AEC 605 QUANTITATIVE Click to edit Master subtitle style DEVELOPMENT POLICY ANALYSIS (1+1)

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Theory UNIT I: Policy framework Goals, Value, Beliefs and Welfare

Maximization.

Market Policy and State

State vs. Market Failure of Policy Failure of Markets Rationale for Government Intervention. 9/11/12 Role of Quantitative Policy Analysis.

UNIT I: Policy framework

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Policy Framework

A systematic policies

model

for

examining

Evaluate

the congr uency of a policy within the context of mission & goals par ticular l y as they relate to social welfare

Policies Useful

goals as the guiding principle for systematic analysis What is the Purpose of a Policy

Framework? for making

comparisons with To provide the analyst with a model or existing policies 9/11/12 Copyright set of questions for Bacon 2010 Allyn and systematically

Continued

Basic Definitions

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Components of a Policy Framework

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Fundamental Objectives of Policy Analysis

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Goal
Goals of policy analysis can range from pure research to providing information to legislators Goals of Public Policy

Equity or Equality

Efficiency Security

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Continued

Equity
There are different kinds of equality These are based on
The The And

recipients of a public good item that is being distributed

the process by which the thing is distributed

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Continued

Efficiency
the most output for a given

What is efficiency?
Getting

input
Achieving Efficiency It

an objective for the lowest cost is not an end goal; it is a means to an end is very difficult to measure efficiency in the public sector or in politics in general
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Continued

The

market is often held up as the paragon of efficiency there are many calls for privatizing government often hear calls to run government like a

Thus, We

business.

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Value
Proposition of Value

Good/Bad

Takes a more evaluative position. Judges whether something is good/bad, right/wrong, just/unjust, ethical/non-ethical, etc. We judge the worth of something. of Value address the relative merit (goodness or badness) of a thing. Here you are usually asked to choose between things, ideas, beliefs, or actions and explain why you choose in the manner you did. is more valuable, Love or Money? (Which and then why) you could retrieve one thing from your childhood, what would it be and why? (Which and why) 9/11/12

Questions of Value
Questions

Which If

 Proposition Advocates In

of Policy Should/should not

a specific course of action.

this class, propositions will include empowered agencies (any group that has power to make policy), and needs to include the words should/should not. of Policy ask the writer to explain what they would do. The key word in these topics is usually "should" as in "what should we do....". The question asks the writer to create a plan of action to solve some sort of problem. The answer is a breakdown of the plan and a justification that it fixes the problem. should be done to combat the drug problem? (Plan and justify) can be done to slow the rise in teen pregnancy? 9/11/12 (Plan and justify)

Questions of Policy
Questions

What What

Beliefs

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Welfare Maximization

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Market
What

characterizes a market?

Voluntary Based

exchanges of things of value on two kinds of information information about the price and quality of an item information about 9/11/12 preferences

Objective

Subjective

Policy and State

The Role of the State and Policy
Pre-World War II liberalism and neoclassical development theory (Johnson, 1958) stressed the role of the market Schools of thought that stressed the role of the state emerged during the 1960s and 1970s: dependency theory (Cardoso and Faletto, 1969), development economics (Hirschman, 1981), growth-with-equity (Adelman, 1975), and basic needs (Streeten, 1979).

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State vs. Market

Exhaustion of import substitution industrialization (ISI) and the debt crisis in the 1980s induced a neoliberal critique of these strategies, calling for a descaling of the role of the state and attributing greater influence to market forces (Krueger, 1974). In the 1990s, as many countries slowly emerge from the debt crisis through successful stabilization and adjustment policies, a new development economics is also emerging. Here the key role of market liberalization is well recognized, a scaled-down but essential strategic role 9/11/12 is assigned to the state, and much greater importance

Failure of Policy
Example

of Failed Policy

Prohibition1919 Didnt Didnt

decrease crime lead to family stability

Instead:

encouraged the growth of organized crime

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Failure of Markets
Governments have to step in when markets fail; i.e., when these assumptions lead to allocative inefficiency or gross inequity. Examples Correction of monopoly Correction of problems of information Problems of impacts on people who are not making the exchange. Failure to provide collective goods (national defense, police) Thus, government is often involved in
9/11/12 Alleviating the inefficiencies of the market

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Can

Government every really look like a market? often regulates the market, by

Government

regulating who or what can buy or sell what products

Government drafts

often compels involuntary exchanges: labor for the army, taxes us for things we may not 9/11/12 individually want, etc.

Continued

v Rationale
1. 2. 3. 4. 5.

for Government Intervention Efficiency Oriented Interventions

Public Goods Externalities Economies of Scale Market Power Transactions Costs and Imperfect Information

9/11/12 .Nonefficiency Oriented

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Continued

of Quantitative Policy Analysis In policy analysis, there is a gap between the

Role

realm of pure theory and the real world that policy makers face (Dervis, de Melo, and Robinson, 1982). Assisting the policy debate requires more than the qualitative insights given by pure theory; it requires quantification of the various mechanisms analyzed by theory. As it is easy to miss many of the complex indirect effects of a policy, empirical modeling can help reveal these effects. In addition, quantitative analysis allows running sensitivity tests to clarify the role of key behavioral assumptions and important parameter values. Quantitative modeling thus allows tracing back disagreements and differences on policy choices to specific behavioral assumptions and causal relations, empirical values given to parameters, and choices of normative objectives. With multiple objectives, including efficiency and non efficiency objectives as listed above, that cannot be aggregated in 9/11/12 any uniquely acceptable welfare function, quantitative

THAN
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