On the Reconciliation of Economic and Political Perspectives on Policy: an Examination of the Relationship Between Past Polici
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On the Reconciliation of Economic and Political Perspectives on Policy: An Examination of the Relationship between Past Policies and the American Reinvestment and Recovery Act of 2009 Jonathan P. Ellis, Texas Tech University School of Law abstract: This study examines the impact of incentives and constraints on public policy. The base for this examination is set by Thomas Sowell’s argument that, through a preliminary focus on created incentives and constraints, the results of certain types of poli- cies can be more easily and reliably predicted. Additionally, that through recognition of such effects, more effective policy might be formulated. The benefits of this perspective are demonstrated through analysis of two historical policies: ethanol consumption and af- fordable housing measures. The study then applies this approach to the recent American Reinvestment and Recovery Act (ARRA). In order to divine true incentive and constraints of this stimulative measure the study investigates some original intentions and rationales inherent in stimulative measures in the work of John Maynard Keynes. The true rationales of these types of stimulative measures are identified within each section of the ARRA so that a more comprehensive view of its stimulative and non-stimulative measures might be recognized. “You know, doing what is right is easy. The problem is determines if you get that item, but the price, and then knowing what is right.” your evaluation of its value to you and if that value is great —President Lyndon Baines Johnson enough to be expressed in the form of currency and pay- ment. The payment represents to others that its value is great enough to warrant the cost. You signify, through your desire to pay the price, your willingness to place the In Economics of Social Issues, the writers put President item in a category beyond the reach of others. Thus your Johnson’s observation another way: “People often ex- cost is the representation of alternative uses which are de- pect more of their governments than those governments nied to others. Desirability, then, in that decision-making can provide. And governments often promise more than process plays a relatively small part. they are able to deliver.” (Sharp, 2008, p. 23) By the very Why then, when seeking desires at a national level, nature of this phenomenon, it is fair to say that we as a is the focus almost exclusively on desirability rather than society have yet to agree, whether by interpretation of all that is inherent, affected, and represented in the proce- moral obligation, historical record, and so forth, about dure of obtaining what is desired? It is little coincidence what exactly the role of government should be, and much that when considering government policy formulation less about how best to enact their “responsibilities.” One the discussion turns to economics. Economist Thomas hindrance is a lack of focus. A possible answer to this is a Sowell points out two reasons for this: “In . poli- focus on something more static and consistent between tics . issues can be framed in terms of the desirabil- models of government that vary in ideology, perceived ity of various goals, such as ‘affordable housing’ . The responsibility, and how they achieve that responsibility, economics . can only make us aware of the costs of that is, how they reach desired goals. our goals.” (Sowell, 2004, p. 126–127) Notice, just as Consider a personal example. Suppose you see with the parallel in the individual purchase scenario, the something you want. It is not that desirability which bulk of the decision-making process is determined by vol. 2 no. 1 PB&J • 1 On the Reconciliation of Economic and Political Perspectives on Policy what would be lost. Likewise Sowell points to the same and therefore our only choice is among the particular situation in policy making: “Economics was christened methods that can be used for this competition. (Sowell, the ‘dismal science’ because it dealt with inescapable 2007, p. 75) constraints and painful trade-offs, instead of the more pleasant and unbound visions, and their accompanying One of the implications of scarcity in a relatively free rhetoric, which many find so attractive.” (p. 127) and competitive market is that prices are measurements In today’s society, where politics and economic im- of personal value and value to others. You pay so they pact are more closely related than ever before, one must cannot use a good or service. Ideally, a consumer’s cost not consider them separate fields of study but inherently should be at least slightly greater than the value of the intertwined when discussing policy formulation and item represented to those to whom it was denied. Price evaluation. This interplay of perceptions in the public as a tool of measurement of value, in a free market rather arena is currently lacking. This has resulted in many short- than control, creates several more implications. This can comings over the years—not just individual incidences, explain its role as a form of rationing. If a price system but larger paradigm shifts. Two aspects discussed in this is not in place, rationing must occur because of scarcity, paper are 1) the phenomenon in policy formulation of Sowell suggests that in some government policies where catering to ideology and demagoguery over effect and 2) prices have been removed, rationing might take the form the concerns which arise when there is a weak system of of a lottery or rotation of recipients. The difference is policy evaluation. The theories are applied to two issues: that it is done by someone other than the former buyer ethanol and housing legislation. Finally this study seeks or receiver. To a certain extent, their responsibility is to apply this perspective to a current policy—the recent removed. stimulus bill—in the hope that incentives and restraints Two things must be recognized regarding scarcity: involved therein can be identified. Given its scale and the 1) allowance for quantifiability and 2) recognition that it space permitted here, only the broader picture of the bill affects action. Intertwined, these two allow for improved will be examined in order to identify incentives and re- policy evaluation. In the world of policymaking, scarcity straints according to underlying alleged ideology—spe- and its two key components are one ever-present pack- cifically those of Keynesian origin. age of elements which can lend itself to measurement. Presented above is a series of concerns which occur With this phenomenon, one begins to understand how when one sees something desirable on a personal scale. policy within incentives and constraints, results in a more Why must this process be followed? Why not simply take appropriate viewpoint that leads to an applicable evalua- that which is desirable? Beside the legal ramifications of tion system. This is in line with Sowell’s thinking. this attitude, the final issue involves scarcity: a long-time economic tool and subject not frequently or commonly The more fundamental point is that we need to know the linked to public policy or political science in public or actual characteristics of the processes set in motion—and academic discourse. The purpose here is to advocate the incentives and constraints inherent in such character- that, as the perceived roles and responsibilities of gov- istics—rather than judging these processes by their goals. ernment enter new territory, there must be new thinking Many of the “unintended consequences” of policies and involved, a creation of a new paradigm and standards of programs would have been foreseeable from the outset evaluation. if these processes had been analyzed in terms of the in- What exactly is scarcity? Sowell defines scarcity as a centives and constraints they created, instead of in terms condition in which of the desirability of the goals they proclaimed. Once we start thinking in terms of the chain of events set in motion everyone’s desires cannot be satisfied completely, regard- by particular policies—and following these events be- less of which particular economic system or government yond stage one—the world begins to look very different. policy we choose—and regardless of whether an individ- (Sowell, 2004, p. 2) ual or a society is poor or prosperous. Therefore compe- tition among people for these resources is inherent. It is One important point about policymaking and its rela- not a question of whether we like or dislike competition. tionship to economics is with regard to the scarcity of Scarcity means that we do not have the option to choose public resources and their allocation to public demands whether or not to have an economy in which people com- placed upon government. What are the most appropriate pete. That is the only kind of economy that is possible— options to balance: demand and supply, or policy with 2 • PB&J vol. 2 no. 1 Jonathan Ellis economics? To have one’s policy demands met with full goal and no accurate and definable measure of progress. economic support must other citizens and their demands It can be argued that these alternative views proposed be ignored? by Smith, Thurmond, and Dye can be consolidated into Consider that much of the rhetoric at our country’s Sowell’s advocacy of seeing policy in terms of incentives founding regarding rights revolved around protection and constraints—thereby focusing on full comprehen- from the government. If rights are often seen as protec- sion of economic elements and results in policymaking. tion from government, where do rights come from? Is a Smith and Thurman note that focus on both a goal and right defined as inalienable, political, economic, social, or the intent of a policy falls when perceiving incentives. some combination of all four? In 2003, Dennis Kucinich Additionally, the quantifiability found in their second called clean drinking-water a right.