Identifying When Public Policy Costs Outweigh the Benefits

Instructor: Christopher Muscato

Chris has a master's degree in history and teaches at the University of Northern Colorado.

Public policymaking can be difficult, since every action impacts people in different ways. In this lesson, we'll discuss the benefit-cost analysis and see how we know when the costs outweigh the benefits.

Public Policy Decisions

Let's do a little role-playing. We loosely refer to any decision that will impact the political, economic, or social lives of citizens as public policy, and today, you are a city-council member for your hometown, responsible for policymaking. The city council is currently debating a law that would make it legal to keep dolphins as pets. Sounds cool, but is it really a good idea? As a policymaker, it's your job to decide.

Benefit-Cost Analysis

Public policymakers, like yourself, are often faced with tough decisions. In this case, you've got to decide if dolphin ownership is beneficial to the people. But where do you begin? One place that many policymakers start is with a benefit-cost analysis. This is an economics term in which benefits from a policy are balanced against the financial, social, and political costs of that action. It's like making a pro/con list, but with a specific focus. It should be noted that not everyone agrees on the usefulness of cost-benefit analyses in all situations, but for our problem it's a great place to start.

What are the costs or benefits of letting people keep dolphins as pets?
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Financial Costs and Benefits

So, how do you begin to evaluate costs and benefits of something like a dolphin law? An obvious place to start is with the actual financial implications. Let's start with the costs. Buying a dolphin would be very expensive; you've got to install a massive tank, import crates of herrings for food, and pay for medical bills. However, those costs are something the pet-owner takes on voluntarily. Since we believe in individual liberties, we have to respect their right to assume that cost, and therefore we don't need to worry about it in our analysis.

However, could there be financial costs for people who don't voluntarily buy a dolphin? Well, if we legalize dolphin ownership, then the municipal government becomes responsible for enforcing pet ownership laws. This means that we have to inspect dolphin tanks, as well as create our own facilities for abandoned or abused dolphins. We have to pay city attorneys to persecute irresponsible pet owners. All of these costs will fall back upon taxpayers, so there could be a cost to individual citizens; even those who didn't choose to buy a pet dolphin.

Now, how about benefits? Legalizing a new pet would create opportunities for people to open businesses selling tanks and dolphin food or offering dolphin-training classes. There is a potential for financial benefit here to individuals and to the community, but the extent of that benefit depends on how many people actually end up buying dolphins.

Other Costs and Benefits

Financial implications are a good place to start, but a benefit-cost analysis needs to be more than that. Every action does have its benefits, as well as a cost in terms of time, effort, or quality of living. In our situation, are there non-financial costs of making dolphins pets? Again, we want to focus on the costs to people who are not voluntarily taking on the assumed risks. For example, if a person buys a dolphin, they voluntarily live with an animal that spends most of its time splashing around. However, their neighbors did not sign up for that. Neighbors could experience water damage to their property.

It's also important to think about the big picture. If dolphin ownership becomes common, it could lead to a reduction of the wild dolphin population and throw ocean ecosystems out of balance.

But what about the benefits? Dolphins are cute, and having one for a pet could make people very happy. Pets help children become more responsible, and having highly intelligent pets could create deeper bonds between people and animals. If a great number of people petitioned for this law, then passing it would also show that the political process is working, respect the liberties of our citizens, and build trust in the government.

Weighing Costs and Benefits

We've laid out our costs and benefits, so now it's time to compare them. If the benefits are greater, we can pass the law. If the costs are greater, we'll reject it. One of the best ways to look at this is to ask these two questions: Who benefits and who bears the cost?

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