Public Policy 55D Final Study Guide

Professor Judith Kelley

Duke University – Spring 2007

Vanessa Villamia Sochat

CONTENTS

Vocabulary ...................................................................................................................................................... 1

Starred Readings ............................................................................................................................................. 8

The Copenhagen Consensus ...................................................................................................................... 8

Health Care Reform .................................................................................................................................... 8

Alamodome .............................................................................................................................................. 10

David Stockman ........................................................................................................................................ 12

Movie ....................................................................................................................................................... 13

NAFTA ....................................................................................................................................................... 16

VOCABULARY

Willingness to Pay: represents value that someone places on something. It is not

always the best measure of value because the WTP is different
than the…

Ability to Pay: a person’s willingness to pay is constrained by income. Can they

ACTUALLY pay how much they value it?

Analysis DEPP: Description, Explanation, Prediction, Prescription

Bayes Theorum:

BATNA: Best Alternative to Negotiated Agreement. The fall back option, if

negotiation fails.

Decision Trees Using probabilities and the values that we place on outcomes (either monetary or
utilities) to figure out what decision will give us the highest payoff.

Chance Node - means there are probabilities

 Decision Node - no probabilities, must make decision!
Outcome

Chicken My favorite white meat. No, a mixed motive game of this form…

Swerve Straight
Swerve
(3,3) (2,4)

Straight (4,2) (1,1)

The best way to win is a commitment strategy. For example if we throw our steering
wheel out the window, then we are committed to going straight, and it is in the other
person’s best interest to swerve. So winning also depends on how rational the other
person thinks that you are. If we are very rational, the other person can predict that we
will swerve, and if we are very irrational, the other person can predict that we will go
straight, and act accordingly.

Maximum Strategy Outcome: (3,3)

Stable Equilibria (2,4) and (4,2)

Collective Action Individuals acting in their rational self interest might lead to irrational social outcomes.
For example, even though paying a tax might have net positive benefits to society, the
small immediate benefit to the individual might be much smaller than the costs, so the
individual doesn’t want to absorb these costs. When ALL individuals act in this self
interested manner, no one does anything & we have collective action failure. Example:
Prisoner’s Dilemma

Commitment Strategy Committing to a decision in a game so that your opponent makes the move that you
want them to… for example “Throwing your steering wheel out the window” in Chicken
sends the message to your opponent that you are irrational and will go straight, making
it in his/her best interest to swerve, and wha-la you arrive at your highest payoff!

Conditional The probability that something happens, given that something else
Probability has already happened P(A|B) means “the probability of A given B”
These probabilities go under the branches on the decision tree

Cost Benefit Find the net value of any policy/proposal by subtracting the costs
Analysis from the benefits. It basically comes up with a monetary value that represents how
much a project is worth. A positive value means there is an overall benefit to society,
and it’s allll good.

Disaggregated A cost benefit analysis that considers who is bearing the brunt of
Cost Benefit the costs and who is enjoying the benefits. Cost benefit analysis
Analysis just looking at the net value is like looking at the SIZE of the pie,
 Disaggregated cost benefit analysis is looking at the BREAKUP of the pie. We have to
look out for inequality.

Discount Rate Taking into account the fact that I like money a LOT more today than tomorrow. The
same amount of money is more valuable to me today than it is tomorrow. We use the
discount rate to calculate NPV, or net present value.
• An increase in the discount rate makes the project less attractive (makes future
more costly)
• A decrease in the discount rate makes the project more attractive
• A discount rate of 0 means that the value of $ doesn’t change

Dominant Strategy A strategy that does equal to or better than EVERY other strategy, If we consider the
choice of one player given the options of the second player, if it is always in the first
player’s best (or of equal) interest to do the same thing, then we have a dominant
strategy.

Dominated Strategy A strategy that does worse than or equally worse than the other strategies. (the
opposite of a dominant strategy)

Efficiency: Efficiency usually means that supply = demand and is an argument for market
economies with competition, no barriers to entry, and little government intervention –
the invisible hand always takes care of everything!

EMV Expected monetary value, usually placed on a node of a decision tree, and represented
the overall expected value of that decision. We tend to choose the nodes with the
highest EMV’s

Equilibrium An outcome in a game (one of the boxes in normal form) is in equilibrium if each player,
given the other player’s choice, doesn’t regret their decision.

Equity Refers to the distribution of the pie. Equity arguments favor government intervention
to redistribute and make things more fair.

Negative Can be on the production or consumption side. Basically, Social

Externality costs are greater than private costs, so there should be less. We fix externalities by
tweaking incentives, usually with a tax to discourage consumption
Smoking, small children on airplanes, etc

Positive Can also be on the production or consumption side. Social

Externality Benefits are a lot greater than Private Benefits, so there should be more!
Education, parks, etc

False Negative P(tests negatively for condition| has condition)

False Positive P(tests positively for condition| doesn’t have it)

Framing In negotiation: framing high or low means bidding high or low at the onset of a
negotiation, which sets the stage for the interaction

In symbolic politics: framing is setting the stage of a narrative, or showing it in a certain

way to include only parts of the story that motivate people to support certain view.
Framing can also refer to depicting a player in a specific way to show them as a victim,
villain, or hero

Free Rider Associated with collective action failure. Free riding is counting
Problem on others to pay and then reaping the benefits. If we pay, then our benefit might be
small… if we free-ride, we get the benefit without having to pay a thing!

Future First Basically, work right to left when solving a decision tree. Prune
Principle branches based on which choices yield higher payoffs for the player whose decision it is.

Market Failure Market failure is when the invisible hand messes up, that is individual decisions fail to
lead to an efficient outcome. In these cases, government intervention is needed… I
guess…
Positive externalities (should produce more)
Negative externalities (should produce less)
Public Goods (collective action failure/free riding)

Maxi-min Strategy AVOIDS worst possible outcome, so we are trying to minimize the damage (so in a game
of chicken, we would swerve to avoid the outcome of both of us going straight and
dying)

Median Voter A way of modeling voter preferences along a 2D space, with

Model extremes on the ends. The model assumes that voters will vote for the option closest to
their preferences. In terms of outcomes of issues, median voter theory says that we
th
should expect centralist outcomes, at the median voters preference in the 50
percentile. In terms of elections, median voter theory says that politicians tend to all
look the same because they are trying to grab the majority of votes in the middle, away
from the other candidate.

Net Present Value The current value that we place on a project, with discounting in mind. NPV =
PV(benefits) – PV(costs)

Paradigm A paradigm is a basic set of assumptions about the way political processes work

Pareto Efficient An outcome is considered pareto efficient if we can’t make anyone better off without
making anyone worse off. The border of a ZOPA is made up of pareto efficient points.
So a

Pareto Improvement …makes someone better off without hurting anyone else.
Policy Analysis A method to analyze policy that is both scientific and artful, that takes psychology,
economics, statistics, law, ethics, sociology, etc. into account. We usually do policy
analysis to make policy recommendations.

Players (actors) Refers to people or groups that hold informal or formal positions in the policy making
process and who need to be considered as part of any analysis.

Political Analysis Political analysis considers the actors, their interests, their sources of power, and the
institutions and rules that are part of the policy process. Political analysis informs
strategies and may constrain policy options.

Politics of Interest A paradigm where the basic units of analysis are individuals or groups with interests.
We assume that everyone is maximizing their interests (rational choice) but that power
is shared and therefore policies emerge out of political bargaining. Phenomena not well
explained by the politics of interest are:
Attention
Beliefs
Values

Pressure Group This theory considers the power of interest groups to buy influence with politicians. The
most organized groups with diffuse interests have the easiest time exchanging money
for votes in their interest. Politicians trade votes for money. Predicts policies in favor of
concentrated groups with diffused opposition. (so not centralist outcomes, but at the
extremes)

Prisoner’s Dilemma Famous model in game theory that shows how individuals acting in rational self interest
wind up at a worst outcome than if they worked together. We have two guys being
questioned by the police in separate rooms. If they both stay quiet (cooperate), they
get minimal jail time. If one stays quiet and the other turns in his partner, one gets a
LOT of jail time and the other goes free. If they both confess then they both get some
jail time. Looks like this in normal form…

The dilemma is that it is in both player’s best interest (dominant strategy) to defect, so
the outcome we wind up at is (2,2), which is an equilibrium. But this outcome isn’t
pareto efficient, because we could make both players better off if they both cooperated
(3,3).
If we employed maximin or dominant strategy, we would wind up at (2,2)
• To gain cooperation we need…
o Communication
 o Trust
o Multiple iterations of the game

Probability Rules

Public Good Non-excludable and non-rivalrous, so my consumption of it doesn’t hinder your

consumption, and everyone can get in on it.

Public Policy Any action by government that affects public welfare (at the local, state, national, or
international level)

Rational Choice Rational choice says that individuals choose the best options according to their
preferences and the available options. Rational choice framework considers:
Players, issue, interests, rules
Limits to rational choice: doesn’t explain sources of interests, or concept of rational
interests. Also doesn’t incorporate altruism or guilt.

Rational Ignorance The idea that we are selective in the information we choose to consume. We can’t
possibly know everything, (costs of information a lot larger than benefits)

so if we have to make a decision we 1) place it in hands of someone that we trust,

maybe thinks like us, or 2) pay someone to figure out information for us!

Reservation Value the value that a player will NOT go below when making a negotiation, a minimum if you
will. We will not go under this value, and if we do, we call off the negotiation, because
this value is equivalent to our BATNA. (so we would be better off with our BATNA)

Rules and Institut. Can be formal or informal.

Formal = the constitution, laws, rules of congress, voting rules
Informal = norms and standards
Rules have important consequences for the policy making process and should inform
political analysis

Standing The relevance of different parties in a cost benefit analysis… we only care about the
ones who have standing. WTP values of individuals with standing are counted as
benefits, WTP values of individuals without standing are not counted, fees to individuals
with standing are transfers,. Fees charged to people without standing are counted as
benefits.

Switchpoint On a decision tree: Finding out how much we would have to tweak probabilities to
change our decision. If we would have to change them a LOT (and it’s unlikely) then the
decision is robust. If changing probabilities a tiny bit alters out decision, then the
decision is sensitive. Basically, set branches of decision equal to each other and solve
for p!
 In cost benefit analysis, finding what a certain benefit would have to be to make the
NPV= 0, which means we are indifferent.

Symbolic Politics Politics as theater. Considers narrative of the political story. The study of people’s
beliefs and how framing can influence perception of an issue. Socially constructed
symbols can be used to engage players and generate political will. Symbolic politics
appeals to the fact that humans are rationally ignorant and use symbols and ID with
symbols and use them to make meaning of events. Media plays big role.

Tit for Tat Strategy Used in AI prisoner’s dilemma games. Basically says cooperate in the first round, and
then repeat opponents last move. It’s good because it punishes your opponent if they
are bad, forgives your opponent if they are bad and then good again, and rewards your
opponent if they are good. Generally may not beat another strategy in an individual
round, but does best in the long run.

Tragedy of the When everyone puts their sheep on the same piece of land to graze,
Commons we wind up with a barren wasteland. There is individual incentive to put your animals
there because there are minimal costs and huge benefits, but when everyone does it
then no one benefits.

ZOPA Zone of Possible Agreement! Includes player’s reservation values and any other
constraints placed on the agreement. Any point within the ZOPA is a possible
agreement, and the boundary points are pareto efficient.
STARRED READINGS

THE COPENHAGEN CONSENSUS

- Goal: set priorities for confronting global challenge, if we had an additional 50 billion to spend

- Players:
o various experts from academic institutions to discuss
o 10 papers with 30 proposals

- Observations
o Kyoto protocol is at the bottom
o HIV/AIDS is the top priority, and then malnutrition, then malaria
o Political costs not considered
o Most pressing issues related to developing countries

- COPENHAGEN CONSENSUS
ranked world problems in order of return to investment

o Assumption: we have a fixed pie of resources to allocate to world problems
o Winners: AIDS, vaccinations, malaria, water
o Losers: global warming
 Very controversial because this affects everyone: AIDS does not
• had an operating value of ONE LIFE – not valuing a western life more than an African life
 people got very upset because a lot of problems (many in Africa) got more
attention/would get more money than ones that affect us

- Question: Is the pie of possible expenditures on these problems fixed?

HEALTH CARE REFORM

Clinton’s Fatal Miscalculation: a vision about government's role that does not fit with the high degree of skepticism
with which the American public now views government solutions.
So White house was correct that health industries and groups would respond strongly against this reform,
but failed to take action quick enough
Undermined support of big business, which was really essential
Task force was public relations disaster – everything was kept secret and this looked really bad to the
public
Magaziner and Hillary worked closely together and kept other people in the dark… legislators said that it
was getting too big and complex, but Clinton’s didn’t listen… they were focused on all or nothing.
A draft was leaked, and industry groups seized the moment and created Henry and Louise ad targeted at
legislators and the public, to send AGAINST message
Insurers packed town halls to give appearance of public anti-reform campaign
Hospitals had trustees go against medicare cuts
Tobacco companies against cigarette tax hike
Washington= “friends of Bill” lobbied White House

Spent 46.1 million doing all this!

Democratic National Committee couldn’t pull off a retaliation – awareness day cancelled for lack of planning,
nonprofit organization disbanded, and only launched lukewarm ads at later date

Business Roundtable, 100 biggest businesses, first thought reform would cut HC bills (hurt smaller business) but at
roundtable were 1) fast food companies that didn’t provide medical insurance and 2) insurance companies, two
groups that had MOST to lose… so voted against

National Association of Manufacters and Chamber of Commerce also voted against it

When big businesses couldn’t be convinced, this was the biggest shift… because Energy and Commerce committee
listen a lot to them….

Gingrich made it about party loyalty (anti-democratic)

Dingell made a lot of sacrifices to sway votes…

Kansas’ Slattery was final vote Dingell needed… but received visit from lobbyists at Hallmark cards and Pizza Hut,
huge businesses in Kansas, that both had large amounts uninsured employees and would suffer with mandated
employee benefits proposed in Clinton’s plan. So Slattery voted against, and HC reform went down the drain.

… in class notes…

What is basic problem today with health care?

• skyrocketing costs
• extremely complex issue with lots of players
• there are a lot of uninsured people – 15%
• health care is a public responsibility
o people that DON’T have HC get it anyway
o public attitude towards HC reform very positive – 60%
o within the year, it dies!
• what did Clinton’s task force propose?
o Employer mandated
o Malpractice reform

Players

• trial lawyers
o didn’t want malpractice reform
• Dingell: Chairman of energy and commerce
o Favored
• Business roundtable
o Small businesses: didn’t favor, opposed because can’t afford extra cost
o Big businesses: originally in favor
bill promised to cut some costs
  But ultimately OPPOSED because promises of cuts of spending weren’t followed through
on
• Newt Gingrich and Dole: house min whip
o Strongly opposed: late in game blocked negotiations on GATT
• Boggs: lobbyist working for opposition, representing trial lawyers, malpractice reform, wants to make sure
that malpractice part taken care of
• Hillary Clinton: Task force
o FOR!
• HIAA
o Opposed – run Harry and Louise AD: sit around kitchen table talking about HC… slogan was “they
choose, we lose”
• uninsured Americans (poor), unions, senior citizens
o FAVOR
• drug companies
o OPPOSED – worried about government control over them
• Ira Magaziner: Chairing tax force with Hillary, brainpower behind entire thing
o FAVOR
• Doctors
o American Medical Association: didn’t want small doc offices
• Media
o Neither for or against, but key player

House: 258 dem 178 Rep

57 Dem 43 Rep

What happened that was really bad?

The draft was leaked! Somebody said Clinton proposing 150 billion dollars in taxes!

ALAMODOME

The Alamadome Decision

• take ½ % tax from VA transport authority

• 2% tax on restaurants, putting tax on visitors
o In terms of cost benefit analysis, it’s better to tax the outsiders
o However politics gets in the way
 Problematic because may deter people away
 Businesses don’t want to have to charge patrons higher cost
• Would change behavior!
• Henry Cissneros is for this thing!
o Upcoming Hispanic hotshot
o Elected with overwhelming majority
o Thinking of running for governor
• why does he want to build a stadium?
 o It will make San Antonio a better place
 Bring more tourism
 Fixated on television, will put San Antonio on the map
• TRANSFER
o More jobs in San Antonio – 1,000 temporary construction jobs
 There is high unemployment in San Antonio, so this isn’t a cost
• (normally wages might be considered a cost)
o Ticket prices: $X x 50000(P) x years

• BENEFITS
o Conventions – C
o Other revenue to city – tourism – T
o Sports attendance – 50,000 seats X 10 events/year X $50 X (years last in future)
 Paying ticket price is actually a TRANSFER
• Revenue (advertisements) IF from outside
o If is internal then it’s a TRANSFER
• Increased property values (we have to be careful with multiplier effect, that we don’t count money twice.
• TV Viewing: Other people get to watch game on TV (measure by opportunity cost of watching TV, how
much pay for cable station.
 Benefits/ Costs of Alamodome

• Political Costs
• Paying $$ for preliminary analysis to promote – use only if contingent on continuing the project
• Use costs after decision making
• Need production costs for what is to happen in the arena
• Did not calculate $$ of getting an NFL team

DAVID STOCKMAN

David Stockman

• Who was he?

o Director of Office of Management and Budget (OMB)
o Was asked to review budget deficit

• Reagan’s Campaign Promises

o Reduce taxes
o Balance the budget
o Increase defense spending

So David Stockman has to CUT 40 billion dollars/700 billion (total budget size)
4-5%
The problem is that we can’t touch…
• 350 is social security
• 150 is defense

So we are left with 200 billion – a lot of which are interest on debt

What his attitude towards making cuts?

• believes that government is wasteful, and economy is going to BOOM! (supply side)
• All that really matters is that people believe going to be a change from the past
• Eventually all of these effects would trickle down to the little guy

What does Stockman want the relationship to be between policy analysis (about what would be efficient/effective
economically) and the political process?
• He is very optimistic – structures negotiations and gets people on his side
• So he believes entire political process can be manipulated, he can manipulate it, based on who is in
power, power in numbers
• Changes numbers around in computer, gets different outcome!
• BUT he has to deal with Congress and Senate. How does he deal with them?
o Holds staff meetings
o Gives concessions in some areas not particularly important
o Makes cuts in a variety of areas so no one can complain, they call each other out “hey my budget
was cut too!”
 o He’s under time pressure, so he makes quick decisions and doesn’t give department heads
documents to discuss until time of meeting
 Ends up backfiring – people figure it out

What problems does he encounter?

• market doesn’t respond the way he thought it would
• attempts to cut backfire, then Reagan goes on TV and says “we’re not touching it”
• puts a budget proposal on table for tax cuts, holds off until future

What happens with tax cutting proposal?

• it gets reworked and eventually passes
• then deficits grow out of control and economy sucks
• a lot of these cuts were fantastic, weren’t real,
• “none of us really understands what is going on with all these numbers” you do NOT want to hear that
from head of office of management and budget!

Then article comes out. And he’s reprimanded, deficits spiral out of control in 1980’s,
You CAN’T cut taxes and increase defense spending by an enormous amount

MOVIE

MOVIE!

What are the symbols? The narrative? Use of story? Perspective/framing these issues

Actors

Student Non Violent Coordinating Committee (SNCC)

Southern Christian Leadership Conference (SCLC)
Have differences about strategy
They needed to engage uninterested white power structure, mobilize public opinion
• Can’t vote = not free, battle for voting rights!
• Eyes on the Prize: showed group of people marching together, unity, transformed into American flag,
these are Americans!
• Addressed as “negros”
• Martin Luther King Jr. symbol of non-violent successful strategy!
• Ellis County – student nonviolent coordinating committee, SNCC, voter registration campaign, had
resistance… SNCC exhausted with little money
• Southern Christian leadership conference and Martin Luther King Jr.
o King responsible for just raising money?
o James Forman: Wanted movement that would survive, not just a charismatic leader
• Jim Park, sheriff: counted on to draw media attention to WIN Washington
• Some political leaders understood tactics and didn’t want to get caught in middle
o Mayor Joe Smitherman: Young mayor with no BG or experience, big eared guy
 Said Martin Luther KOON! That’s got to hurt
½ dallas county citizens black, less than 1% registered by 1965 – few blacks that lined up got in, and getting in
doesn’t equal registration

President Johnson: eliminate every remaining obstacle to the right and the opportunity to vote
Katzenbah:

Arrested Amelia Boynton: teachers marched to court house in protest, knowing could be fired.
The power of public demonstration, sheer number of people

Rev Reese: marched to rally at church –

teachers march first black middle class demonstration in Salma. Teachers are LEADERS they have huge
influence in community

Reverend Vivian confronted sheriff Jim Clark and deputies on court house steps – I am rep ppl in Dallas county and
I have the right to do so… am I saying the truth? (had crowd behind him) This is a national problem… with Jim
Clark it was a clear, physical engagement there is effort to get cameras away

Must take a responsibility for everything… gesticulated with fist to show power. It’s time for us to say to (gov
officials etc) we will have no alternative other than to engage in broader and more drastic forms of civil
disobedience to bring attention of nation to this in Selma Alabama!

Death of Jimmy Jackson, protecting mother from attack: mourning him was a symbol, created movement…
Can’t protect lives of own citizens seeking right to vote, but can spend all this money in Vietnam

MARCH Have to give people honorable context to eliminate grief… otherwise break down in violence and chaos…
as a response proposed symbol march 54 miles salma to capital Montgomery

Symbolic for moving forward- has beginning, middle, end.

Who else marches?
The military: something they are fighting for, we have respect for them
Evokes idea of Israelites marching out of Egypt out of slavery
• takes 5-6 days, give time to discuss in nation (media) what the real issues are
• Governor Wallace didn’t want it to take place – but 600 people gathered to begin march.
• March led by Jose Lewis and…
• No police in sight! Crossed over bridge, there were police waiting on the other side, under orders to stop
the marchers – they attacked them! It was a game of chicken, and attacking showed how serious they
were, that they wouldn’t “swerve”
o Shock
anger
retaliation? Go get the guns? BAD IDEA! Make people think about specifics
of violence and they realize how suicidal it is.
o State troopers: villains, monsters, marchers look like nice decent people
o Scenes shown to national audience: juxtaposed with film on NAZI war crimes!
o Attorney General said knew would be confrontation, had no reason to believe that would set
upon nonviolent and peaceful citizens in way they did… so blamed someone else?
Chose non-violence because want to be seen as oppressed, victims
 o shame on you george Wallace (Yarborough) for tear gas, clubs that broke bones (very specific)
This is NOT the American way.

After beating on bridge… knew wouldn’t send in national guard, sent out call to ppl good will
People came to salma from all over country, clergymen black and white

• We are here to share with ppl of salma with struggle for right to vote… seen violence on TV< here to share
it with you. MEDIA IMPORTANT
• Change in atmosphere, spirit of inspiration, motivation, hope!
• Planned to march Tuesday, Johnson wanted to wait until assured would be no violence,
o Other Frank Johnson banned march
o King never violated federal order, but was pressure to march
o SCLC left decision to march to King… didn’t want him to back down
o Private disagreement and public unity!
o Announcement made that march Tuesday would go forward
o But king told Johnson would call off march… met with King to stress importance of him keeping
his word to ppl that march would go forward… HONESTY in image is important

Tuesday March 9 2000 set out to cross bridge… this times with politicians, members SNCC, southern whites… side
by side with those beaten
Marchers asked to kneel and pray
Rev Ralph Abernathy: Dr King turned marchers around and walked across bridge… wasn’t much else to do… would
have gotten beat up if ran into police line. Sense of confusion… King asked people to stay few more days…

• James Reeb died from blow to head passing night café – marchers mourned him
• News of attack provoke national upcry in many cities, protests and marches.

EQUALITY FREEDOM

Angry that death of white minister stirred nation moreso than death jimmy lee Jackson… nation SHOULD be upset
when anyone is killed, why did it take a white person?

Protecting marchers became issue for President Johnson and governor Wallace – send troops to maintain orders…
the two met in Washington… president Johnson asked if wanted to be remembered as petty men or great men…
Wallace like a rubber band, hoped that Wallace would give press statement determining determination to protect
marchers from Johnson… act like responsible governor!
Hopeful can have solution to problem… did make suggestions… Governor Wallace refused to pay for
protecting marchers. Johnson sensed mood of country and addressed congress…
• 8 days after bloody Sunday, president asked for voting rights bill, used words of movement… their cause
must be our cause too… its all of us who must overcome the crippling legacy of bigotry and justice, and
we shall overcome.
o Everyone cheers, tear ran down cheek, VICTORY – affirmation of the movement.

SNCC still being beaten

Now is the time to… transform Alabama, make justice a reality, etc…
Interviewed people at march…

SCLC heard of plot against King’s life, but King refused to leave march… everyone in blue suit lined up with MLK,
and to this day don’t know why were up there!
Civil rights movement never be same again, it was coming to an end.

Racial violence, 34 died

NAFTA

Rational choice theory predicts a market for symbols, when costs of info itself and processing are high – we rely on
these stories. assumes we know choices available to us, outcomes of those choices, and choose based on
maximizing self interest

Collective action failure theory overpredicts freeriding

Things that are illogical according to collective action theory: voting, charity,

NAFTA is example of how all these groups overcame logic of collective action to fight against NAFTA
Stories entertain and define identity and interest

NAFTA showed that rational choice can’t explain values, beliefs, why someone would care so much about
something that even doing something has little effect

So opposition to NAFTA wasn’t about maximizing self interest, it was about self identity, a matter of honor and
moral imperative.

What is the problem NAFTA is trying to solve?

Global competitiveness
Tariffs/trade

Issues

Large sucking sound (jobs going out of US) – (Ross Perot) JOBS
ENVIRONMENT
Regulatory Environment

Have to use tools we have learned in this course…

• market analysis
• cost benefit analysis –
o important to do disaggregated analysis because we have distribution issues
• decision analysis
• negotiation theory
o There are a lot of different ZOPA’s coming into play… lots of constraints
Narrow Interest Groups

Pat Buchanan
Ross Perot
Unions
Greenpeace

Different Stories…

Unions: human rights, corporate aid, helping corporations at expense of workers, workers are pawns that are
being sacrificed.. creating image of downward spiral going on for some time, goes against American dream

Grassroots(Greenpeace): NAFTA could be good for environment because make way to impose environmental
requirements on all these countries. Greenpeace take out advertisement in newspapers, message is “kills
dolphins” Long time agenda that organization already head, just now linking onto NAFTA.

Ross Perot: Ran in election, trying to survive as a political player. Paints pictures of American workers become
poor (like Mexican workers?) Said that we are going to converge into Mexico… and type of life. SCARE TACTIC

Pat Buchanan: American independence, constitution, statue of liberty is ALL being threatened! Globalization is
going to suck up/obliterate what the US stands for (values) We are going to become a subsidiary of the global
order. Ship that carriers in its cargo the virus of globalization

What is the political problem they are facing in passing NAFTA?

Facing lopsided congress, few people committed, a lot of people against, have to win ALL undecided…
even the Democrats aren’t all on board!

They come up with a three pronged strategy

In Congress: Clinton speaks to each Congressman individually and talks to them until he convinces them… makes
phone calls to all undecided people. Senator Bill Bradley goes to House and talks with all of reps… at first their
message is “just hold off on your commitments – stop the bleeding” don’t choose sides yet! Hold off! Give us some
time!

Industries (side deals): Particular industry group very unhappy with this deal – SUGAR industry… NAFTA could
enable to flood American market with cheap sugar, sugar businesses in America go out of business. Redefine
“sugar” in the agreement. Basically making deals on the margins, increasing some of the ZOPAS. (industry groups
pressure congressmen, congressmen support)

Public: bring in former presidents, Clinton, Raegan, Carter, and Bush.

Carter attacks Ross Perot,
Clinton talks about NAFTA moving us ahead, into the new age.
TV advertisements, bring message that NAFTA is going to bring more jobs, tell story that NAFTA

There are a lot of tools, strategies that we learned, it isn’t just ONE that provides insight into an issue. We have to
use a whole package of tools together!

Answer ? why we need public policy – give us rationale for when government action is needed and non needed,
also give us analytical and communication skills