ADS 514: Introduction to Public Policy, FSPPP, UiTM 1

STAGE 2 OF
POLICY PROCESS
TOPIC 4
/ POLICY CYCLE

POLICY FORECASTING
AND FORMULATION
 ADS 514: Introduction to Public Policy, FSPPP, UiTM

2 Policy Forecasting & Formulation

Content:
• Meaning of policy forecasting
• Purpose of forecasting
• Methods of forecasting and their advantages
and disadvantages
• Problems of forecasting
• Deciding and formulating type / category of
policy options
 ADS 514: Introduction to Public Policy, FSPPP, UiTM 3

At the end of Topic 5, students should be able to

explain:

1. Meaning of policy forecasting

2. Purpose of forecasting
3. Methods of forecasting and their advantages and
disadvantages
4. Problems of forecasting
5. Meaning of policy formulation & policy actors
6. Type / category of policy options
 ADS 514: Introduction to Public Policy, FSPPP, UiTM

Meaning 4 Meaning

Policy Forecasting Policy formulation

Process of predicting future

direction / action towards a • Process of drafting
problem (policy agenda): courses of action (policy
• What kind of option is options) to address
suitable to solve a particular what has been placed
policy problem? on the policy agenda
• What action to take? – new
policy, modifying policy,
terminating policy
 ADS 514: Introduction to Public Policy, FSPPP, UiTM 5

FORMS OF FORECASTING

• Projection.
• Prediction.
• Conjecture: A forecast based on informed or expert
judgments about future states of society.
 ADS 514: Introduction to Public Policy, FSPPP, UiTM 6

WHY FORECASTING?
• Forecasts provide information about future changes in
policies and their consequences.
• Forecasting permits greater control through
understanding past policies and their consequences,
implying that the future is determined by the past.
• Forecasting helps to shape the future in an active
manner, irrespective of what has happened in the past.
• Forecast provides insight into uncertainty
 ADS 514: Introduction to Public Policy, FSPPP, UiTM 7

PURPOSE / OBJECTIVES OF FORECASTING

• To plan for the best possible course of action

among the various alternatives which the future
may offer
• To use the past and present situation to determine
the future states of a problem.
• To shape the future in an active manner in relations
to what has happened in the past.
 ADS 514: Introduction to Public Policy, FSPPP, UiTM 8

METHODS OF FORECASTING
Methods of making decision for future actions / directions

1. Quantitative methods: 2. Qualitative methods:

Time Series, Regression Analysis Judgmental

1. Consensus
 Face to face meeting
 Delphi Technique

2. Genius forecasting
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Quantitative methods:
• Method that relies on hard data / statistics and
statistical model to predict and project future direction
• Example:
• Time series methods – using of past values data of variables
to predict future (to make decision for future)
• Exponential smoothing method – using statistical model:
New Forecast = a (most recent observation) + (1 - a) (last
forecast)
 ADS 514: Introduction to Public Policy, FSPPP, UiTM 10

Advantage & Disadvantages of Quantitative

methods for forecasting:

• Objective
• Data is costly
• Need persons who are good with statistics /
mathematics – difficult to get & costly to pay for their
expertise
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Qualitative Methods (Judgmental)

• Methods that relies on the opinions and
judgments of human being (individual or group of
panel) to predict future direction.
• The panels makes decision base on their expert
judgment (knowledge, personal experience, and
intuition)
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Qualitative Methods & Techniques

1. Consensus
 Face to face meeting
 Delphi Technique

2. Genius forecasting
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Consensus Method

A group decision-making process that compile opinion

from experts in the field or knowledgeable people and
forming consensus from these opinions.
Basic element of consensus involves:
• collaboratively generating a proposal,
• identifying unsatisfied concerns, and then
• modifying the proposal to generate as much agreement as
possible
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Consensus Techniques

 Face to face meeting technique

 Delphi technique
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Face to face meeting technique

Meaning
• Interactive technique of decision-making where
panel discuss issues and listen to opposing
viewpoints on the issues, and work together for
consensus.

Forecasting is made through discussion process. Decision

is made base on consensus
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Advantages & Disadvantages of Face to Face Meeting

Technique for Policy Forecasting

• Meetings provide a time and place for face-to-

face contact and two-way communication-
• Meeting help break down barriers between
people and the agencies that serve them
• Through meetings, people learn that an agency is
not a faceless, uncaring bureaucracy and that the
individuals in charge are real people.
• Meetings give agencies a chance to respond
directly to comments and dispel rumors or
misinformation
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Advantages and Disadvantages of Face to Face

Meeting Technique for Policy Forecasting

• Meetings help monitor community reactions to agency

policy, proposals, and progress.
• Meeting provide formal input to decisions
• Decision may be inaccurate due to personal
considerations and interest, and at last become the result
of one or few experts’ views only.
• It assumes that forecasting by a group of experts is better
than any forecast made by an individual expert
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2. Delphi Technique

A Group expert (penal of experts)

brainstorm decision making technique

• This technique uses a cautiously selected panel

of experts in a systematic and interactive
manner.
• It is to overcome problem that might occur during
face-to-face meeting.
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Delphi technique principles

• Anonymity of participants
• Iterations (process of repeating)
• Controlled feedback
• Statistical group response summaries of questionnaires
• Expert consensus
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Delphi technique procedures and process

• Select group members base on their expertise.
• Separate members to avoids the negative effects of
face-to-face discussions and avoids problems associated
with group dynamics.
• Ask members to answer separately an open-ended
questionnaires, surveys, etc. in order to solicit specific
information about a subject or content area.
• Ask members to share their assessment and explanation
of a problem or predict a future state of affairs.
 ADS 514: Introduction to Public Policy, FSPPP, UiTM 21

Delphi technique procedures and process

• The facilitator (panel director) controls the interactions among
the members by processing the information and filtering out
irrelevant content.
• Panel director gathered, summarized, and then send fed back to
all the group members.
• Ask members to make another decision based upon the new
information.
• Repeat the process until the responses converge satisfactory, that
is, it yields consensus.
 ADS 514: Introduction to Public Policy, FSPPP, UiTM 22

Advantages and Disadvantages of Delphi Technique for

Policy Forecasting
• The success of Delphi process depends upon the
member's expertise and communication skill.
• Each response requires adequate time for reflection
and analysis.
• The major merits of the Delphi process are:
• Elimination of interpersonal problems.
• Efficient use of expert's time.
• Diversity of ideals.
• Accuracy of solutions and predictions.
 ADS 514: Introduction to Public Policy, FSPPP, UiTM 23

GENIUS FORECASTING
Meaning:
• a subjective approach where intuition or gut
feeling are used in making decision about
future direction
• an unspecified set of processes used by
geniuses to arrive at statements about the
future.
• The processes need not be the same for any
two geniuses.
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WHO IS GENIUS
• a single expert or expert panels with considerable
experience
• They forecasts the future based on knowledge,
intuition, insight and luck.
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Genius Forecast Process

Theodore J. Gordon argues
• "Somehow an individual, seasoned by
experience and history, integrates all that is
obvious and implicit - through internal processes
that are not necessarily obvious - and argues for
a particular future or set of developments.
• How do they do it? Not by decision trees like
computers, but by some other “internal genius
processes."
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Basic assumption of genius decision-making

Assumptions lie behind intuitive approaches:

• one whose brain processes knowledge more
rapidly and more often than others and, therefore,
is more likely to guess correctly about the future
than one who does not
• some guess correctly more often than others
therefore, they are a source of reliable judgment
even without knowing why this is so.
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Advantages and Disadvantages of Genius Forecasts

• Not all statements about the future by geniuses are

genius forecasts, only those pronouncements in
their areas of expertise for which they have proven
insight.
• Genius forecasts can also come from people who's
IQ is less than genius, but who have proven great
insight in some specialty.
• A genius is limited to a particular field of knowledge
Genius A who is good in chemistry may not make genius'
judgments in social sciences. Only if government wanted
to forecast the future of chemistry, then Nobel Prize
winners in chemistry would make’
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Advantages and Disadvantages of Genius

Forecasts
• Genius forecasting cuts time and costs. It is much
easier and less costly
• The problem is how do we find them? How do we find
a reliable one?
• How do we know when to trust one intuition? What if
two genius forecasters contradict? How do we know
who's judgment to follow?
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Advantages and disadvantages

of Qualitative Methods
• Although qualitative method can be costly (to
pay for expertise), it may ultimately yield the
most accurate and unbiased results
• Allow human input in the decision-making
process,
• Subjective
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PROBLEMS OF FORECASTING
1. In-accuracy of info / data
2. Data is expensive & difficult to access
3. Limitation of forecasting methods and techniques
4. Invalid experts opinion
5. Personal bias
6. In-accuracy of forecast
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PROBLEMS OF FORECASTING
In-accuracy of info / data
• The extent of accuracy of info / data limits accuracy
of forecasting policy future.
• For example, the Treasury may underestimate the
federal budget deficit based on extrapolation of
trends using single variable or models incorporating
hundreds of variables.

Data is expensive & difficult to access

 ADS 514: Introduction to Public Policy, FSPPP, UiTM 32

PROBLEMS OF FORECASTING
Limitation of forecasting methods and techniques
Quantitative method
• Highly dependent on data and model to predict future.
Forecasting models are develop base on assumption.
Assumption may not be true, data may not sufficiently available

Qualitative method
• Highly dependent on personal opinion to predict future. Experts
and genius is not easily available, and if they are available
within the policy making institutions, their numbers may not be
enough
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PROBLEMS OF FORECASTING
Invalid experts opinion

• if the opinion of one person is incorrect, the forecast

is incorrect.
• the most recent situation / can overly influence
individuals, who then create overly pessimistic or
optimistic forecasts
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PROBLEMS OF FORECASTING

Personal bias

it's difficult to eliminate the forecaster’s personal bias

from the data that underlies the forecast.

Example,
Panel, who tend to be optimists, will likely develop a
forecast that is overly optimistic
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PROBLEMS OF FORECASTING

In-accuracy of forecast
• all qualitative forecasts assume that certain
characteristics that existed in the past will exist in the
future.
• Unfortunately, sometime unexpected occurrences
happen, such as changes in weather, social and
economic factors
• Each of these occurrences can affect decision and the
accuracy of a forecast.
• For this reason, the longer the forecasting period, the
less accurate the forecast will be
 ADS 514: Introduction to Public Policy, FSPPP, UiTM 36

End of Forecasting
• Once forecasting is done, administrator will
starts formulating / drafting the relevant policy
options / courses of action to resolve problem
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POLICY FORMULATION
Meaning:
• Process of formulating (drafting) / developing
acceptable courses of action / options for the selected
policy agenda

• It involve 2 main elements / activities:

 ADS 514: Introduction to Public Policy, FSPPP, UiTM 38

Policy Formulation

Analysis + Authoriation
= Policy
Formulation
• Valid • Acceptable
• Implementable
• Efficient
• Drafting course of
action

Administrators
Politicians
Policy maker
Administrators
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Analysis:
Which policy option to choose?

• In deciding which courses of action / policy option

to choose for a selected policy agenda, policy
maker (administrators) will be doing 2 main tasks:
i. Analyzing the courses of action
ii. Deciding which type / category of policy option to
introduce
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i. Analyzing the courses of

action
In analyzing the courses of action, administrator
would want to know whether or not and to what
extend the options are:
• Valid to solve problem
• Implementable
• Efficient (financial cost)

Refer Anderson p. 108

 ADS 514: Introduction to Public Policy, FSPPP, UiTM 41

Analysis techniques:
Cost benefit analysis:
Refer Anderson (2011, pp. 292-297)

• Consider the direct & indirect benefit of addressing the problem(valid)

• Consider the direct & indirect benefit should new policy is introduced or
existing policy is modified (valid & implementable)
• Consider direct & indirect cost (financial and non-financial) for the actions
to be taken (implementable & efficient) in addressing the problem
• Discount future net benefits – to reduce future direct & indirect benefit and
cost to the present value
• Compare direct & indirect and present and future cost and benefits of
policy alternative
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ii. Deciding which type / category

of policy option to introduce

• one or combinations of the following types of

policy options will be determine:
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TYPES / CATEGORY OF POLICY OPTIONS

Inducement: either positive such as tax credit holiday or negative in nature such as
fines and charges impose for pollution.

Regulatory: to control and regulate behavior of people such as regulation governing

pollution.

Enforcement: involves giving (enforcing) certain people rights or duties they

deserve. For example, human rights legislation.

Allocation of power: where certain body is charged with power to improve certain
situation, e.g. Parliamentary legislations, executive orders, judicial decisions etc.

Distributive: extends goods and services to members of an organization as well as

distributing the cost of the goods among the members of the organization. E.g.
government policies that impact spending for welfare, public education, highway and
public safety
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Analysis is done

• Once analysis is done, administrator will

proceed to drafting the policy (legislation /
administrative rules for the courses of action
chosen)
Refer Anderson pp. 112-114
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Authorization:
Which courses of action to accept?
• At this stage, assuming the course of action is able
to resolve problem and is cost effective, now the
political actor / policy maker will be deciding on
which policy recommendation / causes of action
proposed to be accepted / authorized.
• This is done through political process (first reading)
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Questions to address at authorization stage

• To what extend the chosen course of action able to get

political support
• To what extend the chosen course of action able to get
administrative support
• To what extend the chosen course of action able to get
public support
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Reflection:
Who are actors involved in policy
formulation stage?
Two groups of actors:
• Analyist (policy analyist) / administrators
• Decision maker (policy maker)
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Who are the policy makers?

Malaysia US
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List of policy makers

Refer Anderson pp. 109-112) –
Malaysian context: Refer US context (Refer Anderson)
Ahmad Atory Husain, (2000) &
INTAN publications • President
• Government agencies
• Individual (PM) • Presidential organizations –

• Selected Few (Cabinet,

presidential commissions,
budget committees
Committee / Councils / )
• Legislators – members of
Example. Congress
National Economic Action • Interest groups
Council)
 ADS 514: Introduction to Public Policy, FSPPP, UiTM 50

END OF LECTURE

• Refer tutorial questions for revision and

presentation

Thank You