THE NATIONAL INTEREST
Many economists in government have the simple view of policy in the national interest as being any policy which contributes to national income and growth. It is probably derived from a Benthamite view that government should seek the happiness of the greatest number. In defining the objectives of a cost-benefit analysis, for example, analysts would be careful to define the objective function in national income terms, and look for a positive return above the government's borrowing rate. Stabilisation schemes would be presented in terms of an excess of benefits over costs following intervention. Investment subsidies would be justified in terms of greater export income (and hence by implication greater national income). Distributional matters would largely be absent in such deliberations (as noted by Musgrave 1976).
Economists would also accept political science constructs that emphasise the democratic process. Here the national interest is achieved by parliament agreeing to legislation evolved from compromise and bargaining among the elected representatives. Civil servants provide advice to the legislators and implement the policies that result from political decision making. A career civil service based upon expertise and non-political appointments provides objectivity and freedom from partisanship (Jacoby 1974, p.58).
The economic role of government in this framework is to introduce policies that increase social welfare. The welfare maximisation perspective sees government as an omniscient and benevolent dictator (Swinnen and van de Zee 1993). Governments intervene in the private economy where it fails to function properly in allocating and distributing resources ('market failure'). The state can produce goods, internalise social costs and benefits, regulate decreasing cost industries, and redistribute income. In theory these actions can redistribute resources to maximise welfare.
Randall (1987) calls this the 'public-interest, market failure' model of government. He notes the philosophical lineage from Rousseau, Marshall and Pigon. Its basic premises are that the true public interest will be revealed in the political process; that programmes to promote economic activity, to rectify market failure. (to internalise externalities and to provide public goods and merit goods), and to promote equality of economic opportunity all may be seen as enhancing the general welfare; and that continued vigilance and effort is necessary to ensure that government remains responsive to the public interest. In what follows, the term 'national interest' reflects the broader aspects of government policy aims, and 'public interest' refers to particular theories of government.
The role of the administrative sector is characterised as follows (Randall 1987 pp.39-40):
Given that the political sector wilt reveal the public interest, the administrative sector must adhere to an ethos that emphasises the total submergence of the manager's personal objectives in favour of the politically revealed public interest and the objective, scientific facts of the situation. The managers are true professionals, neither self-interested nor politicised. They seek objective facts from researchers, and educators, who are obliged to tell them all the facts and nothing but the facts.. Thus armed, managers allocate, invest, and regulate in the public interest.
Economics is quite clear how the best possible outcome can be defined. Pareto optimality is achieved in a situation where a reallocation of resources would make at least one person better off without making anyone else worse off. In terms of any mechanism, system or outcome, Pareto optimality indicates that no further reorganisation will make the allocation of resources more efficient. Modifications of the criterion have been made, such as accepting or approving a policy in which one or more individuals are harmed if these individuals are actually or potentially compensatible for such harm. Overall, Pareto optimality defines the national interest in a precise and acceptable way and also provides a theoretical test for policy comparisons. It is essentially normative.
These paragraphs postulate a simple world where politicians make decisions in the 'national interest' and civil servants (including economists) present alternative solutions to perceived problems to the politicians, also guided by concepts of the national interest. The political process is seen as something pure and omniscient and the providers of policy advice as objective, independent and non-political.
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