Formulating policy alternatives is only the beginning: navigating a policy transition is often a major part of the challenge. This book, the winner of the 2015 Donner Prize, explores rationales for transition cost mitigation strategies in a wide variety of policy contexts, providing examples and realistic strategies for genuine policy reform.
I have spent much of my professional career researching, writing, and teaching about the policy reform process in a wide range of policy contexts. I have also, in many contexts, been an active participant in this process, in one capacity or another. I have repeatedly been struck in many, if not most of these contexts, by the realization that diagnosing the ills of the status quo, and imagining better policy alternatives, at least in their broad contours, are often not especially controversial. However, the real challenges, in many cases, relate to getting from “here” to “there.” Over time, existing policies develop their own encrustations of institutions, vested interests, adaptive preferences, and expectations that render the trajectory of getting from here to there a major part of the policy challenge. This book is about that challenge, which I attempt to illuminate both at a general level and through concrete illustrations developed in seven brief policy reform case studies.
As most parents of small children who have embarked on long vacation trips can attest, one of the most recurrent and frustrating questions is “are we there yet?,” to which the common, enigmatic, and no doubt equally annoying answer is typically “we’re getting closer.” This book is about the “here” and the “there,” but most particularly the importance of taking seriously, in political economy terms, “the places in between.”
The long fight to end slavery, led by William Wilberforce, among many others, culminated in Britain with the enactment of the Slavery Abolition Act in 1833. This act made provision for a payment of 20 million pounds (almost 40 percent of the British budget at the time) in compensation to plantation owners in many British colonies — about $21 billion (US) in present day value. Moreover, only slaves below the age of six were initially freed while others were redesignated as “apprentices,” who were to be freed in two stages in 1838 and 1840. Wilberforce and many other abolitionists accepted that compensation and phased implementation were required to ensure enactment of the legislation, particularly by the House of Lords where plantation owners were strongly represented among the aristocracy.
Whenever governments change policies — whether tax, expenditure, or regulatory policies — even when the changes are on net socially beneficial, there will typically be losers. These losers will have made investments of one kind or another, physical, financial, or human, predicated on, or even deliberately induced by, the pre-reform set of policies. Very few policy changes make somebody better off and nobody worse off according to their own subjective valuations (the economists’ concept of Pareto efficiency). Rather, policy changes reallocate social benefits and costs in different ways. The issue of whether and when to mitigate the costs associated with policy changes, whether through explicit government compensation, grandfathering, phased or postponed implementation, is ubiquitous across the policy landscape.
Very few policy changes make somebody better off and nobody worse off according to their own subjective valuations. Rather, policy changes reallocate social benefits and costs in different ways.
A few selective, but far from exhaustive, examples serve to illustrate this point. First, take the case of land use regulations or controls. Sometimes relevant levels of government see fit to change these regulations. They may increase building setbacks from property lines or road allowances. They may impose height restrictions on buildings in residential or mixed-use neighborhoods. They may change zoning laws from mixed-use to residential. In most of these cases, existing property owners will be exempted from these requirements, and their existing uses treated as legal “non-conforming uses.” In a similar vein, in tight residential housing markets, sometimes rent controls are imposed on existing rental properties, but the construction of future rental buildings is often exempted from these controls in order to incentivize new rental construction and alleviate supply constraints.
To take another example, environmental regulations are often subject to change, reflecting new scientific knowledge of environmental risks, or at least public perceptions thereof. Energy efficiency requirements for motor vehicles are but one example where regulations have become more stringent over time. Typically, these do not apply to the existing fleet of motor vehicles but to motor vehicles manufactured in the future, and often with a lead time in order to allow manufacturers to adapt to more stringent requirements. Similarly, in the case of climate change policies, often countries adopt relatively long time horizons for phasing in requirements for renewable energy generation, or carbon taxes, or cap-and-trade regimes on an implementation schedule designed to become more stringent over time, while avoiding disruptive and costly changes to existing forms of production or consumption.
Another example, particularly apt in a contemporary US policy context, relates to proposals to reform gun control laws. Even strong proponents of stricter gun control laws in proposing comprehensive background checks on all purchasers of guns or proposing the prohibition of assault rifles or magazines in excess of a certain capacity recognize that such restrictions can only feasibly apply to prospective purchases of weapons, and not existing owners of weapons, who would be effectively grandfathered under these reform proposals.
A yet further example relates to professional qualifications. In many professions, including law, medicine, and dentistry, entry requirements have become increasingly stringent over the past century. Yet, in applying these more stringent requirements, existing professionals are, in effect, grandfathered, subject perhaps to continuing professional education requirements.
Another, and quite different, international example is found in post-conflict nation-building exercises, where a major challenge is addressing what should be done with respect to atrocities committed in the past by various antagonists in the conflicts that have afflicted a nation. Here, more or less judicious combinations of truth and reconciliation commissions, lustration policies designed to disqualify certain officials from previous repressive regimes from future public office, and residual classes of cases where the most egregious past atrocities are remitted to either domestic or international criminal tribunals for prosecution, are often adopted. Such combinations of policies are obviously designed to draw a qualified line in the sand between what has happened in the past and new rules of civic engagement and collective governance going forward.
The seven brief case studies that I develop in this book are all designed to illustrate in greater detail, and in widely disparate policy contexts, the central importance of transition cost mitigation strategies, particularly those aimed at specific subgroups of populations, in advancing politically feasible reform options.
Excerpted from Dealing with Losers: The Political Economy of Policy Transitions (Oxford University Press, 2014). © Oxford University Press 2014. Used by permission.