Abstract
This chapter provides an overall introduction to, and overview of, the whole book. It starts by framing the purpose of good public policy as improving the wellbeing of individuals and communities. Wellbeing is defined in terms of people’s abilities to live the kinds of lives they have reason to value. Public policy can pursue its purpose by focusing on improving the capabilities and opportunities (i.e., substantive freedoms) of individuals and communities to pursue the lives they wish to live. This in turn requires an increase in, accompanied by a broadening access to, “comprehensive wealth”. We ask, and answer, the question of why we need public policy at all in this context. Our answer is much wider than the one that is based on the standard “market failure” argument. Following an explanation of the several justifications for public policy, we specify the domains of public policy in terms of the dimensions of a collective “wellbeing frontier”. This is then followed by a discussion of appropriate policy instruments, including institutions, that can be used to extend this frontier. The common thread that runs through the chapter, as well as the whole book, demonstrated with the help of examples and numerical simulations, is the interaction between environmental, social, and economic influences on wellbeing. The chapter ends with an overview of the relevant empirical evidence.
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Notes
- 1.
Note that, “the government” is the generic term we use to refer to any collective agency through which we may wish to organise the delivery of certain products or services; it does not necessarily refer to the central government.
- 2.
“Most of the radical, revolutionary innovations that have fuelled the dynamics of capitalism – from railroads to the internet, to modern-day nanotechnology and pharmaceuticals – trace the most courageous, early and capital-intensive ‘entrepreneurial’ investments back to the State”.
- 3.
In an approach to policy design based on viability theory, explained in Chap. 6, the evolution of economies is influenced by viable policies.
- 4.
This is not to deny the existence of many individuals who, for various reasons, are simply incapable of making such deliberate decisions. Good public policy, through various means, such as institutions for the mentally disabled, can help them.
- 5.
Or, to use the language of Phelps (2013), to provide opportunities and capabilities for individuals to flourish and prosper, towards creating an inclusive society that will in turn underpin mass flourishing.
- 6.
Needless to say, limits will have to be imposed on those who want to live their lives in total disregard for the wellbeing of current and/or future generations. Such limits must be ethically based, and able to withstand intense and rigorous public scrutiny. We thank Jonathan Boston for raising this point.
- 7.
This is very much an extension and adaptation of the standard dynamic optimisation model to the problem at hand. In the second part of this book, especially in Chaps. 5 and 6, we explicitly and deliberately introduce radical uncertainty and complexity into our analysis, and explore their implications for the design and implementation of public policy.
- 8.
We make reference to “spheres of wellbeing” as a tribute to the great work by Walzer (1983). Walzer emphasises that some of the spheres of justice are incommensurable. We suspect what he really means is that they are not comparable or rankable, irrespective of how much reason we bring to bear on relevant comparative valuations (see Sen 2017, p. 456). Alternatively, we can argue that various spheres of wellbeing are complementary for the purposes of overall wellbeing. We thank Geoff Bertram for bringing Walzer’s work to our attention.
- 9.
Refer to footnote 15 for a discussion on when and why we may want to differentiate between weak and strong sustainability.
- 10.
For an earlier specification of the same type of model of an economy which produces (possibly) multiple consumption goods representable by an index, using multiple types of capital, over an infinite time horizon, see Weitzman (1976), Asheim and Weitzman (2001), and Weitzman (2009).
- 11.
To avoid “circular definitions”, so that to compute the capital shadow prices we have to first define what wellbeing is, but then we define wellbeing as a weighted sum of capitals, we need to be able to define and measure wellbeing independently. Adler and Fleurbaey (2016) provides a rich resource for various ways of measuring (subjective) wellbeing (see, in particular, Clark 2016). In addition, we have various objective wellbeing indices based on the critical influences on wellbeing similar to those used to construct the OECD’s Better Life Index.
- 12.
In New Zealand, where all three authors of this book live (or used to live), we refer to this as “the investment approach to public policy”.
- 13.
An equivalent classification, using different terminology, distinguishes between the mid-20th century “entitlement state” and the early-21st century “enablement and self-empowerment state” (see Cadogan 2013).
- 14.
In a recent speech, Haldane (2015) provides a wonderful summary of theories and facts about long term economic growth trends, pulling together threads from Economics, History, Sociology, and Psychology. We believe that this book, and more specifically the domains of public policy we focus on, highlight what public policy can do to transform the emerging tensions between “technological tailwinds” and “sociological headwinds” into a mutually reinforcing dynamic process that leads to higher sustained wellbeing.
- 15.
This is where it is appropriate to refer to the distinction between “strong sustainability” and “weak sustainability. A very useful discussion of this distinction, including relevant empirical evidence, is provided by Pelenc et al. (2015). Under “weak sustainability”, we allow for a degree of substitutability both within different categories of capital stocks (such as different elements of natural capital) and across them (such as between natural capital and human capital) in generating wellbeing. Under “strong sustainability”, at the very extreme, all main categories of capital stock are complements in generating human wellbeing (although a degree of substitutability within each category may be allowed). Although, in principle, this is an empirical matter, in fact, it is very difficult to resolve this matter empirically. So, a practical and cautious approach, which is advocated by Pelenc et al. (2015) as well, is to treat natural, social, and economic ecosystems as complements (i.e., “strong sustainability”), while allowing substitutability at the margin within different categories of capital (i.e., “weak sustainability”), in the generation of human wellbeing. Certainly the stylised model of Chap. 2 can accommodate this precautionary principle.
- 16.
The proper domain of public policy remains an area of intense debate. Buchanan and Hartley (2000) favour a narrower scope for public policy, focused on “efficiency”. For an argument favouring a possibly broader or different shaped scope for public policy, including interventions such as “nudging” etc. reflecting behavioural insights, see O’Donnell et al. (2014). As Spence (2014) puts it, “if countering inequality and promoting intergenerational opportunity introduces some marginal inefficiencies and blunts some incentives, it is more than worth the price. Public provision of critical basic services like education or health care may never be as efficient as private-sector alternatives; but where efficiency entails exclusion and inequality of opportunity, public provision is not a mistake” (see also Helm 2010). Also very relevant is the evolutionary approach to public policy (see Schmidt 2015), as well as the broader (strategic) scope of public policy advocated by Mazzucato (2015, 2016).
- 17.
Boston (2016) provides a thorough analysis of the role of public policy in bringing the voice of future generations to decisions made in the present. In that context, he also discusses in detail the design of governance institutions as “commitment devices” so that public policy is always aligned with evolving public preferences and interests.
- 18.
This is our interpretation of “time consistency” in the context of this book. There is no suggestion that the authors of Evans et al. (2013) would agree with this interpretation.
- 19.
As long as an optimal policy is obtained from dynamic programming, it is time consistent. Optimal control derived from Pontryagin’s maximum principle may be time-inconsistent. For a mathematical definition of time consistency see e.g., Haurie et al. (2012).
- 20.
This does not suggest that such access to basic income should be unconditional. Conditionality is critical to ensure that people are incentivised to contribute, to the best of their ability, to their own wellbeing. Thus, by way of example, temporary unemployment benefits need to be conditional on the recipient to be actively looking for employment.
- 21.
We picked the New Zealand chart as an example only because that is where we live; similar charts are available for all OECD countries.
- 22.
See Roos (2015) for an example of this literature.
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Karacaoglu, G., Krawczyk, J.B., King, A. (2019). Introduction and Overview. In: Intergenerational Wellbeing and Public Policy. Springer, Singapore. https://doi.org/10.1007/978-981-13-6104-3_1
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