|A business firm should make decision taking into consideration the existing political, economic, and social environment. The profit-maximization or cost-minimization objective of such firm is remarkably affected by public policy. The business cannot breathe by ignoring public policy. Milton H. Spencer has rightly remarked, “For management decision-making does not take place in an economic vacuum, but rather in a socio-political environment that must be recognized as a limiting factor in the process of adjusting to uncertainty.”|
Public policy is useful to politicians and political parties
The utility of public policy in different sectors/the utility of public policy in business decision-making/the utility of public policy is different for them which is analyzed as follows:
1) Utility to political parties and politicians: The political parties and politicians are directly or indirectly involve for the development of the nation. The state holders or leaders are the main agents for driving the nation. The knowledge of public policy is importance to the political parties and politicians because they may be in power and opposition. The politicians who are in power holders have to implement policies and modify the existing policies. They have to formulate appropriate policies and analysis to the effects of those policies. If the political parties or politicians are in opposition, they have to get knowledge about the public policy. The opposition leaders should have to suggest and give guidelines to the statesmen. The opposition political parties should also check and warn to the government whether the government goes according to rules and order or not. The knowledge of public policy gives appropriate guidelines to the statesmen and provides appropriate guidelines to the statesmen and provides appropriate ideas to the opposition leaders.
2) Utility to administrative officials: The knowledge of public policy is important to all the administrative officials such as senior level officials and junior officials. The policies are formulated by political leaders and executed by the administrative officials. The administrative officials need comparative knowledge about public policy because they are the means of the implementation of the government policies. The existing policies should be effectively implemented according to the development objectives of the government for the development of economy. If the administrative officials do not have good knowledge about public policies, the policies may be used inappropriately and the results will be dissatisfactory.
3) Utility to general people: People are the safeguard to the government and they also make aware of the government. The government conducts various public welfare programs for the people and it promotes and regulates the business sectors. People pay different amount of payments in terms of tax, VAT and other expenses to the government. Various government activities adversely affect to the people. People should also know about the public policy whether they are properly lunched or not, whether the government activities are favour for the public welfare or not. It is also necessary to know the appropriateness of the government policies. Hence, the knowledge of public policy is important to the general people to warn and check the government.
4) Utility of public policy in business decision-making: public policy affects the life of business like the life of an individual from cradle to grade. For example, a business firm should be registered in register’s office according to rule for the establishment (birth). After the license should be received from the concerned department (for example, department of industry) according to rule. Likewise, it should be registered in tax department etc. Similarly, even for the dissolution (death) of a business firm its owners should be according to the rule.
Since business decisions are affected by social, political environment sometime it is not enough that decisions and plans being guided by economic theory. It is also necessary to modify in a different way than that.
The government on the one hand, imposes different types of tax and applies rules like grant, patent, antitrust policy, and price control to affect business activities. These policies of the government have great effect on output, pricing, profit rate, investment rate of the firm. For example, how does the profit tax affects pricing and output decision has been explained with the help of a figure. From it, it is also obvious that the reaction of the profit-maximizing manager is different from revenue-maximizing manager.
Related keywords Public Policy