Finding alternatives

Lesson drawing/Best practices research

Diffusion of innovations

Incentives and rational behavior

Policy instruments & the tools of government

Blackboard readings

Patton & Sawicki: 215 - 242

One of the problems with government intervention in the economy is that there are limits to what government can do and how it can do it.  Thus, it should surprise you to read articles pointing out the inefficiencies associated with government "stimulus" programs and job creation.  See this article from the Weekly Standard that presents a criticism of the recent stimulus bill from a conservative point of view (7/11).    However, ABC news and other news outlets have also reported the relatively high cost-per-job associated with different components of the stimulus bill (ABC 10/09).  The Cash for Clunkers program has received particular scrutiny (Download this series of articles critiquing the program - 10/09).

Sometimes government chooses to deregulate activities.  See this article about some recent efforts to streamline government regulations (5/11).  

Taxes on the supply or demand side are often used to influence behavior.  For example, there is a proposal for Dutch drivers to pay a tax based on their time on the road rather than charging a purchase tax and road tax (AP 11/09).  The Obama Administration floats a proposal to create a vehicle miles traveled tax (The Hill 5/11).  Other states are considering similar proposals (CBS News 7/12).  How might these proposals influence driver behavior or the purchasing or automobiles?  Locally, the Cape Fear Public Utility Authority has been criticized because it changed the rate structure to create incentives to use less water (Star News 6/09).  How is this rate structure attempting to change consumer behavior

Sometimes government chooses to subsidize the production or consumption of a particular product of service.  See this article from describing the wide scale use of subsidies for clean energy in recent years (NY Times - 11/11/11).  As noted in these articles, sometimes the efforts are less than effective.  For example, see this interesting article from the Washington Post looking at an effort to subsidize the production of a "cost-effective" LED light bulb (Washington Post 3/12).  Alternatively, see this article on how the government subsidizes flights at rural airports to provide service to rural areas (AP - 8/11). 

This article describes the adverse impacts of sugar price supports (10/11) while this article discusses how tariffs limit the importation of ethanol from Brazil, which raises costs for U.S. consumers (Desmoine Register 2008).  Similarly, the U.S. recently imposed tariffs on the importation of Solar Panels made in China (USA Today 5/17/12). 

One of the problems of using policy instruments is that they can result in unintended consequences.  For examples, see:

	There are numerous problems with using stimulus grants and loan guarantees to encourage the production and consumption of clean energy (11/11).
	This article describes how subsidizing ethanol production is raising food prices (USA Today 2/11).   See this article on how auto dealerships are scamming Chevy Volt Tax Credits (NLPC 5/11).
	This article describes how a tax designed to reduce energy is threatening research on how to produce green energy in the U.K. (Guardian 5/11).
	What if tax policy is changed to reduce deductions that the "rich" take.  Many nonprofits worry about how it would impact donations to their organizations (AP 5/09).
	What if cap and trade proposals actually reduced the stigma associated with polluting and actually led to increased pollution (Download article from the Christina Science Monitor - 7/08)
	This article looks at an interesting problem in the aftermath of Obamacare where some patients are getting hit with big, unexpected medical bills (CBS News 1/15/12) after getting tests that are paid for.
	There is also an interesting recent study suggesting that increased federal aid to make college more affordable has actually had the opposite effect (Smart Money 2/26/12)
	Another interesting example is in education.  Many states reward teachers with large bonuses if they obtain a Masters Degree, in effect creating incentives for teachers to purchase additional education.  The problem is that as this article from the Star News (11/10) states there is virtually no evidence that obtaining a Masters Degree improves teacher effectiveness and there likely are more effective ways to improve teacher performance.

Assuming that the Christmas Tree really had an image problem and that there is a legitimate rationale for government to promote the consumption of live trees over fake trees, does taxing the produce make much sense (Download articles from 11/9/11)?  Using the handout summarizing the general policy instruments, can you think of other alternatives to better accomplish the sale and consumption of live Christmas Trees over fake trees?  

There are several notable aspects of the insurance problem that create rationales for government intervention.  That said, it is often controversial and can lead to unintended consequences.  See this interesting set of editorials debating catastrophic coverage due to storm events (USA Today 11/07).  It is also clear that the provisions of President Obama's Healthcare reform program are triggering rate increases for current policy holders (Download this article on the increases to the premiums for federal workers - Government Executive 10/10).

Download as an adobe acrobat file

Handout - Summary of policy instruments available to government

Figures - Alternatives

To be added

Rogers, Everett M.. 1995. Diffusion of Innovations. New York, NY: The Free Press. 

Salamon, Lester M. (Ed). 1989. Beyond Privatization: The Tools of Government Action. Washington, DC: The Urban Institute Press.

Rose, Richard. 1993. Lesson-Drawing in Public Policy: A Guide to Learning Across Time and Space. Chatham, NJ: Chatham House Publishers