Government policy is the set of laws, enactments, and regulations that shape how governments go about doing their jobs. Whether it be providing public goods and services, maintaining law and order, fostering economic growth, or protecting the environment, government bodies are constantly working to develop ways to change people’s lives for the better. It’s a daunting task that is impacted by many different factors that all work together to make up the politics of policy making.
Policy decisions are made and executed through the policy process, which consists of several subsections: Agenda Setting: Policymakers decide which issues need to be addressed. This is heavily influenced by the political ideology of the party in power and national borders that impact what types of policies are able to be developed and implemented (both within and beyond one country). Policy Formulation: In this phase, the government evaluates the options available to address the issue at hand. This can be influenced by the aforementioned ideologies, as well as broader socio-economic and technological concerns.
The policy maker then decides on which type of policy to implement. This is typically based on the available fiscal space (how much can be spent or cut) as well as a desired end state. For example, during a recession, the government may choose to stimulate its economy with spending initiatives or tax cuts. The exact type of stimulus is based on the fiscal space, the potential impact on inflation, exchange rates and foreign reserves, or whether it will crowd out private sector investment.
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