Cost-Benefit Analysis of Four Types of Policies

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Presentation transcript:

Cost-Benefit Analysis of Four Types of Policies 1

Cost-Benefit Analysis Federal Busing Tariffs Benefit Variations of cost and benefits Examples COST-BENEFIT ANALYSIS OF FOUR TYPES OF POLICIES Cost: any burden (monetary or non-monetary, real, or perceived), that a group must bear Federal child-care programs (taxes) Busing to achieve school desegregation (taxes, psychological stress). Tariffs (higher prices for goods) Benefit: any satisfaction (monetary or non-monetary, real or perceived) that a group will enjoy from a policy Federal child-care programs (lower child care costs for parents) Busing to achieve school desegregation (improvement in opportunity, greater racial harmony) Tariffs (more jobs for workers, more profits for businesses) Costs and benefits can be either widely-distributed (to many, most, or all citizens) or narrowly-concentrated (for a relatively small number of citizens or groups). Examples: Widely-distributed costs: income tax, Social Security tax, farm subsidies Narrowly-concentrated costs: factory air emission standards, higher capital gains taxes for the wealthy, gun control regulations Widely-distributed benefits: Social Security benefits, strong national security, clean air, federal highways. Narrowly-concentrated benefits: farm subsidies, tariffs, exemption from antitrust legislation 2

Four Types of Policies Majoritarian Policies Interest Group Policies Client Policies Entrepreneurial Policies Four types of policies Majoritarian policies Involve widely distributed costs and widely distributed benefits Examples: Social Security, national defense Analysis: Interest group policies Involve narrowly concentrated costs and narrowly concentrated benefits Examples: tariffs, antitrust exemptions Client policies Involve widely distributed costs and narrowly concentrated benefits Examples: farm subsidies, airline or trucking regulation, pork barrel bills client groups Entrepreneurial policies. Involve narrowly concentrated costs and widely distributed benefits. Examples: consumer product safety legislation, ending farm subsidies, deregulation Strong incentive for potential cost-paying group to participate. Prospective beneficiaries may find widely distributed benefits too small to work hard for. 3