CHAPTER 2

THE POLICYMAKING PROCESS

The General Framework of the Policy Making Process

POLICYMAKING PROCESS – process of identifying real-world problems, formulating solutions, and

identifying a course of action to follow (FAO 2008).
- It is a political process incorporating interdependent phases presented as a
nonlinear cycle or round of activities ordered in time (Dunn 1994).

Policy analysis is an integral part of this process the purpose of which is to produce information relevant to one,
several, or all of its phases. POLICY ANALYSIS is being referred to as “an intellectual and practical activity
aimed at creating, critically assessing, and communicating knowledge of the policymaking process (Dunn
1994).

Since policies are intended to address problems and issues, the required plan of action is developed considering the
following general framework:

1. Analysis of current situation/setting

The questions are “where we are,” what is the present situation and what is the problem or issues that
requires policy action.

2. Definition of goals and objectives

The questions are “where we want to go,” or given the present situation, what is the desired situation?

3. Design of the means (specific policies and action programs) to achieve goals

The questions are “how do we get there,” and what are the courses of action to be undertaken to achieve
the desired situation.

4. Evaluation

The question is “what did we achieve?,” then proceed to #1 and continue with the process as necessary.

For example, the current situation being experienced by a country is one of insufficient food supply. This is
due to shortfalls in local production. In order to meet the demand, the country starts importing that increases
over time. Current policies supporting food production include price incentives through a support price policy
and fertilizer subsidy for farmers. Without any other policy support, production is expected to grow at the
rate of at most 3% per year, which is insufficient due to the rapidly growing population of the country.

Several options may be considered to achieve the goal/objective. A five-year timeline is considered with
annual monitoring and evaluation (M&E) mechanism. Options may include:

1. status quo
2. additional support in credit for food production and 3-month storage, and irrigation
 If option #2 is considered, it is implemented and provided with adequate budgetary support coupled by an
appropriately design M&E mechanism. Lessons from the annual M&E are considered for possible
adjustments in the policy.
Phases or Stages of the Policymaking Process

1. Policy agenda setting. This involves placing the issue or problem to be addressed in the priority agenda
for action. The policy analytic procedure is known as “problem structuring” that involves the ff.:

a. Awareness based on inputs such as facts (condition in measurable form), beliefs (based on
observation of individuals or groups of what is), and values (expression of what should be, ideals,
moral expectations).
b. Specification of goals (desires of individuals or groups formed on the basis of facts, beliefs, and
values).
c. Problem identification – based on felt needs of individuals, group or society – “felt” in the sense
that it is believed that change can be realized and it may arise from social tensions, doubts, conflicts,
failure to realize goals, or concern for an anticipated occurrence that might be preventable. This may
also involve analysis using appropriate theoretical models that help identify causes of problematic
situations.

2. Policy formulation or development – refers to the set of activities that continue until the best policies
within resource constraints have been specified. This involves “forecasting” the consequences of adopting
policy alternatives (Dunn 1994). This steps include:

a. Design of policies involves specification of objectives and alternative policies (food security versus
food self-sufficiency) and action programs (input or output subsidies or market infrastructure and
communication and development) to address the problem.
b. Evaluation of alternatives that looks at how well each alternative addresses the needs specified in the
problem in relation to the costs of implementation based on the resources available. This may include
careful policy analysis using basic economic principles, theories, or models.
c. Choosing or eliminating of each policy among alternatives is based on careful research, design, and
evaluation.

The questions relating to some economic criteria that could be adopted in making a choice are as follows
(Barket and Hayami 1876):

• How efficient is the policy considering total benefit to society relative to the government cost of the
program to be implemented?
• How much is the contribution of the policy as measured by net benefit to society (netting out income
transfer)?
• How large is the burden of the policy or program on the government budget (or tax payers)?
• Which sectors of the society gain and which lose from the program?
• How much is the savings in foreign exchange?

The first criteria can be analyzed using total benefit-cost ratio, net social benefit, and net government cost.
The distribution impacts (4th criteria) can be evaluated by measuring the changes in the distribution of total
benefit among the various sectors of society affected by the program compared with the no program case.

There is no single policy that can address all aspects of a problem without conflict among varied groups
within the society. In almost every policy there are gainers and losers. Conflict of interest often cannot be
resolved but may be minimized if there is careful consideration of the basic beliefs, values, and goals of all
persons or groups potentially affected by the policy, followed by explanation of the proposed action
 programs. In some cases, COMPROMISE solutions or “compensation” for losers may be required (example:
farm-beneficiaries vs. landowners in implementing CARP).

3. Policy adoption and program implementation: This is based on the recommendation resulting from
analysis of the policy alternatives. It is required that the implementing agency (the change agent) prepares
and executes a carefully designed implementation plan. The plan constitute the work and financial plans
specifying the tasks, targets, timetables, assigned groups, financial requirements, and budget releases.

4. Policy and program monitoring and evaluation: The purpose of M&E is to provide management and
policy makers with timely and operationally useful information on how efficiently each stage of the program
or project is operating and the degree to which intended impacts are being achieved (or whether there is
unintended impacts) and the lessons for future actions. M&E requires the use of performance criteria and
these should be included in the overall policy and program design. The specific area for program evaluation,
the following aspects should be emphasized:

a. The aspect identity of clients or interest groups for whom the policy or program is designed.
b. Expected change in their environment or contribution to society
c. Groups that may be influenced adversely
d. Manifestation of adverse effects
e. Reasonable time frame to serve as guide to realize expected changes
f. Financial cost of program in terms of resource use and misuse
g. Effectiveness, efficiency, and responsiveness of program implementation
h. Realistic performance criteria
i. Measures of success consistent with performance criteria framework
j. Problem identification, policy formulation, and the program implementation consistent with
performance criteria.

Considering all these items, evaluation provides feedback so that the policy formulation process can begin
once again when necessary (Figure 1). The different phases are interdependent and follow a cyclical
process. Once phase cannot proceed without the other; depending on the result of the monitoring and
evaluation, the process may involve another round of activities following the various phases.

Figure 3.1 Phases of the policymaking process.

Criteria for Evaluating Policy and the Policy Process

Policymaking involves adopting a procedure to ensure that the process, the policymaking body, and the resulting
policies meet the following decision criteria (Dunn 2004):
 1. EFFICIENCY – means responding quickly yet accurately to problems at a cost acceptable to those financing
the policymaking function and the resulting programs. It is measured as the amount of effort required to
produce a given level of effectiveness.
2. EFFECTIVENESS – refers to how well the policymaking body can reach decisions, and second to how well
these decisions and policies serve the needs of the populace involved; question is “does it work?” It is often
measured in terms of units of products or services or their monetary value.
3. ADEQUACY – means determining the extent to which any given level of effectiveness addresses the
needs, value, or opportunities that led to a problem.
4. RESPONSIVENESS – means being able to respond to the needs, preferences or values of particular
groups. The type of responsiveness necessary depends on the nature of the problem itself.
5. APPROPRIATENESS – is the value or worth of a program’s objectives and the tenability of assumptions
relating to the objective, that is, whether the identified objectives are the proper ones for society or interest
group.
6. TIMELINESS – means dealing with the problem or minimizing its impact early enough or before major
corrective measures become necessary. It is also refers to anticipating future problems, externalities, and
residual effect of a problem.

The Role of Economic Theory and Other Disciplines

A. Multidisciplinary Approach and the Policy Team

• Policy research/policy study/policy analysis is a vital aspect of the policy formulation process.
• Applied to food, food policy analysis refers to “the process of research and thinking design to recover
the complementarities and tradeoffs among food policy objectives and to identify government initiatives
in the project, programs, and policy arenas that best achieve these objectives.
• The policy analyst is expected to assist in providing information and the analytical inputs.
• Policy study team consists of a multidisciplinary expert group (e.g. – agricultural economists/political
scientists/sociologists/nutritionists/agronomists/plant breeders/engineers/animal science specialist,
among others)
• The multidisciplinary approach to policy analysis and formulation is necessary since a particular policy
oftentimes have consequences on many sectors, not just a particular sector it intends to address.
• Agricultural policy extends beyond economics and includes sociocultural, political, and institutional
concerns.

B. Economic Policy Research and the Role

of the Agricultural Economist/Economist

The agricultural economists/economist conducts the study of economic relationships that will:

a. Provide a better understanding of various issues concerning the given problem, and
b. Identify and measure economic consequences or impacts (ex ante or ex post) of alternative policies.

▪ Results of policy research or studies could be disseminated to policymakers, interest groups,

implementing agencies, and other concerned sectors in the form of policy papers, policy brief, policy
memoranda, executive summaries, and press releases (Lantican 2003).

C. Forms of Policy Output, Philippine Examples

• Policies could be in the form of a republic act – formulated and enacted by the congress and
finally approved by the president.
 • Could be in the form of a proclamation made by the president
• An executive order – issued by the president
• An administrative order, a memorandum, or a special order issued by the department
secretary.

D. Analytical Methods

The method at each various phases of the policy-making process range from descriptive to more
quantitative techniques involving econometric modeling and estimation. Some of the commonly used
analytical methods are the following:
1. Forecasting of policy futures. This could be based on expert or informed judgment, extrapolation of
historical trends, or technically sophisticated econometric models.
Informed judgments are based on experience and insights and may use the Dephi approach. An
example of the Delphi technique would be when a team of medical experts is hired to advise on
whether a drug would be effective to treat a particular class of diseases. They're each asked to
anonymously give their opinion about it and then get to see what the others said.

Extrapolative forecasting includes the classical time series analysis involving trend, seasonal, cyclical,
and irregular functions, and liners and nonlinear trend estimation.

Theoretical forecasting covers – theoretical modeling, casual modeling, regression analysis, point and
interval estimation, and correlation analysis.

2. Cost-benefit analysis (CBA). As a basis of policy recommendation, policies may be computed by

quantifying their total monetary cost and total monetary benefits (using ex ante, which refers to the
question of what will happen and what should be done).

When it is used to evaluate policy performance (impacts or outcomes), the application of retrospective
(ex post, which refers to the question of what has happened and what difference does the policy make).
CBA includes cost and revenue estimation, shadow pricing, discounting, and sensitivity analysis.

The advantages of CBA are as follows:

a. Both costs and benefits are measured in the same unit of value (domestic or foreign currency);
hence, costs could be directly subtracted from benefits.

b. Allows links of individual policies and programs to the benefits for the society as a whole, which are
both expressed in monetary terms.

c. Allows comparison of programs in widely differing areas (agriculture and health) since net
efficiency benefits are expressed in terms of a common currency.

3. Cost effective analysis (CEA)

• Used ex ante or ex post
• Compares policies by quantifying their total costs and effects
• Uses two different units of value – one for costs (in monetary units) and one for effectiveness
(typically measured in units of goods, services, or some other valued effect)
• Effectiveness is expressed in either as the number of a good or service produced per peso
expended, or how much (in peso) is expected per unit produced.
• CEA – appropriate in determining the most efficient way of using resources to achieve
objectives that cannot be expressed in terms of income. EXAMPLE: How many children will
achieve adequate nutrition for x millions of peso to be spent in a supplementary feeding
program?
• Although CEA could not be applied to questions involving aggregates social welfare, it has the
following advantages:

a. easy to use
b. application to goods and services whose values cannot be estimated using market prices,
and
 c. appropriate for analyzing externalities and intangibles

4. Other analytical methods depending upon the policy problem or issue. These other analytical
methods are:
a. partial or general equilibrium analysis
b. competitiveness analysis using domestic resource cost (DRC), revealed comparative
advantage (RCA), export/import parity and domestic price comparisons, and net social
profitability (NSP)
c. income distribution analysis involving Lorenz curve and Gini coefficient estimation and
measures of poverty
d. economic valuation or environmental impacts; and
e. policy analysis matrix (PAM) using budget data on representative commodity system to
determine the impact of a set of all policies and market distortions.

E. Data Presentation

• Data can be presented through graph, pictorial, tabular. These would enhance the preparation of
policy reports as well as presentation materials.
• Charts, graphs, tables, maps, and photos are also useful.

F. Writing a Policy Paper or Policy Brief

A policy research oftentimes involves a comprehensive analysis of a policy or policy options. However, for
policy advocacy and for greater appreciation of the policy recommendations by the various stakeholders,
including policy makers who are not necessarily economists or researchers, there is a need to translate
results of policy research into a concise policy paper.

A policy paper is a decision-making tool (according to FAO 2008) that:

1. defines an urgent policy issue

2. identifies and evaluates policy options including their outcomes, and
3. recommends a preferred alternative (policy recommendation)

• the policy paper should provide comprehensive and persuasive arguments to justify the policy
recommendations presented and prompt the target audience (the decision maker) to take action.
• policy paper should be brief and could be about 10 pages or less to be interesting to the decision
maker, but should be comprehensive enough to present convincingly the arguments for a particular
policy recommendation.
• policy paper may be written according to the purpose and target audience.
• policy paper may be used as advocacy material and policy report or policy makers and interest groups,
and as presentation materials in policy forums and discussions.

The elements of a policy paper (FAO 2008) are as follows:

a. title
b. table of contents
c. an executive summary
d. introduction
e. a problem description
f. policy options
g. conclusions and recommendations
h. appendices
i. bibliography
An alternative format includes a letter of transmittal, executive summary, background of the problem, scope
and severity of the problem, policy recommendation, references, and appendices.