Proposed fiscal year 1997 budgets for social and behavioral science research

COSSA is the advocate in Washington for the social and behavioral sciences. He also chairs the Coalition for National Science Funding. He has testified before Congress many times and has written and spoken extensively on legislative-executive relations, the federal budget process and science policy, particularly as it affects the social and behavioral sciences. This report was prepared by the author with the assistance of the COSSA staff.     

(Non)equivalence in a federalism: Dual tax shares, flypaper effects and Leviathan

Among the best-known theorems of fiscal federalism is the presumed allocative and distributive equivalence between a lump-sum grant to a collectivity and a set of lump sum grants to the members of a collectivity. Interestingly, the simple elegance of the theorem is at odds with observed behavior. Grants to governments produce greater public spending than does tax reduction. Explanations of this "flypaper effect" range from misspecified econometric modeling to presumed behavior based on fiscal illusion. In this paper we show that theoretical equivalence exists in a model that recognizes only one tax share, the citizen voter's local tax share. When the model is expanded to include voters' federal tax shares as well as local taxes, non-equivalence and the flypaper effect become the rule, not the exception.     

Pigou, Coase, common law, and environmental policy: Implications of the calculation debate

The implications of the calculation debate are explored for Pigouvian, Coasean, and common-law liability approaches to externality problems. There is no escaping Hayekian-Misean information problems, but the institutional setting within which environmental policies are resolved affects the domain of third-party calculation. The calculation required is likely to be significantly less under common-law arrangements than under administrative processes. The primary implication for environmental policy is that increased reliance on competitive market processes and the common law in copying with externality problems may be more effective than attempts to improve current administrative approaches.     

The public demand for smoking bans

Smoking bans are gaining widespread support in the United States and other countries. While supporters argue that bans are necessary to resolve market failures associated with negative externalities, the Coase Theorem predicts that, under various conditions, private markets internalize negative externalities. We examine the smoking issue within the framework of the Coase Theorem and hypothesize that smoking bans misallocate air space resources shared by smokers and nonsmokers. Because smoking bans shift ownership of scarce resources, they are also hypothesized to transfer income from one party (smokers) to another party (nonsmokers). Supporting evidence for these hypotheses is provided by an examination of a comprehensive smoking ban imposed in San Luis Obispo, CA.     

The political economy of central bank intervention

This paper analyzes an exchange rate policy game between a central bank and rational speculators under symmetric information. The central bank tries to counteract shocks to the exchange rate by means of sterilized intervention working through the expectations channel. Private speculators resist being fooled. They anticipate the interventions. An “intervention bias” results with an inefficiently high equilibrium volume of intervention which does not reduce the impact of shocks to the exchange rate. The model implies that the more independent the central bank the smaller and the more consistent the intervention efforts. An empirical illustration lends some support to the model.     

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.     

Workplace education for hourly workers

Concerns about U.S. competitiveness have increasingly focused the attention of policymakers on the workforce and mechanisms that could be used to enhance both the quality and quantity of human capital in the workplace. This article focuses on basic skills education of hourly workers, precisely the type of human capital which is likely to be most underprovided by the private market. Five questions are addressed: First, what is the nature of workplace education programs? Second, why do some firms provide workplace education programs while others do not? Third, what, if any, characteristics distinguish those firms that provide workplace education programs from seemingly comparable firms that do not? Fourth, what, if any, evidence can be found identifying the effects of these programs on the firms that sponsor them? Fifth, what policies appear most likely to stimulate additional workplace education?     

Market incentives to encourage household waste recycling: Paying for what you throw away

This article investigates the use of market incentives to encourage household waste recycling by pricing waste-disposal services according to the quantity of waste generated. We use a natural experiment from an upstate New York county to examine how quantity-based pricing of waste disposal affects reported household recycling behavior, when used by itself or in conjunction with curbside pickup of recyclables or mandatory recycling laws. Curbside pickup was found to have the greatest effect on reported recycling behavior, although higher waste-disposal prices might alter these conclusions. Other concerns about quantity-based pricing of solid waste—distributional effects, public acceptance, and adverse incentives—are also examined.