The Complexity Surrounding Market Rationale in Public Decision Making in the Twenty-First Century

Applying market rationale to public decision making has been in the center of the debates in both political and academic circles. Theoretically, these debates center on the role of government in society and how that role should be played. This chapters shows that applying market rationality to public decision making is problematic for three reasons. First, in reality, neither market nor individuals can be rational as envisioned in neoclassic economics. Second, public organizations pursue broad social goals that are often not measurable by market indicators. Third, the context within which public decisions are made is governed by legal and constitutional mandates that do not always suit market rationale, i.e. utility maximizations. Notwithstanding this, public choice theory can provide public organizations with alternative methods for maximizing social benefits. In doing so, public organizations have been adopting market-based standards as a method to promote performance and manage for results.

States via Markets and Markets via States

Theories that the state and market are in a conflictual and binary relationship read the history of the past 30 years as a triumph of the market and a withering of the state. The underlying alleged conflict between state and market misrepresents history and reality. States and markets are commingled forms of power; each cannot exist without the other. States and markets operate on different logics and constantly mutate in response to changes in their environment. States constantly face competitive threats and need markets to generate revenue in efficient ways; market actors face competitive threats and need states to stabilize production and exchange relationships. States and market actors both need each other as a place to externalize threats to their legitimacy.

Causes and Ramifications of Public Pension Fund Underfunding

The problem of public pension plan underfunding has grown increasingly acute in recent years for numerous states and cities including Illinois, New Jersey, Connecticut, Charleston, Chicago and Philadelphia. Underfunded pension systems have profound implications for state and local governments' ability to provide basic services to their citizens and calls into question the retirement security of their public employees. The history of the severely underfunded New Jersey pension funds will be examined in order to understand how the current crisis developed. Economic and demographic changes, conditions in the capital markets, political and budgetary priorities and pressures, and actuarial conventions will be examined in order to highlight how the crisis is the result of the complex interaction of social, political and economic forces. The primary focus will be on how the capital markets influence the funding levels of pension systems and the options for government action.

Private Prisons and the Shift in Marketplace From the War on Drugs to the War on Terror

This paper outlines the emergence of a new marketplace in the United States, immigration detention, especially after September 11th. This phenomenon is not limited to the United States, but is also observable in other countries as the result of the globalized economy. This paper first explains how the private prison industry adapted from shaping harsh drug law sentencing during the War on Drugs to now sponsoring legislative bills that target immigrants, the new “cash crop” for the private prison industry. Because of the securitization of immigration governance, politics of fear are easily used to justify and build public support for a tough stance on immigration. The end result is that immigrant detention is a highly lucrative and record-breaking profitable enterprise for private prison corporations, with little accountability in its treatment of immigrants and with more and more power in sponsoring and shaping legislation beneficial to their bottom line. Implications now that Trump, who ran a very xenophobic presidential campaign especially hostile to Mexicans and Muslims, are discussed.

Healthcare in the United States

Healthcare in the United States is a dynamic mix of public and marketplace solutions to the challenge of achieving the maximum public good for the greatest number of people. Indeed, in the U.S. the healthcare industry generates over $3 trillion in the economy. This creates a uniquely American paradox that is examined here. The basic structure of the U.S. public-private healthcare delivery system is explored. The dynamics of public sector involvement in healthcare delivery is reviewed, with particular emphasis on the impact of the Patient Protection and Affordable Care Act. Economic impact, employment indicators, and recent cost estimates of public revenue investment will be considered. Finally, a discussion about the future implications of healthcare for public administration in the 21st century is presented. Eight tables and figures present a visual and detailed explanation to accompany the narrative.

Political Economy of Public Administration

Public administration is fundamentally a discipline closely linked to management. Scholars and practitioners alike have argued that government, nonprofit, and health organizations should use public resources in the most efficient manner possible, and calls to “run government like a business” are frequent. At the same time, scholars and practitioners have also argued that public organizations should also provide an equal opportunity for all, and administrators have faced public pressure and mandates, for example, to ensure that “no child [is] left behind.” This chapter reviews literature regarding efficiency and equity in public administration, and uses examples from both government and healthcare to illustrate the inherent tradeoff between efficiency and equity in practice.

The Role of Government in a Liberal Market Economy

This essay is a critical assessment of the market failure theory and public choice theory. While the market failure theory provides a justification for government intervention in the economy, the public choice theorists are very skeptical about the role of government as a corrector of market failures. Since government failures can be worse than market failures, the imperfections in the market process, they argue, do not necessarily call for government intervention. These two theoretical perspectives, notwithstanding their difference, do share something in common. Both assume that individuals are self-interested. This essay contends that a shift from rational self-interested behavior to bounded-rational behavior provides a less contested role for the government. With bounded-rational behavior, the state should no longer be viewed as a mere surrogate of the market, but as “a choice architect,” “an entrepreneur,” and “a manager of conflict.”

Markets, Efficiency, and Governance

This chapter provides an overview of markets and the conditions under which they fail to allocate society's resources efficiently from the perspective of neo-classical economic theory. The sources of market failures discussed are public goods, externalities, poorly defined property rights, high transaction costs, and information asymmetries. In addition to offering standard positive explanations for government intervention in failed markets, the chapter also presents a normative argument for doing so. Market theory is then linked to contemporary public administration through a discussion of alternative strategies for deciding the mode and extent of intervention. Finally, economic efficiency is extended to public management by arguing that managerial decision making is appropriately measured by technical efficiency, or a manager's ability to maximize program outputs given her resources.

Understanding the Relationship Between the State and Markets in Public Administration

This chapter evaluates several theoretical perspectives to examine the role of the state and its relationship with markets. It divides theories into two groups: macro and micro. The macro theories covered in the chapter include Adam Smith's approach, Keynesian views, the Austrian school of thought, Marxism, pluralist theory, public choice approach, and elite theory. The selected macro theories provide an elaborate perspective on the relationship between markets and the state. In order to have a holistic picture the chapter also discusses several micro theories, which effectively depict the relationship between markets and the state from the budgetary perspective. Incrementalism and punctuated equilibrium are included in the evaluation. The application of theories in relation to specific public policies is provided.

Enhancing Competitiveness of Public Utilities in Nigeria

The poor performance of the state owned electricity company the National Electric Power Authority (NEPA), has provided the impetus for the establishment of the Power Holding Company of Nigeria (PHCN). However, despite the power sector reforms in Nigeria the country has continued to face massive challenges in the generation and distribution of electricity.