The Faculty of Policy Studies at Chuo University was founded in April 1993, and it will very soon be its 20th anniversary. A new science of policy studies is an interdisciplinary research which investigates policy by a comprehensive approach. Policy is efforts engaged in by people who seek to realize a better society. Therefore, the policy studies comprehensively researches these efforts engaged in by people who are trying to make our real-life society into a better society. How then can we judge what is a better society? This value judgment becomes important.
2. One Yen One Vote and One Person One Vote
In economics we call it a Pareto improvement when a change is made which makes someone better off without making any member of society worse off in doing so. Namely, a Pareto improvement is defined as a social change in which at least one individual is made better off and no individual is made worse off. A value judgment that sees this improvement as being a good thing is the Pareto criterion. However, in reality, there are almost no policies which will make everyone better off. Some people are in agreement with and some people are opposed to most actual policies. In other words, by the implementation of a policy, some people may make gains, while other people will incur losses. At this time, if the total gains of the people who are in agreement exceed the total losses of the people who are opposed, the compensation principle judges that a better society will be realized by the implementation of the policy. If the total gains still exceed the amount of compensation even after compensation is made for the people who incur losses, in the sense that some people will be better off without making any member of society worse off if compensation is made, a Pareto improvement is possible.
The compensation principle implies that decisions should be made on the basis of “voting by money.” Then the principle can also be put in terms of voting scoring, at one yen one vote. Actual political decisions are made by rule of majority voting, by voting based on one person one vote. If the agreement of a majority of people can be gained in the implementation of a policy, it is judged that the society after the implementation of the policy will be a better society. Even if the agreement of a majority cannot be gained, if the number of votes in agreement with the policy exceeds the number opposing the policy in a plurality or relative majority, it is judged that the society after the implementation of the policy will be a better society.
Let us suppose a society which is made up of 3 individuals, and where if a certain policy is implemented, 2 of the individuals will each make losses of 10, and the other individual will make a gain of 25. According to the compensation principle, the implementation of this policy is right, while according to the rule of majority voting, it is wrong. Which criterion of value judgments should be used in considering the right or wrong of implementing this policy? If the 3 individuals in the numerical example above are the representatives of 3 regions, is it correct to make the judgment on implementing the policy based on the rule of majority voting without taking into consideration the population size of these regions? This also relates to the issue of the disparities in the value of votes.1
3. What is fairness?
It is often judged that a society if without unequal in terms of income of the individuals would be a better society. In policy implementation, if an index of inequality such as the Gini co-efficient becomes lower, it is judged that the society after implementation of the policy will be a better society. This is one sort of fairness standards. There are diverse possible fairness standards depending on the question of what one is trying to be fair or unfair about. The issue of the disparities in the value of votes is the issue that the substantial value of one vote is unfair. Fairness and unfairness can relate to income (becoming rich), consumption (living a rich lifestyle), and wealth (being rich), but which of these are to be used in judging a better society? Furthermore, depending on which sort of fairness one pursues – ex-ante fairness or ex-post fairness or procedural fairness – the sort of better society that should be achieved will be different.
Rather than looking at the state of distribution across the whole of society in this way, there is also the Rawlsian maximin criterion which judges what is a better society by focusing instead on the economic condition of the people placed in the worst situation in society. This judges a better society as being realized when the utility (economic condition) of the people placed in the worst situation in society after the implementation of the policy is higher (better) than the utility (economic condition) of the people placed in the worst situation in society before the implementation of the policy.
4. The Issue in Choice of Theory
The difficulty in evaluating society after a policy is implemented lies not only in the issue in choice of value judgment, but it is also related to the issue in choice of theory, to predict what sort of losses and gains will be made when the policy is implemented. The losses and gains in the policy implementation mentioned above, occur as a consequence based on what sort of theory? As a consequence of the implementation of the policy in a society of 3 individuals, 2 of the individuals will each make losses of 10 and the other individual will make a gain of 25, but is this theory really correct? Based on a different theory, the consequences of the policy might be different. Thus, the evaluation of society after the implementation of a policy may differ according not only to the value judgment used but also to the theory on which the consequences are based.
The maximin criterion is based upon the premise that no one knows his or her place in society but all individuals are assumed to have equal knowledge of the outcomes of alternative constitutional rules and the same preference for risk aversion under the veil of ignorance. However, even if they share a common theory (general knowledge) under the veil of ignorance, if one accepts that there are some individuals in society who have risk neutral or even risk seeking preferences, policies or rules which bring about a different consequence may become more preferable. Moreover, not everyone has a theory on how to link together the relationship between before implementation and after implementation of a policy. Individuals have to invest resources such as time to come to understand theory and to make it their own. Individuals who undertake the necessary investment may become policy entrepreneurs who attempt to demonstrate the possible outcomes that follow from different alternatives to individuals who do not to make such investments in the processes of policy decision-making.2
5. Consequential and Non-consequential Reasoning
The value judgment mentioned above examines which is a better society on the basis of the consequences of policy implementation: the situation in which individuals in society are placed after the implementation, or the losses and gains due to the implementation. This is a judgment criterion based upon consequences. In contrast to this, instead of the situation of individuals or the losses and gains of individuals which are generated as a consequence being at issue, non-consequentialism uses the process or procedure itself which brings about the situation as the target of its evaluation.3 The consequences brought about by the constitutional rules and procedures of society which define each person’s rights and obligations or decision-making rules are irrelevant, and the constitutional rules and procedures themselves are seen right or wrong, in order to judge a better society. Procedural fairness is a type of non-consequentialism, but here what sort of procedure is seen as right differs depending on the individual. Thus, each individual needs to think about his or her own value judgment in order to decide what constitutional rules and procedures themselves are right and wrong.
In thinking further about policies and value judgments in order to put into practice comprehensive policy studies, it is also important for us to engage in policy as a member of society and a responsible, involved party, besides attempting to act as far as possible as an objective observer of society. I have contributed to the discussion on real-life policy challenges in newspapers, and in doing so, I am engaging in efforts at seeking to realize a better society, by engaging in policy as both an observer and at the same time as an involved party, with my own theories and value judgments.4
Not only those of you who are happily facing your graduation ceremonies on March 25, but if each and every one of us, each with our own theories and value judgments, goes on to engage in efforts which seek to realize a better society by engaging in policy, as members of a society which you think is important and as responsible involved parties, then comprehensive policy studies will truly be significant. Make every day a good day, and make a good policy every day.
1. The students in my seminar also tackled this issue of the disparities in the value of votes as the topic for their research project for the 2012 academic year, and the outcomes of their research have been posted on the Chuo University website, so please take the time to read them through (http://www.chuo-u.ac.jp/chuo-u/news/contents_j.html?suffix=k&topics=19158&start=30).
2. For further considerations on the situation under the veil of ignorance, please refer to Akira Yokoyama, “The Calculus of Consent at fifty: the development of public choice in Japan,” Public Choice 152: 345-349, 2012. (http://link.springer.com/article/10.1007/s11127-012-9979-z)
3. Regarding non-consequentialism, please refer to Kotaro Suzumura in Part 5 of Foundation in Welfare Economics – Rational Choice and Social Evaluation [Kosei Keizai-gaku no Kiso – Gori-teki Sentaku to Shakaiteki Hyoka], Iwanami Shoten, 2009.
4. For example, please see Akira Yokoyama “Public Finance in Japan: Conditions for Avoiding Crisis [Nihon Zaisei Kiki Kaihi no Joken (jo)],” Nikkei Newspaper’s Economics Classroom [Keizai Kyoshitsu], Oct. 17, 2012.
Professor, Faculty of Policy Studies, Chuo University
Areas of Specialty: Economic policy, public finance, public choice
Born in Yokohama City in 1949. Gained his Doctoral degree (in economics) from Keio University in 1992. Graduated from the Faculty of Economics, Keio University in 1972. Withdrew from the Doctoral program at the Graduate School of Economics, Keio University, in 1979, after completing the required course work. After serving as Full-time Lecturer, Assistant Professor, then Professor at the Faculty of Economics, Josai University, he was appointed to his current position in 1993.
He has served in positions which include Member, Board of Management of the Japan Public Choice Society (1996 to the present); President of the Japan Economic Policy Association (2001 to 2004); Member of the Tax Commission, Cabinet Office (2007 to 2009); Member, Board of Management of the Japan Institute of Public Finance (2008 to the present); Senior Research Fellow of the Policy Research Institute, Ministry of Finance (2008 to the present); Temporary Member of the Central Environment Council, Ministry of the Environment (2009 to the present); Chairman of the Tax Commission, Tokyo Metropolitan Government (2009 to the present), etc.
His major publications include Tax System and Tax Policy – Good Reform [Zeisei to Zeisei – Kaikakukara arubeshi], (co-author, Yomiuri Shimbun-sha, 1994); Public Choice Analysis of Public Finance [Zaisei no Kokyo Sentaku Bunseki], (Toyo Keizai Shinpo-sha, 1995); Public Economics [Kokyo Keizai-gaku], (co-author, Toyo Keizai Shinpo-sha, 1998); Environmental Economics [Kankyo Keizai-gaku], (co-author, Yuhikaku, 2007); New Developments in Decentralized Finance [Bunkenka Zaisei no Shintenkai], (co-editor, Chuo University Press, 2007); System Design for Economic Growth and Countermeasures to Global Warming [Ondanka Taisaku to Keizai Seicho no Seido Seikei], (co-editor, Keiso Shobo, 2008); Modern Public Finance [Gendai Zaisei-gaku], (co-author, Yuhikaku, 2009); New Developments of Public Finance under Globalization [Gurobaru-ka Zaisei no Shintenkai], (co-editor, Chuo University Press, 2010), among others.