Policy instrument

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

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 example of this type of instruments are subsidies and grants. This is a form of financial aid and support. Those instruments are chosen 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, p. 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

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).

Examples of Policy instrument

• Taxation: Taxes are a form of policy instrument used by governments to fund public services and infrastructure projects, as well as to reduce economic inequality and encourage certain behaviours. Governments can use taxation to raise money, redistribute income, or encourage certain behaviours by offering tax breaks or credits.
• Regulation: Regulation is a type of policy instrument that is used to control and limit certain behaviours and activities. Regulations can be used to protect the environment, protect consumers, or promote public health and safety. For example, government regulations can limit the amount of air pollution a company can emit, or require companies to provide safe working conditions for their employees.
• Subsidies: Subsidies are a type of policy instrument used by governments to provide financial assistance to businesses and individuals. Subsidies can be used to support certain industries, encourage investment in certain areas, or help low-income households afford necessities. For example, governments may provide subsidies to farmers to encourage them to produce more food, or provide subsidies to low-income households to help them pay for housing or utilities.
• Public Spending: Public spending is a type of policy instrument used by governments to fund public services and infrastructure projects. Governments can use public spending to improve the quality of life for citizens, create jobs, and stimulate economic growth. For example, governments may invest in public transportation systems, education, or health care.
• Public-Private Partnerships: Public-private partnerships are a type of policy instrument that combines the resources and expertise of the public and private sectors to achieve a common goal. Public-private partnerships can be used to build and maintain infrastructure, provide public services, or create jobs. For example, governments may partner with private companies to build roads or provide health care services.

Advantages of Policy instrument

Policy instruments have many advantages which make them an attractive option for governments. These include:

• The ability to target specific issues or outcomes that need to be addressed, allowing governments to tailor their interventions to the situation at hand.
• The capacity to influence decisions and behaviors of individuals, firms and other organizations in order to achieve desired objectives.
• The potential to raise revenue from taxes, fees, fines and other forms of payment.
• The capacity to encourage compliance with regulations and laws.
• The ability to shape public opinion and create public awareness.
• The potential to coordinate and harmonize the actions of different actors in pursuit of a common goal.
• The ability to shape market forces and outcomes in order to achieve desired objectives.
• The potential to create incentives for private actors to invest in socially desirable activities.
• The potential to create a more efficient and equitable distribution of resources.

Limitations of Policy instrument

• One limitation of policy instruments is that they may not be effective in achieving the desired outcomes. This is due to the fact that they may not be adequately informed by research or evidence of what works in a particular context, or may be too narrowly focused on one issue, failing to account for the complexity of factors that influence policy outcomes.
• Another limitation is that policy instruments may be too costly or inflexible to implement, making them difficult to scale or adapt to changing circumstances.
• Additionally, policy instruments can be difficult to monitor and evaluate, meaning that it can be hard to tell whether they are achieving the desired outcomes or not.
• Policy instruments may also be difficult to implement in practice, due to bureaucratic or political obstacles. This can lead to delays, inefficiencies, and ultimately a failure to achieve the desired outcomes.
• Finally, policy instruments may be subject to unintended consequences, such as creating perverse incentives or unintended beneficiaries.

Other approaches related to Policy instrument

A policy instrument is a tool used to affect policy outcomes. Other related approaches to policy instrument include:

• Market-based instruments - These instruments rely on the use of financial incentives or penalty systems to alter the behavior of economic actors and institutions in order to achieve policy goals. Examples include taxes, subsidies, and tradable permits.
• Regulatory instruments - These instruments involve the use of rules, regulations, and standards to achieve policy objectives. Examples include zoning laws, building codes, and environmental regulations.
• Information-based instruments - These instruments involve the use of information, communication, and education to influence decision making and behavior. Examples include public information campaigns and educational programs.

In summary, policy instruments are tools used to influence policy outcomes. Other related approaches include market-based instruments, regulatory instruments, and information-based instruments.

Policy instrument — recommended articles

Public tasks of local government — Etatism — Environmental policy — Public task — Non-governmental organization (NGO) — Principles of organization of public sector entities — Policy makers — Interest group — Tourist policy

References

• Bähr H.,(2013),The Politics of Means and Ends: Policy Instruments in the European Union, Ashgate Publishing, p.13-14, 16
• Bemelmans-Videc M.L., Rist R.C, Vedung E.O, (2011), Carrots, Sticks, and Sermons: Policy Instruments and Their Evaluation Transaction Publishers, p. 9-12, 21,26
• Eliadis P., Hill M.M., Howett M., (2005), Designing Government: From Instruments to Governance , McGill-Queen's Press, p. 31
• Li Q., Gerstl-Pepin C., (2013) Survival of the Fittest: The Shifting Contours of Higher Education in China and the United States, Springer Science & Business Media, p. 31
• Sørensen P.B., (1998),Public Finance in a Changing World, Palgrave Macmillan UK, p.51
• Woo J.J., (2015), Business and Politics in Asia's Key Financial Centres: Hong Kong, Singapore and Shanghai, Springer, p.35

Author: Wioletta Szymska