Abstract
The
goal of this paper is to summarize for social workers the insights of the
classical liberal school of political economy and sketch a working model of how
to apply these ideas in policy practice.
Though philosophically and methodologically distinct from the
progressive and Marxian traditions of critical policy analysis, political
economy is a structural theory of government that illuminates the exploitation
of marginalized groups by government.
Each section will explicate the work of a school of political economy
and present fundamental questions social workers should ask when critically
evaluating specific policy proposals as well as the role of government more
broadly. Beginning with questions of privilege
within the democratic system, the article will examine how oppressed and
minority groups are structurally impeded from shaping the policies that affect
their lives. Subsequently, the use of
policy to achieve specific ends in social justice is critiqued for its tendency
towards paternalism and the marginalization of individual knowledge in favor of
the preferences of policymakers and public administrators. After examining this
policy analysis framework in detail, conclusions will be drawn about how
political economy impacts social justice and the state.
Introduction
What
is political economy?
Political
economy is the application of economic logic to political decision-making. Using the work of political economists
provides a different view of government action than is found in traditional
social work texts. Probably the most
famous and influential political economy text for social work scholars is Paul
Starr’s classic The Social Transformation
of American Medicine (1982) which chronicles the rise of the American
Medical Association and American Hospital Association by establishing their economic
and social power through the political process.
Starr’s account examines how these interest groups capture government
privilege by crafting favorable legislation, undermining unfavorable regulation
or change, and improving their financial situation through governmental
lobbying. Although this text is limited
to the medical field, the underlying method of political economy is
transferrable to understanding government behavior generally and how the
structure of government may deleteriously impact social justice policy
proposals. The democratic process is
dominated by entrenched interests, who draft policies that benefit themselves over
the target population of a given policy, a process termed government
privilege. Moreover, the policymaking
process lends itself to top-down paternalism, silencing the voices of the
target population and removing the incentives for individualization and
responsiveness in service delivery.
Examining
government is necessarily an ideological endeavor. Political economy arises from the ideological
tradition of classical liberalism. Based
on political affiliations, most social workers are likely to identify with the
modern liberal, progressive, social democratic, and Marxian ideologies (Rome & Hoechstetter, 2010;
Mullaly, 2008). Common to each of these
approaches is a belief in the importance of collective decision-making through
participatory democracy, an entitlement state administered via a central authority,
and the central planning of the market economy through regulation, tripartite
bargaining, or collective ownership—as seen in Table 1.
Table 1.
|
Ideology
|
Market Orientation
|
Economic Justice
|
Governance
|
|
Modern Liberal
|
Regulated Market
|
Neoliberal Entitlement
State
|
Participatory
Decision-Making
|
|
Social Democracy
|
Tripartite Bargaining
|
Thick Entitlement State
|
Participatory Decision-Making
|
|
Marxism
|
Planned Economy
|
Thick Entitlement State
|
Participatory
Decision-Making
|
|
CLASSICAL LIBERALISM
|
Free market
|
Minimum Income and Voucher Programs
|
Decentralized, limited
|
Adapted
from Mullaly, 2008
Political economy
represents a thoroughgoing critique of democratic governance, entitlement
states, and central planning by asking two questions: Does this system continue
to help the target population when people act in their own self-interest? And can a public administrator or policymaker
have enough knowledge to create programs that are responsive to individual
needs and preferences? Answering both
questions in the negative, political economy forms the social scientific basis
for the classical liberal or libertarian skepticism of government, politicians,
and bureaucracy. Though it is unlikely
many scholars impassioned by the social justice movement will find
fellow-feeling with classical liberal scholars, their works provide an incisive
critique of public policy. Instead of
focusing on the opportunities for altruistic action by well-intentioned
bureaucrats or policymakers, political economy examines the “business” of social
policy—or how it is experienced and enacted by individuals in the everyday. Examining
the business of social policy entails looking at the incentives and rules
within the bureaucratic and governmental structure to determine whether these
policies are likely to contribute to social justice or perpetuate social
injustice.
Limitations
and strengths of political economy
Vincent Ostrom (1989)
puts it best when he likens the choice of paradigm to the economic concept of
opportunity cost. The cost of choosing
the tools of political economy over other ideologies, political science
theories, or frames of reference in policy analysis is the positive aspects of
alternative theories we forgo. For
instance, other theoretical approaches are not burdened with the neoclassical
assumptions of rationality, self-interest, and individualism. They also provide a greater understanding of
altruistic action on the part of political actors, instead of focusing on their
self-interest. For example, a notable
policy analysis text to macro social workers is Kingdon’s Agendas, Alternatives, and Public Policies (2010). Kingdon presents a more nuanced view of
political action than does political economy.
His three streams of problem, policy, and politics are populated with
largely well-intentioned actors who implement policy ideas formulated in
communities of specialists in accordance with the national mood or public will. His account allows for a greater degree of
input from media, policy experts, and budget constraints. Political economy argues, in stark contrast
to Kingdon, that the national mood does not exist, policies are largely crafted
by interest groups, and the feedback mechanisms in government and bureaucracy
are insufficient to coordinate knowledge from the target population to
policymakers or administrators. Other
policy analysis tools are more congruent with political economy, as the
positive and negative conclusions of political economy policy analysis are
valuable inputs into the framework of cost-benefit calculation as well as Strengths,
Weaknesses, Opportunities, and Threats classification. Indeed, one of the strengths of political
economy is to elucidate different aspects of costs or benefits that are
overlooked in the less methodologically individualistic approaches of Kingdon
and other policy analysis scholars.
In addition to its
strengths and limitations in explaining policymaking, there are significant limitations
to using political economy as a guide to understanding the role of the state in
achieving social justice. Political
economy is largely silent about the ability of marginalized groups to
participate in the market process, which they view as a superior though
imperfect alternative to government action.
Indeed, political economy does not attend to the oppression outside of
governments and is silent on how non-governmental privilege shapes the social
world. Political economists discount the
importance of outcomes for groups of people in favor of determining whether the
process by which outcomes arise is fair, just, or equitable (Stone, 2002). Finally, political economy works better as a
critical frame, rather than as a basis for concrete policy proposals (Boettke
& Martin, 2011). In spite of these
limitations of political economy, it has significant explanatory value for
understanding aspects of social policy overlooked by other political science
theories; moreover, its conclusions significantly impact our understanding of
how social justice and social policy intersect.
Part One: Government Privilege
What
are the incentives for political actors?
This
is the fundamental question of the Public Choice school of economics, and it is
a question ripe with nuance. Public
choice focuses on the actions of individuals within the government (i.e.
methodological individualism). It argues
that when we speak of “the government” or “the Department of Health and Human
Services” writing a certain policy or conducting an audit, for instance, we are
speaking metaphorically. Only
individuals can act, and understanding the environment in which they act is key
to understanding what behaviors or trends emerge (Ostrom, 1989). Political actors are modeled similarly to how
individuals act in an economic context, based on self-interest and
rationality. Buchanan (1997) terms this
behavioral symmetry. Importantly, these
are not seen as the sum-total of all humanity’s motivation, but derive from the
goal of building rules, organizations, and institutions that constrain
individuals from acting selfishly and against the public interest (Boettke
& Leeson, 2004). Public choice also
does not discount the altruistic motivations of political actors, but examines
the incentives faced by both altruistic and opportunistic actors.
Modeling
the actions of policymakers based on self-interest illuminates the structures
behind many of the political phenomena we encounter daily. In stark contrast to the view of politicians
as serving the public interest reluctantly accepting power for a short time,
most politicians are career-oriented political entrepreneurs who seek to raise
funds for reelection, increase their reputation and power, and enhance their
financial interests. Policymakers will
often trade votes on bills or kludge together unrelated bills to better serve
the parochial interests in their district (Tullock, Seldon & Grady, 2002). Similarly, the actions of bureau chiefs and
bureaucratic actors more generally are to increase their salary, office perks,
public reputation, power, patronage, output of bureau, ease of making changes,
ease of management, discretionary budget, and the scope of their department
(Niskanen, 1994). Voters, in the public
choice model, are rationally ignorant about public policy and have very little
power to affect any change through the ballot box (Congleton, 2001; Tullock,
Seldon & Grady, 2002).
Beginning
with this theoretical frame, we can start to understand how public choice’s
differential views on what the political process looks like in practice
provides an incisive critique of the status quo. From a political economic perspective, it may
be dangerous to entrust social justice to a policymaking and bureaucratic process
wherein the individual has little power to affect policy change and the
rational self-interest of political actors is runs counter to the interest of
the public good.
What
is government privilege?
More
important that understanding the interests of voters, public administrators,
and politicians is investigating the incentives within the political process
for interest groups. Interest groups
include private businesses or business coalitions, non-profit advocacy groups,
voter coalitions, and government bureaus.
Their motivation is to seek profit from the political process by carving
out favorable regulation or deregulation, monopoly or cartel status, and direct
financial assistance from the government.
These favorable policies constitute government privilege, or political
and economic power that puts the interests of small groups over the public good.
Public choice
economists talk about government privilege in economic terms. The costs of providing privileges to favored
interest groups are spread across the entire population. Each individual is unlikely to notice the
small increases in the money cost of physician, nurse, or social work services
that result from licensure laws or title protection laws. However, the benefits of increased prices—achieved
through reducing competition and raising barriers to access for those entering
the health professions—are concentrated among existing health professionals. This concept, known as concentrated benefits
and dispersed costs, underlies a good proportion of all legislation passed by
government, according to political economy.
The structural critique of government rests upon the power of interest
groups to influence politicians through fundraising and lobbying, and the
competition by interest groups for government resources. Within this policy analysis frame, the public
interest and the welfare of the least advantaged are dominated and excluded by
the competition for resources by well-positioned interest groups.
How
does this structure affect oppressed groups?
Part
of the answer lies in the rational choice mechanics of the formation of an
interest group. Interest groups exist
when participants can easily restrict benefits of privilege from those who do
not contribute financially or those who are not directly related to the
interest group. The most powerful groups
exist based on common traits—such as occupation, race, or age—that are held in
high esteem by the general public, whose symbolic capital gives them power in
the political arena (Bourdieu, 1989).
Paul Starr’s (1982) text, for example illuminates how physicians use
their positive public reputation to extract favorable legislation from
politicians. In addition this symbolic
capital, groups with high economic, social, and human capital are best able to
capture political privilege, as they have greater power within the social space
(Bourdieu, 1989).
The structure of
policymaking ultimately benefits those who are already comparatively well-off,
leaving little room for individuals and groups who do not meet these
criteria. Recipients of federal welfare
programs, for example, are a large, heterogeneous group without many shared
identifiers. They generally possess
lower levels of capital and are held in comparatively lower esteem by
society. These structural hurdles
prevent the interests of public assistance recipients from being adequately
heard within the political process.
While non-profit groups and government bureaus often advocate for
greater funding for support programs, these interest groups also have self-interested
motivations, making them imperfect agents for advocating the interests of those
in need. Additionally, as we will see in
the following section on paternalism, government bureaus and non-profits also
lack the knowledge to effectively lobby for the manifold, unique interests of
the individual.
What
does a Public Choice analysis of public policy look like?
After
acquainting ourselves with the general theory, the first thing to investigate
is what interest groups are relevant to a given policy and who they represent. For example, if we were examining the
Affordable Care Act (ACA), we would look at the American Medical Association,
American Hospital Association, large health insurance companies, Pharmaceutical
Research and Manufacturers of America, and American Association of Retired
Persons—among a great many others. Each
interest group is seeking government privilege in order to enrich their members
at the expense of the general public.
The next step involves finding aspects of regulation, deregulation,
monopoly or cartel status, tariffs, quotas, price floors or ceilings, or
mandates that positively impact these groups.
A policy analyst may examine how the ACA maintained monopoly health
licensure for existing professional organizations, protected drug manufacturers
from overseas competition while maintaining the patent monopoly, and did
nothing to examine certificate of need laws that empower existing hospitals to
veto any new competitor entering the market.
A shrewd political economist may also take note of the organizations
whose self-interest aligns with those adversely affected by a policy and attempt
to form a counter-coalition
Part Two: Paternalism
How
is knowledge created and coordinated within a policy structure?
Austrian
economics, in contrast to the public choice school, is agnostic as to the
motivations of individuals acting within the policy arena. Whereas the public choice school is
vulnerable to criticisms of oversimplification or neoliberalism, Austrian
political analysis follows from epistemologically different assumptions
(Burczak, 2006). The theoretical works
of F. A. Hayek formulate policy critiques based on epistemological conclusions
about what knowledge exists in the social world. Shunning what he termed the “scientism” of
the progressives, social democrats, and socialists of his time, Hayek (1964)
constructed a model of economic action where rationality is merely a social
construction, knowledge is imperfect, dispersed, and highly subjective, and the
most robust structures in society are formed through human action, not human
design. In his long-standing battle with
Oskar Lange and other socialist theorists, Hayek and his teacher Mises argue
that central planning cannot efficiently allocate resources because of the lack
of a price system, a potent communication tool (Hayek, 1945; Mises, 1981). Moreover, without the incentives created by
profit and loss, there is little motivation to create new information by
innovating and individualizing services.
Although the Austrians address their arguments to the socialists of
their time, their work is applicable to modern policies that use central
planning in social policy. Most
importantly, Austrian political economy questions a policy on the degree to
which individual choice and agency are respected.
How
paternalistic is this policy?
Questions
of paternalism and knowledge are inextricably linked, as the definition of
paternalism implies that any actions done by the dominant power are in the best
interests of the subordinate (Mead, 1997).
Austrian economics states plainly that the person who is most
knowledgeable about a given situation is the person most affected by it, the
individual actor (Hayek, 1945). Additionally,
Austrian-informed policy analysis drives us to ask questions of power and
powerlessness, vital aspects of a social justice-informed policy critique. However, it is not due to social justice that
Austrians criticize paternalism, but because replacing the values of
individuals from a target population with the judgments of planners suppresses
the best informed knowledge about a phenomenon and prevents it from being
coordinated across individuals.
Addressing a
complex social issue for diverse populations involves an overwhelming amount of
knowledge—knowledge that is particular to time and place, that is tacit or
difficult to linguistically articulate, and that is dispersed widely among
individuals (Burczak, 2006). Policymakers
substitute their own preferences for those of the target population, excluding
the knowledge within a target group.
Policy analysts using a political economic framework should ask
themselves who determines what is important in this policy. If policymakers or public administrators are
dictating to a target population what is important or what they should value,
it is not merely an affront to social justice.
It is a lack of understanding of how knowledge about how to solve social
problems emerges within the social world.
Instead of pursuing technical solutions that try to achieve a given
outcome, Austrians prefer the construction of a general framework under which
individuals can serve each other’s needs, such as voucher, minimum income, and
consumer-directed health programs.
What
role does the market play in providing services?
Austrian economics is often considered to be
“free-market economics” due to the ideological affiliations of its theorists. Most political economists in this tradition
are libertarians, conservatives, or anarchists.
However, the conclusions of Austrian economics regarding the role of the
market and the role of the government come not from ideology but from analytical
claims about knowledge in the social world (Horowitz, 2012). One of the reasons Austrians favor market
allocation of resources over political allocation is that market incentivizes
the creation of new services and innovations in service delivery (DeCanio, 2013). Austrian analysts are likely to look more
favorably on policies that utilize voucher systems or consumer-directed health
and social service plans because they use the market to allocate resources
(Goodman, 2012). While governments are
necessary to provide public goods that are underprovided in a totally free
market, the price system of the market and system of profit and loss are
superior methods of allocation. Most
importantly, markets do not require the inordinate amount of knowledge that a
centrally planned social policy does (Burczak, 2006). Distributed, individual, and tacit knowledge
are coordinated in the price system to bring about services that are responsive
to individual needs.
Does
the policy allow for choice and competition?
To
some extent, policy environments always compete with one another. Some public choice scholars even model this
competition between localities as creating efficiency through the free movement
of citizens to environments that suit their preferences (Ostrom, Tiebout &
Warren, 1961). However, the choice and
competition present in a marketplace provides more options to individuals
without the high search costs of finding a better residence (DeCanio, 2013). Individuals within a marketplace may also
choose from many different providers of services, making the system more
responsive to individual need and heterogeneous preferences. The diversity of a marketplace is its core
strength, and through creating voucher programs, public and private
competition, and consumer-directed service plans, government can best utilize
the knowledge of the target population.
When government acts without these knowledge-creating systems, resource
misallocations divest scarce social welfare funding away from the services that
target populations truly need. Moreover,
the greater the restrictions placed on consumers and producers within a
marketplace, the less agency provided to individuals.
What
does an Austrian policy analysis look like?
One
of the best examples of a policy proposal that is responsive to the issues of
paternalism raised in Austrian analyses is the self-directed services
movement. Self-direction is composed of
three parts: a personalized assessment of needs, resources, and supports,
employer authority over the workers who consumers rely on for their daily
needs, and budget authority over spending in their own lives (Scala &
Nerney, 2000; Moseley, 2005). Programs
that include self-directed supports for Medicaid recipients are operational in
almost every state and the majority of states adhere to the general model of
services (Walker, Hewitt, Bogenschutz & Hall-Linde, 2009). For individuals in this program, their lives
are dramatically less shaped by what government policy dictates and more on
what they consider important. The model
empowers individuals with developmental or intellectual disabilities, the
aging, and those diagnosed with a mental health issue to determine the services
that are most important to them via an individual budget (Crisp, Doty, Smith
& Flanagan, 2009). Paternalism
within this structure is reduced by elevating the authority of the consumer and
using their preferences to determine with which services and providers they
work. Should a consumer wish to spend
money on vehicular modifications, supported employment, or socialization
activities, they have the authority and the financial ability to do so. Furthermore, because consumers are purchasing
these goods on the market, they are allowed to choose services that are most in
line with their needs and preferences.
Over time and across consumers, this results in a social support system
that incentivizes the creation of services that better serve individual needs. In this way, self-direction also serves to
align the self-interests of service workers with consumers, a key part of
public choice political economy.
Although
there are many things to recommend self-directed supports from a political
economy perspective, there are still many strictures that allow for
critique. Service providers to the
self-directed services population are still encumbered by licensure laws, labor
laws, and wage and price controls which distort price signals and impede
competition and choice. Many of the
states base their individual budget calculations based not on what individuals
can bargain for on the open market, but on the average cost or prevailing cost
in a state for that particular service which substitutes political allocation
for that of the market. Finally, many
individuals have diverse needs or preferences and many state programs continue
to limit the types of services an individual can purchase using their budget
authority. Taking both the positive and
negative together, Austrian economics provides a unique way of understanding
social policy.
Conclusion: Privilege and Paternalism
Social
work is by its nature a progressive tradition, one that values social justice,
diversity, and the dignity and worth of individuals and groups. The use of political economy in policy
analysis illuminates issues in social policy that, due to its methodological
individualism, fall outside of these traditional social work ideological
frames. Austrian economics draws
attention to the creation of knowledge within a system, and underscores the
limits of knowledge possessed by paternalistic central planners. It asks:
·
Does a policy allow for robust feedback from
consumers?
·
Does it provide for individualization and
customization in services and goods?
·
Can individuals with non-normative needs and
preferences have their needs met?
·
Is this policy accountable to consumers or to
policymakers and administrators?
These questions are necessary to
understanding not only how to critique a given policy program but for
understanding how to craft policies that are robust in the face of limited
knowledge. Policymakers exist in a sea
of uncertainty and by treating individuals as complex actors with their own
valid understandings of the world, Austrians argue systems will arise that
embody the diversity of human understanding and need.
In
addition to the epistemological issues raise by Austrian political economists,
scholars in the public choice tradition raise issues of privilege within the government
system. The domination of the political
process by interest groups raises fundamental questions about the ability of
government to address problems of social importance. It asks:
·
What are the barriers to gaining an effective
voice in the policymaking and rule-making process for oppressed and
marginalized groups?
·
How is a policy designed to help powerful
interest groups at the expense of others?
·
What interest group’s self-interest aligns or
conflicts with social justice?
·
How does a given policy incentivize or limit the
opportunistic motivations of political actors?
By answering these questions, we
can more accurately assess the power structure within a given policy and see if
it accords with the demands of social justice.
Political economy helps to put aside the rhetoric in the political arena
and investigate whether a policy will benefit those in need or powerful,
established interests.
The
ultimate goal of political economy in policy analysis is to create adaptive
complex systems that empower those governed by the policy. Deconstructing how policy is used to promote
privilege and paternalism is part of that mission. Through the use of a political economic orientation
to social policy, social justice may viewed in a qualitatively different
light. Modern liberalism treats the
market as a necessary evil that provides for the prosperity of the few at the
expense of the many. Political economy
rehabilitates the market as a vehicle for achieving social justice that
provides greater voice to the preferences of those with little political power
than traditional bureaucratic administration.
Furthermore, it critiques the ways in which powerful interest groups and
other political actors use government privilege pursue their self-interest at
the expense of oppressed and marginalized groups who are structurally
discriminated against due to their low levels of capital. Political economy, as a whole, is a
structural critique of granting the state more power in the service of social
justice. Although many of the
ideological and philosophical commitments of political economy may be anathema
to social work policy analysts, it is an important framework with a rich
tradition of scholarship that questions the role of the state in achieving
social justice.
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