Varieties of public policy

POLI 352A

What does government do?

• Extracts resources

• Expends resources

• Regulates

• Directly owns means of production

The logic of government interventionGovernment intervention can help solve market failures

relating to:

• Fairness

• Insurance

• Macroeconomic management

• Public goods– Non-excludable

– Non-rival consumption

– Not all publicly provided goods are public goods

A public good

The logic of non-intervention

• International competitiveness

• Budgetary sustainability

• Individual incentives (moral hazard)

• Individual choice

Comparative puzzles

What are some differences in policies across countries that

interest / puzzle you?

A common dilemma

• How do we balance equality against economic efficiency?

• How do we protect individuals and households against economic risk while preserving incentives to work (and save and invest)?

• What is the proper role of the state in the economy and society?

Varieties of welfare state

A welfare state is a collection of cash-benefit programs and government services that protect individuals against poverty and economic risk.

Roughly, it comes in three varieties:

1. Liberal

2. Corporatist

3. Social democratic

Liberal welfare state

• Means-tested benefits

• Low benefit levels

• Stigma

• Strong work incentives

• Examples: U.S., Canada, Britain, New Zealand, Australia

• Think safety-net welfare state

Corporatist welfare state

• Social insurance against risk– Entitlement based on contribution

• Earnings-related benefits preserve status

• Generous benefits for middle classes

• Covers those who work

• Weak services low female employment

Corporatist welfare state

• Examples: Germany, Austria, Italy, France

• Think insurance welfare state

Social democratic welfare state

• Emphasis on equality and universality

• Also, large role for social insurance, but

• More generous than conservative W.S., especially for low-earners

• Generous government services– Child care, nursing care, training

• Boosts female work participation

Social democratic welfare state

• Think citizen’s welfare state

• Examples: Sweden, Denmark, Norway

Looking ahead:The motivating puzzle

Why such different policy answers to a

common social dilemma?