Policy instrument

Policy instrument
Primary topic
Related topics
Methods and techniques

Policy instrument is a tool used by governments in order to have outcomes which conform to the objectives of policy. These interventions are made by both public and private actors in local, national as well as international economics. Furthermore these entities are responsible for formulation and implementation policy instruments. They can affect to political goals for example by using compulsion, advice, financial incentives or persuasion (P. Eliadis, M.M. Hill, M. Howett, p.31).

Typologies of policy instrument[edit]

The most well-known typologies of policy instruments.

  • Easiest categorization of policy instruments presented by Brigham and Brown divides policy tools into penalties and incentives. The first one are sanctions which cause unpleasant consequences. Whereas such measures are intended to prohibit or deter an action. While incentives could be used to encourage to take up an action. Grants, benefits and tax exemptions are good examples of such positive tools ( M.L. Bemelmans-Videc,R.C.Rist, E.O. Vedung, p.26).
  • Typology by Vedung defines a tripartite instrument configuration. Vedung has distinguished the 3 following categories: regulation, economic means and information. Regulations are actions taken by governments. Policital actors create rules and directives which force people or groups to act in a certain way. Second category is economic policy instruments. The best exemple of this type of instruments are subsidies and grants. This is a form of financial aid and support. Those instruments are choosen to encourage activities the government wishes to promote. Third category is information described as attempts of transfer of knowledge. Campaigns are the easiest way of communicating with citizens ( M.L. Bemelmans-Videc,R.C.Rist, E.O. Vedung, p.9-12).
  • Hood's typology of policy instruments is based on the type of governing resource. Hood made a distinction between four resources and created NATO schem: N (for nodality, information), A (for authority), T (for treasure or money) and O (for organization). (J.J. Woo, s.31). Nodality refers to the ability of governments to communicate with citizens and provide valuable and relevant information. Authority refers to the possession of power and the ability to make law. Treasure refers to the possession of economic and money resources. Organization refers to the capability to implement policy programs. NATO model is one of the most popular categorization of policy tools. (Q. Li , C.Gerstl-Pepin, p. 35).

Choice of policy instrument[edit]

It is very important to implement carefully selected and honed techniques that lead us to achieve policy goals. Policymakers should have adequate knowledge of how to choose instruments. What is more, we sholud pay particular attention to the fact that various tools have caused different effects. The measures themselves differ in efficiency, state of being in accordance with the law or effectiveness ( M.L. Bemelmans-Videc,R.C.Rist, E.O. Vedung, p.9, 21). Some economists are in favor of the minimalist approach. They believe we should take only limited actions explained by market failure. Others claim that governments should use policy instruments and play an important part in public sector. For example by relocating recources or redistribution of income they could optimise market fail ( P.B. Sørensen, p. 51).


Author: Wioletta Szymska