Why Government Succeeds and Why It Fails

This book looks beyond politics to show how the ability of the U.S. government to implement policies is strongly affected by various economic constraints. These include the credibility of the policies, the ability of government to commit to them, the extent to which firms and consumers rationally anticipate their effects, whether the success of a policy further encourages firms and individuals to behave in intended ways, and whether the behavior of such actors can be sustained without continued government intervention. The authors apply these concepts to four areas of policy: macroeconomic policies to promote employment and economic growth, redistributive policies to benefit the poor and the elderly, production policies to provide goods and services, and regulatory policies to guide the behavior of firms and individuals. In doing so they provide plausible explanations of many puzzling phenomena—for example, why government has been successful in reducing cigarette smoking, but has failed to get people to install and maintain emission-control devices in their cars. This book recasts debates about public policy, avoiding conventional “pro-government” or “anti-government” positions; rather, it helps to predict when public policy will succeed.

Table of Contents:
Acknowledgments Introduction: Public Policy-Limits and Possibilities How Economics Interacts with Politics Structure of Analysis Conceptual Apparatus: Economic Constraints What Makes Problems Soluble? 1. Macroeconomics: Can Government Control the Economy? Managing the Economy: Partisan Incentives and Political Cycles Monetary Policy and Rational Expectations Fiscal Policy-Is It Just Crowding Out? Exhortation: Persuasion and the Art of Equilibrium Selection Spending, Taxes, and Expectations: Budget Deficits as Policy Instruments Can Government Control the Economy? 2. Redistribution: A Success Story? Economic Constraints and Redistribution Uncertainty and Redistribution: Data Government Commitment to Future Redistribution Implications for Redistribution Effectiveness of Redistributive Policy Why Not Taxes? Conclusions: Redistributive Possibilities 3. When Can Government Regulate? The Scope of Regulation Regulating Firms: Possibilities and Pitfalls Regulating Consumer Behavior Conditions for Regulatory Success 4. Producing Goods and Services: Getting the Right Mix What Is Production? Crowding Out Private Provision Credibility as an Obstacle to Inducing Production Credibility as an Obstacle to Restricting Production Production Is Difficult 5. Economic Constraints and Political Institutions Divided Government and the Politics of Gridlock Federalism and the Devolution of Authority Political and Policy Reform What Do Politicians Know? Institutional Design and Policy Effectiveness 6. Final Thoughts What Can Government Do? Five Lessons Conclusions: The Burden of Government Notes References Index

About the Author :
Amihai Glazer is Professor of Economics at the University of California, Irvine. Lawrence S. Rothenberg is Max McGraw Distinguished Professor of Management & the Environment and Co-Director of the Ford Motor Company Center for Global Citizenship at the Kellogg School of Management, Northwestern University.

Review :
In their bold effort to explain why government succeeds (and why it fails), Amihai Glazer and Lawrence Rothenberg again prompt us to examine the relationship between politics and policy, this time by setting the ‘political machinations’ of politicians and interest groups to the side in order to ask: How do economic conditions impact the success or failure of a public policy? …More specifically, they argue that an analysis of public policy based upon four economic constraints—credibility, rational expectations, crowding out or in, and multiple equilibria—will help reveal the kinds of problems that government is most likely able to solve, and why. Readers intrigued by the public policy between economics and politics will appreciate this effort to use economic theory to understand why specific policy approaches succeed or fail. Economist Glazer and political scientist Rothenberg base their analysis on four economic constraints (credibility, rational expectations, crowding in/crowding out, and multiple equilibria) that they consider particularly helpful in explaining public policy’s success and failure… A demanding study…that offers useful insights. A very important book, Why Government Succeeds and Why It Fails goes well beyond standard public choice theory in several regards. First and most importantly, it advances the debate over government failure. Rather than staking out a simplistic ‘pro-government’ or ‘anti-government’ position, it helps us determine when government policy is likely to succeed. Second, the book shows that credibility is a more important concept than had previously been realized. And third, it offers new and striking analysis and evidence on particular policies, such as recent attempts to make government more accountable. On top of all this, the book is highly readable and will command significant attention across a variety of disciplines. Most economists have a list in their heads of the conditions under which markets fail. Most political scientists have a set of theories about why politicians may fail to represent notions of the ‘public interest.’ The authors here ask a different type of question, which is often overlooked: under what economic conditions are government policies likely to work? Across many different areas of public policy, they illustrate how the success or failure of policies can be predicted. This is an excellent book. It will be a welcome addition to many different types of classes where public policies are debated and examined.