Skunks in an English Woodland: Should England Embrace For‐Profit Higher Education?

The British government is encouraging the growth of for‐profit alternative providers of higher education (HE). While it is true that for‐profits have opened HE access to previously under‐served groups and have been more agile in reacting to market demand, they have done so at a considerable cost to students and the taxpayer because they do not share in the cost of the failure of HE to ensure a payoff for many of their students. The US experience with for‐profits should be a cautionary tale for those supporting their expansion in Britain. Policy is needed to craft a regulatory framework that produces the benefits that for‐profits can provide, but minimises the costs that often accompany them. At present, it is far from clear that expanding alternative providers—that is, for‐profits—would ‘work better’ for students.     

FHA restructuring proposals: Alternatives and implications

Abstract

This article evaluates problems of the Federal Housing Administration (FHA) under its current structure, develops criteria for judging alternative structures, and suggests one alternative—an assigned risk pool—that encourages efficiency in the insurance function while still promoting low‐ and moderate‐income housing. A historical introduction explains how the current institutional relationships came about and created FHA's problems.

FHA's decline resulted from the mixing of a heavy social agenda with the basic insurance objective, a destructive reorganization of the Department of Housing and Urban Development that caused FHA to lose control and focus, and government's inherent inability to respond to market signals. Yet the economic rationale for government involvement in FHA functions is strong. An FHA organized as an independent government agency, a government‐sponsored enterprise, or even a privatized entity structured as an assigned risk pool could improve efficiency of underwriting, pricing, and administration while achieving the redistributional objectives.     

National Competition Policy: The Downside

Identifying the ‘downside’ of competition policy raises the question of whether there is an ‘up-side’. Competition is supposed to drive the organisers of commodity production to minimise the costs they have to bear in some short to medium term, within environments more or less circumscribed by government regulations. The actual period tends to be that for which the providers of finance are prepared to wait for returns after a poorly performing company is restructured. Economists used to say that cost minimisation requires an industry structure in which there are many independent producers. Nowadays, more enlightened writers speak of ensuring that the market positions held by existing producers are contestable by prospective new producers. The question of what government in Australia may do to establish competition in this sense of competition has recently focussed on the desirable re-organisation of public enterprises, perhaps especially those that exist at the level of the states. So what are the dimensions of the ‘downside’ of opening the market positions occupied by public enterprises to contestation by private companies, especially those which are monopolies? The answer takes a large measure of the gloss off the Hilmer promises. The problems to be addressed are: the limit put on contestability where there is an element of natural monopoly; the tendency for cost minimisation to depend on the tighter management of labour; and, the difficulty of insisting simultaneously on both ‘competition’ and the satisfaction of ‘community service obligations’ (CSOs).     

Federal Government Leasing: Costs, Incentives, and Effects

This article examines the lease or borrow decision from the perspective of the United States federal government as the lessee. It argues that there are several sources of friction in the leasing market that will make leasing more costly than buying for the federal government. Nevertheless, the budget process contains powerful incentives for federal government agencies to lease even though leasing is the most costly alternative.     

Social Security Privatization and Market Risk

Under Social Security privatization, workers would be allowed to divert some of the money that currently goes to Social Security into private accounts. This would expose them to market risk, that is, the risk of a substantial drop in equity prices or of a prolonged bear market. This could result in generations of workers with less money than they thought they would have for retirement. Depending on a worker's birth date, if the privatization approach proposed by President Bush's Commission to Strengthen Social Security had been enacted at the start of the Social Security program, the retirement benefits generated from putting 10% of earnings in a private account for 35 years would have ranged from 100% to less than 20% relative to pre‐retirement earnings. The extraordinarily high retirement income generated from the booming 1990s stock market was the equivalent of winning the generational lottery—unlikely to be repeated regularly. Even under these beneficial circumstances, a privatized system could have cost the government more than $1 trillion in today's dollars over the past 3 decades if the government decided to help out those who accumulated too little for retirement. The primary alternative to a government bailout of the Social Security system, older workers working longer, would likely not generate the desired results. Workers wanting to work longer would create labor market pressures typically at times when unemployment is already high.     

Nonprofits as Local Government Service Contractors

Despite the growing role that contracts with nonprofits play in local service delivery, only limited attention has been directed to why some cities rely more on nonprofit organizations to produce services or how political institutions influence the role nonprofits play in service delivery. To investigate these issues, the authors present a transaction cost explanation that focuses on how political system characteristics and structures of service markets shape the costs of negotiating, monitoring, and enforcing contracts for local governments. The findings indicate that forms of government, mayoral turnover, racial segregation, and the market of nonprofit producers influence the role of nonprofits in delivering elder services, but decisions to contract exclusively with nonprofits are subject to different influences than decisions to jointly produce service with a nonprofit organization.     

Market failure,government failure,and the private supply of public goods: The case of climate-controlled walkway networks

Two opposing models of public-goods undersupply are those of “market failure” and “government failure”. Empirical work on the relative explanatory power of these two frameworks has been limited by the scarcity of acceptable data. The case of climate-controlled walkways in major urban cores is a rare instance where such difficulties can be overcome. We investigate the supply of CCWs in 55 large city-cores in North America. We find that (1) CCW networks are well-supplied by market forces, when (2) such forces are not frustrated by government policy. We also find evidence that (3) rules-based regimes dominate discretion-based regimes. These results are consistent with the position that the “government-failure” paradigm is a viable alternative to the traditional “market failure” paradigm.     

A Future of “Happiness”: Can Markets Be Co-evolved?

The downturn of the markets in the recent global economic crisis points to a need to question the current dynamics of the market system, a decade after the turn of the millennium. The inequalities with regard to the consumption of resources across world markets, the declared low satisfaction rates over what is offered in the marketplace, and the increasing skepticism with marketing practices are all more pronounced than ever. It is becoming evident that consumer marketing fails in constructing a happier society. Consumers, producers, and governments as the three main market stakeholders, share responsibility for the undesired consequences. This article provides a critical perspective on the contemporary paradigm that dominates marketing thought in relation to the central role and the evolving meaning of consumption in the market economy that is favored by most governments. The core position of the article is that determining happiness as the ultimate end requires a shift to a new societal orientation for all stakeholders of the market system.     

Should I Stay or Should I Go Now? Voluntary Retirement from Danish Local Government

Why do politicians choose to retire voluntarily from a position they have been working hard to get? It is argued in this article that the institutional setting of the elected assemblies influences the direct, as well as the alternative costs and benefits of having a political career and hence the patterns of voluntary retirement. Drawing on previous research from the United States Congress, this is explored in a new empirical setting: local government in Denmark. The results show that positions at the labour market matter as private‐sector employees are more likely to retire than public‐sector employees. Furthermore, internal institutional factors matter. Holding an institutional position such as chairing a committee makes retirement less likely. Furthermore, seniority makes the councillors more likely to retire when age is controlled for – a result not found in national studies. However, councillors who reach a high‐ranking position at an early stage are not more likely to quit with seniority than those who do not reach such a position. A high personal share of votes decreases voluntary retirement. In contrast to previous findings, the ideological distance from the ruling party does not play a role. This may be due to norms of consensus in the local councils.     

When government programs create inequities: A guide to compensation policies

When the government institutes a program thought to be useful for society as a whole, such as building a highway or controlling air pollution, those that benefit from such programs are usually quite different from those that bear its costs. Sometimes the government responds by postponing or modifying the program, sometimes by compensating those that are bearing an inequitable share of the costs. By using familiar economic concepts, the analyst can more effectively choose between the two approaches. Applying those concepts to the case of highway construction in California, we conclude that in this instance cash compensation is clearly superior to postponement as the policy of choice.     

How Values Shape Program Perceptions: The “Organic Ethos” and Producers’ Assessments of U.S. Organic Policy Impacts

Among the more recognizable programs related to natural and sustainable food is the United States Department of Agriculture’s National Organic Program. Although the robustness of the organic food market is difficult to contest, many debate the extent to which U.S. organic policy outcomes adequately serve consumers and the organic agriculture producers they rely on. This paper engages the debate from the perspective of certified organic producers. Drawing on the results of a nationwide survey of USDA‐certified producers, we first provide a snapshot of how producers assess the environmental, consumer, and market impacts of U.S. organic food policy. We then examine the extent to which organic producers’ policy impact perceptions are associated with their alignment with an “organic ethos”—understood as producers’ commitment to core organic principles and the organic movement. The paper highlights producers’ values as perceptual filters and cognitive mechanisms that help shape producers’ policy impacts perceptions, illustrating a contributing factor to the enduring nature of organic policy debates.     

The growth effects of fiscal policy in Greece 1960–2000

This empirical paper uses annual data for Greece 1960–2000 to study the link between fiscal policy and economic growth. Our regression analysis implies that, although a smaller public sector can be good for growth, it is necessary to look beyond size; the composition and quality/efficiency of the public sector are equally important. The policy lesson is that a smaller government share in GDP, a reallocation of funds away from the wage bill to public investment, and an improvement in government quality/efficiency can become engines of long-term growth.     

Policy incentives and the extension of mortgage credit: Increasing market discipline for subprime lending

The lax underwriting in non‐prime mortgage markets is widely perceived as one cause of the recent difficulties in the housing market. Policymakers are currently considering moves such as enforcing more careful underwriting to provide additional discipline to mortgage markets. This research explores the possibility of another approach to supplement or replace some of these efforts, namely the use of policy to create incentives for Fannie Mae and Freddie Mac (together, the GSEs) to help “check” behavior in non‐prime markets. The hypothesis is that the GSE Act affordable housing goals have increased GSE focus on targeted loan purchases, which in turn has led prime market lenders to compete more aggressively for borrowers on the margin between prime and subprime credit quality. As a consequence, these marginal borrowers will be more inclined to take prime mortgages rather than higher‐cost subprime loans. We test this hypothesis and find empirical support for it. We observe a negative relationship between the growth in GSE market share and the growth in subprime market share over time, and find that the impact of the GSEs on subprime lending tends to be stronger in high‐minority neighborhoods, where subprime lending has been concentrated and growing the fastest. Simulations show that a 10 percent increase in GSE market share (for example, from 20 to 22 percent) can cause 45,000 borrowers using prime instead of subprime loans a cost savings of about $1.7 billion. These results suggest that the GSEs, regardless of their postconservatorship form, should continue to devote attention to serving underserved populations and suggest that significant welfare benefits will accrue. © 2009 by the Association for Public Policy Analysis and Management.     

Costing Constitutional Change: Estimating the Cost of Five Variations on Australia's Federal System

Australia's system of government is by far the most centralised of the four 'classic' federations, hosting extremely centralised states, exceptionally weak local governments, and little of the substantive decentralisation and subsidiarity often presumed to derive from a federal structure. Five variations on the present structure are examined to estimate the costs of improved decentralisation, including New States models as traditionally advocated, Regional States models based on the ACT combined state–local prototype, and a National–Local model comprising a strengthened national government and local governments in essentially their present form. 1 Results indicate that the Regional States or National–Local models could deliver greater decentralisation while saving over $20 billion per annum compared to the present system. Generally, the analysis suggests that coherent modelling of alternative government structures may be more feasible than previously thought.     

Market imperfections,government imperfections,and policy mixes: policy innovations in Singapore

Proper roles for government and market in addressing policy problems may be assessed by considering the duality between market imperfections and government imperfections. The potential of government interventions or market mechanisms as core policy instruments can be eroded by fundamental deficiencies deeply rooted in either government or market as social institutions. The impacts of such deficiencies are much more extensive than postulated by the existing theories. Analysis here, based on policy innovations in land transport and health care in Singapore, suggests how policy mixes might become the norm of response for addressing policy problems found in a range of sectors. The analytical framework presented may help to distinguish among different policy mixes according to their effectiveness, but also provides some useful guiding principles for policy design.     

Administrative problems of the provincial sales tax on beer in Papua New Guinea

With the establishment of provincial government in Papua New Guinea, the Organic Law has conferred on the provincial governments the authority to raise revenue using local revenue bases including retail sales taxes. These taxes have significant advantages and a sales tax on beer has particular benefits in P.N.G. in terms of potential yield and ease of administrative management. The tax is levied on the two breweries and the breweries collect the tax at their breweries and wholesale warehouses on behalf of the provincial governments. For the brewery with the dominant share of the market the arrangement under which it collects the tax for a commission and pays over quarterly to the provincial governments brings financial advantage. The brewery with a smaller share of the market and localized sales is less likely to be benefitting by the arrangement. For the future given expected beer consumption a change from a quantity based tax to ad valorem rates would be financially advantageous to the provincial governments, and would reduce the need for some provinces to seek tax sources elsewhere, but experience shows the general benefit of raising the tax, not at the point of final sale, but on the wholesaler or manufacturer.     

How to increase citizen coproduction: replication and extension of existing research

ABSTRACT

The value of coproduction—the joint productive efforts by regular producers, such as teachers, and consumer producers, such as parents, in helping children to learn—has been recognized for some time. However, strong empirical evidence of how these benefits can be achieved is scarce, and recent research has found mixed results. A new randomized field trial replicates elements of previous studies and extends them by using an additional age-appropriate outcome measure. Methodologically, the results illustrate the challenges of carrying out replication studies because when target groups change, outcome measures also often change. Substantially, the findings suggest that a government initiative providing parents with materials and information to enhance parents’ coproduction efforts can be extended to a broader target group of parents. Together, the findings illustrate how findings from single studies should be generalized with caution and the value of working systematically with replications and extensions.     

The limits of economic globalization in East Asian developmental states

Abstract

In an attempt to adjust to economic globalization or internationalization, East Asian developmental states have liberalized their domestic economic systems, accelerating the introduction of the free‐market ideology. Despite their plan to establish the internationally compatible open‐market economy, however, the extent to which they can advance economic liberalization is limited. Political and economic burdens that the developmental state's extensive intervention in the market has incurred in the course of state‐led mercantile economic development, make it impossible for those states to execute full‐scale economic liberalization. The South Korean case clearly shows this. The Korean developmental state retains two major economic burdens: the exclusive ownership and the poor financial structure of the chaebôl. Insofar as Korean big business preserves those weak spots, the government cannot surrender the power of regulation despite its spontaneous implementation of the economic liberalization policy. In addition, the common ‘egoistic’ interests which government bureaucrats and the political class share also limit the degree to which economic liberalization policy can be implemented. The degree of state intervention in the market in Korea has been deeper than that in Japan which pioneered Asian developmental statism, and, thus, the political and economic burdens it has incurred for itself are heavier. Consequently, the East Asian developmental state cannot entirely withdraw its intervention in the market. The ‘support’ of industries is likely to diminish, but ‘regulation’ for the formation of the autonomous market will increase. For the Korean developmental state, globalization and economic liberalization are political economic slogans to re‐launch economic growth and to elevate the international economic competitiveness of industries under the initiative of the state, and motivated by nationalistic reasons. Hence, the role of the state in the market is still far from becoming redundant even in the tide of globalization and economic liberalization in the case of South Korea, where the legacy of strong developmental statism remains considerable.     

ECONOMIC THEORY AND POLICY ANALYSIS: CONCEPTUAL GUIDELINES FOR PUBLIC POLICY-MAKERS

Abstract: Traditionally public policy analysis has been able to employ the conceptual framework offered by the theory of market failure in order to evaluate the efficiency of market outcomes. However, until fairly recently, no corresponding analytical structure existed which could facilitate the examination of the efficiency and equity characteristics of government or non-market outcomes. Quite apart from public choice theory, an embryonic normative theory of government failure has now been developed which can act as a conceptual analogue to the market failure paradigm. At present, three theories of government failure coexist in the literature: Wolf's theory of non-market failure; Le Grand's theory of government failure; and Vining and Weimer's theory of govern- ment production failure. These models form the basis for a more universal theory of government failure. Nevertheless, in its current state of development this seminal literature can still assist in rational public policy design subject to certain caveats. Foremost amongst these is the need for policy analysts to augment the efficiency and equity criteria with some additional broader normative measures, and the necessity for care to be taken in the use of allocative efficiency as a benchmark in non-market circumstances.     

EC trade protection law: Produmping or antidumping?

This paper argues that the anticipation of protection can have astimulating effect on exports instead of the commonly claimed effect of harassment. If protection serves market cartelization by fixing export quantities or prices, exporters may have an incentive to increase their sales abroad in order to secure a large share of the expected rent, which is brought about by the anticipated import restriction. This may even result in sales below marginal costs or dumping.The effect of the protectionist threat may then be the reverse of what is intended: it can raise the speed of import penetration and it can provoke dumping. A formal model and a supportive institutional analysis of EC trade protection is supplemented by preliminary empirical evidence.