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When Making Public Policy Decisions

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1. When making public policy decisions, policy makers must face a world with imperfect information and a finite amount of resources. Both of these realities put limitations on how effectively a policymaker can make people’s lives better off. Obviously, it is impossible for anyone to perfectly predict how a certain policy will play out when it is enacted. This includes policymakers, who despite their noble goals of increasing the well-being of society, can only make an educated guess about the effects a policy will have. Factors such as the fickleness of human nature or hidden information creates uncertainties that are hard to address when making policy. For example, in 1929 the causes of the Great Depression were not fully understood, but…show more content…
This has caused many people to call into question the workings of capitalism as it operates in the United States. By letting markets produce this outcome, it has become clear that the efficiency gained from this system is creating an equal loss in equality. Whether there exists a natural tradeoff between efficiency and equality or their inverse relationship is a product of our political system does not change the fact that the tradeoff exists in our current society and is affecting policy decisions. Policymakers who are against increasing equity see it leading to a moral hazard. By creating a safety net through redistribution, they believe it will eliminate the incentive for people to work hard and contribute to society. Government on the other hand would have to increase their work effort in order to create the bureaucracy responsible for ensuring that equality is maintained. If government is using up their resources and energy to achieve this goal, they are not only decreasing efficiency but also incurring an opportunity loss by not using those resources for other purposes that could benefit society in other ways. The way the United States government has handled the equality-efficiency tradeoff shows that for the most part, they value efficiency more. As long as this tradeoff exists in our system, or even just the belief that it exists, the lower portions of society will have little hope to
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