Market approaches, such as inducing choice alternatives through offering voucher schemes, have been presented as solutions to deteriorating public school systems nationally and abroad.  Since it is in the rational economic actors best interest to choose an alternative that will provide him with the most benefit, or utility, such logic suggests that with increasing options for schooling and decentralization of education systems, the competitive market approach will force schools to become more efficient, and thus effective.  What is implied is that there are appropriate signals in the educational marketplace that can replace price signals and parents have the capacities to understand them.

This is a form of creating incentives for schools (public, private, charter or other) allowed to participate in the voucher program to provide better education opportunities and bring equity into systems that lack it (Munger, 150).  Advocates of the voucher system in education suggest that certificates could fund the “exit” of students who are unsatisfied with their educational experience  (Gershberg et al. 1026).  Through this exit, schools would have an incentive to compete for students and would seek the most efficient way to do so.  In function, a voucher would be giving students “exit” and the system would be an incentive structure for the education system to repair itself.

Since education is offered as a public service around the globe, it also has to meet the three reasons Hirschman specifies as justifications for public provision of goods and services: technical or legal monopoly, services which are not paid for directly but all citizens are entitled to, and services which require some uniformity, regardless of consumer preferences (Hirschman, 87).  For education, Hirschman argues that public education fits this description, citing Levin, “particularly in democracy with diverse ethnic and religious groups, has been that is desirable for all children to pass through a ‘common educational experience,’ that is, for all schools to instill basic civic values and to offer uniform instruction in certain elementary field” (87).  Since education clearly meets the criteria for public service provision and in it’s failing state policy experts have suggested an infusion of market mechanisms to provide more efficient and effective education facilities a voucher system seems like a good fit. 

Hirschman points out that the literature surrounding vouchers suggests that when used as a representation of “exit”, the scheme is most effective:

(1) When there are wide spread differences in taste that are recognized as legitimate;

(2) When people are well informed about the quality of goods and services they want and can easily compare and evaluate them;

(3) When purchases are relatively small in relation to income and recurrent, so that buyers can learn from experience and easily switch from one brand and supplier to another; and

(4) When there are many competing suppliers (Hirschman, 88).

The author points out that in cases of education consumers are often ill-informed of quality, there are limited suppliers, and comparing services is difficult.  These faults undermine points two and four.  

            Additionally, voucher systems are ineffective for creating increases in educational institutions through incentive structures since the voucher system is often designed with three different elements that can undermine the effectiveness of schooling: regulation, financing and support services. Regulation is in reference to the schools that are selected to be part of the voucher program, in which limited opportunities would undermine point four.  Financing can be partial or in whole and this could be to the detriment to the school a student is leaving, and to the family of the new school they plan to attend if they cannot afford the balance of tuition, which undermines point three.  Lastly, supports services are activities that governments undertake to make regulation and financing more effective, are more concerned with equity than efficiency, and can undermine all four points.

Hirschman argues that in health and education leaving, or exit, of such system could undermine voice, which is exemplified in the concept of educational creaming (Arenas, 382).  This is apparent in many countries where voucher schemes are present, where schools are allowed to select or control the students who enroll in their schools, and often the higher achieving schools select the brightest, highest testing, and most active or educated parents are involved are chosen over lower achieving students.  Once the highest achieving have been moved to better schools, the poor public schools are left with less resources and the least academically capable students, who now have a lower “peer-effect” from losing the excelling students.  Voice may be harmed by students whose families were most engaged in reform at the school, and advocacy drops because of exit.  

For publically provided education, voucher systems, although a novel idea of brining marketplace mechanisms to create competition, does not provide the incentives for schools to provide a better education for students as anticipated.  Often, voucher programs give student opportunities to different educational settings at the detriment to the school they leave and possibly their own social capital. 

Resources:

Gershberg, Alec I, Pablo Alberto Gonzalez, and Ben Meade. “Understanding and Improving Accountability in Education: A Conceptual Framework and Guideposts from Three Decentralization Reform Experiences in Latin America” World Development 40:5. 1024-1041.

Munger, Michael C. Analyzing Policy: Choices, Conflicts and Practices,  W.W. Norton & Co., 2000., Chapter 5: “Experts and ‘Advocacy’: The Limits of Policy Analysis.”

Hirschman, Albert O., Chapter 4: “An Expanding Sphere of Influence” in Rival Views of Market Society and Other Recent Essays, Harvard University Press, 1992.

Arenas, A. “Privatization and Vouchers in Colombia and Chile”.  International Review of Education 50:3/4, July 204. Pp 379-395.

By Claude Joseph
Laboratory research undertaken by a physicist would hardly be influenced by the ideology and other subjective qualities of the researcher. Natural and physical sciences such as physics are indeed fields where objectivity and neutrality to a large extent prevail. However, unlike the physical sciences, neutrality is by no means a feature of social sciences. A policy scientist, for example, is unable to utterly put his ideologies aside when undertaking research. A market fundamentalist – to use a concept coined by Georges Soros – would always find evidence to show  “why government is the problem”[1]. Therefore, the well-touted value-free approach in social sciences should be viewed as a myth.

Now provided that neutrality is an illusion, how should a policy scientist overcome the dilemma of subjective and objective responsibilities? A subjective responsibility is the ideological framework within which someone operates. It is a specific ethical view. Whereas, an objective responsibility is the responsibility defined and delineated by an external entity. For instance, a policy analyst has an objective responsibility toward the U.S. Constitution; he likewise has a responsibility toward the principles outlined by the agency within which he works. As it happens, the subjective and objective responsibilities oftentimes clash. When that happens, to repeat our main question, what should the policy analysis do?

Albert O. Hirschman, reflecting on likewise dilemmas, envisages two main options: Exit and Voice with an intermediate concept that he calls loyalty. By exit, the author means “withdrawal from a relation with a person or an organization” (p. 78). On the other hand, voice (horizontal and vertical) is the use of all communicative ways to inform those in charge that something is amiss. In the case of policy analysis, which one is more feasible? How, for example, a policy analyst manages a transition from a key executive agency in the Bush era to the same agency in the Obama era? Suppose that the policy analyst in question was chosen for his belief in policies that advance the interest of the well-off such as tax breaks for the wealthy, what will be his reaction when Obama decides to go back to Clinton tax code for those earning more than four hundred thousand dollars? Should he stay to implement the policy? Boycott it by some strategic moves that can be equated with voice? Or should he exit? 

In circumstances where subjective and objective responsibilities are in conflict, the policy analyst faces a no less important dilemma. In the World Bank, Joseph E. Stiglitz resigned because of value clashes. In other words, he chose to exit because World Bank policies toward developing countries were in sharp contrast with his world outlook. However, when he was facing the same dilemma in the Clinton’s administration he voiced himself among his fellow liberal democrats due to the loyalty that Hirschman refers to. In contrast to what Hirschman says, the exit does not exclusively depend upon the availability of other alternatives; in the case of policy analysis the exit-voice should be strategic. If I know that the divergence is a mere matter of means to reach an end and not ideology, voice is the best move. Otherwise, exit might be the right decision.

 


[1] See Milton Friedman, 1993, Why government is the problem?

As the world has entered the urban century (more than 50 percent around the globe live in cities) the thematic of cities as engines of growth has reemerged in a powerful way.[1] In the past years, consultancy groups and local governments have published a series of long-term city strategies reflecting the importance of cities as growth centers; Vision Mumbai 2030, Vision Nairobi 2030, Vision Cape Town 2030 all showcase this tendency. Beyond the obvious similarities in the strategy titles, these elaborations share a common language -- referring to the future transformation of the cities above into “world-class” or “iconic” cities – and a common realization: that, as Jane Jacobs simply noted “cities, not countries, are the constituent elements of a developing economy and have been so from the dawn of civilization.” (1984 p. 32).

Beyond these shared characteristics, the ways through which policymakers attempt to induce city growth is not always evident. Perhaps this is a consequence of the fact that cities are not only engines of growth but equally motors of redistribution and arenas of competition.  Often, basic questions such as -- how do cities grow? how do they create wealth? how are they managed? – unveil important polemic views. As Molotch notes “We need to see each geographical map…not merely as a demarcation of legal, political, or topographical features, but as a mosaic of competing land interests capable of strategic coalition and action.” In that sense, cities represent a laboratory in order to understand the dynamics and power relations within policy decisions. Such decisions are usually characterized by what we might call a deep path dependency in the sense of Sewell (1996, 262-3), who suggests that “what happened at an earlier point in time will affect the possible outcomes of a sequence of events occurring at a later point in time.”

Interestingly within the urban context, this policy path dependency is reflected by the shape of cities. For instance, as recent studies on the density of cities have showcased, the land policy management across different cities and the policy decisions to regulate or not land markets has implications on the overall shape of cities. Whithin free market economies, unregulated – for the most part -- land markets have created what is known as a negative density gradient. In contrast, in cities where land management was based on other criteria (central planning, political regimes such as Appartheid) without considering land market prices, as for instance in Moscow, the density gradient took a positive slope. (see Figure below).

            Beyond the implications of what each density pattern might imply, in terms of city planning (transportation, location of jobs, location of housing, etc.) the example above raises important questions: given the obvious long-lasting effects of policy decisions on the development of cities and the asymmetric power dynamics in the city policy environment is it conceivable to strive for one specific type, or as mentioned above one world-class city? Also, how does Hirschman’s concept of exit and voice apply to the urban policy context, especially in cities were path-dependent policy decisions have neglected the ability to voice discontent or exit (assuming that entering was possible in the first place) the decision making process for the majority of citizens? Hirshman, (1992, 81) admits “the difficulties of combining exit and voice are in a sense “problems of the rich” and that historically both exit and voice are in short supply. Perhaps then, a precondition for the creation and sustainability of city growth relies on the extension of voice and exit opportunities beyond the spectrum of the political elites that dominate the urban agenda. If growth is not inclusive, then its costs will continue to asymmetrically affect the majority of citizens, while its benefits will be realized by the few lucky ones, who can voice their vision of iconic. 

Achilles

References

Bertaud, A. 2004. “The spatial organization of cities: Deliberate outcome or unforeseen consequence?”
Hirschman. A. 1992. Rival Views of Market Society and Other Recent Essays.
Jacobs, Jane. 1984. Cities and the Wealth of Nation: Principles of Economic
Lives. New York: Random House.
Molotch, H. 2011. “The City as a Growth Machine: Toward a Political Economy of Place.”


[1] The 2012 UN-Habitat State of the World Cities is dedicated to the issue of cities as engines of growth.

Source: Alain Bertaud

Andrea 

This week, The New York Times reports that the city of Detroit, long the infamous poster child for urban decline in the United States, has a new, emerging dichotomous identity. The Times reports that private industries are once again booming in Motor City, even as the city’s finances continue to lie in ruin, and the State of Michigan seeks increasing control of the city’s government and tax revenue.

In “City as a Growth Machine,” Molotch (1976) posits the city as a market commodity; an aggregate of land-based interests (310-311). In the city, otherwise competing groups collude to achieve a common land-enhancement scheme, for the purpose of achieving mutual benefit for all. In Detroit, where extreme depopulation and a shrinking residential and business tax-base have led to fiscal crisis, the need for different interests groups to work together to create better economic and social outcomes is particularly important. Now that the auto industry is once again booming downtown and new small businesses have begun to open their doors, the need for the private sector to work as allies, rather than competitors, in order to revitalize the city’s business sector, is especially apparent.

However, as businesses have made strides forward, with both small boutiques and national chains (Whole Foods) making plans to open in the city, public sector services have continued to suffer, as services budgets continue to be cut. As Molotch explains, cities rely on both government and private sector for growth (312-313). While the public bears infrastructure costs, quasi-public industries like newspaper publishers and universities become “growth statesmen.” In Detroit, the growth of the private sector, both small businesses and big employees like Whole Foods and Blue Cross / Blue Shield, has been enabled by public support in the form of tax incentives and pro-business laws.

Public policy has played a major role in encouraging businesses to locate in the city, but the city itself has not benefitted. Is this the result of the path dependency, wherein increasing returns are predicated on the relevant benefits of one activity versus another? As Pierson (2000) writes in “Increasing Returns, Path Dependence, and the Study of Politics,” a huge component of path dependency is economic geography (255); increasing returns are based on institutional emergence and change. Here, we apply this concept (pioneered by Paul Krugman in 1991) to the changing economic landscape of Detroit, where it seems that the public sector remains constrained, and disadvantaged, by the traditional principles and patterns of path dependency while the private sector works around these constraints to create new, better outcomes for itself.

As Molotch argues, the local environment plays a huge role in micro-economic outcomes (357). In Detroit, it seems that the local environment is benefitting business while the public sector is excluded from growth opportunities and increasing returns. This is problematic not only for the fiscal health of the city, but its political stability. Political stability is very rare during economic crisis; government administrations often take the blame for economic downtowns, the result being that political leaders are then voted out of office during the next election cycle.

As the Times reports, the fiscal situation in Detroit, including the emerging dichotomy between the public and private sector, has become a major political issue. Following a pattern outlined by Molotch, the emerging growth in Detroit does not represent the average person; it has been defined by business agendas (316). This is evidenced by the fact that mayoral hopeful Krystal Crittendon criticizes current policy as supporting corporations at the expense of people, and has called for new initiatives to make sure everyone can participate in the city’s recovery. Current Mayor Dave Bing has not said if he will run for reelection. Michigan Governor Rick Snyder is pursuing a plan for the state to become the city’s primary economic overseer, with the support of an independent manager.   

In Detroit, we see a perfect case study of how path dependency (long-term fiscal struggle and decline) compounded with pro-business policymaking that supports the city’s role as a market commodity, plays out in how the benefits of policy are distributed and whom they benefit. Detroit is certainly not the only city in which the gap between the success of the private sector versus the continuing decline of public services in increasingly apparent, particularly following the 2008 economic crash, but its long story of dramatic decline from it’s heyday as a powerful industrial metropolis makes it perhaps the most visible poster child of this phenomenon.         

Resources:

Davey, Monica. “Michigan Naming Fiscal Manager to Help Detroit.” The New York Times. March 2, 2013. 

Davey, Monica. “A Private Boom Amid Detroit’s Public Blight.” The New York Times. March 4, 2013. 

Pierson, Paul, “Increasing Returns, Path Dependence, and the Study of Politics,” The American Political Science Review, 94(2), 2000.

Logan, John R. and Harvey L. Molotch, Chapter 3: “The City as a Growth Machine” in Urban Fortunes: The Political Economy of Place, University of California Press, 1987.


I think your analysis on Detroit brings out the important dilemas and unanswered questions at the forefront of urban policy. While the idea that cities function as engines of growth is widely accepted, there are many ways and perhaps disagreement on how to achieve sustainable and equitable growth. Beyond the fact that in the past years Detroit has often symbolized the urban decline of once thriving productive US cities, through its recent pro-business policy making it is transforming to a site of experimentation in urban policy. The question is if these pro-business policy shifts will produce welfare benefits for the impoverished majority? For the proponents of the pro-business approach the present limited gains will extend to the rest of the population. This shift appears automatic, some kind of deus-ex-machina, but as you argue it is more realistic to elaborate on how these actual gains can be extended. What seems critical in the case of Detroit, and equally for many shrinking cities of the US is, how urban policies can provide the redistribution mechanisms (through taxes, infrastructure provision) in order to achieve such gains. It seems that policy planning in this case is very shortsighted. And once again as you argue this can have greater future implications given the path dependent nature of such policies.  
Achilles