Policy Analysis

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Policy Analysis
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• We are solving economic problems politically.
• Sec. Cito Lorenzo
• Presidential Adviser for One Million Jobs

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Policy Analysis Historical Trivia

• 1st used by Charles Lindblom in 1958
• A type of quantitative analysis involving
  incremental comparisons in which qualitative
  methods are included in recognition of values and
  policy
• Lindblom (1959) wrote of government as the
  science of muddling through

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Policy Analysis Other Definitions

• Use of reason and evidence to choose course of
  action to attain a given set of goals/objectives
• A body of concepts and principles aimed at
  helping the decision maker make choices
  intelligently, ethically and effectively.
• Analyzes existing practices/policies for
  effectiveness.

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What is a policy?

• A policy is a course of action or inaction chosen
  by public authorities to address a given problem
  or interrelated set of problems.
• Source Leslie Pal, Beyond Policy Analysis
  Public Issue Management in Turbulent Times, 2nd
  edition (Scarborough, ON Nelson, 1997)

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What Policy Analysis is not

• Is not an exact science
• Is not infallible
• Is not a tool for advocacy of views of the
  analyst

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Dimensions of Policy
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FRAMEWORK
Policy Analysis
Theoretical Basis
Process
Tools

• Economic
• Political

• Formulation
• Implementation
• Evaluation

• Quantitative

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Dimensions of Policy
Inter-Island Shipping Bill

• Legal
• Bill proposes to lift the Cabotage Law by
  amending the Tariff and Customs Code of the
  Philippines to allow foreign vessels to operate
  domestically
• There is a need to amend the Constitution (Art.
  XII Sec. 11 stipulates maximum 40 foreign
  equity in domestic shipping)

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Dimensions of Policy
Inter-Island Shipping Bill

• Economic
• Increased competition to lower transport cost and
  improve quality of service (foreign vs. local)
• Global competitiveness, countryside development
  vs. domestic shipping industry
• Political
• Lifting the Cabotage Law is not a politically
  viable option (strong pressure from domestic
  shipping industry)

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Approaches in Policy Analysis

• Basic Analysis
• a subset of policy analysis methods comprising
  quickly applied but theoretically sound ways to
  aid in making policy decisions
• Policy Research
• a subset of policy analysis methods requiring
  substantial budget, time and data to achieve
  results

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Elements of Policy Analysis
Policy Analysis
Formulation
Implementation
Evaluation

• What should be our goals?
• Which option or option mix promises fewest
  negatives and greatest benefits?
• What is the problem?

• Is the policy politically viable?
• What variables are available to help ensure the
  successful implementation of the policy?

• By what criteria can be policy be judged fair?
  Judged good?

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Relationship of Policy Analysis/Review and
Policy Formulation

• NEW POLICY
• Policy Formulation
• Problem Identification and Analysis
• Policy Proposal
• Policy Implementation
• Policy Adoption
• Program Operation
• Policy Evaluation

• EXISTING POLICY
• Policy Analysis/
• Review
• Policy Reform
• Policy Implementation

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Players in the Policy-Making Process

• Policy-makers (executive, legislative and
  regulatory)
• Policy Advocates (individual, business entities,
  special interest groups)
• Affected Parties (consumers/general public)
• Media

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Criteria for JudgingPolicy Outcomes

• Efficiency
• Equity
• Growth
• Stability

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Criteria for Judging Policy Outcomes

• EFFICIENCY
• Allocative efficiency. An efficient economy is
  one that produces what people want and does so at
  the least possible cost.

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Criteria for Judging Policy Outcomes

• EQUITY
• Fairness. May imply a more equal distribution of
  income and wealth.

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Criteria for Judging Policy Outcomes

• GROWTH
• Economic growth is an increase in the total
  output of an economy brought about by devising
  new and better ways of producing goods and
  services.

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Criteria for Judging Policy Outcomes

• STABILITY
• A condition in which output is steady or growing,
  with low inflation, and full employment of
  resources.

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Criteria for Judging Policy Outcomes

• EXAMPLE
• Economic Evaluation of the Proposed Excise Tax on
  Light Commercial Vehicles (Carandang, 1997)
• Tax structure on automobiles are based on engine
  displacements.
• However, small cars (1300 cc) and LCVs with
  seating capacity of less than 10 are subjected to
  an excise tax.
• A proposal was considered to subject LCVs with
  more than 9 seating capacity to a flat rate of
  15 regardless of engine displacement and type of
  fuel used.

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Criteria for Judging Policy Outcomes

• It is intended to close the gap between utility
  vehicles (which are not subjected to excise tax)
  and low-priced cars (which are subjected to
  excise tax).
• It is also intended to simplify the tax structure
  and encourage the broadening of the tax base.

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Criteria for Judging Policy Outcomes

• Evaluation focused on
• Efficiency
• Effect on govt tax collection target of P1.1
  billion
• Equity
• Welfare cost
• Growth
• Impact of the 15 excise on LCV sales
• Stability
• Inter-dependence effects of the 15 excise tax on
  the macro-economy

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Criteria for Judging Policy Outcomes

• Methodology
• Efficiency
• Regression Model (for forecasting tax collection)
• If Forecasted Tax Value is greater than the
  Target Tax Collection, the tax policy is
  efficient
• Equity
• Consumer Surplus Analysis using price
  elasticities (to derive the excise burden of
  tax or deadweight loss)
• Excise burden of tax is defined as a loss of
  welfare above and beyond the tax revenues
  collected
• Rule of thumb Welfare cost must not exceed 5 of
  the government revenue gain

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Criteria for Judging Policy Outcomes

• Methodology
• Growth
• Regression Model (for forecasting LCV sales)
• Stability
• Input-Output Analysis (for establishing backward
  and forward linkages and quantifying impact of
  changes on the final output)

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Criteria for Judging Policy Outcomes

• Results
• Efficiency
• Target Tax Collection of P1.1 billion will not
  likely to be met (Forecasted Tax Value is only
  P930 million)
• The tax policy is inefficient
• Equity
• Excess burden of tax (9.5) is greater than the
  5 rule of thumb

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Criteria for Judging Policy Outcomes

• Results
• Growth
• Based on the forecast, LCV sales will decline by
  6.1 with the implementation of the tax policy.
• Stability
• Based on I-O Analysis, the economy stands to lose
  P1.185 billion worth of goods and services being
  provided by the other sectors forwardly and
  backwardly linked to the automotive industry if
  the tax policy is implemented.
• Recommendation
• Government should not implement the proposed
  excise tax on LCVs.

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Example of Possible Options to an Identified
Policy Problem

• Problem Environmental costs of logging are not
  shouldered by loggers
• Options
• Class lawsuit against loggers for damage due to
  erosion and flooding
• Increase taxes and fees paid by loggers
• Reforestation tax paid directly to local
  governments for funding commercial reforestation
• Transfer the residence of the logger where he
  will be the first to suffer from erosion and
  floods

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Example of Possible Options to an Identified
Policy Problem

• Problem Environmental costs of logging are not
  shouldered by loggers
• Options
• Levy a license fee that will be deposited in a
  trust fund, the annual proceeds from which will
  subsidize the cost of fertilizers to make up for
  loss of topsoil
• Give local communities suffering from negative
  environmental consequences of logging a share in
  the ownership of the logging firm
• Use timber tax to fund researches for developing
  methods for quantifying the liabilities and
  compensatory fees from loggers

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Example of Possible Options to an Identified
Policy Problem

• Problem Environmental costs of logging are not
  shouldered by loggers
• Options
• Give negatively affected communities the first
  priority for employment by logging firms
• Deputize negatively-affected local communities as
  watchdogs over loggers.

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Policy Analysis / Development Model /
Framework
Data Analysis
Policy Antecedent
Policy Recommendation
Policy Issue/ Analysis
Performance Data
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The Key to Successful Policy/Formulation is
the definition of objectives yet there is
nothing resembling agreement on this central
issue, either in terms of ends or means. Peter
de Leon (1987)
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Job of Policy Analysts (Nelson, 1991)

• Persuade decision makers not by
• asking them to trust your professional
• authority but by
• the ability to draw convincing historical
  analogies
• taking diverse events and integrate them into a
  big picture

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cont. Job of Policy Analysts

• showing that policy proposals make sense
  political, moral, legal, philosophical and other
  perspectives
• finding simple statistics and data that make a
  point and
• Convert broad policy principles into feasible
  short-term measures that over time will serve to
  implement these principles

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Practical Principles for Policy Analysts

• Learn to focus quickly on the central decision
  criteria of the problem.
• Avoid the tool box approach to analyzing policy.
• Learn to deal with uncertainty.
• Say it with numbers and/or figures.
• Make the analysis simple and transparent.

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cont. Practical Principles for Policy Analysts

• 6. Check the facts.
• 7. Learn to advocate the position of others.
• 8. Give client analysis, not decisions
• 9. Push boundaries beyond of analysis beyond
  
• policy envelope
• 10. Be aware that there is no such thing as an
• absolutely correct, rational and complete
  
• analysis.

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Stages of Policy Analysis Process

• 1. Problem definition

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Stages of Policy Analysis Process

• 2. Goal/objective setting.

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Stages of Policy Analysis Process

• 3. Framework/hypothesis.

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Stages of Policy Analysis Process

• 4. Determination of evaluation
  criteria.

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Stages of Policy Analysis Process

• 5. Identification of alternatives.

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Stages of Policy Analysis Process

• 6. Evaluation of alternatives.

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Stages of Policy Analysis Process

• 7. Comparison of alternatives.

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Stages of Policy Analysis Process

• 8. Assessment of outcomes.

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Stages of Policy Analysis Process

• 1. Problem definition
• 2. Goal/objective setting
• 3. Framework/hypothesis
• 4. Determination of evaluation criteria
• 5. Identification of alternatives
• 6. Evaluation of alternatives
• 7. Comparison of alternatives
• 8. Assessment of outcomes

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Rules to Help Select Methods of Analysis

• Be guided by what your client wants to know.
• Time you have been given to do the analysis.
• Knowledge of factors affecting the policy
  decision.
• Complexity of the issue

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cont. Rules to Help Select Methods of Analysis

• 5. Data that is available.
• 6. Do you need a position or actual
• numbers or both?

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Goal Definition

• An object or end that one strives to attain aim
• Objective Definition
• Something aimed at or striven for