Economic policy analysis is extremely important for the relevancy of the agricultural economics profession, as applied economics is our professional niche. Economic policy analysis, however, as a public decision-support tool, is a challenging endeavor that is difficult to do well. Furthermore, if analysis is to be an input into public policy formulation and implementation, it is not sufficient for applied economists to merely supply high quality economic policy analysis; there must also be a demand for it. As a profession, applied economists appear to pay more attention to the supply of policy analysis, with less consideration of who wants and will use our analysis, or how they will come to know it.
For this short paper, I will explore what I believe comprises high quality decision-oriented economic public policy analysis. Then I will place that definition in the context of the demand for economic policy analysis. I will conclude with my opinions as to why finding an audience for nonpartisan policy analysis has become more difficult, and will identify ways for applied economists to be effective in the current public policy environment.
Policy-Relevant Economic Science
Bromley (forthcoming) defines policy as comprised of intentions, rules, and enforcement that result in policy outcomes. While most applied economists relate easily to the meaning of "rules, enforcement, and outcomes," we tend to be less conversant about policy intentions.
First, public policy is concerned not only with facts and competing interests, but also with values. Policy statements are about the right and wrong things to do (Bromley forthcoming, Wildavsky 1987). That is, public policy is about what preferences people should hold, what fair allocations of resources are, and what the legitimate scope of the government is (Wildavsky 1987). Environmental policy debates include discussion of cultural and moral concerns pertaining to environmental stewardship, justice, and equity (Graffy 2005).
Second, public policy is also about the ability of certain parties to shift uncompensated costs and risks to other parties. Indeed, public policy can be thought of as incidence policy, where the essence of the policy is to redistribute power and property rights (Bromley 1990, Schmid 2000, Vatn and Bromley 1994, and Wildavsky 1987). The values, that is, the implicit prices, embedded in policy are usually found through some negotiated process of bargaining after decision makers confront alternative choices (Schmid 2000, Samuels 1989).
Thus, the intentions of public policy are desired future outcomes (Bromley forthcoming). For example, two intentions of soil conservation policy are to reduce soil erosion and water pollution. The policy vehicles to obtain these desired outcomes are technical assistance and the compensation to farmers with public payments for the voluntary adoption of soil conservation and pollution prevention practices. The policy prescribes what should be accomplished (i.e., adopt practices) to presumably obtain the desired outcomes (Bromley forthcoming). In addition, farmers are assumed to be worthy beneficiaries and are assumed to have the property rights for soil erosion and pollution. Thus, the policy assumption is that farmers should be compensated for any changes society asks of them to reduce soil erosion and pollution.
If policy (intentions, rules, and enforcement) is to be informed by economic science-based policy analysis, then there must be policy-relevant economic science (Jasanoff 1990). One can think of policy analysis as a substitute for learning by explicit decision making; it allows decision makers to avoid trial and error experiments (Wildavsky 1987). Good policy analysis will evaluate, order, and structure incomplete knowledge so as to allow decisions to be made with an understanding of the current state of knowledge, its limitations, and its implications (Morgan 1978). Done well, economic policy analysis can inform decision makers about alternative institutional arrangements; it can expand the range of choices in the debate; it can provide an estimate of the opportunity cost of choices and outcomes; it can reframe the policy problem definition; it can identify potential solutions; it can identify values or incentives associated with particular choices; it can provide information that will lead to changes in regulatory processes and procedures; it can combat misinformation and raise the value of information; and it can provide legitimacy for some arguments (Shabman 1989). …