Stages of Public Policy | Subject Matter of Public Policy

The public policy can be divided into four stages as follows:

1) Policy Formulation


At first, in the view of people’s demand or realizing the need of that by the government, itself, the government authorities formulate any policy. After that those policy is announced through various media like radio, television and public speech. The basis of formulating a public policy are the country, time, situation, geo-political condition, economic and political level of the people and so on. The principles propounded by various scholars on the formulation of public policy are also used. These principles are found to have given emphasis on the factors such as the need to have capacity to face the problem, need to select appropriate alternative after scrutinizing the possible alternatives of the solution of the problems, need to have appropriate adjustment between available means and ends.

Public policy is formulated with a view to serve majority of people’s interests; protect minority of people, maximum utilization of resources, end conflict between classes and raise living standard of people. Among the different stages of public policy, formulation stage is regarded as the first and foremost stage. The sources of public policy are as follows:

  • Voice of people: The voice of people and the constitution of the country, directly or indirectly expressed public desire, slogan, procession, the values directed by socio-religious, cultural, natural conditions, existing tradition are the source of public policy formulation. 
  • Political parities: The organized institutions established with different objectives, pressure groups including political parties, opinion of concerned experts, election and so on are also the sources of public policy. 
  • International trends: The international trends, the economic, political, social policies of neighboring countries, the policies of international multilateral institutions etc. are also the sources that affect the public policy.

In Nepal as well, legislature, executive, the administrative mechanism of Government of Nepal under delegated power and other constitutional organs basically involve in policy-making. The work of implementation is done by the administrative agencies. A separate committee involving different agencies can do the job of evaluation.

2) Policy Interpretation


There is a possibility that the terms and sentences of the devised policy may denote wrong meaning. To check this, the terms and sentences of the policy statements are interpreted. The policy interpretation may also be called policy analysis. And in policy formulation, different classes, scholars and authorities are involved in policy analysis as well. The public policy is affected by different factors. For example, the political principles always affect the government policy. Since public policy is the result of the relation of groups, group formation also affects policy. Similarly, since there is dominance of elite class in the state, the wish of the elite class may also affect public policy.

3) Policy Implementation


In the third stage after policy analysis, there is policy implementation. To use the matters mentioned in policy statement in actual practice is called implementation. Since policy statement is meaningless without implementation. It is equally necessary to give attention on implementation aspect. If the objective is not realized according to policy, policy powers to be a useless slogan. The implementation is usually done through administrative bodies. The degree of the use of resources, inaction or negligence, possibility of success or failure and so on are looked in the implementation stage itself.

4) Policy Evaluation


In the final stage after implementation of policy is evaluated. Under policy evaluation, the evaluation of whether policy was implemented in reality or not is made. Likewise, a detail scrutiny is also made regarding the desired impact of the policy, the problem in implementation of policy, and the measures to solve problems. The evaluation is made on the involvement of different bodies on the basis of the seriousness, subject matter and so on of the public policy. Such evaluation may be made by the supreme legislature itself or also by other bodies of the government according to the constitutional provision. The auditor general may make evaluation over the executive. Similarly, evaluation can also be made by forming a committee or commission.

Subject Matter of Public Policy


Under subject matter of public policy, the following headings are included.

i) Policy Making Process


The policy making process is included under policy analysis. The policy making process is classified under four heads.
  1. Political policy making: The policy is made in accordance of political parties’ commitment during the time of election. The pressure groups such as press, communication, speech section etc. plays a vital role in political policy making. Though, political policy making is formulated by the elected parliament. 
  2. Executive policy: The policy which makes implementation of the general policy made by the existing parliament. To implement the policy formulated by the parliament effectively is the responsibility of executive. Furthermore, the executive can make different policies under main policy.
  3. Administration policy: The policy made on the basis of administrative suggestions is called administrative policy. The efficient persons in the administration implement the public policies. The administrative persons present their opinion and suggestion in the concerned bodies about policy making, implementation, effects on society and the alternatives. 
  4. Technical policy: The policy taken with the works of technical nature is known as technical policy. This policy making and implementation is done by the skilled persons in the technical services.

The political parties, public officials, non-officials and external sources are directly as well as indirectly involved in policy making.

ii) Policy Contents and Specific Issue Areas


The merits and demerits of different provisions made in the law are explained under this heading. These topics are population, employment, environment, water resources, money, banking, public finance etc.

iii) Policy Analysis, Evaluation and Impact Techniques and Methodologies


After the policy making, implementation is made. Then, impact of public policy on people’s lives is evaluated. The policy-makers and the evaluators use specific methods or techniques. These methods and techniques are operational research methods, mathematical and statistical techniques, logical proof etc.

iv) Particular Approaches to Policy Studies


The definite methods related to policy study are studied under this topic. Public study means the study of public choice and the study of public output etc. The topics such as the criteria of determining individual and collective rationality are also studied under it.

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Public policy is useful to politicians and political parties | Utility of public policy in business decision making | Utility to administrative officials

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 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 favor 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 registrar’s office according to rule for the establishment (birth). After that 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.

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.”

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. From it, it is also obvious that the reaction of the profit-maximizing manager is different from revenue-maximizing manager.

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Meaning of Public Policy | Characteristics of Public Policy | Scope of Public Policy

Public policy may be defined as a proposed course of action of an individual, a group, an institution or a government for the accomplishment of certain objectives in a given situation. Public policy is one that is formulated by some public or governmental authority. Government, which is the representative of the interest of the society as a whole, is the legitimate institution to make
public policy. Whatever policy the government formulates in the form of legislation, regulation, executive orders, or court decisions is public policy. In fact, it is the ‘authoritative base’ of the public policy that distinguishes it from the policy in general.

As pointed by Anderson, Brady and Bullock, “Goal directed or purposeful course of action followed by an actor or set or actors in an attempt to deal with a public problem. This definition focuses on what is done, as distinct from what is intended, and it distinguishes policy from decisions. Public policies are developed by government institutions and officials through the political process (or polities). They are distinct from other kinds of policies because they result from the actions of legitimate authorities in a political system.” However, this definition is narrow in focus as it refers to ‘what is done’ in contrast to ‘what is intended to be done’. The government need not engage in a formal action for public policy to be put into effect.

According to Thomas R. Dye, “Public policy as whatever government chooses to do or not to do.” He argues that public policy must include all actions of the government and not just stated intentions of either government or a government official. He also points out that public policy must include what government chooses not to do, as government inaction with respect to particular issues can have as great as an impact on society as government action. However, this definition can be criticized on the ground that it is too vast as it also includes ‘what government chooses not to do.’

From the above mentioned definitions, we find different views about the definitions of public policy. However, we can summarize that it is the study of a set of government policies of conducting public welfare activities. 

But now the question arises as to what should be included in the scope of public policy. The scope of public policy may be highlighted on the following broad areas:
  1. Promotion of social welfare: Policies pertaining to social welfare cover the problems pertaining to food, housing, health, education, social security, social welfare, employment etc. Public policy has a direct bearing with the socialization of the people by providing social equity and guaranteeing social justice, trying to eradicate all social evils, promoting education, setting up social insurance, social security and launching welfaristic schemes for the backwards, women, children and minorities.
  2. Economic betterment: Policies relating to economic affairs deal with activities of various sectors of economy such as industry, agriculture, foreign trade and commerce, foreign exchange etc. for ensuring a prosperous and stable economy. In agriculture sector, policy improves the quality and use of seeds, pesticides, fertilizers, agricultural equipment etc. In the industrial sector, it deals with the efficient development of both the small scale and large-scale industries and promotes better employment facilities. It launches various schemes to train and educate the common people in different trades, occupations and skills.
  3. Political advancement: For the success of any political system, awareness on the part of the common people is essential. This is more so about a democratic system. In such a kind of system, public policies are framed to encourage common masses to participate actively in the affairs of the government.
  4. Administrative efficiency: Public policies help to promote administrative efficiency directly as well as indirectly. This means that there may be policies, which are specifically formulated to and aim at enhancing efficiency of the administration. Thus, they lay down various procedures or guidelines to be followed by the administration in immediate future. Besides this, an enhancement may be a result of some other policies. With officials knowing what exactly they are expected to do and a code of discipline and conduct guiding all performances, all of it naturally adds to the efficiency of the administrative system.
  5. Management of financial affairs: The scope of public policy also covers the entire financial management of the government. Thus, it includes the realm of taxation, circulation of money, borrowings, debt structure, foreign exchange and the like.
  6. Environmental protection: Public policies are also aimed at creating healthy and clean environment. Environment pollution has become major threat before the world towards the close of the previous century. Hence, protection and maintenance of environment in the modern time has become a major responsibility of the governments. Thus, they are required to lay down policies in regard to water, air and noise pollution, for maintenance of eco-balance, afforestation, soil conservation and the like.
  7. Foreign affairs: Public policies are also framed to promote and maintain international relations. Thus, maintenance of international peace, harmony and cooperation are the important areas covered under the scope of public policies. Besides, what sort of relations with other countries of the world are to be maintained are decided through public policies.
  8. Defense: A state has also to frame policies in the field of defense as well. Such policies are of paramount significance for its stability and progress depends upon how much effective its policies in the field of defense. These policies include both maintenance of internal order and defending its external boundaries. Since now the problems have almost become worldwide phenomenon, no government can dare to ignore them.
  9. Development of infrastructure: The acid test of a country’s development and progress is that how efficient it has developed its infrastructure. All the countries that are considered as developed in modern times have a well-developed infrastructure. On the other hand, main hindrance in the development of Nepal is that we have not been able to create a well-developed infrastructure in the form of transportation, power and electricity, communication network etc. Seen in this background, it obviously becomes imperative for a country to formulate relevant policies in these areas.


Characteristics of Public Policy


The public policy contains the following main characteristics:
  1. Purposive (Goal-oriented) actions: Public policy in modern political systems reflects the behavior made on the basis of definite objective. It implies that public policy does not reflect the behavior that occurs suddenly or incidentally. For example, public policy reflects the behavior determined for the purpose of alleviating poverty, but does not reflect the behavior made for the relief of the people sufficient from earthquake all of a sudden.
  2. Course of action: Public policy is a plan of action or course of action taken by government authorities. A single decision made by an authority on his discretion cannot be a public policy. Because, since a decision will have to be implemented, there may be a doubt that the decision of a single person will be implemented.
  3. Action doing: In public policy, what the government actually does is reflected instead of the intention of the government, since mere intention of the government may not be converted into reality. For example, although there is a law that child labor should not be used; it cannot be a policy if not being implemented.
  4. Positive or Negative form: Public policy may be of both positive and negative form. Positive form involves the action taken by the government to influence certain action. For example, the policy that there should be at least a female teacher in each primary school for female upliftment is a positive policy. The negative form involves the government policy on not doing certain work. For example, government’s disinterest in pollution control is a negative policy.
  5. Law based on authorities: Public policy is positively based on laws. Similarly, the authorities having authority devise public policy. Consequently, those violating public policy should face penalty and punishment. Such compulsions cannot be found in the policies of private enterprises, since only the government has power to punish those who violate the laws. For example, only government can punish those who drive a car without license.
  6. Applied social science: Public policy analysis is assumed to be the subject of applied social science. Policy analysis makes enquiry and uses different methods of reasoning for producing and transforming relevant information with policy, which can be utilized in solving policy problems. United Nations has also dubbed policy-making act as policy science.

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Law of Returns to Scale in Production | Increasing Returns to Scale | Constance Returns to Scale | Decreasing Returns to Scale

Returns to scale describe the change in output when all inputs are changed / increased by the same proportion. This means that returns to scale explains production activities over the long run. Over the long run, a firm can increase all inputs by equal proportion or by unequal proportion. Returns to scale is based on the assumption that over the long run all inputs of production are increased by equal proportion.

According to A. Koutsoyiannis, “The term returns to scale refers to the changes in output as all factors change by the same proportion.” This law of returns can also be defined as, “Returns to scale related to the behavior of total output as all inputs are varied and is a long run concept.”

When each of the inputs of production are increased proportionately, output may increases more than proportionately or less than proportionately or equi-proportionatly. If it increases more than the percentage increase in inputs, it is called increasing returns to scale (IRS); if output increases by less than the percentage increase in inputs it is called decreasing returns to scale (DRS); and if output increase by equal proportion to the increase in inputs, it is called constant returns to scale (CRS). The concept of returns to scale is summarized in table.

Table: Returns to Scale
Increase in the Quantity
 of Factors/inputs		Increase in OutputType of Returns
 to Scale
10%20%Increasing
10%10%Constant
10%5%Decreasing

Increasing returns to scale occur when the economies of scale operate. Diminishing returns to scale occur when the diseconomies of scale operate. Constant returns to scale are an intermediary situation, when certain advantages of large scale production are counterbalanced by certain disadvantages.

The law of returns of scale can be explained with the help of Isoquants for a single output with the use of two inputs.

i) Increasing Returns to Scale (IRS)


When a certain proportionate change in both the inputs K and L, leads to a more than proportionate change / increase in output, it exhibits increasing return to scale. For instance, if quantities of both the inputs, K and L are successively doubled and the corresponding output is more than doubled, the return to scale is to be increasing return. It is illustrated with the help of figure.

Increasing Returns to Scale

The movement from point A to B as the line / ray OR should mean doubling the inputs K and L. In above figure, input combination increases from 1K + 1L to 2K + 2L. As a result of doubling the inputs, output is more than doubled. Similarly, the movement from point A to B, B to C, C to D indicates increase in inputs as a result of which the output increases more than the increase in inputs. Along the ray OR, the gap between AB, BC and CD is decreasing, that is OA > AB > BC > CD.

Increasing returns to scale (IRS) means the reduction in average cost of production with the expansion in the scale of the firm and increase in the size of output. That is, increasing returns to scale is another name of decreasing average cost of production with increase in the size of production.

Causes of Increasing Returns to Scale


a) Specialization

Each worker can acquire specialization in the performance of simple repetitive task rather than many different tasks. As a result, labor productivity registers a rise.

b) Dimensional relation

Increasing returns to scale is a matter of dimensional relation. For example, when the size of cloths (10m x 20m = 200 sq. m) is doubled to 20m x 40m = 800 sq. m., the size of the cloth is more than doubled, 800 sq. m. is 4 times of 200 sq. m. Following this relationship, when labor and capital are doubled, output is more than doubled over initial level of output.

c) Use of specialized machinery

In addition, a large scale of operation permits the use of more productive specialized machinery, which was not possible at a smaller scale of operation.

d) Effect of research and development

Conduction of research and development (R & D) works modifies methods of production. Research and development bring efficiency, economy and effectiveness in the production process. Hence, more spending on research and development is possible only in firms of large size.

e) Use of indivisibilities

Capital equipment of a given capacity and entrepreneur skill are the indivisible factors. They cannot be sub-divided into parts. Hence, as output increases, there is better and effective utilization of these factors. Therefore, as a results of the effect of all these factors, a given proportionate increase in the amount of all inputs leads to more than proportionate increase in output.

ii) Constant Returns to Scale (CRS)


When the change in output is proportional to the change in inputs, it exhibits constant return to scale (CRS). In other words, if quantities of both inputs, K and L are doubled and output is also doubled, then returns to scale is said to be constant.

A production function showing constant returns to scale is often called ‘liner and homogenous’ or homogeneous of the first degree’. The case of CRS is illustrated by means of figure.

Constant Returns to Scale

In the figure, the movement from point A to B, B to C and C to D is assumed to indicate doubling of the inputs. When inputs are doubled, output is also doubled. Similarly, the movement from A to C indicates trebling input, output also trebling. The gap between AB, BC and CD is same, that is OA = AB = BC = CD which means that the distance of successive isoquants is equal in case of CRS.

The main reason for the operation of constant returns to scale is that beyond a certain point, internal and external economies are neutralized by the growing internal and external diseconomies of production. When inputs of same efficiency are duplicated, output would increase by equal proportion.

iii) Decreasing Returns to Scale (DRS)


When output increases in a smaller proportion than the increase in all inputs, decreasing returns to scale (DRS) are said to operate. When a firm goes on expanding by increasing all its inputs / resources of production, eventually decreasing returns to scale will occur. For example, when inputs are doubled and output will be less than doubled. The decreasing return to scale (IRS) is illustrated with the help of figure.

Decreasing Returns to Scale

When the inputs K and L are doubled, that is, when capital-labor combination is increased from 1K + 1L to 2K + 2L, output also increases but by less than the proportionate increase in inputs. The movement from A to B, B to C and C to D indicates increase in the inputs. But the output increases by less than the increase in inputs. The gap between AB, BC and CD is increasing, that is AB < BC < CD. When decreasing returns to scales applies, the distance of successive isoquants along the ray through origin increases. Decreasing returns to scale also means increase in average cost of production with the expansion in the size and output of the firm.

Causes of Decreasing Returns to Scale


i) Managerial inefficiency

With the fast expansion of the scale of production, personal contacts and communication between (a) owners and management and (b) managers and labor, get rapidly reduced. Remote control and management replace close control and supervision. With the increase in managerial personnel / staff, decision-making becomes complex and delay in decision-making becomes inevitable. Implementation of decision is also delayed due to co-ordination problem between different sections and/or branches. As a result, output increases less than proportionately than the proportionate increase in inputs.

ii) Labor inefficiency

Another cause of decreasing returns to scale is over crowding of labor causing to loss of labor productivity and their accountability. On the other hand, increase in number of workers encourages labor union activities which mean simply the loss of output per unit of time.

iii) Exhaustible natural resources

The decreasing returns to scale may be found in the use of exhaustible natural resources. For example, if more and more fisherman used to fishing in a certain area of Trishuli river of Nepal, the catching of the fish will not increase in the same proportion.

iv) Fiscal diseconomies

With the expansion of the scale of production, the discount and concession that are available on bulk purchase of inputs come to end. As a result, output increases less proportion than the proportionate increase in all output.

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