The process of public policy has a number of stages which interact in a dynamic fashion: identification, information gathering, decision-making, implementation, evaluation, termination and renewal.
Investors need to understand their role for each.
1 Identification
Decisions need to be made on what, whether and how to proceed. This will involve discussions about the issue, the information needed, the key actors to be consulted and the policy options that may be available.
Policy processes may be initiated by investors concerned about gaps in regulatory frameworks (e.g. Ceres call for the SEC to require the disclosure of climate change related information in SEC lings), or about weaknesses in the implementation of regulation (e.g. the Code for Responsible Investing in South Africa was catalysed by investors concerned that asset owners were not su ciently active in terms of corporate governance).
2 Information gathering
This will involve reviews of the available evidence, and discussions with key stakeholders and opinion formers. It will also include some initial analysis of the issue in question, of the options for action, and of the merits of alternative courses of action.
Investors can contribute by providing information on current practice (e.g. the insurance industry provided this input on Solvency II), and through providing practical support to policymakers (e.g. Japanese investment trade bodies helped to co-ordinate policymakers’ dialogue with investors on the Japanese Stewardship Code).
3 Consideration and decision-making
When making a decision on the policy measures to be adopted, policymakers will assess the likely e ectiveness of the options available (including the ‘do nothing’ option), the nancial costs and bene ts of taking action, and the political implications of taking action.
Investors may contribute to formal consultation processes (such as those that led to the French Grenelle II legislation and that informed the Japanese Stewardship Code). They may also publicly set out their views and lend explicit support to their preferred policy options.
4 Implementation
Depending on the case in question, further guidance or rules may need to be developed, and decisions need to be made regarding responsibilities for implementing the policy measure in question.
5 Evaluation
This involves reviewing the e ectiveness, the dependability, the cost, the intended and unintended consequences, and other relevant features of the policy measure in question.
Investors can contribute by providing evidence of the impacts and implications of the policy measure in question (e.g. Ceres produces annual reports tracking the number of companies reporting on climate change in their SEC lings and analyses the quality of these disclosures). Investors can also advise on how the policy measure may be strengthened or on whether the policy measure is no longer relevant.
6 Termination or renewal
Termination may be explicitly built into the policy measure, the policy measure may lose relevance or may not be implemented. It is frequently the case that terminated policy measures reappear in another form, such as in another piece of legislative or led by another agency.
Both the French Grenelle II legislation and the European Solvency II legislation can be seen as examples of legislation renewal, where the new legislation revised, updated and, in some ways, replaced existing bodies of legislation.
In many cases, the policy process is ongoing – requiring a long-term stance for e ective engagement from investors.
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The public policy making process plays a central role in the lives of every person on the planet. The main purpose of the government is to have lawmakers set policy and then have government workers carry out those policies. They impact the life of every citizen, from how and when we vote to where we can park and what does and does not constitute a crime.
Understanding how the policy making process works is one of the focuses of an online Bachelor of Science in Public Administration program. Those who aspire to leadership positions in government will graduate from the program ready to take on the challenges of guiding public policy at the local, state and federal levels.
How Public Policy Works
Public policy involves actions taken by public officials and public institutions to meet the challenges of real-world issues. Scholars have a variety of definitions. The Center for Civic Education defines public policy as what a government official (including school officials, city council members, county supervisors, the U.S. Congress, etc.) “does or does not do about a problem that comes before them for consideration and possible action. “
Public policies can differ based on political affiliation or the type of challenge under consideration. Typically, officials create public policy in response to a problem and involve what the government will do to address the problem. Public policy can take the form of a new law, city ordinance, or government regulation.
Steps of the Policy Making Cycle
The main idea of creating policy is to improve life for members of the public. Officials design policies that move the public closer to a desired state or public goal. Even if the ideas come from outside government, the creation of policy falls to public officials.
Harold Lasswell, an important figure in the development of policy sciences at the University of Chicago and Yale University in the 1950s, created a policy making model still used today. It contains five distinct steps, according to the International Encyclopedia of the Social and Behavioral Sciences.
Agenda Setting
In this first stage, a problem or challenge that impacts the public is initially identified. Solutions are put forward by interested parties both inside and outside of the government. Agenda setting typically goes through these stages:
- Systemic agenda. All issues public officials feel are worth addressing
- Institutional agenda. Distilled from the systemic agenda list, these issues are chosen as the ones policymakers should analyze and consider acting on.
- Discretionary agenda. This list comes directly from lawmakers, not from the systemic and institutional agendas.
- Decision agenda. The final list of issues that policymakers will consider for action.
Policy Formation
This step involves the development of policy options within the government. This occurs after officials narrow the range of possible policy choices by excluding infeasible options. In this step, different interested parties attempt to have their favored policy solution rank high among the remaining options. This step often involves a period of intense debate.
Decision Making
In this step, government leaders decide on a particular course of action. Ideally, it is the course that will best address the problem for the most members of the public.
Policy Implementation
In this step of the policy making process, governments put the chosen public policy option into effect. Officials use the tools of public administration that impact the distribution of government goods and services or make changes in how the government taxes the public. The changes should reflect the sentiments and values of the affected parties.
Policy Evaluation
Interested parties both within and without the government monitor the impact of the policy and determine if it is achieving the intended goal. This can lead to further changes in public policy done in light of the impact of the original policy.
In reality, the policy making process is not typically so linear. However, these five steps provide a framework to better understand public policy formation and help students identify the strengths and weaknesses of the system.