ABSTRACT

As a book on public policy, this book is unique in addressing explicitly the role of human nature. Only with a good understanding of human nature can policy makers address their foremost needs and anticipate how people may respond to specific designs in policy. This way policy makers can avoid "unintended consequences." The book also provides a new perspective on the meaning of public interest, which is based on intellectual roots dating back to J.S.Mill and more recently Harsanyi and Rawls.

Traditionally, economists have referred to either the Hicksian criterion or the Kaldorian criterion as the yardstick to whether a policy is welfare enhancing, not realizing that both of these criteria fail abjectly in producing a convincing test for welfare improvement. This is because ex post, typically some people will gain and some people will lose from any policy. The author argues for an alternative, ex ante welfare increase criterion that is based on how people would assess a policy if they were completely impartial and totally ignored their personal interests. It applies the principles to key policy concerns such as health policy, tort law reform, education and cultural policy, and pension reform.

The healthcare reform proposals in the book illustrate the application of the principles. The author proposes a basic protection plan under which standard basic healthcare services are priced the same whether they are provided by public or private caregivers—at levels that can contain both demand side and supply side moral hazard. Annual eligible healthcare expenses are capped to alleviate worries. A "Lifetime Healthcare Supplement" that includes an element of risk sharing adds to patients’ choice and protection without compromising fiscal sustainability.

chapter 1|18 pages

Introduction

Government as servant of the people

part I|57 pages

The theory of public policy design

chapter 2|14 pages

What makes good public policy

chapter 3|19 pages

Human nature and public policy

chapter 4|22 pages

Institutional choice as ex ante choice

part II|54 pages

Risk management

chapter 5|15 pages

Health care pricing and financing

In search of a better model

chapter 7|10 pages

Bank deposit insurance

chapter 8|13 pages

Demographics and public pensions

part III|38 pages

Resource allocation and redistribution

chapter 9|10 pages

Government or market?

chapter 10|14 pages

Education and cultural policy

chapter 11|12 pages

Taxes, social safety net, and redistribution

part IV|42 pages

Public policy and “ecology” of the economy

chapter 12|10 pages

“Economic ecology”

The case of the Great Depression of the 1930s

chapter 13|15 pages

The global financial tsunami of 2008

chapter 14|15 pages

How a misguided housing policy can cause a deep recession

The case of Hong Kong

chapter 15|23 pages

Public policy in the new millennium