Public Policy:Objectives and Principles

Roger KerrNew Zealand Business Roundtable

“The framework of institutions, laws and programmes laid down by the arms of government (parliament, the executive and the judiciary) that regulate the economy and wider social interactions.”

Critical issue:

The proper role of government

SINGAPORESINGAPORE

IRELANDIRELAND

HONG KONGHONG KONG

Objective of public policy

Human flourishing

- not just about economy, monetary values, efficiency

- encompasses fairness, environmental quality, freedom

Ideological?

• Should be evidence-based

• Role of economics

• Free trade, school choice, privatisation

• Boundaries of political debate

Common framework

• Markets vs government

• Invisible vs visible hand

• Need governments to set rules of game

Market exchanges

Politics/collective choice

Voluntary cooperation

Voluntary cooperation

Dominant means of getting what we want

• Norm in families, small groups

• Also clubs, associations, charities

• Involves redistribution within families and through altruism

• Works best in ‘face to face’ settings

But can’t run a large society that wayBut can’t run a large society that way

Market exchanges

Essential for society at large

• Gains from specialisation and trade

• Prices- transmit information- coordinate plans

- markets continuously adjust

• Consumers’ interests paramount

But - market failuresBut - market failures

Politics

• Voting mechanism is imprecise - candidates, parties, electoral systems, accountability

• Coercion - not mutual benefits, as with markets & voluntary cooperation

• Tyrannies of majorities and minorities

Political market failuresPolitical market failures

Upshot?

• No ideal yardstick

• Political/government failures routine, not exceptional

Must compare real-world alternatives

In choosing among real world alternatives

• Focus on incentives

• Bias in favour of economic freedom

Implies limited governmentImplies limited government

How do we constrain government ?

How do we constrain government ?

Economic constitutions

Sound processes

• Compensation for Regulatory Takings

• Taxpayer/Ratepayer Bills of Rights

Public policy and business management

• A country is not a company

• National central planning doesn’t work

• Different skill requirements

• Problems with DIY economics

Conclusions

Good public policy: institutions that promote human flourishing

There is a significant role for government,

but

• individuals need protection from government abuse

• governments don’t necessarily act in the public

interest

• remedy of government intervention sometimes

makes things worse

The biggest public policy mistake:

to expect too much of government

The challenge:

how to restrain government to what it does well