Stokey-Zeckhauser A Primer for Policy Analysis

Stokey-Zeckhauser A Primer for Policy Analysis - A PRIMER...

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Unformatted text preview: A PRIMER FOR POLICY ANALYSIS Edith Stokey and Richard Zeckhauser Kennedy Schoof of Government. Harvard University w - w - NORTON & COMPANY New York v London _———————______ 1"“ 1 Thinking About Policy Choices Should the federal government require oil-burning power plants to switch to coal? Given the declining birthrate, should Memorial Hospital convert some of its maternity rooms-to a cardiac unit? Should the state university develop a master‘s program in public policy? Should the Transport Authority extend the subway system to the outer suburbs? Should the United States stockpile grains to diminish extreme price fluctuations? To address these questions one must understand the principles of policy analysis; introducing you to those principles is the goal of this book. Our Approach to Policy Analysis The approach to policy analysis throughout this Primer is that of the rational decision maker who lays out goals and uses logical processcs to explore the best way to reach those goals. He may perform the analysis himself or he may commission others to do parts or all of it for him. The decision maker may be an individual or a group that acts essentially as a unit. We will not consider explicitly the situations in which several decision makers with conflicting objectives participate in a decision. Nonetheless, our approach should prove helpful to an individual who takes part in such a process of shared decision making, whether as a legislator deciding how to vote or as a bureaucrat trying to line up support for a proposal. In any case, the emphasis in this book is on how decisions ought to be analyzed and made, rather than on the details of the information that should serve as inputs to the decisions. In establishing this framework We rely heavily on the analytic techniques deveIOped in economics, mathemat- ics, operations research, and systems analysis. In actual practice, to be sure, policy analysis is much more broadly eclectic, drawing on a great variety of disciplines, including law, sociologY, and political and organiza- tional analysis. We will have little to say about these important comple- mentary disciplines, although you should recognize their relevance for the Thinking About Policy Choices working analyst. If he is designing a program for welfare reform, he must take account of the capabilities of the state bureaucracies that will implement the program. If he is drawing up safety regulations, he must understand the administrative and judicial processes through which the regulations will ultimately be enforced. Nor will We discuss the natural sciences here, even though understanding how pollutants Spewing from tailpipes mix with pollutants escaping up chimneys may be critical for drawing up a set of environmental regulations. In short, understanding and predicting how the world will actually behave is essential for any process of policy formulation. Our concern here, however, is with how the decision maker should structure his thinking about a policy choice and with the analytic models that will aid understanding and prediction, not with all the disciplines that could conceivably provide helpful information. Most of the materials in this book are equally applicable to a socialist, capitalist, or mixed-enterprise society, to a democracy or a dictatorship, indeed wherever hard policy choices must be made. In deciding whether a vaccine should be used to halt the spread ofa threatened epidemic we need not worry about the political or economic ideology of those innoculated. Nor will the optimal scheduling for refuse trucks depend on whether it is capitalist or socialist trash that is being collected. Questions of values are, nevertheless, a critical and inevitable part of policy analysis. Nothing can be written on the subject without making value judgments, at least implicitly. No specific policies are recommended here; policy issues are used merely for illustration. Still, the very nature of the tools and concepts we expound reflects a philosophical bias and a particular set of ethical concerns. For one thing, the subject itself, policy analysis, is a discipline for working within a political and economic system, not for changing it. For another, we follow in the predominant Western intellectual tradition of recent centuries, which regards the well-being of individuals as the ultimate objective of public policy. We turn in the last few chapters to a further exploration of these points. No doubt those who Search for it will find a backward trickle from these later chapters to the more tool-oriented chapters that are the main body of the book. The Plan of Attack A Primerfor Policy Analysis consists of three major sections. In the first, “Cornerstones,” we establish a framework for thinking about policy problems and making choices. The second and much the longest section, “Nuts and Bolts," focuses on the usc of models to represent real-world phenomena, and the more general use of analytic methods to assist in the entire process of making decisions. We will work through a toolbox of techniques, starting with fairly simple situations and gradually adding such important complexities as outcomes that are uncertain or that have consequences over future time periods. We deal initially with techniques that help us see clearly what the decision maker‘s choices are, and then with techniques that assist in identifying and formulating his preferences. A Framework for Analysis Each technique is to be understood as part of a total structure for thinking about policy choice, as a means of determining some of the pieces of that total structure, and not as an end in itself. The third section, “Ends and Means,“ is broader in scope and less technical. To provide a background against which policy analysis can be viewed, it considers critical ethical questions: who should make what policy choices, and on what basis? It lays out the basic criteria for policy choice, identifies the circumstances in which the government should play a role in allocating the resources of society, and reviews briefly the alterna- tive forms that government intervention might take. We might have begun the book with this more philosophical discussion. We did not because this Primer is meant to be an essentially practical work emphasizing the structural aspects of policy analysis. Moreover, we want to get you thinking right away in terms of analytic methods, especially if this is a mode of thought you find a bit unfamiliar. A Framework for Analysis What do you do when a complicated policy issue lands on your desk? Suppose it‘s your first day on the job as a policy analyst in a New York State agency; you are directed to investigate and evaluate alternative pollution control measures for the Hudson River. The problem has so many ramifications you wonder how you will ever sort them out—and even where to begin. You can always muddle along, hoping eventually to develop a feel for the situation, but such a hit-or-miss approach rather goes against the grain. You would prefer to have a standard procedure that will at least help you make a start on digging into a complex policy issue. Many policy analysts have experimented with a variety of ways to structure complex problems like this one. We suggest the following five- part framework as a starting point. As you gain experience in thinking analytically about policy choices, you will perhaps wish to revise it to suit your own operational style; so much the better. 1. Establishing the Context. What is the underlying problem that must be dealt with?-What specific objectives are to be pursued in confronting this problem? 2. Laying Out the Alternatives. What are the alternative courses of action? What are the possibilities for gathering further informa- tion? 3 3. Predicting the Consequences. What are the consequences of each of the alternative actions? What techniques are relevant for predicting these consequences? If outcomes are uncertain, what is the estimated likelihood of each? 4. Valuing the Outcomes. By what criteria should we measure success in pursuing each objective? Recognizing that inevitably some alternatives will be superior with respect to certain objec- tives and inferior with respect to others, how should different combinations of valued objectives be compared with one another? 5 Thinking About Policy Choices 5. Making a Choice. Drawing all aspects of the analysis together, what is the preferred course of action? - We do not mean to imply that an analyst will always proceed in an orderly fashion from one stage of the analysis to the next. Real people— even those who are models of administrative efficiency—can rarely operate so neatly, nor should they try to. But we do insist that each of these five critical areas must be dealt with. The conduct of an analysis will usually turn out in practice to be an iterative process, with the analyst working back and forth among the tasks of identifying problems, defining objec- tives, enumerating possible alternatives, predicting outcomes, establishing criteria, and valuing tradeoffs, to refine the analysis. This is an entirely sensible approach. We claim only that it is easier to keep track of where you are in this iterative process, and to avoid going around in circles (a disease with which even the best analysts are occasionally afflicted), if you keep in mind a basic framework to which every aspect of the analysis must be related. Furthermore, the consumers of your analysis will thank you, for strict adherence to a clearly visible structure makes for far easier reading and comprehension, and opens up the analysis for evaluation and debate. We believe you will also find the outline useful as a background for the rest of this book, to help tie together the wide array of methods and concepts that are considered. The techniques described in the following chapters are all aimed at enabling us to provide better answers to one or another of the questions in the outline. At every point as you work your way through the following chapters, ask yourself, “How does this method fit into the overall picture?" To be sure, not all the questions we bring together here will be addressed in every piece of policy analysis. The analyst will frequently be asked merely to predict outcomes, or will enter the decision process at an intermediate stage, after the range of possible actions has already been delineated. He may be asked to set forth the nature of the tradeoffs that must be made among objectives without making a final choice. This is particularly likely to be the case when a decision revolves around what are sometimes labeled "fragile values,“ such as risks to health or to the ecosystem. Perhaps the decision maker will be pressed for time, so that waiting for further information (an option that is frequently understressed) is out of the question. And often an analyst will be asked to “suboptim- ize," to find a best choice for a lower level problem without worrying about the overall problem. Almost all budget decisions are made in this way; the local library trustees are expected to make their expenditure decisions within a given total sum without reference to how the highway department will be spending its funds. I Some Practical Advice Many of the policy decisions you will encounter will not fit neatly and automatically into the models presented here, for the real world is rich and Some Practical Advice complex. Policy analysis is not an assembly line process, where a single- purpose tool can be applied repeatedly to whatever problem comes along. Thesc are a craftsman's tools; you must learn to wield them with skill. Reading about policy analysis is only a beginning. An academic mastery of the tools will hardly prove sufficient; judgment and sophistication in applying them should be your ultimate goal. Therefore our perennial advice to students is "Practice!" Practice on all kinds of situations, large and small, public and private. Look regularly at the front page of the newspa- per and think hard about one of the policy problems featured. Perhaps a proposed plan for energy conservation is under discussion; see if you can define the immediate objectives of the plan and their relationship to the underlying problem. What procedures would you use to predict the practical outcome of the plan? How would you treat uncertainty? What further information would you want? Should the plan be implemented sequentially? By what criteria would you evaluate the success of a proposed policy? On what basis should the decision be made? Practice thinking informally in terms of objectives in your day-to-day work. When you are taking part in a budgeting process, say for a committee or a voluntary organization, consider what the organization‘s objectives might be and what various expenditures would accomplish. For example, suppose you are serving on a committee to allocate limited student aid funds. What are the committee‘s objectives? How should they be traded off against one another? How do various types and amounts of aid satisfy thesc objectives? Practice on your own problems and decisions, using models to get your thinking straight or to illuminate commonplace events. For example, when you find yourself waiting in line, ask yourself what could be accomplished with additional service capacity, and what the benefits of such a move would be. When the local school committee advocates an inexpensive building with high maintenance costs, think about the tradeoff between present and future spending that is implied. Above all, practice prescnting your conclusions systematically; you don’t need to become a gifted and sephisticated analyst before you can upgrade your output. Make up your mind that at least once every day you will deliberately apply the outline set forth above to a problem you face. You’ll be amazed at what it will do for your reputation for perceptiveness and good judgment. 7 -' .. _'_r: x ...
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This note was uploaded on 11/13/2009 for the course ECON 181 taught by Professor Kasa during the Spring '07 term at University of California, Berkeley.

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Stokey-Zeckhauser A Primer for Policy Analysis - A PRIMER...

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