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    Public policies as investments

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    Many governments around the world are currently experiencing financial stress. Due to changed economic circumstances, tax revenues have fallen while pressures on expenditures have increased. In response, governments have been engaging in more deficit spending. Longer term, however, deficits must be eliminated and ways must be found to run surpluses so that government debt can be sustainably managed. Despite improved government abilities to manage their financial position in the face of changing economic circumstances, we can expect periods of fiscal stress to recur from time to time. During these periods, governments inevitably look for ways to reduce their expenditures. How should spending be cut? This is what we know: Usually spending cuts are imposed across the board. Agency staff members are expected to exercise discretion in determining how to meet savings targets. In practice, this can mean imposing expenditure cuts uniformly across a range of programs. Sometimes, particular programs are targeted and eliminated because they do not enjoy strong political support. Others – like professional development programs for staff members – are viewed as ‘nice to have’ but as ‘luxuries’. Spending for them is cut with the intention that, when the fiscal situation improves, spending on them will begin again. In 2010 I was appointed by the New Zealand Government to chair a taskforce on early childhood education. From November 2010 through to April 2011, I worked with a group of eight other experts to review the current situation in that sector and suggest future policy directions. There was an occasion when I met with Treasury officials to discuss our work. By that point, I was familiar enough with the evidence base to know that funding high-quality, effectively-targeted early childhood education programs was one of the best investments that governments could make. In the conversation with Treasury officials, I was briefed on the difficult fiscal situation the government faced. I was reminded that the taskforce was to consider ways to improve outcomes without increasing spending. And it was suggested to me that the Treasury viewed early childhood education as an area where spending had been increasing too fast and where there appeared to be a lot of room for making cuts. My response was to ask about the logic underlying budgetary decision-making in the Treasury. It became clear from that conversation that the ‘logic’ involved looking to make cuts wherever it was politically viable. When I asked about comparison of marginal returns on expenditures, I was met with quizzical stares. Ultimately, the taskforce I chaired argued strongly for improved targeting in early childhood education spending, and for promoting of higher quality service provision. We also argued that this area should be made a top expenditure priority for government spending and that, as more funding became available, increased expenditure in the area would be merited. This paper is an initial step in my effort to build on and broaden the logic that led me to believe the New Zealand Government should give high priority to funding high-quality, effectively-targeted early childhood education programs. Currently, I am working to amass existing evidence about the positive returns that societies can enjoy when governments make well-chosen public policy investments across many areas, not just education. I intend to show that effective use of evidence is essential to the making of good public policy choices, but that too often such evidence is ignored. Further, I intend to establish the foundations for an on-going research agenda that will ultimately promote more theory- driven, evidence-based decision-making in government than is presently observed. This paper has one key message. Public policy choices should be informed by investment analysis. Often, they are not. But investment models are starting to be used more systematically to guide government decision-making (see, e.g., Aos et al 2011). Consequently, an opportunity now exists for extending the logic of investment decision-making to most government spending choices

    Behavioural public policies and charitable giving

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    Some of the challenges in Sanders et al. (this issue) can be aptly illustrated by means of charity nudges, that is, nudges designed to increase charitable donations. These nudges raise many ethical questions. First, Oxfam’s triptychs with suggested donations are designed to increase giving. If successful, do our actions match ex ante or ex post preferences? Does this make a difference to the autonomy of the donor? Second, the Behavioural Insights Team conducted experiments using social networks to nudge people to give more. Do these appeals steer clear of exploiting power relations? Do they respect boundaries of privacy? Third, in an online campaign by Kiva, donors are asked to contribute directly to personalized initiatives. In many cases, the initiative has already been funded and donor money is funnelled to a new cause. Is such a “pre-disbursal” arrangement truthful and true to purpose as a social business model

    Public Policies against Global Warming

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    Judged by the principle of intertemporal Pareto optimality, insecure property rights and the greenhouse effect both imply overly rapid extraction of fossil carbon resources. A gradual expansion of demand-reducing public policies – such as increasing ad-valorem taxes on carbon consumption or increasing subsidies for replacement technologies – may exacerbate the problem as it gives resource owners the incentive to avoid future price reductions by anticipating their sales. Useful policies instead involve sequestration, afforestation, stabilization of property rights and emissions trading. Among the public finance measures, constant unit carbon taxes and source taxes on capital income for resource owners stand out.global warming, carbon taxes, Pareto optimality

    Female employment and Public Policies.

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    Public Policies against Global Warming

    Get PDF
    Judged by the principle of intertemporal Pareto optimality, insecure property rights and the greenhouse effect both imply overly rapid extraction of fossil carbon resources. A gradual expansion of demand-reducing public policies -- such as increasing ad-valorem taxes on carbon consumption or increasing subsidies for replacement technologies -- may exacerbate the problem as it gives resource owners the incentive to avoid future price reductions by anticipating their sales. Useful policies instead involve sequestration, afforestation, stabilization of property rights and emissions trading. Among the public finance measures, constant unit carbon taxes and source taxes on capital income for resource owners stand out.
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