Understanding Public Policy

In a course where an unregulated market (in theory) is the best condition, understanding public policy is one the most interesting and useful things to learn, since it not only gives you depth and the right tools to analyze different government actions (and plans to which it helps you become a critical and concerned citizen) but also helps you understand what, when and where government intervention is needed.

Econ 151 is an econ elective required for every Economics student in UP Diliman which talks about Public Economics in which it would give you the right tools in understanding public policy. One of the important things to remember is that the job of every policy maker is a tremendous task and we must give the best of understanding as citizens to the faults of our policy makers (assuming it isn`t too excessive of course)

Efficiency or Equity? That is one of the main questions (in economic terms) of every policy maker to which it is his or her choice to make given the predicted consequences of any decision, and as economists we`re in charge of providing those consequences, the impacts of choosing either efficiency, equity, anything in between, or both (though it rarely happens). The rule of thumb that would be learned in understanding public policy is that the market does not guarantee equity in which the government must step in order to help either through redistributing, social services and the like. Examples of government intervention for equity reasons would be that of Sin Tax, there is an efficiency-equity trade-off since there are inefficiencies caused by the tax but the tax would be used for a universal health care that would greatly benefit the poor/underprivileged (equity) not to mention the reduced amount of smoke which society values highly.

Though the government also steps in due to market failures (imperfect competition, public goods, imperfect information etc.) the main interesting question would be that of efficiency or equity since this would be the difficult decision to make to which what would the policy maker be willing to sacrifice of one in attaining another, in which there is an efficiency-equity trade-off. The tools learned in Public economics would provide the knowledge to measure the efficiency-equity trade-offs which would provide a better gauge on how to analyze different public policies.

Though even without the knowledge of how to measure efficiency-equity trade-offs and the like, one would learn important rule of thumbs in understanding public policy in which (1) as citizens we must give ample tolerance to the actions of our policy makers, (2) we must voice out our interests to the policy makers before and after any policy given a chance, (3) we can analyze public policy (government intervention) if it is for efficiency or for equity but in a moment of efficiency-equity trade-offs there is never a right answer since those would be normative questions, (4) as economists and those aspiring to be one, we could never make the normative choice to which our job is to provide the impacts of any decision that could be made, the job in deciding what choice would be made is that of the policy maker.

– Miguel Rey Ramos, 2012-30997


2 thoughts on “Understanding Public Policy

  1. I’m taking Econ 151 now and I really enjoy the class. Making tradeoffs between efficiency and equity, or even justifying means and ends is what makes decision making in society so difficult and controversial, and learning about these tradeoffs and the different approaches to them makes for interesting discussions.

  2. Well said, and just to add: I think one of our jobs as (future) economists is to make it clear to the public that in providing things for “free”, someone always bears the cost, so there should also be careful consideration on the implications of policy on, say, disincentives for whoever is bearing the cost — which is again a normative choice.

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