 All right so we've been talking about policy implementation and we're gonna continue today by looking at these implementation inducements then I want to go on and pursue a couple of other issues today and in particular the problem of feedback this notion of street level bureaucrats and implementation and why it's important but I want to pick up what we left off on Tuesday by focusing on some general implementation strategies. We looked initially at the issue of central imposed rules as a strategy and talked about some of the challenges they face and I want to go down and look at market incentives, partnerships and education and information in a little detail and I want to focus on market incentives initially to kick this off this morning. Let me say this, there's been an increasing emphasis in the United States and also in many other developed countries in recent years on using so-called market incentives to implement public policies. There are so many examples of this has become so ubiquitous and widespread that it's almost become a kind of a political theology that well you know the best way to get things done is to use economic incentives, pay people for doing the right thing, give them reductions on their taxes, tax credits, whatever kind of inducements you come up with. One of the best examples recently is in the base over environmental policy and in particular over climate change. The major initiative of the Obama administration for example is the notion of cap and trade which essentially means that emitters of greenhouse gases in particular utilities and large industrial sectors would get a credit if they contain their carbon dioxide emissions within a prescribed cap and to make that cap economically worthwhile if they exceed their compliance which is to say if they reduce their emissions even further than the cap will regulate or prescribe then they can do what with those conditions that they say. They can basically sell them to somebody else that's having a difficult time achieving those reductions because they can't afford carbon capture technologies or fuel substitution or other means to obtain emission reductions. So it's an economically efficient means of achieving the goal of reducing greenhouse gas emissions. So far, the Congress of the United States has not approved a cap and trade policy under the Clean Air Act for carbon dioxide so the policy remains just theoretical policy. Is there precedent for cap and trade in environmental policy? Anybody know? Europe's been doing this for a couple of decades now in parts of Europe and even here in the United States the Clean Air Act of 1992 has a cap and trade allowance for sulfur dioxide and air pollution. In fact, it's been working utilities about the United States actually trade emission rights and the evidence is very very strong that it has reduced sulfur dioxide emissions because what it's done is large utilities that can afford to use clean coal technologies have brought down their level of sulfur dioxide emissions. They sold their tradable emissions allowances to poorer utilities and they're allowed to pollute more. So cap and trade being one example of market incentives. Some advantages and disadvantages. Clearly, market incentives are flexible. Basically they give you a lot of room for discretion. You can participate or you can't participate. It's up to you. It's an inducement to participate. You can actually earn greater revenues so on programs like the environmental protection programs it's a good strategy. However, strategies are sometimes unclear. When we talk about market incentives we assume that there's a clarity that everyone understands what it means to be efficient or everyone understands precisely what price point, for example, a charge or a fee or an allowance should be set. And that's not true by experience. What has to happen, what does happen is that it takes a long time before the market sorts itself out and we can learn in fact how much savings can actually be engendered and whether or not it will be worth your while. And in fact what often happens is that a lot of organizations that participate in these strategies participate through what's called low hanging fruit which is an expression the economists use that means you participate if it doesn't cost you very much and if it's easy to enter and let's say you're a large utility company and you were going to convert all of your old coal plants to natural gas anyway because the old coal plants are so old and can't meet emission standards you were going to shut them down and convert to natural gas which is not fairly economical and plentiful, right? So you were going to do that anyway as part of your business strategy so okay we'll participate, we'll participate in this program. Also how does one assess compliance? Is progress measured through, sorry I should have corrected that, but is progress measured by participation or is progress measured by actual achievement of some larger goal and oftentimes you'll hear in market incentives programs people say well this is a good program because lots of members of the affected universe participate so it's progress measured by the number of participants or is progress measured by some objective goal like the bringing down of emissions so that's something to participate and how do you assess compliance level of change how much gain is genuine and how much is a pecuniary effect and let me let me stress what I mean by pecuniary effect here. You recall some weeks ago we were talking about assessing public policies from an economic perspective a benefit-cost perspective economists often argue in policy analysis conversations that what we often define as a real benefit isn't like redevelopment agencies being an example isn't an actual gain to society it's just taking a gain that would have been one location moving it to another. Did you see how that might play out in something like emissions training policy? It should be pretty obvious basically someone say you're paying for the right to pollute you know Southern California Edison can afford to convert its old power plants to clean coal and natural gas and they even have some allowance for renewable energy because in California there's lots of economic incentives to adopt that so they'll trade emissions with some utility in Arizona or Utah and that utility is basically buying the right to pollute more so all we're doing is moving the pollution from California to Utah that's a pecuniary effect it's not a real gain so something to think about. Questions about that so market incentives market incentives are widely used in environmental policy it's probably the one area where we see market incentives more widely used than in any other policy area it's starting to be used in as we'll see it a little bit education to some extent field of public education with mixed results we'll talk about no child left behind. Mary? Can you say how you think that relates to like in Orange County we cite them like the gas in the landfill and we sell it through the third party back to the blessing company as fuel so it's like a county entity selling it the landfill back to itself but it's through yeah you have different agencies that are in charge of the generation of power versus those that are managing the solid waste. Right, but it still ultimately comes back to the county budget but it's just done through this. Right, but it's a good way it's because the county can't necessarily enforce environmental policies on other like transportation agencies which operate independently so this is a good way to do yeah but you're inducing other actors that you don't have a direct command or control over to do certain things that benefit the county as a whole. Yeah yeah a lot of local governments do this in the United States it's sort of like school systems school systems are parts of counties and cities but they're often governed by their own special districts and government doesn't have the county government may have control over buildings school buildings but they don't necessarily have control over other aspects of the budget so you try to induce through various ways the school system to do certain things or an orange county transportation orange county transportation authority is an independent agency that has its own does get money from the county but also has its own revenue source right and it's own director and as a result does it always do what the county wants it to do? No, in fact that's real sources of controversy. The county would like more bus lines, would like more transit oriented development in some areas of the county, OCTA says well we operate on a narrow budget margin, you don't give us any funds, we have to take it out of ridership so we have to set our priorities differently. So a couple things about voluntary partnership I mentioned last time this is an innovation that's also been done in a lot of different areas of public policy but it basically says that the government cannot be solely responsible for implementing programs cannot be solely responsible for implementing policies so they need to work with non-state actors they need to work with the civil society and again environmental example seemed to predominate in this area because these are where most of the innovations in implementation have taken place but there are many ways in which this works particularly in the United States the Environmental Protection Agency for example has decided to negotiate with all 50 states what are called the performance agreements in which basically they delegate to each state ways of complying with the Clean Water Act, Clean Air Act, the Autistic Substances Control Act, all of these variety of out of that soup of federal environmental laws out there and basically the states are given the discretion for carrying out implementing the laws. What do they get for it? Well what they get for it is a promise that if they comply in their own way they will get funding for non-environmental programs. If you agree to meet environmental requirements and do it in your own individual way we'll make sure that you're getting that highway funds included in your highway system. We'll make sure you get public works funds for improving your infrastructure. The idea is to transfer it into some non-environmental area to induce compliance and one way that the federal government can induce compliance is to transfer block grants of money for various programs. This is a fairly old concept fairly old meaning it goes back to the early 1970s. One of the interesting things about these performance partnership agreements is they began, I feel compelled to say this given the state of our federal budget, this began in an era when the national government was running surpluses and states were never running surpluses to speak of very much but the federal government was running surpluses and so the theory was you have all this extra money you can either reduce taxes or you can take these surpluses and use them in some constructive distributive fashion to achieve a social debt and so the idea was to transfer money to states to induce them to do certain things. Federal facility compliance agreements another form of partnership. Throughout the United States you have lands that are owned by federal agencies, military bases, weapons sites, national laboratories, all kinds of things that are run by the federal government many of which have been shut down and many of which like the great park which before it was a great park or before it was in becoming the great park was what was a marine airbase, El Toro and of course it's pristine and clean, your kids can play in the dirt. Seriously it's a pretty contaminated place in spots that's a lot of work that needs to be taken place and there's actually a federal facility compliance agreement between the state of California and the Department of Defense on cleaning up El Toro and in fact much of the federal monies that are going to the great park are not going to the park that's coming out of development funds that are being raised by the city of Irvine as you know working in partnership with private sector. The federal government is has an agreement with the state of California to clean up El Toro and to make it suitable for the things that Irvine and the state of California would like to do in Orange County. So these are highly flexible, they're negotiable for both sets of actors that the state federal government state governments and local governments all of these and at the agreement this is very important the agreement has the force of law even though it's not something that was made by Congress even though it's not a piece of legislation it's not a statute it's something that's simply negotiated by parties. Once it's negotiated it has the force of law and that's significant because it's one of the few examples that we see in the United States of a situation where a state can actually force the federal government to obey a law and usually the other way around federal government says we under the Constitution of the Congress pause with the Trump state well once you agree to this you agree it's a it's like a contract so but they do have criticisms and I wasn't thinking of the great part when I said this but I guess it is. Critics charge that such agreements tend to be negotiated in secret often away from public visibility. Kandor is an advantage in the agreement you know if you could be candid and secretive and do all kinds of negotiated things out of public view you can often come to a real agreement we know this to be true in international relations it's also true in domestic policy but it can be a problem in terms of later enforcement because people will often criticize things oh I didn't know we would be committed to doing that oh wow so in exchange for the federal government promising to clean up El Toro Orange County and the state of California commits to transforming this into a part and that wow okay gee wish I would have known that they should have covered that fact and then Orange County register well they couldn't because the agreement was negotiated in secret and the other aspect of this has to do with policy analysis I think this overlaps with much of ratings discussion and beyond that development policy analysts when they look at these agreements oftentimes they evaluate the process of agreement they'll say this was an effective process because the parties came together and agreed on ABC and they concentrate on the negotiations they concentrate on the substance of agreement what they don't pay as much attention to is the results the agreement bring about now I would argue that that's partly a function of time you don't know how to evaluate them until you see their results which may take years to occur but nevertheless this is a problem in the literature and when you look at policy analytic studies of these partnership agreements what you'll notice is that the agreements oftentimes emphasize the process by which stakeholders came together and agreed on something and that even say it was successful because they agreed to do the following things a far greater number of things that had would have been achieved if they didn't come together but that's not the same as as analyzing the outcomes this makes sense and then finally education and information I want to say a little bit about that lots of consumer programs not just environmental programs but health nutrition all kinds of labeling and alerting processes that are used to induce you and I directly as citizens to do certain things in our lives that will achieve certain policy objectives some people would say that if centrally imposed rules are the most intrusive way of inducing people to do things because you have said rules that are compelling institutions change the way they do business and so on down the line education and information is the least interest turn off the TV don't read the magazine don't look at the sign don't read the billboard it's up to you it's a totally voluntary and it's supposed to a page on individuals there's no real way to control it which is also one of its problems or challenges it's highly flexible as we know information can be tailored to a variety of audiences and a variety of context and governments spend a lot of time trying to use people to change their behavior many examples of this you know particularly in terms of consumer product safety so that's a good thing but clarity and transparency is a problem you have to be very careful in crafting a message for the affected audience and you have to ensure that you prescribe a solution it's not enough and there's been a lot of research on this it's not enough to simply warn people about something don't do this you have to tell them why they shouldn't do it what would happen if they did you one of the most direct examples of this and there's been a lot of political debate in the public health community about this there's warnings on cigarettes or tobacco products years ago those warnings used to say in a warning cigarettes maybe has it is to your health major maybe not it's kind of indifferent indecisive now what do they say anybody know there's no person here what they say on the packs of cigarettes they have no carcinogens that would dissuade me yeah it's pretty direct it's not only telling you not to do something but it's telling you the consequences if you do it so can choose to ignore warnings or not because education and information can be ignored or misunderstood it's difficult to assess effectiveness we do know a number of studies that have been done on this suggests that when the information is relevant to people's interests the information tends to be effective now what makes something relevant well that depends on the audience but for example we know this in california with things like water and electricity utilities if you can convince people that if they do certain things they will save money they will pay less on their bill if they shut off their lights you know the debate that the new fluorescent bulbs how many of you found can i read it with those strengthway of asking questions okay uh but we have to buy these new fluorescent bulbs because incandescent bulbs have been banned and one of the things that um federal credit commission and others have tried to do is to figure out a way of abusing people to use them to buy them a lot of consumers are still resisting and one of the most effective tools is the fact that they use about 75 percent less electricity for the same illumination and they last longer which means that in the long run you save money both on your electricity bill and on the bulb itself isn't there a major issue with the disposal of them i mean i think they have certain chemicals that should be landed on yeah not so directly you're supposed to be taking them to a special location yeah with your batteries but it's a great question it's a great question and the message is extremely mixed there is less mercury in the average fluorescent bulb that's used in regular electrical appliances uh than there is in the kind of household thermometers that you use when you have the fever and when you break those it's a kind of dangerous thing there's less mercury in them but the question is how much is a lot with mercury because it's a very pernicious substance that it gets in the environment that's inhaled particularly children and elderly it's very very dangerous it's very toxic worse and some of you have seen this on the packages that come with the bulbs and they give you this elaborate set of instructions what to do with breaks open the windows put a mask on sweep the contents into a sealable plastic container you know and then dispose of it separately from everything else it doesn't sound very uh concerted i mean it sort of sounds like wow i just went out and bought toxic waste in my house what a cool thing uh but it's a great question because i think it really gets to the heart of this matter what's relevant is the saving money relevant or is the health and safety of my household more relevant that's one of the bases going on within the consumer community on this and it started to resonate in Congress Congress is considering reconsidering whether or not there should be this national mandate on replacing incandescent bulbs because of this concern so if the issue of relevancy is cost savings then people will do it the other thing i will say in conclusion about all this is that you'll notice that these inducements like other policy elements we've talked about over the past few weeks are not conducted in isolation normally what you have is a set of implementation strategies that use some combination of these devices so there's regulation but there's also some market incentive at some level plus there's education plus there may be a partition well an interesting example of education and information um strategy is Mexico uses soap operas to promote family planning yeah and one of the reasons they do that is the government doesn't want to come out as being like an active policy that is pro family planning yes the church has that that's that's a great example because yeah it is effective and and it shows the combination which is culturally shaped of using a kind of a partnership and a form of education form of partnership that makes sense because as you go out of the government promoted the record family planning in Mexico there'd be tremendous political opposition from those political parties like the pond which is very very strong strongly aligned with the Catholic Church and there'd be tremendous political opposition political risk but if you can do it through a very popular medium that many people in Mexico enjoy namely soap operas then you can get the message through without seeming to come from government and of course Mexico does have unlike the United States the government and the media work in a very close partnership some people would say that's you know bad because it's sort of in terms of what we consider freedom of expression or freedom of speech is not something that's as embedded a part of the tradition as it is in a liberal libertarian society of the United States but it works it works other questions availability so we can spend all the time we want to talking about the challenges of various strategies to induce implementation but when you talk about inducements whether it be rules and regulations or the marketing incentives or economic incentives or educational programs or partnerships you still have to talk about resources there has to be money and people and talent available to implement public policies and i want to spend some time on this because resources not only are becoming but i would say in virtually every country in the world have become perhaps the paramount issue in shaping implementation strategies and helping governments decide how and why they're going to try to implement policies in certain ways and let me suggest that we can actually unpack this problem as having sort of three distinct but interrelated aspects the first is the collecting of revenues they might say well what's the issue there you know governments always tax it's easy and then it's just a question as we saw last week and we talked about redistributive policies and before that distributive policies where you set your priorities how you want to allocate those revenues well not so fast it's it's a difficult challenge it's a difficult challenge for developing nations because they simply don't have the capacity to raise large amounts of revenues which by the way great example that you pointed out with mexico really fits this perfectly i think you know the state does not have a huge capacity to regulate family plan even if they had it in their mind to do so they don't have the capacity to do so in terms of the of a public health sector that penetrates to the lowest level of society you're using other vehicles that do have those resources like the media right which is a good strategy it fits fits the the cultural constraint but let me suggest this is also a constraint in more developed societies where a policy strategy and this is an increasing trend not just at the national level but within states of what we call self funding we see this in california oftentimes when a new public policy is introduced particularly in recent years the expansion of the community college system the expansion of our water resources system the legislature will say well that's fine but we're not going to impose the responsibility for those policies on all californians who pay taxes not every californian attends community college not every californian benefits from expanding the state water project i know probably turning around and saying well but we all consume water and we all eat food which was grown by the water provided but the way legislators think about these things tends to be geared very much to this distributive model of policy we've been talking about so what they'll do is they'll require self funding and we're going to look at an example of this in a few minutes and how this game can be played in a variety of directions self funding which is done in many developed policies simply says that a public policy has to in effect have its own trust fund that is prescribed and allocated for that policy now sometimes the reasons for doing this are really very good economics social security and we talked about pension systems a couple weeks ago social security is a very good example of this when the social security system was established in 1935 the united states and later european governments that adopted comparable systems adopted a strategy in which they said the only way this can really work is if the money that pays for people's retirements is put into a separate off-budget category it can't be intermingled with expenditures for environmental protection building roads or post offices or whatever national defense it has to be kept in a separate fund want to build public trust if you're asking people to set aside a portion of their income that they may never see they may not live to see it of course their children might benefit from it their spouses might benefit from it but they may never see the benefits to build trust and confidence you've got to ensure that those revenues are put in a kind of a lockbox that is devoted specifically to that program that's how social security was designed it built public confidence it became an enormously popular third rail of politics as we say in the united states precisely for that reason now lock boxes and still run out of money that's another reason another day but the point is is that it makes the program separately and independent from other variability in tax revenues or in policy decisions or policy priorities made by other government agencies in the united states social security isn't the only policy we do this for in the 1950s beginning in the 1950s we did this with a number of public works programs and probably the best example is called the highway trust fund which was established back in 1956 at the same time the federal government created a national system of interstate and defense highways and why did they create a separate trust fund first of all let me ask how is this trust fund funded taxes on the gasoline which constitute a secreted portion of what you pay at the pump you can read the fine print on the pump and say how many pennies are going to for you that's right petrol taxes why did they establish this why not just take tax revenues and just say what we're going to build more highways this is people who are using highways paying for them yeah the idea is highways really should be paid for by those who are the beneficiaries of it which means those who drive motor vehicles both trucks as well as automobiles and came with a massive increase of the taxes as far as i know it did so that was kind of a way to depend that increase precisely if we're going to charge you for using the highways essentially it's a user fee if you stop and think about you don't pay at all we don't californians hate to pay tolls but we do pay at all the time you go to the gas station and fill up your car you're paying a user fee use the road system highways the idea was really too full one there would be a dedicated fund that would be paid for equitably by those who benefit from the public works which means that it would not be a burden to the rest of society the government knew the private sector knew that roads particularly super highways would not only need to be built but would need constant maintenance over time in a sense similar principle to social security what you're saying is this is not a one-time deal you've got to build the thing and then you've got to maintain the thing and if you're going to maintain it into the distant future indefinitely you've got to be able to have some assurance that to build public confidence this thing will actually work so that was the first reason second reason very interestingly is that it created a guaranteed source of revenue to support the ever expansion of the system according to needs the theory is as the population grows as society becomes more urbanized there will be more people who will drive they will drive further in the 1950s these were all thought of as good things oh and you'll have a bigger car which is even better and it'll get 6.5 miles okay all right so you'll have bigger cars you'll drive faster further that's good for the economy and we'll have a guaranteed way of improving the system as the revenue stream expands hiring training and equipping of personnel is another issue it's very important to regulate and to bestow benefits many programs as raiding i think elegantly points out are complex precisely because unlike the past where the job of the government was simply to pass money for or to simply enforce some regulation increasingly government programs are very complex and that they require people who are expert in monitoring results people who are highly trained to be able to measure effectiveness and monitor effectiveness of programs to evaluate them on an ongoing basis that means as raiding points out that people who work in the public sector have had to become better trained and educated in precisely the way that the audiences being affected by the policies are sadly on issue to manage health care you have to know the intricacies of health care to manage housing or transportation programs you have to be expert on the substance of those issues that means that government has had to pay more to hire and train and equip people who are a droid at doing these things that's another resource issue and it's a relatively recent horizon resource issue in a lot of countries around the world it's a big public policy challenge final observation on that this phenomenon has tended to blur the distinction this is one of the things i think that raiding points out implicitly it's blur the distinction between the public officials and the policy analysts that in fact over time many middle level bureaucrats within federal and state agencies have in effect become analysts and not only carry out a policy that they're compelled to evaluate we see this in california and the state treasurer's office for example they not only report on how much income the state is earning and how much is going out but now the policy the state treasurer's office is sort of expected to assess various public policies and whether or not the money is being spent in a wise way notice that in effect it's the imposition of a policy analytic set of skills on the very people who are not necessarily supposed to be doing that but it's a combination of resource scarcity and yet the media have that expertise next week we're going to talk about evaluation but i do want to give you a heads up because it's related to this issue of implementation and falling away another resource issue there are no policies and certainly no recent policies anywhere in the world that do not require almost intrinsically in their strategies for the gathering of information to monitor effectiveness and to carry out the policy almost all public policies today have within them the requirement that the beneficiaries of the policy or the people that implement the policy have to evaluate the policy you know where you see this really clearly uh in california is with our public university system both the cal state system and the uc systems uh the office of the president to the uc system in uh oakland one of the functions they perform is they have to report to the state on a annual basis what the university is doing the state revenues and moreover how is contributing to very specific sets of parameters that the regions have outlawed not just how many students are being graduated but how many patents are being registered to the university of california because that's a source of revenue to both the university and to the state the economic spinoffs from university activities inventions economic productivity improvements in the quality of life and the fact the university puts on a yearbook every year it's very nice a lot of pretty pictures in there but it's not just for that consumption it's a way of reporting your effectiveness as an institution some people would say it's a good example of the feedback loop in public policy what you're doing is you're reporting back on the demand side what you've achieved with the resources you have and why the system should continue to support you so in recent years as you could imagine as resources have become scarcer greater thought has been given to how to present those outcomes it's an effect of self analysis the self-assessment of what the university does and every great public university does this has to be done in order to to do this there are some issues here and we'll come back to these issues in more detail next week but i do want to highlight them now because they underscore the resource demands which is what we're talking about is long-term trend data available if it's not then you're going to have to go out and get that data you're going to have to mine it you're going to have to hire people to find it if you're dealing with public health problems you're going to have to come up with a way of reconstructing epidemiologically things that have happened in the past so that you can actually make a bona fide taste that we've made progress in spending money our presumed relationships compatible and can causality be well established i know these are questions that we get asked all the time in methods classes but here's the payoff in public policy governance and government agencies get asked the same question if you're claiming that the spending of money or the creation of a set of rules or the establishment of a set of partnerships are changing x improving health increasing nutrition making sure that more families are being fed remember our discussion of food stamps on tuesday people are going to ask you to establish causality can you in fact relate to variables in some way and if you can't if there's some intermediate intervening set of variables can you establish what those are and this costs money and are the data and conclusions trustworthy and high-end confidence questions questions i have a question because it seems like some of the problems one problems with like the negative view of the stimulus bill is because causality hasn't been permanently established that's a great yeah it's great how would you establish causality in a situation like that because you can't really have control no that's right and part of the problem is there's a fundamental disagreement over methodology one of the debates that's come up with the stimulus bill of 2009 that i think exemplifies this very well is the fact that the no government agency not the labor department not the commerce department not the treasury department of the consul on economic advisors none of them by their own admission have been able to establish categorically how many jobs have been created as a result of the stimulus bill there have been guesses a number of advocacy organizations have of course made their own guesses based on what they are advocating for you to believe and they've used all kinds of models to try to ascertain it there's no consensus on a viable model what is interesting however is that the official view of the federal agencies that are in charge of monitoring these numbers is they've tried to come up with a consensus in the other direction and they apparently have some methodologies that seem to not only have consensus within the government but externally are externally being validated by economists and academic institutions and elsewhere who don't really have a dog in the fight and the the statistic i'm talking about is not how many jobs were created but how many jobs were probably not additionally lost you've been following this argument yeah it's it's kind of a reverse logic on the unemployment rate well given the number of jobs that were being lost on a month by month basis as recorded by the labor department and given the sectors in which those jobs were being lost in it since the stimulus bill and its expenditures on public works on infrastructure on what am i leaving now public service work you know police teachers and so forth you can see a direct relationship between the decline in job loss or the stabilization of employment and stimulus expenditures that seems to be a a statistic that does resonate within the government and external communities as well now how fine a point do you want to put on these things you know if you're trying you know from a political standpoint if you go before voters and you say well we spent x billions of dollars and unemployment is the rate of unemployment is declining compared to what it would have been if we didn't do this that's not an easy set that's not the kind of thing that's going to hit you a five minute sound bite on the evening news and make you look like a hero well fewer jobs have been lost than they have been lost but it's true for it seems to be true and that is a important thing so one can say from a policy analytic framework if the goal was to somehow change to somehow create a delta a change in what would have been a trajectory of events without the policy intervention then you can say there definitely has been change whether it's the change that many people would agree late people would agree is the change you'd like to see which is an upward trend of jobs no does that help so there is this methodology today it's a very very important issue that's a good question and it depends on the policy area and what congress decides uh increasingly the trend has been that the agencies do their own initial evaluation and they in effect kind of choose their own methodology however uh increasingly with an understanding that the same data that they used must be made available to independent auditors and the principal independent auditor is the government accountability office the GAO and it's very interesting if you ever read GAO reports they don't go out and gather new data what they do is they go into an agency and they just take the numbers that you generate the defense department says we spent so many billion on this new weapons system and by gosh it's good weapons system so the GAO comes in they take your data then they go out to the factory where the new airplane was built and they go out and they talk to the people that fly it and they go out and they and they say well hmm you know we're getting kind of a different set of outcomes here you're taking these numbers and you're not using them in the right ways or you're making assumptions about certain things that don't seem to be holding up about the liability or safety or security but they don't do independent research they basically take the same data but independently evaluated so that's kind of the way it works the first step is internal evaluation the next step is an external audit and if needed a third staff might be having a special commission to investigate or validate what's going on it's not feasible to generate data how other people come in with evaluations yeah different data different related data you said totally different about that that's right that's right and so that's one of the reasons you have to be very careful in making a comparison that's viable in value so let's talk about trust funds wanted to focus in on this this is about as recent as it gets the federal fiscal year 2012 budget what will that take shape well it was supposed to take shape last fall okay but of course we missed that we always miss budgets in the federal that's kind of perennial but the obama administration is proposing something very significant somebody might be aware of this i think it really dovetails with our discussion about the sources and implementation they're proposing to alter the funding mechanisms for not just highways but other forms of transit and you can read it for yourself but it's very significant the administration through the department of transportation through secretary rave of the secretary of transportation wants to replace the fund by renaming it the transportation trust fund what do you think why should all of that money go to cars go to highways what about high speed rail what about low speed rail what about any kind of rail yes and that's the problem it's too small in the obama administration's opinion because it's too prescribed to be a small percentage so it's a very good point the point here you would have separate accounts for highways transit high speed rail what's called a national infrastructure bank i love it very interesting phrase a national infrastructure bank in the near term highways would see only a small a slightly smaller share of the trust fund that also go to inner city transit rail but longer term it would move away from a dedicated highway trust fund signaling the administration's desire to leave the country away from the automobile that is a quote from secretary rave essentially we now are a critical history where we have to think very seriously about real alternatives to private automobile these disparate pots would over time be streamlined by putting them into a larger pool that would make the department of transportation more nimble in funding good projects now there's more detail here that permit on the slide but good detail some of these things have already been appearing in other parts of transportation policy over time what would be a good project how about an integrated transportation instead of coming to the federal government with a plan to build a new highway or to build a new spur instead cities and states that want money from the trust fund have to come up with an integrated plan to chose how there's going to interlink roads with rail with inner city transit maybe even with greenways and bikeways now in fact the number of federal transportation laws ice ski early part of the decade in fact is aiming at that direction but the change here which is a very subtle but important change is by changing the nature of the trust fund and allowing monies to be shifted around that you may pay out of gasoline taxes into the fund to allow the government to more nimbly shift from account to account depending on the needs as they're defined within these integrated plans is a major change in resource implementation what do you what do you think the odds of this change being made are a terrible question to be had do you think chances would be good i think there will be opposition to this the road building industry would maybe not be so broad about this still pretty hypothetically um and they kind of i mean saying okay we want to shift that on long term means and but but they kind of don't fix it in any law or anything or any regulation means that you could easily just don't do it in other industry no that that's exactly right this is part of the budget but it has to be approved by congress which means congress of course authorizes the budget so the change in the trust fund has to be authorized by congress the obama administration is using the argument we're not asking for more revenue it's already established as a trust fund revenue is already coming in through a guaranteed source we're not asking for more revenue we're not even going to ask for an increase in the existing taxes we're just asking to be able to manage the trust differently to reflect on that you're right you can see states and regions arguing that it's going to mean the money is going to be allocated more disproportionately because transit and high speed rail benefit very specific areas and are less distributed in the country right that's exactly right and it's going to be kind of an electoral college effect in in in essence by which i mean larger more populated states particularly that are also by definition practically more urbanized would be more favored under this trust fund rating one of the things that the federal highway trust fund and one of the reasons it's been so popular as it's configured is utah in effect gets as much benefit as california have fewer people but they have interstate highways you got to go through utah to get you know the california go that latitude of the country if you change it to this you are in effect redefining what constitutes needs which means it's going to favor it's a very good way of thinking about it again we keep coming back to these issues of the sub-government and how these calculations play out among interests what interests will be winners what interests might see themselves as being losers i feel like even though every state has highways i mean in south dakota and north dakota they certainly have highways there's still you know a different amounts of highways i mean there's less highways in south dakota and utah than there are in california so there are any sort of um an apportioning of highways based on population the same thing would happen with any kind of high-speed railing right so what grounds would they really have to complain at their needs or satisfy is what they're and if you know utah is okay with having less highways based on the smaller population then she wouldn't be also okay with less well in north dakota i pay so much in federal gasoline taxes i don't think that money should go to california to build a high-speed rail system that i'm not going to use i think that money should come back to north dakota i mean that's kind of how the argument plays out but your point is the very old table and you see that the equity debate here and this is exactly how congress is going to argue florida california other northeastern corridor states will probably say this is a good thing to do but in the senate where every state has the same number of votes it's not going to quite probably pay a play on it so yeah i'm just afraid like i mean yes like california for example is a place that definitely needs something like this but i feel like people aren't going to use it because we're so accustomed to having our car yes and it's so convenient like i mean i went to school in tenor mario in 2015 the train took like six seven hours or as i could drive yes in jerry with less money than what the amtrak ticket cost so i think like there's just no cost benefit for people that's why they just use their car as much as gas and it's expensive now there's i mean to take the train that's going to buy my back is like seventy dollars i can fill up my tank for less than that i mean having my car with the whole trip that's a very good point and it raises a deeper question which i want to resonate back to all of you so this being the case how do proponents of these trust funds argue this anyway i mean why should uh you know well let me rephrase that once upon a time we didn't have freeways we didn't have interstate highways the federal government donated gave money to states to build a u.s highway system but those roads were really built mostly by the states federal government selected the routes but the states built the roads the states maintained the federal government would give a little money upkeep about 10 of the costs the interstate highway system flips at around 90 of the cost is absorbed by the federal trust fund 10 comes from the states okay states usually pay for the signage okay federal government pays for the concrete building these things uh there is an argument that has been made beginning of the 1950s that said effectively had it not been for federal intervention into a highway system maybe the automobile would not have become the favored way of intercity travel that in effect what the federal government did perhaps inadvertently was by creating an efficient at least in the fifties it was efficient an efficient system of interstate highways across the world across the country never stopped i remember my dad said this is great you can drive from new york to california without a stop sign stop one what a great thing okay all right well dad let me tell you oh thanks uh a little bit but yeah so what you've done is that you've made automobile traffic travel cheaper you've made it more economical you've made it you've increased the demand you've made it more viable prior to that people used to take trains right they take planes it trains it trains the united states in effect what i'm getting at is that subsidies of various sorts favor certain economic sectors which over time made bias against other sectors and this is how this argument i think resonates uh what proponents of this change are saying is we've been favoring the automobile for a long time we have in fact subsidized the automobile industry by building a cheap transport system even quickly erode taxes let's face it's not the money you know it was the last time you complained my gosh you pay that darn gasoline tax today and that just really irritates can't pay my rent no it just disappears you don't think about it right but you're getting this benefit that being the case the argument is used maybe it's time we subsidized another form of transportation for a while until it can get out of speed you've probably heard this argument made about rail but i just kind of throw that out there because i think there's a there's an important argument that can be made that all of these policies end up favoring or subsidizing or promoting certain sectors and the high speed rail industry will say sure we need a subsidy we're going to need something to jumpstart this but once it's jump started we can be self-sufficient just like the automobile industry other question it's a good point very good point this is the kind of uh logistical argument that is going to be taking place for some time to come for the more you like uh separate your own personal cost of the natural economy costs which are uh the way higher if you take your car since you have all the external factors this the perfect terms and accidents of health care that um like off accidents and all this and in fact if you have to pay all these yourself and developing something like that that never pays it um you might reconsider taking the car yeah you raised a very important point which i think resonates with uh particularly stones argument about symbols in public policy um externalities we pay gasoline tax and so we think we're purchasing the privilege of being able to use our automobile on these federally trust fund paid for roads but are we in fact paying for the pollution and its mitigation are we paying for the health effects that may be caused by the automobile as we pass through cities and schools located and built you know professor house has been doing tremendous amount of research on this makes a pretty compelling argument about environmental justice you know an interstate highway that passes through an elementary school that not a good thing okay so you know are those externalities captured and the answer is usually no we're paying for one specific slice of the policy pie we're not really paying for all of it so if you're really going to make comparisons in terms of nimble the dot might say well integrated transportation policy would be one that embraces efficiency but also embraces equity and further embraces environmental externalities and if you can nimble the move funds back and forth between different transportation modes you might achieve a more rational set of policy outcomes than you do if you simply funnel money in and funnel it out to one thing that makes sense that's kind of the argument that's been made by a lot of these proponents symbolically however the automobile is freedom and i don't want any restriction on my freedom let's end up this morning i want to talk about feedback and policy readjustment the phrase principal agent theory was used in another context a few weeks ago when we talked about information and it also applies very very strongly and directly and hopefully maybe we'll get to this case study this morning if not we'll pick it up on Tuesday but basically principal agent theory applies in that top level and what we called on Tuesday street level remember the distinction top level bureaucrats street level bureaucrats or officials and the public define public policy problems different in fact everything we've been talking about this morning i think example applies depending on where you stand in the policy process you might just find a problem from a different perspective it's partly a function of the different kinds of knowledge that people hold within society there is such a thing as local knowledge versus expert knowledge we see this problem in urban planning for example with anti-poverty programs and community development programs one of the criticisms of policies that are implemented from above and dictate from the top down what should be done is that they don't really take into account the needs of people who may be more aware of problems from the vantage point of a local neighborhood maybe they understand nutrition issues or environmental justice issues more acutely than somebody sitting at the top of the bureaucracy now here's where principal agent theory is a very important tool for understanding this according to p-a-t principal agent theory feedback is affected i get this very interesting social science concept by what subordinates think their bosses want to hear how many of us have ever worked in bureaucracies yes thank you okay what do they want me to tell it is this policy effective let me think about that for a while and the degree to which principles rely on subordinates for information about what's really occurring on the ground do principles really want to know do they ask do they inquire or would they rather not know because uh how did mr gore put it um a uh an inconvenient truth you know we've all known about inconvenient truths many examples of this i mentioned a couple of these last time and i want to focus in more detail about one of these law enforcement the three strikes policy in california the cop on the beat prosecuting attorneys penal officials have a more negative view of the implications of three strikes then does the state legislature and previous governors of california who have supported this because from their vantage point and say publicly popular issue people want to say yeah three strikes you're up sounds great it's a compelling rhetoric there's a lot of symbolic value the stone points out but it may not be effective if you're the person that has to charge someone with a crime or prosecute them through the system or pay for them to be incarcerated in education no child left behind which is a case we are going to look at specifically is how this plays out in this principal agent theory context classroom teachers and principals administrators have a somewhat different view of no child left behind then do the architects of the law and in fact it's not always clear it's not that there's consensus in fact as we're going to see there's a lot of dissensus both between subordinates and principals some subordinates think it's very good some subordinates think it's not so good some principals think it's very good some principals don't think it's very good it's a very complex interplay of principal agent theory as we'll see and a disaster preparedness emergency responders and healthcare workers often view disasters and the needs of disaster response very differently than principals remember Katrina one of the most visible and telling problems of hurricane Katrina was from the perspective of FEMA federal emergency management agency you might recall we're there we're on the ground we're aware of the problems we're right there we're responding we're attentive they should have asked people in the warlands they didn't the emergency responders and healthcare workers on the ground were saying there was a complete disconnect a complete and total breakdown the principals did not want to know and they didn't keep lines of communication open about how bad things were what resources were needed how quickly how urgently in this case the subordinates spoke up but they were often ignored and the principals often didn't ask because they did not want to think about the unthinker certainly every time a major disaster strikes we know what to do we're assuming here so let me leave you with this thought and next Tuesday we'll pick up with this case study which is also a good case study of evaluation in some ways we suggest that what principal agent theory teaches is that effective feedback and you do need effective feedback the policy is going to be implemented well effective feedback occurs when the street level bureaucrats and the upper level officials can freely communicate now that's easy to say but what do we mean by free communication well let me suggest a little deeper analysis here free communication means that the street level bureaucrats very significant can share information with the principals honestly and without fear of penalty or retribution what do you mean it's not working how dare you accuse us this is a real problem in public bureaucracies it's easy to ask why do organizations that implement policies fail but when we think of it in these terms it becomes a little easier to understand oftentimes people at lower levels are afraid to give information because they do not believe it will be embraced and that they will be seen as some way as either being insubordinate ineffective negligent or trying to reflect badly on their supervisors questions and comments how many of you have seen these sorts of experiences it's very common and it's a classic maybe the most classic implementation problem related to feedback all right i'll see you next Tuesday