Varieties of public policy POLI 352A

What does government do? Extracts resources Expends resources Regulates Directly owns means of production

The logic of government intervention Government 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?