After the agenda has been set and a community recognizes a problem, a policy must be formulated to address the issue. A very important part to policy formulation is defining what the problem truly is. This is true for any model in policy formulation. For example, one may recognize excessive smoke in the air and define smoke as a problem. In reality, the true problem is the fire causing the smoke. It is easier to deal with the symptoms (smoke) rather than the root of the problem (fire). The symptoms call for a quick fix and bringing better political return for the policy. It takes much more time and effort to investigate the root of a problem. There are also people who have a long history associated with certain issues. They are called policy entrepreneurs. Policy entrepreneurs are individuals, groups, organizations, or corporations that have earned an expert reputation in a subject area and drive policy formulation. Through this perceived expertise, we turn to them to define a problem or give an opinion on a solution. A policy entrepreneur can be anyone, which shows that policy formulation is not always driven by the elite; in this manner, anyone can sway legislation. It is important to note that policy entrepreneurs are not always reliable experts, but simply may have a reputation of being associated with a subject based on beliefs and appearance. These individuals or groups can choose to volunteer their services or sell their services. When volunteering, the groups lend their reputation to policy they favor. When their services are bought, the groups can be easily manipulated and swayed to promote a policy they do not necessarily agree with. For example, Mothers Against Drunk Driving would be consulted when drunk driving laws are being debated. Any labor union would have expertise on policies regarding fair employment, wages, and such. Government agencies can also be policy entrepreneurs. When the Center for Disease Control puts out a study showing the need for revised policy on health standards, they are regarded as experts and policy will be revised.
There are two models for policy formulation: top down model and bottom up model. Let us first focus on the top down model. This model is the classical idea that policy is made by elected officials and is passed down to the bureaucracy for implementation. There are three models which follow the top down requirements. The rational comprehensive model may be the simplest model, but with the most limitations. The steps for this model of policy formulation are as follows: define the problem, lay out all potential alternatives to solve problem, and choose the best alternative. Defining the problem is the easiest step, but it does matter who defines the problem; whoever defines the problem has the power to decide what the solution should be. Once the problem is defined, politicians must set out a comprehensive analysis of all solutions. This is very problematic because our rationality is bounded; there is no possible way to know every alternative to a problem. There are two types of analysis: cost-benefit analysis and cost effectiveness analysis. Cost-benefit analysis deals with the direct and indirect costs, and present and future benefits of a policy. Simply, when the benefits outweigh the costs that is the policy we should adopt. It is also important to know who is paying the costs and who is reaping the benefits. This is a reason why government cannot be run like a business, but needs to balance resources and benefits. Vilfredo Pareto, an Italian economist, set two standards to show opportunity cost in the production of goods in an economy. Concerning cost-benefit analysis, a policy should be implemented when there is a Pareto improvement. This happens when a policy benefits one group, but does not cost another group. When one group benefits while another group loses, Pareto optimality, this policy should not be implemented. Cost...
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