Public Policy: Objectives and Principles Roger Kerr New Zealand Business Roundtable

“The framework of institutions, laws and programmes laid down by the arms of government (parliament, the executive and the judiciary) that regulate the economy and wider social interactions.”

Critical issue: The proper role of government

SINGAPORE IRELAND HONG KONG

Objective of public policy Human flourishing - not just about economy, monetary values, efficiency - encompasses fairness, environmental quality, freedom

Ideological? Should be evidence-based Role of economics Free trade, school choice, privatisation Boundaries of political debate

Common framework Markets vs government Invisible vs visible hand Need governments to set rules of game

Market exchanges Politics/collective choice Voluntary cooperation

Dominant means of getting what we want Norm in families, small groups Also clubs, associations, charities Involves redistribution within families and through altruism Works best in ‘face to face’ settings But can’t run a large society that way

Market exchanges Essential for society at large Gains from specialisation and trade Prices - transmit information - coordinate plans - markets continuously adjust Consumers’ interests paramount But - market failures

Politics Voting mechanism is imprecise - candidates, parties, electoral systems, accountability Coercion - not mutual benefits, as with markets & voluntary cooperation Tyrannies of majorities and minorities Political market failures

Upshot? No ideal yardstick Political/government failures routine, not exceptional Must compare real-world alternatives

In choosing among real world alternatives Focus on incentives Bias in favour of economic freedom Implies limited government

How do we constrain government ?

Economic constitutions Sound processes Compensation for Regulatory Takings Taxpayer/Ratepayer Bills of Rights

Public policy and business management A country is not a company National central planning doesn’t work Different skill requirements Problems with DIY economics

Conclusions Good public policy: institutions that promote human flourishing There is a significant role for government, but individuals need protection from government abuse governments don’t necessarily act in the public interest remedy of government intervention sometimes makes things worse

The biggest public policy mistake: to expect too much of government The challenge: how to restrain government to what it does well