Policy

monetary policy

Measures employed by governments to influence economic activity, specifically by manipulating the money supply and interest rates. Monetary and fiscal policy are two ways in which governments attempt to achieve or maintain high levels of employment, price stability, and economic growth. Monetary policy is directed by a nation's central bank. In the U.S., monetary policy is the responsibility of the Federal Reserve System, which uses three main instruments: open-market operations, the discount rate, and reserve requirements. In the post-World War II era, economists reached a consensus that, in the long run, inflation results when the money supply grows at too rapid a rate. Seealso monetarism.

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Collective governmental effort to control the incomes of labour and capital, usually by limiting increases in wages and prices. The term often refers to policies directed at the control of inflation, but it may also indicate efforts to alter the distribution of income among workers, industries, locations, or occupational groups. Seealso wage-price control.

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Measures employed by governments to stabilize the economy, specifically by adjusting the levels and allocations of taxes and government expenditures. When the economy is sluggish, the government may cut taxes, leaving taxpayers with extra cash to spend and thereby increasing levels of consumption. An increase in public-works spending may likewise pump cash into the economy, having an expansionary effect. Conversely, a decrease in government spending or an increase in taxes tends to cause the economy to contract. Fiscal policy is often used in tandem with monetary policy. Until the 1930s, fiscal policy aimed at maintaining a balanced budget; since then it has been used “countercyclically,” as recommended by John Maynard Keynes, to offset the cycle of expansion and contraction in the economy. Fiscal policy is more effective at stimulating a flagging economy than at cooling an inflationary one, partly because spending cuts and tax increases are unpopular and partly because of the work of economic stabilizers. Seealso business cycle.

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Use of government to make economic decisions with respect to the use of resources. In communist countries with a state planning apparatus, detailed and rigid planning results in a command economy; land, capital, and the means of production are publicly owned and centrally allocated, and the government makes both micro- and macroeconomic decisions. Microeconomic decisions include what goods and services to produce, the quantities to produce, the prices to charge, and the wages to pay. Macroeconomic decisions include the rate of investment and the extent of foreign trade. In most industrialized countries, governments influence their economies indirectly through monetary and fiscal policies. A few key economic sectors may be publicly owned, but the trend has been toward the privatization of industries that were socialized in the aftermath of the Great Depression and World War II. Japan is the most notable example of economic planning in a capitalist framework; government and industry cooperate closely in planning patterns of capital investment, research and development, and export strategies. Seealso capitalism, communism, socialism, zaibatsu.

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Economic policy of the Soviet Union (1921–28). A temporary retreat from the failed War Communism policy of extreme centralization and doctrinaire socialism, the new measures included the return of most agriculture, retail trade, and light industry to private ownership (though the state retained control of heavy industry, banking, transport, and foreign trade) and the reintroduction of money into the economy. The policy allowed the economy to recover from years of war. In 1928 chronic grain shortages prompted Joseph Stalin to begin to eliminate private ownership of farmland and to collectivize agriculture under state control, effectively ending the NEP. By 1931 state control was reimposed over all industry and commerce.

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A policy is a deliberate plan of action to guide decisions and achieve rational outcome(s). The term may apply to government, private sector organizations and groups, and individuals. Presidential executive orders, corporate privacy policies, and parliamentary rules of order are all examples of policy. Policy differs from rules or law. While law can compel or prohibit behaviors (e.g. a law requiring the payment of taxes on income) policy merely guides actions toward those that are most likely to achieve a desired outcome.

Policy or policy study may also refer to the process of making important organizational decisions, including the identification of different alternatives such as programs or spending priorities, and choosing among them on the basis of the impact they will have. Policies can be understood as political, management, financial, and administrative mechanisms arranged to reach explicit goals.

Impact of policy

Intended Effects

The goals of policy may vary widely according to the organization and the context in which they are made. Broadly, policies are typically instituted in order to avoid some negative effect that has been noticed in the organization, or to seek some positive benefit.

Corporate purchasing policies provide an example of how organizations attempt to avoid negative effects. Many large companies have policies that all purchases above a certain value must be performed through a purchasing process. By requiring this standard purchasing process through policy, the organization can limit waste and standardize the way purchasing is done.

The State of California provides an example of benefit-seeking policy. In recent years, the numbers of hybrid vehicles in California has increased dramatically, in part because of policy changes in Federal law that provided USD $1,500 in tax credits (since phased out) as well as the use of high-occupancy vehicle lanes to hybrid owners (no longer available). In this case, the organization (state and/or federal government) created an effect (increased ownership and use of hybrid cars) through policy (tax breaks, benefits).

Unintended Effects

Policies frequently have side effects or unintended consequences. Because the environments that policies seek to influence or manipulate are typically complex adaptive systems (e.g. governments, societies, large companies), making a policy change can have counterintuitive results. For example, a government may make a policy decision to raise taxes, in hopes of increasing overall tax revenue. Depending on the size of the tax increase, this may have the overall effect of reducing tax revenue by causing capital flight or by creating a rate so high, citizens are disincentivized to earn the money that is taxed. (See the Laffer curve)

The policy formulation process typically includes an attempt to assess as many areas of potential policy impact as possible, to lessen the chances that a given policy will have unexpected or unintended consequences. Because of the nature of some complex adaptive systems such as societies and governments, it may not be possible to assess all possible impacts of a given policy.

Policy cycle

In political science the policy cycle is a tool used for the analysing of the development of a policy item. It can also be referred to as a "stagist approach". One standardised version includes the following stages:

  1. Agenda setting (Problem identification)
  2. Policy formation
  3. Decision-making
  4. Policy implementation
  5. Policy analysis and evaluation (continue or terminate)

An eight step policy cycle is developed in detail in The Australian Policy Handbook by Peter Bridgman and Glyn Davis: (now with Catherine Althaus in its 4th edition)

  1. Issue identification
  2. Policy analysis
  3. Policy instrument development
  4. Consultation (which permeates the entire process)
  5. Coordination
  6. Decision
  7. Implementation
  8. Evaluation

The Althaus, Bridgman & Davis model is heuristic and iterative. It is intentionally normative and not meant to be diagnostic or predictive. Policy cycles are typically characterised as adopting a classical approach. Accordingly some postmodern academics challenge cyclical models as unresponsive and unrealistic, preferring systemic and more complex models.

Policy content

Policies are typically promulgated through official written documents. Policy documents often come with the endorsement or signature of the executive powers within an organization to legitimize the policy and demonstrate that it is considered in force. Such documents often have standard formats that are particular to the organization issuing the policy. While such formats differ in form, policy documents usually contain certain standard components including:

  • A purpose statement, outlining why the organization is issuing the policy, and what its desired effect or outcome of the policy should be.
  • A applicability and scope statement, describing who the policy affects and which actions are impacted by the policy. The applicability and scope may expressly exclude certain people, organizations, or actions from the policy requirements. Applicability and scope is used to focus the policy on only the desired targets, and avoid unintended consequences where possible.
  • An effective date which indicates when the policy comes into force. Retroactive policies are rare, but can be found.
  • A responsibilities section, indicating which parties and organizations are responsible for carrying out individual policy statements. Many policies may require the establishment of some ongoing function or action. For example, a purchasing policy might specify that a purchasing office be created to process purchase requests, and that this office would be responsible for ongoing actions. Responsibilities often include identification of any relevant oversight and/or governance structures.
  • Policy statements indicating the specific regulations, requirements, or modifications to organizational behavior that the policy is creating. Policy statements are extremely diverse depending on the organization and intent, and may take almost any form.

Some policies may contain additional sections, including

  • Background, indicating any reasons, history, and intent that led to the creation of the policy, which may be listed as motivating factors. This information is often quite valuable when policies must be evaluated or used in ambiguous situations, just as the intent of a law can be useful to a court when deciding a case that involves that law.
  • Definitions, providing clear and unambiguous definitions for terms and concepts found in the policy document.

Policy typology

Policy addresses the intent of the organization, whether government, business, professional, or voluntary. Policy is intended to affect the 'real' world, by guiding the decisions that are made. Whether they are formally written or not, most organizations have identified policies.-Citation Needed

Policies may be classified in many different ways. The following is a sample of several different types of policies broken down by their effect on members of the organization.

Distributive policies

Distributive policies extend goods and services to members of an organization, as well as distributing the costs of the goods/services amongst the members of the organization. Examples include government policies that impact spending for welfare, public education, highways, and public safety, or a professional organization's policy on membership training.

Regulatory policies

Regulatory policies, or mandates, limit the discretion of individuals and agencies, or otherwise compel certain types of behavior. These policies are generally thought to be best applied in situations where good behavior can be easily defined and bad behavior can be easily regulated and punished through fines or sanctions. An example of a fairly successful public regulatory policy is that of a speed limit.

Constituent policies

Constituent policies create executive power entities, or deal with laws. Constituent policies also deal with Fiscal Policy in some circumstances.-Citation Needed Noman Dhakkn

Miscellaneous policies

Policies are dynamic; they are not just static lists of goals or laws. Policy blueprints have to be implemented, often with unexpected results. Social policies are what happens 'on the ground' when they are implemented, as well as what happens at the decision making or legislative stage.

When the term policy is used, it may also refer to:

  • Official government policy (legislation or guidelines that govern how laws should be put into operation)
  • Broad ideas and goals in political manifestos and pamphlets
  • A company or organization's policy on a particular topic. For example, the equal opportunity policy of a company shows that the company aims to treat all its staff equally.

There is often a gulf between stated policy (i.e. which actions the organization intends to take) and the actions the organization actually takes. This difference is sometimes caused by political compromise over policy, while in other situations it is caused by lack of policy implementation and enforcement. Implementing policy may have unexpected results, stemming from a policy whose reach extends further than the problem it was originally crafted to address. Additionally, unpredictable results may arise from selective or idiosyncratic enforcement of policy.-Citation Needed

Types of policy include:

  • Causal (resp. non-causal)
  • Deterministic (resp. stochastic, randomized and sometimes non-deterministic)
  • Index
  • Memoryless (e.g. non-stationary)
  • Opportunistic (resp. non-opportunistic)
  • Stationary (resp. non-stationary)

These qualifiers can be combined, so for example you could have a stationary-memoryless-index policy.

Types of policy

Other uses of the term policy

See also

References

  • Blakemore, Ken (1998). Social Policy: an Introduction.
  • Althaus, Catherine; Bridgman, Peter & Davis, Glyn (2007). The Australian Policy Handbook. 4th edition, Sydney: Allen & Unwin.
  • Müller, Pierre; Surel, Yves (1998). L'analyse des politiques publiques. Paris: Montchrestien.
  • Paquette, Laure (2002). Analyzing National and International Policy. Rowman Littlefield.
  • Jenkins, William (1978). Policy Analysis: A Political and Organizational Perspective. London: Martin Robertson.
  • Lowi, Theodore J. (1964). "American Business, Public Policy, Case-Studies, and Political Theory". World Politics 16 687–713.
  • Lowi, Theodore J. (1968). "Four Systems of Policy, Politics, and Choice". Public Administration Review 33 298–310.
  • Lowi, Theodore J. (1985). Regulatory Policy and the social Sciences. Berkeley: University of California Press.
  • Spitzer, Robert J. (1987). "Promoting Policy Theory: Revising the Arenas of Power". Policy Studies Journal 15 (4): 675–689.
  • Kellow, Aynsley (1988). "Promoting Elegance in Policy Theory: Simplifying Lowi's Arenas of Power". Policy Studies Journal 16 713–724.
  • Heckathorn, Douglas D.; Maser, Steven M. (1990). "The Contractual Architecture of Public Policy: A Critical Reconstruction of Lowi's Typology". The Journal of Politics 52 (4): 1101–1123.
  • Smith, K. B. (2002). "Typologies, Taxonomies, and the Benefits of Policy Classification". Policy Studies Journal 30 379–395.
  • Greenberg, George D. et al. (1977). "Developing Public Policy Theory: Perspectives from Empirical Research". American Political Science Review 71 1532–1543.
  • Dye, Thomas R. (1976). Policy Analysis. University of Alabama Press.

  • Stone, Diane."Global Public Policy, Transnational Policy Communities and their Networks", Journal of Policy Sciences, 2008

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