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Public Policy Analysis

Policy is created in response to problems.

It can be difficult to agree on what is a problem, and which problem is the most important.

A snowstorm is not a problem by itself. A snowstorm is a condition. However, this condition can lead to problems, like more traffic accidents.

Four fundamental policy goals:

• Equity
• Efficacy
• something - prof changed slides too fast
• Liberty

Key Attributes

• Problems
• Goals
• Public Interest
• Made by Government
• Action and Inaction

Pareto Efficiency

In relation to the free market, Pareto Efficiency is the point where nobody can be made better off without making somebody else worse off. In this case, there is no economic need for government policy.

If we are not in Pareto efficiency, we can make somebody better off without making anyone else worse off - the market is not acting efficiently, and government policy may help.

2020-09-10

• leave your comments and thoughts in the discussion posts on myCourses
• Go over the reading and post in the forum by EoD
• There is a problemset that will be emerging at some point
• ProblemSet answers due next Tuesday
• Handwriting answers is acceptable??
• But scanning to pdf is kinda nice
• graded by effort

Conditions for an efficient free market:

• Many buyers and sellers - price taken as given
• identical products
• no barrier to entry or exit
• perfect information

What could create a market failure?

• Externalities
• Public Goods
• Monopolies
• Information Asymmetry

Under a market failure, government intervention may be able to increase efficiency.

In a perfect market, there still might be regulation, towards the other 3 policy goals.

#What tools do we have to address social damage?

Pigouvian Tax - A tax on each unit of good, equal to the social damage of that unit of good.

Cap and Trade - In the context of pollution - the cap is the total amount of permitted pollution. Then, a license to polute is given to industry. Different industry players can trade their licenses, to allocate the permitted pollution via a free market.

Bonus class, 2020-10-06, Tax Policy

2020-10-15 - Cost Benefit Analysis

2020-11-05 - Prof. has given the option to opt-out of the final paper. Details:

• Presentation would move from 10% of final to 25% of final
• 5% penalty, max class grade is now 95%

2020-11-05 - Policy Evaluation