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Public and Private Dimensions of Governance - Lecture Notes | PADM 600, Assignments of Introduction to Public Administration

Material Type: Assignment; Class: PUBLIC ADM & ORG THEORY; Subject: Public Administration; University: University of Louisville; Term: Unknown 1989;

Typology: Assignments

2009/2010

Uploaded on 02/24/2010

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Module 6 Public and Private 6.1
Module 6 Public and Private Dimensions of Governance
Part 1 Why Public Action?
Part 2 Informal Organizations and the public-private boundary
In this Module we explore a central issue in economics, political
science, and public administration:
when is government involvement justified?
We will also examine the political environment of public
administration including classic theories of iron triangles and
issue networks.
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Module 6 Public and Private Dimensions of Governance

Part 1 Why Public Action?

Part 2 Informal Organizations and the public-private boundary

In this Module we explore a central issue in economics, political

science, and public administration:

when is government involvement justified?

We will also examine the political environment of public

administration including classic theories of iron triangles and

issue networks.

Module 6

Part 1 Why Public Action?

In this section we examine the justifications for public action

given by classical political theorists as well as economists.

Social Contract Theory

A social contract is a voluntary agreement in which a group of people choose to give up certain freedoms in return for certain functions provided by government.

Social contract theory provides a justification for government

based on the theoretical construct of “the state of nature.”

The state of nature is a hypothetical situation that existed prior to government, in which humans existed in a wild state. Philosophers ask, “what made people give up the freedom of the state of nature in order to live under government?” People may be willing to give up a measure of freedom in exchange for certain limited services from government.

Enforcement of contracts

Maintenance of social order

Those interested in this area are invited to read

Thomas Hobbes (1651) Leviathan John Locke (1690) Two Treatises of Government Hobbes viewed the power of government over people as unlimited. For Locke, sovereignty rested with people. There are two implications he derived from this proposition:

Limited government

Overthrow government if it fails to discharge its duties properly

Justification for government action based on market

failures

Tranactions costs

Monopoly power

Externalities

The philosophy behind this approach:

Use private markets unless there is some overriding reason not to, in this case, market failure.

Market Failure: Transactions Costs

Costs involved in market transactions including

Gathering information, negotiating, and monitoring contracts

Goods with low transactions costs are effectively traded on the

market, e.g. tennis rackets, computers.

High transactions costs are not always a justification for

government action, but they can justify a move from negotiated

to administered decision making.

e.g. in labor markets, we don’t contract with firms for each discrete activity we will perform or write new contracts for each week. Instead we submit to the rules and hierarchy of long term general contracts with organizations.

Market Failure: Monopoly power

The market power of a monopolist can cause market failure.

By being the sole provider, the monopolist is able to restrict output and thereby drive up the price. The monopolist can also provide poorer quality goods and services, due to lack of competition.

Monopoly can also lead to government failures

The quality of many government services also suffers without the discipline provided by markets. For this reason, introducing competition into government service is often a great reform strategy.

There are a number of different types of market failures caused

by monopolies.

The most challenging of these is the “natural monopoly,” because there is no one obvious solution. The alternatives include

Government regulation of private firm(s)

Public ownership

The natural monopoly is where capital investment costs are so high, the firm needs all of the customers in an area to pay them off.

e.g. phone service, cable TV

Market Failure: External effects, or “externalities”

These are the costs and benefits of goods that are not paid for

when they are traded.

Market failure if the external effects are negative:

Consider food grown with chemical fertilizers and pesticides. These chemicals flow off and pollute streams and drinking water. This environmental cost is not included in the cost of a bag of apples or tomatoes. One solution

Tax the product up to the point where the costs of the tax equal the

environmental damage.

Use the tax receipts to clean up environmental damage or to subsidize

products with positive externalities (e.g. organic produce).

Political realities

We rarely have this type of solution because of the power of

Lobbies representing traditional (i.e. polluting) farmers; Lobbies representing the companies making chemical agricultural products ; Big money that flows into congressional campaigns from these sources.

The result is system-wide loss in favor of the few with greater political

power.

Inherently public functions

Prof. Garvey calls these “appurtenances of sovereignty”

Appurtenances means something that belongs with another more important thing, as in an accessory

The previous criteria that we discussed provided justification for

government funding of the function. Here the criteria is a

justification for government itself to perform the function, and

not contract it out or privatize it..

One justification for certain core functions to be carried out by

government is their symbolic value.

By having the government run the prisons, it symbolizes our collective dislike of lawbreaking.

Other examples of inherently public functions:

Setting policy Dispensing justice

Chapter reading:

“Three Ways of Organizing Production and Exchange in

a Modern Society,” by John Donohue

As you read this excerpt, consider the following questions:

What are the advantages and disadvantages of delivering public goods through

Public means?

Private means?

When is public delivery of a good most likely to be preferable? When is private delivery of a good most likely to be preferable?

Iron triangles

Executive Branch Congress Bureaus Subcommittees Private sector (individuals, corporations, interest groups)

Iron triangles are the informal relationships, generally of

mutual political advantage, among

administrative bureaus, legislative committees, and the private sector (individuals, interest groups, & corporations)

Congress members join committees in areas of policy most

affecting electoral constituencies

e.g. Senators from Kentucky and North Carolina will obtain committee assignments relevant to tobacco regulation This practice leads to increased contact with interest groups and administrators involved in this area.

Issue Networks

Issue networks consist of people with policy expertise in a

certain area.

They are not a permanent stable structure, but something which becomes mobilized when a policy is being developed and approved Those in the network are consulted by public officials because of their specialized expertise. To develop an energy policy, an administrator might consult with

Tax reformers

Nuclear power specialists

Renewable energy specialists

Civil rights groups concerned about jobs, etc.

Involvement of all of these knowledgeable stakeholders provides are more comprehensive understanding of the policy issue.

Summary

In this module we are developing a deeper understanding of

when government action is appropriate.

If you are committed to a life of government service, then you should have a good understanding of government’s role in society. Such understanding is important in this era when few people have this knowledge and there is widespread anti-government sentiment.

Many of those critiquing government’s role in society do not

understand the fundamental differences between public and

private goods.