University at Buffalo - The State University of New York

Published: October 17, 2002

By SUE WUETCHER
Reporter Editor

Economic analysis is the key to formulating intelligent public policy, according to SUNY Provost Peter D. Salins, a former chair of the Department of Urban Affairs and Planning at Hunter College of the City University of New York and member of the prestigious College of Fellows of the American Institute of Certified Planners.

Speaking to a group of students in the master's program in applied economics as the semester's first speaker in the program's Visiting Speakers Series, Salins examined several societal issues from the viewpoint of applied economics. Stressing that he was speaking as an urban planner, rather than as the chief academic officer of SUNY, he noted that once economic analysis was introduced, there had been a lot of "redirection of thought"—the forming of "new paradigms—in major public policy issues.

As an example, he pointed to changes in approaches to fighting crime. The prevailing theory about crime—accepted during the 1960s through the 1980s—had been that crime cannot be fought without attending to the root causes, such as poverty. However, a new paradigm is now being applied—that crime be viewed simply as an economic activity—which leads to policies based on the premise that crime can be controlled if its profitability is impeded, he suggested.

Salins noted that this was the philosophy guiding Bill Bratton, New York City police commissioner under Mayor Rudy Giuliani, when he took a "broken windows" approach to crimefighting in which attention was paid to low-level crime, and not just to high-profile crimes, like murder and drug-dealing.

The public views inattendance to low-level crime as a sign of disorganization, while criminals see a low level of policing as an economic opportunity, he said. But, he pointed out, it's "much easier to catch people breaking windows than robbing banks." Moreover, focusing on low-level crimes gets guns off the streets, as well as some serious criminals, he added.

By following a strategy of making crime "no longer pay," New York saw a significant decrease in crime, specifically homicide, and now has the lowest homicide rate among any large city in the country, Salins noted.

When intelligent economic analysis was brought to bear on this issue, "the policies shifted and the results improved," he said.

Another public policy issue that is "ripe for a new paradigm" is health care, Salins said.

He cited the prevailing theory on health care: health insurance is so intrinsically expensive that most people feel they can't afford it unless someone else—like their employers or the government—pays for it. Until now, apparently, it has been assumed to be "against nature," he added, for consumers to go out and buy their own health insurance.

Looking at the issue from the perspective of applied economics, he suggested, a new paradigm might be considered—in which individuals are motivated to buy their own insurance and not all health care needs would be insured.

Salins noted that health insurance would be less expensive if it did not cover such routine medical visits like those for upper respiratory complaints—the common cold—and those visits would be less expensive if they weren't covered by insurance, he said.

Moreover, if employers did not deduct money from employees' paychecks to fund health insurance, there would be more money for the employees to pay for insurance themselves, he said.

And in applying sound economic analysis to the issue of education, Salins pointed out that education falls within the public policy domain because it is considered a "public good." At the elementary and secondary levels in particular, the government funds the entire cost of education because it benefits society as a whole, not just the individual, he said.

But once a student reaches college, he says, the "personal benefit" to the student—in the form of increased opportunities and income—increases relative to the benefit to society as a whole.

Therefore, as the ratio of personal benefit to societal benefit shifts, it is logical for the state-support ratio for higher education to also shift, with the student picking up a larger share of the cost of a public education, he said.

Salins concluded by observing that public policy paradigms based on intelligent economic analysis "cut through all the nonsense" and make specific public policies much more effective.

He urged the students to put their applied-economics training to good use in the public sector. "Don't be reluctant to take this approach," he said. "The key to rational public policy is economic analysis."