Introduction

A number of years ago while living and working in Costa Rica, the senior author was impressed by how well the population was served by the national health service. From reading about and visiting the region, it was clear that the national health services of neighboring countries were hardly functioning. That was evident from the influx of patients from Nicaragua and Panama seeking to use Costa Rican clinics and hospitals and to obtain medicines and other health-related services. Even the Cubans he met were impressed by the system’s effectiveness and adapted for their own health care reforms many elements of the largely free, decentralized Costa Rican model that required doctors to work outside the capital city of San Jose in exchange for their study subsidies. How did the author know the Costa Rican system was efficient and cost effective? Were there valid performance metrics? Were there larger structural variables that explained why health care policy worked in Costa Rica and not in neighboring countries? Was it regime? Or culture? Adequate financing? Institutional systems that properly aligned patient-system incentives? Was the successful health care system but a reflection of the political regime and Costa Rica’s long-standing inclusive democracy? If so, are there at least parts of this health care system that could be transferred to work in neighboring countries? Could they be transferred to similar countries in other regions such as Africa and Asia? Conversely, what explains the resistance by countries needing health care that have resources (their own and/or from international aid) to adapting successful lessons from countries like Costa Rica? Are these same questions applicable to other key policy sectors such as education, urban transport, and environmental protection?

The International Flow of Applied Policy Lessons

Since that perplexing experience in Costa Rica, much has changed in the policy world. It is now clear that the flow of inter-country policy lessons at the sectoral or functional level is immense and growing. For example, U.S. analysts reviewed health care financing of systems in Switzerland, Canada, and Germany to use as inputs in the design of the final Affordable Care Act of 2010. Switzerland has a market-based system of health care that uses private insurers, covers everyone, and does so at a much lower cost than the American system. Other important health care models were available from regions such as Latin America for adaptation by OECD countries contemplating reforms. Conversely, Brazilian policy-makers have been examining German fiscal federalism for lessons on how to redesign their system in order to strengthen fiscal discipline. New York City poverty policy analysts reviewed the successful performances of conditional cash transfer programs in several Latin American countries, including Mexico and Peru, in order to develop their own cash transfer system. In fact, Mexico’s pioneering policy—to make cash benefits targeted to poor families conditional on behavioral changes such as getting children vaccinated and sending them to school—has been copied by almost 50 countries (Economist, 2014: 58). And a wealth of reports from the World Bank, the IMF, and other donors offer lessons from multiple countries on how to improve particular country sector policies. In short, generation and adoption of applied policy lessons on what works and what doesn’t is proceeding at a brisk pace.
Unfortunately, less research attention has been paid to the favorable contexts needed for successful systems adaptation and institutionalization of policy lessons. Policy design, implementation, and results lessons from Germany, for example, do not neatly apply in Brazil or Nigeria. But comparative studies often proceed as if they do. The literature seems replete with almost random transfer of policy lessons across international boundaries. Like the problems noted with transferring lessons from Costa Rica, where lessons ought to apply to nations such as developing countries in Asia or Africa, there may be cultural and institutional reasons why they have not been transferred. Kenya, for example, has 15 million mobile phone users that use their phones to transfer money and make payments. About 25 percent of GNP flows through mobile phones. Despite this, countries like India, China, Sudan, and Somalia ignore these lessons, largely to protect their state phone monopolies. Instead, they reinforce policy ignorance by smothering attempts at mobile start-ups in red tape. The enormous opportunity cost of ignoring the telecommunications policy lessons from countries like Kenya is clear from the few countries that have adopted positive lessons: Tanzania utilizes mobile phone systems to receive tax payments; the Philippines uses them to deliver welfare or social assistance payments; Afghanistan uses them to pay salaries. Corruption and turf protection by powerful ruling groups probably explain much of the reluctance to permit mobile phone systems competition.
In this book, we cannot offer tested methods to change such entrenched systems in the short run. Instead, we provide substantive policy issues in each sector from which lessons can be generated, explained, and adapted for use elsewhere than the home country. This will be done through (a) review of the policy issue areas in the following chapters, (b) presentation of analytic tools and frameworks, and (c) provision of cases/exercises for practice in applying the methods and frameworks.
In this chapter we review basic concepts of public policy, including policy-making and implementation cycles, formulation processes, and performance results measurement. Familiarity with these well-known concepts is important to define and distinguish the policy stages and to facilitate the focus “on” sub-policies in the form of programs and projects. We then provide a comprehensive approach to international policy analysis. This consists of three frameworks for (1) empirical validation of policy inputs-outputs-outcomes; (2) explanation of performance variations through a political economy approach; and (3) adaptation and transfer of lessons consistent with a comparative methodological guide. Finally, in each chapter, we offer introductory economic tools relevant for the analysis of the particular policy area, and we provide opportunities to apply them to international cases. Particular sectors and policy areas lend themselves to particular methods and tools. For example, urban rail-bus transport policies are really a combination of current spending for operations, maintenance, and capital investment for facilities and rolling stock. These methods may or may not be sufficient to identify options and preferences that make the best use of available financing to achieve service efficiency and effectiveness. Urban transport policy-makers need to know tools and methods to forecast passenger demand, design optimal pricing strategies, analyze costs and benefits of investment projects, and to assess the cost effectiveness and performance of whole transport systems. Such practical and mostly economic tools as these are essential for policy analysis in the urban transport sector.
To refine the use of our frameworks, we offer the opportunity in each chapter to apply some of the standard tools in each policy area to international cases. As an aid to understanding, our approach can be used as a checklist or policy-audit framework to review such important performance determinants as: (a) application of tools and methods (e.g. Were demand forecasts inaccurate because of data and method problems? Did pricing ignore income or demand elasticity?); (b) incentive effects of institutions and context (e.g. Do the internal routines and micro-rules create perverse incentives, such as those with flood insurance policies? Are there urban transport governance problems that require structural changes at the strategic level?), and (c) design of the policy and its financing (e.g. Were subsidies not properly targeted to clients or users?). It may be that incremental changes can be made in one or more of these areas to improve policy results. If so, transfer to other countries might be more feasible and likely to produce the expected results. If there are deeper contextual problems, such as an adverse political culture and lack of regime support, and if they can be remedied only over the longer term, transfer of policy lessons at the strategic level should either not proceed or should be transferred with the understanding that success will require long-term political and resource commitments.

Sectoral Policy Focus

We have selected certain sectors from a large list of candidates on the basis of three criteria. First, these are non-defense and security sectors. While analytic tools would be similar for this sector for weapons systems procurement in the defense sector, the bases for their need, demand, and utilization in tactical or strategic contexts is beyond our expertise. Second, these sectors affect the majority of people in most countries, those who reside in metropolitan areas and their suburbs. While over 50 percent of the world’s population live in cities today, by 2050 this proportion is expected to grow to 66 percent (Ramirez-Djumena, 2014: 42). Third, they represent the bulk of budgeted funds for programs and services in most countries and their financing depends on both fiscal policy and the performance of the financial sector. Thus, we selected macroeconomic and fiscal policy because budgets finance policies and their macroeconomic impact on growth needs to be estimated carefully and controlled. We focused also on urban transport and infrastructure supply because it is a growing problem in many countries; in response, innovative models of alternative urban transport service delivery and financing are being tried with many transferable lessons. Health care financing and service delivery are also important problems with many transferable lessons available from around the world at both the strategic and operational levels. Education policies are in the midst of an international revolution in cities and countries, particularly in Europe and North America. Social assistance and poverty policies offer a wide range of policy implementation and reform lessons learned, particularly from Latin America, that have already been transferred successfully. Global demand for clean energy is growing and the persistence of coal and petroleum sources continues to require smart environmental regulation and control of air, water, and solid waste pollution. A superb example of comparable policy lessons not learned is provided in Chapter 7 (Cases 7.6 and 7.7) by the failure of Japan to learn the costly errors of recent German solar energy subsidies. Finally, the banking and financial sector affects every citizen. We have separated fiscal policy from the financial sector just as they are in the national accounts of every country. Fiscal policy refers to governmental expenditure and tax policies. They are the major macroeconomic tools that target aggregate demand within the broad limits of fiscal discipline. The financial sector refers to institutions that facilitate saving, facilitate the accumulation of wealth, and minimize risk. Example of financial sector institutions include: Banks, pension funds, savings banks, mutual funds, and financial products such as money market funds and collateralized debt obligations. Since financial collapse can wipe out incomes, savings, and jobs, threatening macroeconomic stability, maintenance of a stable financial sector is an important regulatory function of public policy. Failure to do this at the country level, as evident in the 2008 economic meltdown, can jeopardize the performance of the entire world economy.
In short, our selected sectors serve mostly urban people and reflect general urbanization trends across all regions. Each sector offers examples of controversial policy design and implementation. They are all non-defense sectors, since that sector often eschews economic methods in the name of strategic concerns of national security. They all can be subdivided into programs and projects that may be analyzed for lessons which can be transferred to or from the national and sub-national levels. They are all directly linked to the general welfare o...