The Moon and the Ghetto - Public Policy 101 for Sustainability Enthusiasts

The Moon and The Ghetto, An Essay on Public Policy Analysis

Richard R. Nelson, 1977

From the back cover: “If we can land a man on the moon, why can’t we solve the problems of the ghetto?” Our society has become accustomed to spectacular technological achievements and to material progress that surpasses the most optimistic forecasts of a few decades ago. Yet that same society can register only modest gains against a host of urgent problems: the need for medical care delivered at reasonable costs, for efficient mass transportation, for adequate housing and education in the inner cities… Why? What, if anything, can be done?

Here’s a book that I came across that I thought highly relevant in this time where so many governments and public institutions are trying to address sustainability problems by regulating sustainable finance tools, of course the EU’s Sustainable Finance Action plan being the most prominent example.

It seems to me that, to be effective as a sustainable finance professional, a solid understanding of how public policy ‘works’ (or, often, does not work…) is essential. And I think in reading about the three ‘traditions’ you will have a lot Aha! moments, just like I did.

The book was written in 1977, so most examples are quite dated, and it contains 150 pages of dense academic prose. Still, I find it offers some fascinating insights that I believe are still highly relevant today.

So, I thought I would write a brief summary of the main insights, the three traditions, and the recommendations going forward.

It seems to me that these observations on what goes wrong in developing public policy and how we can do better are as relevant today as they were in 1977, if not more so.

Key insights

-         We’re trying to solve problems; problem-solving requires more than ideology, it requires solutions

-         We shouldn’t confuse means & ends – we need to know not only where we want to go, but what route will take us there

-         The lack of success in many policy areas has as much to do with unrealistic expectations as it does with lack of adequate policy measures

-         Most of these societal problems are highly complex – they require highly complex solutions, there are no quick fixes

-         Each of the three traditions described in the book “has certain attributes of a religion”.

The three policy ‘traditions’

Nelson examines three main ‘traditions’ that have dominated thinking about causes and cures for societal issues:

1.      Rational analysis or logic-of-choice approach –> public policy experts

Approach: “laying out alternative courses of action, tracing their consequences in terms of relevant benefits and costs, and identifying the best policy, or at least a ‘good’ one.”

I think of this as: a centralized, or top-down approach. It sets the direction and makes decisions, but does not think about how these decisions will be implemented. Telling quote: “Chief executive making decisions”.

Its strength: setting the direction, determining the strategy.

Its weakness appears to be assuming that the ‘steering wheel’ is directly connected to the ‘rudder’. The impact of policies depends to a great extent on the performance of people not directly under the control of the policy maker. Also, there’s too much focus on ‘normative’ approaches.

2.      Organizational or systems perspective – > economists / sociologists

Approach: “Downplays the role of any single decision-making body and treats decisions, and the way they are carried out, as largely endogenous, predetermined by basic institutional structure. The performance of any economic sector is seen as determined largely by … the machinery for determining demand … and the supply machinery.” “Public policy can try to achieve its aims by imposing various demands on the system through the demand apparatus. Or it can try to influence parameters that determine the nature of supply adjustment.” “Prediction of human and organizational behavior under different regimes becomes the heart of the matter.” “Institutional structure determining what is going on”.

I think of this as: the school of The Economist (the publication, especially their consistent calling for a carbon tax to address climate change), and behavioralists like Richard Thaler (“Nudge”) and Daniel Kahneman. It’s all about human behavior and incentives.

Its strength: determining the organizational elements, making sure the strategy gets implemented.

Its weakness: it is normatively weak. Also, it lacks a theoretical structure for generating predictions of the consequences of organizational changes. It is also basically conservative, focusing on “what is”, not on “what should be”.

3.      Research & development orientation –> scientists & engineers – “technologists”

Approach: “Where the policy analysis perspective sees a chief executive making decisions, and the organizational perspective sees institutional structure as determining what is going on, the science and technology perspective focuses on the human intellectual enterprise, the human creativity and capability for learning and mastering nature, and sees the policy problem in terms of giving thrust and guidance to these forces.”

I think of this as: the Bill Gates approach, investing in new technologies needed to address problems such as climate change (updated nuclear energy technologies), disease (“reinventing the toilet”) and poverty (access to farming technologies). Also: calling on governments to make these investments themselves, rather than ‘outsourcing’ it to private investors.

Its strength: delivering the tools needed for implementation of the strategy.

Its weakness: “The tradition has been weak in setting forth normative criteria, and fractious and unpersuasive in proposing how to marshal science and technology to deal with the new problems.”

Solutions

Nelson proposes a number of solutions and recommendations going forward:

-         “In some cases simple open-minded communication would have an enormously salutary effect. In other cases the problem is more severe, and a truly integrated perspective will need to be built; but a start on that problem also requires more in the way of open-minded communication.”

-         “It would help if social scientists were more honest, indeed aggressive, about saying that certain things are not well known and those who propose solutions confidently are either charlatans or fools. Where we have strong understanding, we should say so.”

-         “For many of our toughest problems I suspect we do not have the knowledge to draw out reliable road maps. It is extremely important to educate the political process that certain problems are poorly understood, and that it will not be easy to find solutions that will really solve anything.”

-         “At the least, such analysis can encourage a sequential experimental approach to hard problems, and can help prevent the adoption of nostrums that ultimately must disappoint and disillusion.”

Most insightful quote

“The case studies (…) indicate that the political process does not possess sharp comprehension of the problem, the alternatives, and their consequences.

Rather the case studies show the process operating in the intellectual dark, not really recognizing what the problem is about, treating symptoms and being vague about causes, remaining unclear about alternatives as well as issues, and having little to go on in assessing the consequences of taking different actions.

If the policy analysis community has often been too quick to dismiss the utility of traditional political machinery and the importance of conflict in the policy-making process, those who stress the efficiency and the efficacy of traditional machinery may greatly overestimate its intelligence, in the absence of good analysis.”