This book looks beyond politics to show how the ability of the U.S. government to implement policies is strongly affected by various economic constraints. These include the credibility of the policies, the ability of government to commit to them, the extent to which firms and consumers rationally anticipate their effects, whether the success of a policy further encourages firms and individuals to behave in intended ways, and whether the behavior of such actors can be sustained without continued government intervention.
The authors apply these concepts to four areas of policy: macroeconomic policies to promote employment and economic growth, redistributive policies to benefit the poor and the elderly, production policies to provide goods and services, and regulatory policies to guide the behavior of firms and individuals. In doing so they provide plausible explanations of many puzzling phenomenafor example, why government has been successful in reducing cigarette smoking, but has failed to get people to install and maintain emission-control devices in their cars.
This book recasts debates about public policy, avoiding conventional “pro-government” or “anti-government” positions; rather, it helps to predict when public policy will succeed.
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About the Author
Amihai Glazer is Professor of Economics at the University of California, Irvine.
Lawrence S. Rothenberg is Max McGraw Distinguished Professor of Management & the Environment and Co-Director of the Ford Motor Company Center for Global Citizenship at the Kellogg School of Management, Northwestern University.
Table of Contents
Introduction: Public Policy-Limits and Possibilities
How Economics Interacts with Politics
Structure of Analysis
Conceptual Apparatus: Economic Constraints
What Makes Problems Soluble?
1. Macroeconomics: Can Government Control the Economy?
Managing the Economy: Partisan Incentives and Political Cycles
Monetary Policy and Rational Expectations
Fiscal Policy-Is It Just Crowding Out?
Exhortation: Persuasion and the Art of Equilibrium Selection
Spending, Taxes, and Expectations: Budget Deficits as Policy Instruments
Can Government Control the Economy?
2. Redistribution: A Success Story?
Economic Constraints and Redistribution
Uncertainty and Redistribution: Data
Government Commitment to Future Redistribution
Implications for Redistribution
Effectiveness of Redistributive Policy
Why Not Taxes?
Conclusions: Redistributive Possibilities
3. When Can Government Regulate?
The Scope of Regulation
Regulating Firms: Possibilities and Pitfalls
Regulating Consumer Behavior
Conditions for Regulatory Success
4. Producing Goods and Services: Getting the Right Mix
What Is Production?
Crowding Out Private Provision
Credibility as an Obstacle to Inducing Production
Credibility as an Obstacle to Restricting Production
Production Is Difficult
5. Economic Constraints and Political Institutions
Divided Government and the Politics of Gridlock
Federalism and the Devolution of Authority
Political and Policy Reform
What Do Politicians Know?
Institutional Design and Policy Effectiveness
6. Final Thoughts
What Can Government Do? Five Lessons
Conclusions: The Burden of Government
What People are Saying About This
A very important book, Why Government Succeeds and Why It Fails goes well beyond standard public choice theory in several regards. First and most importantly, it advances the debate over government failure. Rather than staking out a simplistic "pro-government" or "anti-government" position, it helps us determine when government policy is likely to succeed. Second, the book shows that credibility is a more important concept than had previously been realized. And third, it offers new and striking analysis and evidence on particular policies, such as recent attempts to make government more accountable. On top of all this, the book is highly readable and will command significant attention across a variety of disciplines.
Tyler Cowen, George Mason University
Most economists have a list in their heads of the conditions under which markets fail. Most political scientists have a set of theories about why politicians may fail to represent notions of the "public interest." The authors here ask a different type of question, which is often overlooked: under what economic conditions are government policies likely to work? Across many different areas of public policy, they illustrate how the success or failure of policies can be predicted. This is an excellent book. It will be a welcome addition to many different types of classes where public policies are debated and examined.
James T. Hamilton, Terry Sanford Institute of Public Policy, Duke University