Before policy formulation there can be objections and disagreements by policy makers at the stage of analysis. Firstly, they may look askance at the programme outlined in draft form by analysts to realise the overarching goals of the concerned policy. Either the programme recommended by the analysts may appear to them as inappropriate or inadequate. If there are no precedents for similar programme, scepticism may start brewing and prevail obstinately. This is particularly so when the programme is not of brick and mortar vintage. A socio-economic programme has many imponderables, exogenous factors for which it is likely to become a dependent variable, while its success lies in factors not within its remit. Even a sure-fire brick and mortar programme like building a highway for a bridge can be vulnerable to sudden developments like sub-soil subsidence because of flood water or a bridge may be threatened by river erosion. To dovetail a programme with a policy, it has not only to sound credible but also include measures built-in in it to cover risk and uncertainty. Few policy analyses give attention to this aspect in the draft programme. Before formulation of actual policy, analysis focuses on targets and the means of fulfilling them. Even here the opportunity costs of a particular means or strategy is not properly estimated and explained to policy makers.
In fact, rare is the case where at the stage of policy analysis the choices and options available are analysed and their relative advantages and drawbacks are compared with a view to selecting the optimum one based on economic and non-economic grounds. As a result, policy makers are kept in the dark about the full implications of the programme recommended. Given this kind of Hobson's choice policy makers may grudgingly accept what is presented to them by analysts, particularly when there is time constraint and urgency. But there can be exceptions, and now-a-days they often are. Politicians may not be technocrats and specialists, but they have strong common sense and can see through the convoluted reasoning made by analysts. Some of them may have their own counsel to second guess the handiwork of the policy analysts. As more and more educated and experienced persons enter politics, it becomes difficult to hoodwink them by using a smokescreen of theories and jargons. They can and increasingly do, reject the policy analysis as unpractical and inadequate or not sustainable. This requires several models of a programme to be presented before policy makers delineating their advantages and shortcomings, costs implications included. Few policy analysts show eagerness for such a multifarious approach because of haste (they have other pastures to graze) or the complicated tasks that the approach entails. Just as ill-defined goals and objectives may lead to wrong analysis, inadequate and impractical or costly programmes render them unsatisfactory and unsustainable. The realm of programme formulations is littered with examples of failed ones or those that delivered only partially and at a high cost.
Secondly, there can be lack of clarity in respect of objectives to meet the goal. It is very easy to prepare a list of objectives of economic policy to which a government publicly subscribes. Rapid economic growth, a just distribution of income, price stability are some of the commonplace objectives in policy declarations made by a government. The difficulty for policy analysts may be to find out the real intention of policy makers, particularly through the rhetoric of public pronouncements. To obviate this problem policy analysts have to observe the preferences revealed by what the government actually does, as different from the rhetorical statements. Even when objectives are clearly defined and the governments are sincere in saying about incorporating these in policy, the difficulties are not over. Decision-making powers and delineation of objectives may be decentralised and delegated to agencies within the polity. Various agencies and interest groups have their own objectives which may conflict with each other and the government is hard put to reconcile these. Then there is the question of priorities that are attached to various objectives. Does a programme have to prioritise the creation of jobs or generation of profits? Governments are in most cases unable to be precise about their priorities given the pressure from different interest lobbies or demands from target groups/beneficiaries. To complicate matters priorities may change over time. This makes a policy inappropriate and inadequate because it was designed to address different objectives.
The conclusion that emerges from this discussion is that a government is likely to pursue a multiplicity of objectives but with varying priorities. No doubt there is only one overriding objective of economic policy, that of maximising the welfare of people. But this may not be helpful in all cases or circumstances. An attempt may be made to distinguish major objectives from what may be considered as secondary objectives (ignoring the strident voices of specific interest groups). Maximising foreign direct investment (FDI) is a secondary objective because it is required not for its own sake but for its contribution to economic growth. But some subsidiary objectives like price stability, reduction of population growth, etc., merit more attention because they may promote more than one major objectives. The real problem here arises with major objectives when they are in conflict with each other. A great deal of potential conflict exists between the major objectives of social justice in the short-term and sustained growth in the long term. This is because the satisfaction of both public and private ones tends to conflict with the development goals of high savings and investments.
Faced with conflicting objectives of social justice according to the welfare optimising model, economists point out the trade-offs between the two with no subtle preference for growth, justifying on the ground that in the absence of growth welfare maximisation cannot be sustained. They will cleverly present the Phillip's Curve showing a trade-off between price stability and level of unemployment in the economy. It will be demonstrated that reduction of unemployment will lead to demand for higher wages which, in turn, will give rise to increasing inflation. Addressing inflation government will be forced to curb investment resulting in slower growth. In reality, the trade-off between distributive justice and economic growth is not so clear-cut and stark. Taxation of the rich at levels that ensure reasonable margins of profits can finance welfare maximising programme without creating disincentives for investments by business and entrepreneurs. Tax incidence on the public in Scandinavian countries has been to the maximum of 80 per cent for many years without affecting growth while providing comprehensive welfare programme to the people. The trade-off argument has not held water nor has the working of Phillip's Curve been evident there.
Finally, policy analysis in most cases recommends the implementation procedure of the programme in question. This has both feasibility and viability dimensions. Feasibility focuses on practical aspects of implementation of programme while the viability issue is financial in nature. The first problem can be addressed through a pilot project to find out the outcome of the programme in real life situation. It is not a foolproof system as pilot projects are conducted in incubator-like ideal conditions with all requirements for implementation met. In the absence of a better alternative this has some merit and is often used by governments and donors. The financial viability can be tested using shadow prices to make cost-benefit evaluation of public sector investments.
In the face of multiple and conflicting objectives the most common reconciliation technique is the use of multiple policy instruments designed to achieve simultaneously more than one goal.
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