on the public’s behalf to resolve a specific issue. In so much, government is the will of the people and represents people in the decision-making processes. Yet there are many challenges that governments face to represent the will of the people.
Governments typically have three fundamental actions regulatory, tax or spend on different groups of people. Whereas politics is part of the government systems, whether it be in the legislative, judiciary, or executive/administrative branch of government, and a public policy can be called a plan that embraces the general goals of a nation state in its pursuits.
In the United States in order to maize inequality, there are a few divergence thoughts with what the American Dream composes of. For example, our popular notion of the American dream is often used between politicians to improves one’s livelihood. Schlozman (2018) suggests there are two constructions of the American Dream. One where “A prosperous America provides opportunities to improve economic well-being (higher income, home ownership_ over the life cycle and across generations. And two/: “opportunities for success are equally available to all who are hard-working, talented and lucky irrespective of initial circumstances of advantage or disadvantage.” The American Dilemma “how can we guarantee equality of opportunity when inequalities of condition mean that we are so unequal at the starting line?
Recent indicators have suggested that public policy outcomes are failing because of America’s highly unequally system: describe this research:
· Wilkinson, Richard and Kate Pickett (2009). The Spirit Level. The Spirit Level: Why More Equal Societies Almost Always Do Better was published in 2009.
· Wilkinson, Richard and Kate Pickett (2020). The Inner Level: How More Equal Societies Reduce Stress, Restore Sanity and Improve Everyone's Well-Being Paperback – January 21, 2020
Some political economist has had a more critical lens of economics as to what type of economic system is best to meet the political one. Varieties of capitalism[xi] is one such way to evaluate this, but so is Esper Anderson’s work on the demodification of work. In his first published book in 1990, second book in 1999, Esper Anderson developed the idea of welfare regimes and proposed to measure welfare outcomes that result from government-markets-family interactions with two concepts: Decommodification and Defamaliarisation. Instead of the US policy systems that evaluate based on Government and Markets. He added a third area to better understand Society and Families and what they needed from government to survive. Which include social policies of Health, Housing, Education, Protection against social risks and Social care.
One critical eye as to the limits of government ability to govern was done by Theodor Lowi[xii] In his book, he claims that “capitalism” has died as a public philosophy in the United States. He attributes this to the expansion of government after 1932 with the Roosevelt revolution, which permitted the emergence of interest-group liberalism and, by the 1960s and 1970s, the death of capitalism as a public philosophy. By "interest-group liberalism," Low has in mind the atrophy of institutions of popular control, the maintenance of old structures of privilege and the creation of new ones, and conservatism in several senses of the word. Congress has delegated its authority to interest groups, who govern via their influence over the bureaucracy.
This suggest that Issue networks and iron triangles created an isomorphic system whereby which social and civic groups participated in government to reap its benefits. (Dimaggio and Powell) That are therefore dependent on the government for the services.
Therefore, some political economist more recently has evaluated the efforts of some governments to minimize citizen participation (engagement within the three branches of government) in exchange for more efficient government outcomes. Economist try to minimize politics into the economics of a country regardless of size or administrative capacity to they can minimize the fluctuations in the economy.
One way to do this is through the analysis of Political institutions. Parsons and Tabellini 2003 studied how Electoral Rules and Forms of Government are constructed and managed which allows for governments to grow. They do this by a large country comparison data analysis. These authors found that Presidential regimes are more accountability to voters while parliamentary regimes are more representative to the voter’s needs. They broke the political systems into Voters (principles) and their Political Representatives (the agents) to better understand how they could create problems for democracy.
As such, they studied electoral processes and ways in which Problems are inherent to Electoral Rules: District Majority, Electoral Formulas and Ballot Structures as ways politics could manipulate voter opinions. Then they studied how administrative structures are crafted. The Problems inherent to forms of government include how Separation of powers/ federalism. Confidence Requirement/Credible commitments, Legislative cohesion /coalitions.
Furthermore, many politicians in the United States are suggesting that these administrative or the role of government as failed as a system of Capitalism, Democracy but the interaction of the two creates even more failures to public policy outcomes.
- Size and capacity of government
Governments can fail based on the size, ratio of electorate to the population, ratio of taxes to GDP, ratios of administrators to people, or administers to tax income of the state. Economist see that tax subsidies are important way to measure who gets what when and how by the administrative system. The quality of public policies and its implementation can be influenced by the state’s capacity to manage funds, the state’s administrative system, the level of education bureaucrats have or their certification, the amount of money they have to allocate to resources or the actual amount of bureaucracy that exists in society. In the United States, we have more than 85,000 local governments that includes 1 federal government, 50 states governments, many tribal governments, 30,000 school districts, special districts, city and county governments. [xiii]
1. Problems Inherent in Direct Democracy
Tyranny of the Majority, Referendums, Voter Paradox, William Riker, General Possibility theorem, Transitivity, Kenneth Arrow, Bundling Preferences
2. Problems Inherent in Representative Government
Private interests, $/ well-being, cash, constituencies and career security, Watch dogs and Interest groups, Budget Preferences, budget process, geographic representation, Rent Seeking, Logrolling, Policy Window, Public Agendas, Public Attention Sunk Costs, Precedents and Electoral Cycle
3. Problems Inherent in Bureaucratic Supply
Public Supplied market failures? Principal Agent problem/ Agency Loss, Discretionary Funds, “Accruals Spending”, Ex-anti controls, Political-Administrative Dichotomy, Organizational Public Goods, Externalities
4. Problems Inherent in Decentralization
Implementation Problems, James Madison, Federalism, complex systems, Implementation Problems, fiscal federalism, Wallace Oats, Charles Tieboutism, “vote with your feet”, Fiscal Externalities, Inter-Organizational Cooperation/ Transfers
- Does government exacerbate or limit- government as an agent
Governments can either exacerbate inequality, maintain its levels or neutralize it. This can be done at the national, federal or within unitary states, or at the subnational level (between or across cities within a state or providence, or across the country by the size of the population of cities).
More often the media focuses on the economics of inequality and less on how government intervention could be used to minimize it. (see New York Times articles below)
For example, many professionals, such as statisticians, demographers, economists, architects, and even urban planners seek to offer cities that are mixed use properties in order for different social engineering to happen. Social mobility is known as movement of individuals, families, households, or other categories of people within or between social strata in a society. This social engineering can be as simple as a bus ride across town to see how others live, or college admissions and aid to low income students but it can be as complex as intergenerational wealth and reparations due to institutionalized racism. Here is an example of a study described by the New York Times as to how cities and induced social environments can help to reduce income inequality between residences because social mobility is available.
Here is a study from the United States:
“New Study Shows a Key to Reducing Poverty: More Friendships Between Rich and Poor” https://www.nytimes.com/interactive/2022/08/01/upshot/rich-poor-friendships.html
Here is a study from Mexico:
“Parallel Worlds: Revealing the Inequity of Access to Urban Spaces in Mexico City Through Mobility Data” https://projections.pubpub.org/pub/01kebgos/release/1
Governments especially at the local level can also make inequality worse by requiring payments of user fees differently across the population. Sometimes user-charges are not applied evenly but disproportionally are paid by the poor. Here is a study from Alabama on how backwards governments can be to use fees to ensure that the poor stay poor, and not redistribute the wealth or create social equity when its needed.
https://www.nytimes.com/2022/07/27/opinion/alabama-fines-fees.html
Increasingly studies are being done to see how eliminating user fees can public revenues raise https://www.nytimes.com/2022/03/31/nyregion/nyc-library-fines-books-returned.html
A $2 “service fee” is tacked on whenever a parking ticket is paid online — ostensibly to pay the processing charges. (There is no fee when a parking ticket is paid by mail.)
- Social Equity (tool for governments) *maybe
- And how to increase understanding of what governments do in not only ways that limit/increase inequality
- Financing
- Levels of problem solving (problems of federalism)
Herbert Simon (Admin behavior) **why there isn’t a great answer but contextual answers*
Government Failure can be used as a way to teach not only the virtues of government but also its misgivings because of many reasons (some structural economic rational but other political the forces people to think about the micro level of the political economy). Here are seem of my favorite on theories of the bureaucracy /bureaucracy capture by business/Interest Groups and the Bureaucracy: Theory and Practice.
Most academic political economy articles focus on how legislative processes apply to public policy. Research on inequality in American democracy has more focused on legislative processes, largely overlooking administrative policymaking, where most U.S. law is now made under pressure from vast amounts of money, lobbying, and political mobilization. Less so is study of the public bureaucracy and its process to use rulemaking procedures for the benefit of few and not many.[xiv]
But in reality, there are many many ways in which government failure to meet citizen demands.
Corruption is typically used to describe how government fails. For example, government is responsible for ensuring fairness. The distributional guidance, procedural or compensatory ethic that police officers have used. Such that those who pass a traffic stops are met with their Miranda Rights ensures governments are fair.
For example, Paul Lagunes has done survey and a quasi-research design of corruption by policy in Mexico which could be useful for this area[xv].
Policy Problems as Market and Government Failures. These include the way in which corporate taxation is crafted, how the federal government is able to implement at the local level, the formation of government, the mechanisms for application at the local level to name a few.[xvi]
- Social equity is a way government can improve people’s lives and minimize inequality.
Primarily the debate in Public Administration now is that government agencies have “agency:” and one of the benefits of the US decentralized, federalist state is how we have defragmented decisions making. Because of that fundamental fact, many of our public policies are subnational/state or local others are procedural and therefore the compensation for the complex causes of inequality becomes decisions of local administrators. This therefore gets to why we also don’t have a solid response by our “State” to respond to inequality now that we have a hyper bi-modal economic system (these three guys make the incomes of 50% US Pop)
If you are considering including social equity[xvii] into the program, I would suggest this as an introduction to the topic. Below I will also highlight how this does not work or does in the application of LGBTQ politics, BLM, Education Achievement Gaps, automation and Labor Markets and Finally, one on Policing:
[ii] Piketty teamed with economists Emmanuel Saez and Gabriel Zucman created the World Inequality Database (WID.world), which presents income and wealth data for numerous countries.
[iii] Here are the various ways to measure income inequality in the United States https://www.census.gov/topics/income-poverty/income-inequality/about/metrics.html
From Pew https://www.pewresearch.org/fact-tank/2015/09/22/the-many-ways-to-measure-economic-inequality/
[iv] Institute for Policy Studies report can be found here: https://ips-dc.org/billionaire-bonanza-2020/ Also the evaluation by the Cato Institute: https://www.cato.org/policy-analysis/exploring-wealth-inequality
[v] Reading Resources from the New York Times:
Inequality can be measured, understood and applied to different things such as climate change: https://www.nytimes.com/2022/05/28/nyregion/heat-waves-climate-change-inequality.html
Gender inequality:
Economic Inequality: https://www.nytimes.com/2020/07/01/opinion/economic-inequality-moral-philosophy.html
Growth Inequality: https://www.nytimes.com/2020/09/28/business/economy/coronavirus-pandemic-income-inequality.html
Covid inequality: https://ips-dc.org/inequality-and-covid-19-in-13-charts/
Inflation Inequality: https://www.nytimes.com/2022/08/08/business/economy/inflation-jobs-economy.html
[vi] https://www.un.org/ohrlls/content/list-lldcs
[vii] The Primacy of Institutions Over Integration and Geography in Economic Development
by Dani Rodrik, Francesco Trebbi, Arvind Subramanian, November 2002
[viii] www.cepal.org/sites/default/files/project/files/annex_9_measuring_poverty_and_inequality.pdf also look at Seth, S. and Alkire, S. (2013). ‘Measuring and Decomposing Inequality among the Multidimensionally Poor using Ordinal Variables: A Counting Approach’. OPHI Working paper 68. https://opendocs.ids.ac.uk/opendocs/handle/20.500.12413/11812?show=full
[ix] https://ophi.org.uk/measuring-inequality-among-the-multidimensionally-poor-new-ophi-working-paper/
[x] Halleröd, Björn & Rothstein, Bo & Daoud, Adel & Nandy, Shailen, 2013. "Bad Governance and Poor Children: A Comparative Analysis of Government Efficiency and Severe Child Deprivation in 68 Low- and Middle-income Countries," World Development, Elsevier, vol. 48(C), pages 19-31.
[xi] Hall, P.A. and Soskice, D. (2001) Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. Oxford University Press, Oxford.
https://doi.org/10.1093/0199247757.001.0001
[xii] Lowi. 1979. The end of liberalism. New York: W. W. Norton & Company.
[xiii] Britannica says The largest local government unit is the county (called a parish in Louisiana or a borough in Alaska). Counties range in population from as few as 100 people to millions (e.g., Los Angeles county). They often provide local services in rural areas and are responsible for law enforcement and keeping vital records. Smaller units include townships, villages, school districts, and special districts (e.g., housing authorities, conservation districts, and water authorities). https://www.britannica.com/place/United-States/Cultural-life
[xiv] Selden, Sally Coleman, Jeff Brudney, and J. Edward Kellough. 1998. “Bureaucracy as a represent Institution: Toward a Reconciliation of Bureaucratic Government and Democratic Theory.” American of Political Science 42:717-744
O’Leary, Rosemary. 1994. “The Bureaucratic Politics Paradox: The Case of Wetlands Legislation in N Journal of Public Administration Research and Theory 4 (4): 443-468.
Ringquist, Evan J. 1995. “Political Control and Policy Impact in EPA’s Water Quality Office.” American Journal of Political Science 39(2): 336-363.
Golden, Marissa Martina. 1998. “Interest Groups in the Rulemaking Process: Who Participates? Who’s Get Heard?” Journal of Public Administration Research and Theory 8(2): 245-263.
Carpenter, DP and Angelo Dagonel, Devin Judge-Lord, Christopher T. Kenny, Brian Libgober, Jacob Waggoner, Steven Rashin, Susan Webb Yackee (2022) Inequality in Administrative Democracy: Large-Sample Evidence from American Financial Regulation, American Political Science Association Annual Conference 2021 https://judgelord.github.io/research/finreg/
Yackee, Jason Webb, and Yackee, Susan Webb. 2006. “A Bias Towards Business? Assessing Interest Influence on the U.S. Bureaucracy.” Journal of Politics 68 (1): 128-139
Moe, Terry M. 2006. “Political Control and the Power of the Agent,” Journal of Law, Economics and Organization 22(1): 1-29.
Balla, Steven J. 1998. “Administrative Procedures and Political Control of the Bureaucracy.” American Science Review 92(3): 663-673.
Smith, Mark. 1999. “Public Opinion, Elections and Representation Within a Market Economy; D Structural Power of Business Undermine Popular Sovereignty?” American Journal of Political Scienc 842-863.
Lowery David. 1998. Consumer Sovereignty and Quasi-Market Failure. Journal of Public Administration Research and Theory: J-PART, Vol. 8, No. 2 (Apr.), pp. 137-172
Lynn, Jr Laurence E. 2001.The Myth of the Bureaucratic Paradigm: What Traditional Public Admini Really Stood for Public Administration Review, Vol. 61, No. 2 (Mar. - Apr.), pp. 144-160.
[xv] Fried, Brian J, Paul Lagunes, and Atheendar Venkataramani. “Corruption and Inequality at the Crossroad: A Multimethod Study of Bribery and Discrimination in Latin America.” Latin American Research Review 45, no. 1 (Jan 1, 2010): 76–97. http://search.ebscohost.com/login.aspx?direct=true&AuthType=ip,shib&db=edsfra&AN=edsfra .22496847&lang=es&site=eds-live&custid=s1166397
[xvi] Williams, John, and Brian Collins. 1998. “The Political Economy of Corporate Taxation.” American Jo Political Science 41: 208-244.
McFarland, Deborah, and Kenneth Meier. 1998. “Do Different Funding Mechanisms Produce D Results.” Journal of Health Politics, Policy and Law 23 (3): 423-454.
Wood, B. Dan. 1991. “Federalism and Policy Responsiveness: The Clean Air Case. Journal of Politics 53: 851- 859.
[xvii] Guy, M.E. and McCandless, S.A. (2012), Social Equity: Its Legacy, Its Promise. Public Admin Rev, 72: S5-S13.https://doi.org/10.1111/j.1540-6210.2012.02635.x
Etienne Charbonneau & Norma M. Riccucci (2008) Beyond the Usual Suspects: An Analysis of the Performance Measurement Literature on Social Equity Indicators in Policing, Public Performance & Management Review, 31:4, 604-620, DOI: 10.2753/PMR153-9576310405
McKown, C. (2013), Social Equity Theory and Racial-Ethnic Achievement Gaps. Child Dev, 84: 1120-1136.https://doi.org/10.1111/cdev.12033
Nuri Heckler & Janiece Mackey (2022) COVID’s Influence on Black Lives Matter: How Interest Convergence Explains the 2020 Call for Equality and What That Means for Administrative Racism, Public Integrity, DOI:10.1080/10999922.2021.2014203
Heather Wyatt-Nichol & Lorenda A. Naylor (2015) Liberty and Equality: In Defense of Same-Sex Marriage, Public Integrity, 17:2, 117-130, DOI: 10.1080/10999922.2015.1000108
Erin L. Borry & Heather Getha-Taylor (2019) Automation in the Public Sector: Efficiency at the Expense of Equity?, Public Integrity, 21:1, 6-21, DOI: 10.1080/10999922.2018.1455488
Finally, one of my favor books on Latin American Policy and Governmental exceptionalism:
Sex and Danger in Buenos Aires: Prostitution, Family, and Nation in Argentina (Engendering Latin America) Paperback – January 1, 1995 by Donna J. Guy (Author)
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