The Public Use of Private Interest (Miscellany of History No. 5)

" According to conventional wisdom, government may intervene when private markets fail to provide goods and services that society values. This view has led to the passage of much legislation and the creation of a host of agencies that have attempted, by exquisitely detailed regulations, to compel legislatively defined behavior in a broad range of activities affecting society as a wholehealth care, housing, pollution abatement, transportation, to name only a few. Far from achieving the goals of the legislators and regulators, these efforts have been largely ineffective; worse, they have spawned endless litigation and countless administrative proceedings as the individuals and firms on who the regulations fall seek to avoid, or at least soften, their impact. The result has been long delays in determining whether government programs work at all, thwarting of agreed-upon societal aims, and deep skepticism about the power of government to make any difference. Strangely enough in a nation that since its inception has valued both the means and the ends of the private market system, the United States has rarely tried to harness private interests to public goals. Whenever private markets fail to produce some desired good or service (or fail to deter undesirable activity), the remedies proposed have hardly ever involved creating a system of incentives similar to those of the market place so as to make private choice consonant with public virtue. In this revision of the Godkin Lectures presented at Harvard University in November and December 1976, Charles L. Schultze examines the sources of this paradox. He outlines a plan for government intervention that would turn away from the direct ""command and control"" regulating techniques of the past and rely instead on market-like incentives to encourage people indirectly to take publicly desired actions. " Foreword (vii) I (1) II (16) III (28) The Causes of Market Failure (29) Transaction Costs (32) Uncertainty and Information Costs (35) The "Free Rider" Problem (42) Market Failure in a Federal System of Government (43) Public Failures in Dealing with Market Failures (46) Regulation (46) Capital Grants (57) Federal Grant Programs (61) Failure to Consider Incentive Problems (63) A Final Note (65) IV (66) The Inseparability of Efficiency and Equity (67) "Do No Direct Harm" (70) Rights and Duties versus Incentives (72) The Mystery of the Market (76) The Short Run versus the Long Run (78) Sharp Corners versus Smooth Curves (80) The Creation of Markets (82) V (84) Index (91) "Hess brings not only first-rate credentials, but a cool, dispassionate perspective, an incisive analytical approach, and a willingness to stick his neck out in making judgments..." - American Political Science Review Charles L. Schultze. Rev. And Expanded Version Of The Godkin Lectures Delivered At The John F. Kennedy School Of Government, Harvard University In Nov. And Dec. 1976. Includes Bibliographical References And Index.