The role of analysis in policy making

We use the term .” analysis” here to mean the inquiry of professionals trained in social science or in other disciplines into the policy alter­ natives, the values at stake, the likely consequences of adopting dif­ ferent policies, and the articulation of the findings of such inquiry with the express aim of illuminating and influencing policy choices. It is useful to examine the ways in which different schools of eco­ nomic thought view the role of policy analysis.

If one takes seriously the assumption made in some “rational ex­ pectations” models – that all individuals know all the public policy options and the consequences (perhaps state-contingent) of the choice of any one -it is hard to discern any role for policy analysis. The presence of public goods and other reasons for collective action call for collective-decision-making machinery, but there is no such thing as a “public interest” to be served, only a collection of individ­ ual interests. In arriving at collective decisions, conflicts of interest need to be resolved. But, from this perspective, no one interest is “better” than any other. And since everybody knows the structure of the economic (and political) problem as well as anyone else, there are no “experts” and there is no need for “analysis.” The policy-making problem is simply one of arriving at a Pareto-optimal agreement. This, of course, may be no simple task, given actual collective-choice machinery. Many simple voting schemes do not achieve it. One pos­ sible role of policy analysis, within a rational expectations frame­ work, might be to constrain the set over which voting or bargaining proceeds to alternatives that are “efficient” or at least for which “benefits exceed costs.” But such “analysis” would simply define the constraints on the choice set, and would not provide any new “information.”

In contrast, economists who during the early 1960s expressed a strong faith in “policy analysis” adopted a position that stresses the limitations of existing knowledge and the i mportance of particular studies to marshal knowledge. Analysis is needed to illuminate the current policy problem, and to educate elected officials, bureaucrats, and the electorate about the right way to look at it. From this point of view, lack of knowledge is highlighted and conflict of interest played down. There is a “public interest” to be found and analysis can help to find it.

It should be apparent that actual policy making involves both wrestling and bargaining among different interests and an attempt to identify a public interest. There is some truth in the Downsian view of politics in which elected officials, interested only in reelection, cater to equally self- interested voters, but there is more to it than that.3 As a special case, relevant to analysis of the Clean Air Act, we concede the limited power but reject the completeness of revisionist theories of regulation.” A striking feature of both the clean air and fluoridation cases is that for many parties there was no strong private interest. Yet they were interested in the policy issue, felt it impor­ tant, and took stands. It is reasonable to say that they were at­ tempting to identify a public interest, and to support it.

We think it useful to view the role of analysis in public decision making as part of the process by which a public interest gets defi ned. By that we do not mean that studies identify a true public interest in any strictly objective sense. We mean that studies help to define a public interest. This is not just a quibble over the meaning of words. We, as do other scholars, have trouble with the concept of an objec­ tive public interest. We observe, however, that political actors often behave as if they were searching for one. In recent years studies seem to play a large role in that search. And we do not deny that studies can be and often are put forth to further a particular private interest. Rather, our point is that, unlike the testing of strength and bargaining that also are part of the political process, studies are ex­ pected to present arguments that rationally persuade people that one policy is better than another, in terms of values that are widely ac­ cepted and that are viewed as applying to the society as a whole rather than to a particular group.

Our position here is similar to that taken by some philosophers regarding science. It m ay be doubted that an objective truth really exists or, if one does, that science can find it. Nonetheless, science can be perceived as a q uest for truth, and that quest may be fruitful even if the ultimate objective is not attainable.

This perspective certainly is consistent with portions of the articu­ lated faith of the policy analysts, particularly the more recent state-ments. Thus, Schultze (1968) stresses the role of policy analysis, in an interactive process, as that of holding forth an “efficiency goal .” Effi­ ciency may not be the only public interest, but it certainly is widely regarded as one general characteristic of good policy. We diverge from modern policy analysts, however, in treating the public interest as something that is created in political dialogue rather than as being something objective, as something around which widespread politi­ cal s upport dusters, given a particular interpretation of the problem, rather than an objective that reflects definitive understanding of the problem and the values at stake, and durable agreement on goals.

We likewise have trouble with the idea that analysis helps to iden­tify a “best” policy, and with the style of analysis associated with this view. According to this view, the right way to do analysis is to construct a model of the situation and find the best policy within this model . The model may be rich and complex, or it may involve simply a listing of a finite set of alternatives and the calculation of benefits and costs for each. In either case, there is an implicit belief that the choice that is best within the model is an optimum, or at least a good, policy within the real context, or that in any event going thro ugh the optimizing exercise is the most useful way to focus intellectual attention.

There is a large leap of faith here. In his presidential address to the Operations Research Society, Hitch (1955) recognized this leap expli­ citly. He stressed that models are highly simplified and often mis­ leading characterizations of the real context, but proposed nonethe­ less that going through the exercise of building a model and searching for an optimum within that model is a useful heuristic for finding or designing good policies for the actual context. Perhaps so, but this is far from obvious. The work of Newell and Simon (1972) on human problem solving in a context as 1/ simple” as a game of chess suggests that there are better heuristics than building a simple model of chess and optimizing within that model. These better heuristics involve the recognition of patterns, the use of pattern recognition to focus q uickly on one or a small number of alternatives, exploring only these in any depth, and the consideration of the merits of various moves in terms of their positioning advantages and dis­ advantages . The values, of course, of different positions are “proximate.” Given limits on computational p ower, they cannot be calculated by dynamic programming. They have to be formed and re­ formed on the basis of experience and general understanding of the game. Proximate values are an important part of problem-solving heuristics.

Posing the task as the identification of (Pareto) optimum policies serves to distance analysiS from the tug-of-war of competing goals and values in ways that sometimes reduce the ability of analYSis to contribute to the political dialogue. Economists, of course, differ in the extent to which they take seriously the warning of Arrow’s impossibility theorem against the posing of policy problems as if there were a technically correct way to brush aside differences in interests among individuals and g roups . Those who have learned the lesson have a greater tendency to recognize that social decision mechanisms, beyond analysis, are needed to decide what is to be done . But in most cases they still view good analysis as laying out the alternatives and tracing their consequences, while remaining neutral regarding which or whose values should be weighted most heavily. However, from the perspective being developed here, even this po­ sition  is  simplistic.  One  little- recognized  consequence  of  our bounded ration ality is that we lack the capability to sharply separate our values from our knowledge. Indeed our (proximate) values form a large part of our knowledge. Analysis of proximate values is an im­ portant part of good policy analysis.

We are not endorsing here a Panglossian view that what appear at first thought to be conflicting interests can be discerned, after more careful analysis, to be truly not conflicting, or that analysis can always identify the more salient interest. In some cases study and persuasion can result in the emergence of a recognized public inter­ est; in other cases it may be impossible to gain any agreement upon this among informed interested parties. Even when it is so possible, the process by which a recognized public interest is defined in a pluralistic democracy involves a complex interchange of views, and often bargaining, among different interests. Studies should be seen as handmaiden to that political process, not as having p oliti cal legiti­ macy in themselves. In some cases studies may play a dominant role, and in others a minor role. Were that not so, democracies could dis­ pense with all the complicated and expensive apparatus we have for making political decisions, a nd simply establish an analytic office that would decide things for us. Some writers who puff the role of analysis seem disturbed that we do not do just that.

Is it possible to draw some guidelines for good policy analysis, recognizing explicitly that our rationality is bounded, and that in most instances there really are conflicting values and interests and that a public interest, if one be defined, is a matter of (perhaps tem­ porary) social agreement rather than an objective fact? We think it is.

First, the role of analysis is to enhance understanding of the problem. The obj ective is not to find an optimum. The tactical objec­ tive is to identify reasonable next moves in the chess game of policy development. Articulation of the higher-order objectives (winning) may provide some guidance as to what not to do next, but often is not very helpful in discriminating among plausible (not clearly losing) next moves. In order to make that evaluation, it is necessary to have a good strategic understanding of the sort of chess game being played. And it is here, we believe, that policy analysis can and does have its greatest impact. Analysis helps people think about the problem- what they see as a reasonable range of options, the conse­ quences of choosing one or another, the proximate values at stake. Like tactical analysis, strategic analysis should not be thought of in optimizing terms. People simply cannot know the best way to get from here to some unfamiliar and distant place, and cannot even know exactly what it will be like when they get th ere. However, a good road map, and some thoughtful consideration of the purpose of the trip, certainly can help. As the air quality regulation story and many others signal too clearly I a real danger is that policy making can get so bogged down in argumentation about which turn to take next that the purpose of the trip and the map are forgotten .

Second, analysis should be understood as influencing the dis­ course and bargaining of democratic politics. Analysis cannot make a “public interest” out of a set of divergent private interests. But it can unmask proposals, put forth as equitable, that in fact sharply benefit one interest at the expense of others. It can help to identify policies that have promise of achieving a broad public purpose (such as re­ ducing hazardous air pollution at reasonable cost) where that pur­ pose has been obscured or lost in a tangle of specific piecemeal poli­ cies and narrow vested interests. Discussion of the objective and the trip plan does infl uence the bargaining about which turn to take next.

Often discussions of policy analysis implicitly assume that the most important studies are produced in government itself or by hired consultants. Analyses done in or close to government clearly are important. However, as indicated by the clean air case and others, it is often the scholar outside government who calls attention to the problem, who provides the most illuminating and scathing criticism of existing policies, who opens thinking to new ones . Perhaps it is characteristic of democratic politics that governments in power are incapable of fresh strategic thinking, or even of keeping the existing strategy in mind when making tactical decisions, unless forced by outside criticism or new blood to back off and think. In such a context, analysis (done outside government) is an important component of the system by which society keeps its government under control and tolerably alert.

Third, the flexibility of an action today in terms of the range of choice kept open for tomorrow, and the information about alterna­ tive future paths that action will create, are important desiderata. At best, strategic road maps are grossly d rawn . While they provide direction and broad guidance, they may not tell you that a certain road is in an unexpectedly bad state of repair. They are sure to omit certain newly built roads which become visible when one comes to a branch point and looks about with open eyes. Policy making is a continuing evolutionary process. Analysis should not proceed as if pragmatic social learning could take an easy short cut.

Fourth, if one views policy making as a continuing process, the organizational and institutional structures involved become critica1 . Public policies and programs, like private activities, are embedded in and carried out by organizations. And, in a basic sense, it is the organizations that learn, and adapt. The design of a good policy is, to a considerable extent, the design of an organizational structure ca­ pable of learning and of adjusting behavior in response to what is learned . The legislative mandate should provide broad guidance to the values to be pursued, but should not tie the hands of the admin­ istrating agency regarding choice of means. If the value tradeoffs or the nature of the most appropriate instruments is uncertain, explora­ tion ought to be an explicit part of the legislative mandate and of the administrative strategy.

These propositions are, of course, old saws in the field of public administration, but their intellectual basis there is almost exclusively experiential. Economists instinctively find them attractive, and seem to think that they are deducible from standard microeconomic theory. But they are not, unless perhaps one introduces to that theory considerable ex ante uncertainty, and costs of information transmis­ sion as well as acquisition. These factors, of course, are central to our evolutionary perspective.

In a recent article Majone and Wildavsky (1978) took a point of view similar to that sketched above. Their article is titled, interest­ ingly, “Implementation as Evolution./I They , too, see policies as institutionally embedded. Policies are articulated often at a relatively high level of government, but are carried out by lower levels of gov­ ernment in interaction with private parties. The way in which a broadly articulated policy is implemented depends on the adminis­ trative structure. The implementation of a policy both generates new information about what works and doesn’t work, and involves the working out of conflicts of interest among the potential benefi ters and losers. As a result of experience, the way a broadly articulated policy actually proceeds is modified . The articulation may change as well.

Fifth,  just  as  many  analyses  of  the  workings  of  the  market economy tend to abstract the private economy from public policies, programs, and institutions, too many analyses of public policies and programs do not recognize adequately that their effects will be deter-mined, to a considerable degree, by private and not governmental actors. Indeed a wide range of public p olicies can be viewed as de­ fining a mix of market and nonmarket activity, or a mode of government-private interaction, in a particular area. The problem of regulating air pollution certainly can be regarded in this way. The fluoridation policy dialogues turned increasingly on the appropri atelimits on governmental action.

Certainly there are some issues  in which the choice of private­ public mix is not central. The question of which defense system to procure is to only a very limited extent an issue about public and pri­ vate responsibility. In recent years the discussion about policy in primary and secondary education may have excessively centered on the question of the private- public mix (vouchers, tax deductibility of tuition payments, and so forth) . But there is certainly an interesting area of policy discussion where the mix and fit questions are crucial. Serious policy analysis of any such arena requires detailed under­ standing of the institutions, mechanisms, interests, and values at stake. For all the reasons discussed in the preceding chapter, simple (and simple-minded) arguments about the optimality of private en­ terprise, or simple pointing to market failures, does not carry the analysis very far. Serious analysis of a particular policy problem inevitably means immersion in a set of relatively unique attributes of that context. It is beyond the scope of this book, which is about theory, to actually engage in such a detailed analysis of a policy problem. Nonetheless, we have stressed the impo rtance of a theoret­ ical perspective in the interpretation of particular phenomena and situations. In view of our argument that a principal criterion by which a theory ought to be judged is its ability to illuminate policy issues, it is incumbent upon us to indicate at least roughly how our evolutionary theory frames certain policy questions.

Much of this book has been concerned with developing theory about technological change in industry. It seems appropriate, there­ fore, to consider how our evolutionary theoretical ideas illuminate policy issues relating to that topic. Earlier we have considered, in a piecemeal manner, some of the policy implications, for example con­ undru ms regarding antitrust policy. We conclude this chapter by considering more systematically the questi on of appropriate govern­ ment policy toward industrial R&D.

Source: Nelson Richard R., Winter Sidney G. (1985), An Evolutionary Theory of Economic Change, Belknap Press: An Imprint of Harvard University Press.

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