Policy Analysis and Sustainability
Policy analysis focuses at determining the needs of the entire process of making policies, framing, interpreting, and expounding on the existing scientific and technological knowledge to put it into formats that are relevant to, and answer the questions faced by the community the policy serves. Policy analysis provides direct support to decision makers with particular policy choices (Morgan, 2017, p. 1). There are different approaches and models to policy analysis which are used according to their effectiveness in various institutions and motivation behind the need for review. The goal of policy analysis is to evaluate, order, and structure insufficient knowledge to enable decision making with a maximum understanding of the existing knowledge, limitations, and implications of policy. Policy analysis differs from science regarding empirical testing in that; there is minimal to zero experiments in policy analysis unlike in science where evidence through experiments has to be produced (Morgan, 2017, p. 6). While in science every scientific paper presents a bar of error as proof that no knowledge is perfect or sufficient, uncertainty in policy analysis has previously been a rare occurrence.
I agree with the author in that some questions in public policy can be asked of science but cannot be answered by science, this means that such questions transcend science. Such questions involve the probability a catastrophic accident to occur given a new reactor design.
According to Morgan (2017, p. 53), in benefit-cost analysis, prices have in the previous year’s been used to estimate benefits by analysts until in the year 1844 when Jules Dupuit explained the idea of using consumer surplus. Shadow pricing that is social value is commonly used in cost-benefit analysis and in public policy where if the market price is higher than the shadow price, the scale of the activity should be reduced. If the market price is lower than the social value, expansion of the activity should be undertaken. In modern day, Compensation value and Equivalent Variation are used as measures of benefits in that compensation value assumes a price reduction as a result of a rise in output (Morgan, 2017, p. 55). The willingness to pay is limited to consumer and societal income and therefore cannot be used as a valid measure of economic value. Pareto Optimality Criterion is used to describe a situation where an attribute may be beneficial to some people but not all, and at the same time does not result to a worsened condition on those that it fails to benefit. In the case where an implemented policy results to winners and losers, the winners would be required to compensate the losers for there to be a Pareto criterion. The ability to make such a transfer possible is a standard strategy in the benefit-cost analysis that is referred to as the Kaldor-Hicks Standard. Ethically, citizens become better with the use of KH tests in numerous rulemakings than in the use of the Pareto tests (Morgan, 2017, p. 64). Some critics have raised the question on the ability of benefit-cost analysis to aid public decisions without subjecting them to mechanical process with the tendency to ignore non-economic values. However, economists use them as a tool that guides them to think systematically when it comes to data collection, social issues, and in the analysis.
I agree with the author in that, for there to be an equilibrium, the market price must match the social value, otherwise, if either of the two is higher than the other, public policies will be based on bias and will result to economic instability.
Lave “Benefit-Cost Analysis”
According to Lave (1996 p. 108), the benefit-cost analysis is a problematic tool in the case where there are limited resources, limited times, and the people involved have limited knowledge, skill, and experience in performing the analysis. Utilitarianism refers to an ethical theory which states that the best action is one which makes maximum use of the utility, in that it is used in the description of the morality of actions and leads to ultimate good (Lave, 1996 p. 110). In the benefit-cost analysis, utilitarianism reflects in the case where rights are made for the benefit of the whole in a utilitarian society, but when the net benefit of a right becomes negative, it no longer serves as a social policy. The benefit-cost analysis reveals uncertainties and knowledge gaps hence exposing a reader to bias when making decisions (Morgan, 2017, p. 67). Therefore, during decision making, the decision maker may fail to make appropriate interpretations of the BCA without prior knowledge of the analyst values and the organization involved.
I do not agree with the author’s argument that a decision maker may be obliged to make decisions without referring to previous BCA. In my opinion, reference to previous benefit-cost analysis assist the decision maker in making a more informed decision which is free from errors from the past.
Benefit-Cost Analysis differs from Decision Analysis in that DA gives a more severe involvement to uncertainties than BCA. DA supports optimization of the expected utility during an uncertainty in situations that require a single choice in the face of options. On the other hand, BCA focus on analyzing the net utility of only a single action. According to Morgan (2017, p. 55), DA may not be solely used in making decisions, but it can be significant in assisting in informing complex issues.
I do agree that Decision Analysis are significant in the analysis of uncertainties but can not be used independently in a decision-making process. A decision maker should make use of both BCA and DA, to comes up with a decision with minimal uncertainties.
According to Morgan (2017, p. 55), the value of statistical life refers to the value derived from the marginal rate through which society and individuals are ready to invest to minimize injury and death eventualities in the case where the risk is small to individuals involved. Today, the notion of VSL is applied in the labor market in that when seeking employment; individuals refer to the mortality and morbidity risks attached to the job. Contingent Valuation is more of an ethical view towards compensation and value placement. The opinions of people are collected by analysts who later use the opinions in the construction of monetary measurement of values. When valuing the ecosystem, marginal contributions should be made where comparisons should be made between the value of transforming an ecosystem to a different state and leaving it in its natural form. It is however impossible to place a quantitative monetary valuation to the ecosystem, but it is beneficial. Both market and nonmarket methods of valuation may be applied during value estimation of the ecosystem.
I agree with the argument on contingent valuation in collecting people’s opinion before transforming an ecosystem. People value the ecosystems around them differently and therefore prior consultation from the societal members will enable decision makers make a more informed decision before transforming the ecosystem. For example, before transforming a park into business center, the analysts should consider the attachment that people have with the park and how much they would be willing to be compensated for the transformation.
Goulder and Parry “Instrument Choice in Environmental Policy”
In environmental policy, instruments such as emission taxes, tradable emissions allowances, emissions reductions subsidies, performance standards, technology mandates, and subsidies in research and development are used. All instruments are equally superior regarding their relevance to policy choice. When choosing between instruments, one should consider its economic efficiency; therefore, an economist can contribute to enhanced political outcomes by coming up with new policy instruments, and by being more effective in communicating critical insights in research to policymakers (Goulder, and Parry, 2008 p. 6). In this way, they will have devised instruments that perform better at reconciling cost-effectiveness and distributional goals.
I do agree with the author’s view on the importance of effective communication. Efficient collaboration between analysists, economists, and policy makers will result to development of more enhanced policy instruments.
Goulder, L.H. and Parry, I.W., 2008. Instrument choice in environmental policy. Review of environmental economics and policy, 2(2), pp.152-174.
Lave, L.B., 1996. Benefit-Cost Analysis (pp. 104-134). Washington, DC: AEI Press.
Morgan, G., 2017. Theory and Practice in Policy Analysis. Cambridge University Press.