Dealing with Losers

Abstract

Whenever government change policies – whether tax, expenditures, or regulatory policies – even when the changes are on net socially beneficial - there will typically be losers. These losers will have made investments of one kind or another, physical, financial, or human, predicated on, or even deliberately by, the pre-reform set of policies. Very few policy changes make everybody better off, but rather reallocate social benefits and costs in different ways. The issue of whether and when to mitigate the costs associated with policy changes, whether through explicit government compensation, grandfathering, phased or postponed implementation, is ubiquitous across the policy landscape. This book explores both normative and positive rationales for transition cost mitigation strategies. In the case of normative rationales, it explores efficiency, distributive justice, utilitarian, communitarian, and libertarian rationales for and against transaction cost mitigation strategies. In terms of positive rationales for mitigating such costs, the book focuses extensively on the ability of potential losers to mobilize and obstruct generally socially beneficial changes in the absence of well-crafted transaction cost mitigation strategies. Compensation for expropriation forms a tiny part of the universe of such strategies (although much of the existing literature focuses on government ‘takings’), but rather deploys a wide range of grandfathering, postponed, or graduated implementation of policy changes.