Policy Instruments and Tools

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What is a policy instrument?

Policies are composed of a number of analytically distinct elements, with some policies focused on attaining concrete outputs while others focus on less tangible normative and cognitive aspects of policy-making. The policy alternatives which policy designers create are composed of different sets or combinations of such policy elements. Policy instruments are especially significant in this process as they are the techniques or means through which states attempt to attain their goals (Linder and Peters, 1990). They are the subject of deliberation and activity at all stages of the policy process and affect both the agenda-setting and policy formulation processes as well as being the subject of decision-making policy implementation, and evaluation (Howlett 2005; Howlett, Ramesh and Perl 2009).

These tools have a special place in the consideration and study of policy design because, taken together, they comprise the contents of the toolbox from which governments must choose in building or creating public policies. Policy design elevates the analysis and practice of policy instrument choice – specifically tools for policy implementation – to a central focus of study, making their understanding and analysis a key design concern (Salamon 1981; Linder and Peters 1990). Instrument choice, from this perspective, in a sense, is public policy- making, and understanding and analyzing potential instrument choices involved in implementation activity is policy design. One role of a guide in policy design (as this Lab aims to be) is thus assisting ‘in constructing an inventory of potential public capabilities and resources that might be pertinent in any problem-solving situation’ (Anderson 1975: 122).

It is important to repeat, however, that policy instruments exist at all stages of the policy process – with specific tools such as stakeholder consultations and government reviews intricately linked to agenda-setting activities, ones like legislative rules and norms linked to decision-making behaviour and outcomes, and others linked to policy evaluation, such as the use of ex-post, or after-the fact, cost–benefit analyses. Policy tools are thus in a sense ‘multi-purpose’, since, for example, regulation can appear in the implementation activities of several governance modes, while some tools, like impact assessments, can also appear within several stages of the cycle. However, a regulation appearing within the implementation phase of a network mode of governance which mandates information disclosure, for example, serves a different purpose than a regulation found in a market mode which limits a firm to ownership of only a specific percentage of an industry. Similarly, consultations which take place in the agenda-setting stage of the policy process have a different purpose and effect than those which take place after a decision has been made. While the general terminology may be similar, pains must be taken to distinguish these tools and activities in order to avoid confusion and errant efforts at instrument selection and policy design.

Although policy instruments appear in all stages of the policy process, however, those affecting the agenda-setting, decision-making and evaluation stages of the policy process, while very significant and important in public management (Wu et al. 2010), are less so with respect to policy design activities. This is because as we’ve seen policy design largely takes place at the formulation stage of the policy cycle and deals with plans for the implementation stage. Thus the key sets of policy instruments of concern to policy designers are those linked to policy implementation, in the first instance, and to policy formulation, in the second. In the first category we would find examples of many well-known governing tools such as public enterprises and regulatory agencies which are expected to alter or affect the delivery of goods and services to the public and government (Salamon 2002), while in the second we would find instruments such as regulatory impact or environmental impact appraisals which are designed to alter and affect some aspect of the nature of policy deliberations and the consideration and assessment of alternatives (Turnpenny et al. 2009).

The role played by implementation instruments in policy design, however, is key to policy design. It is they which provide the substance or content of whatever design deliberations occur at the formulation stage. Thus as Linder and Peters (1984) noted, it is critical for policy scientists and policy designers alike to understand this basic vocabulary of design:

Whether the problem is an architectural, mechanical or administrative one, the logic of design is fundamentally similar. The idea is to fashion an instrument that will work in a desired manner. In the context of policy problems, design involves both a systematic process for generating basic strategies and a framework for comparing them. Examining problems from a design perspective offers a more productive way of organizing our thinking and analytical efforts. (253)

What is an implementation tool?

Implementation tools are key to policy design. They are policy instruments which affect either the content or processes of policy implementation, that is, which alter the way goods and services are delivered to the public or the manner in which such implementation processes take place (Howlett 2000). One common type of implementation instrument proposes to alter the actual substance of the kinds of day-to-day production, distribution and consumption activity carried out in society, while the other focuses upon altering political or policy behaviour in the process of the articulation of implementation goals and means. Substantive implementation instruments are those used to directly affect the production, distribution and consumption of goods and services in society while procedural implementation instruments accomplish the second purpose (Ostrom 1986; Howlett 2000; 2005).

Substantive instruments are expected to alter some aspect of the production, distribution and delivery of goods and services in society: broadly conceived to include both mundane goods and services like school lunches to crude vices such as gambling or illicit drug use, to more common individual virtues such as charitable giving or volunteer work with the physically challenged, and include the attainment of sublime collective goals like peace and security, sustainability, happiness and well-being. We can thus define substantive policy instruments as those policy techniques or mechanisms designed to directly or indirectly affect the behaviour of those involved in the production, consumption and distribution of different kinds of goods and services in society (Schneider and Ingram 1990; 1993; 1994). This is a large field of action since it extends not only to goods and services provided or affected by markets, but also well beyond to state or public provision and regulation, as well as to those goods and services typically provided by the family, community, non-profit and voluntary means often with neither a firm market nor state basis (Salamon 1989; 2002).

Substantive implementation instruments can affect many aspects of production, distribution and consumption of goods and services regardless of their institutional basis. Production effects, for example, include determining or influencing:

  1. Who produces it – for example, via licencing, bureaucracy/procurement, or subsidies for new start-ups.
  2. The types of goods and services produced – for example, through bans or limits or encouragement.
  3. The quantity of goods or services provided – for example, via subsidies or quotas.
  4. The quality of goods or services produced – for example, via product standards, warranties.
  5. Methods of production – for example, via environmental standards or subsidies for modernization.
  6. Conditions of production – for example, via health and safety standards, employment standards acts, minimum wage laws, inspections.
  7. The organization of production – for example, via unionization rules, antitrust or anti-combines legislation, securities legislation, or tax laws.

Consumption and distribution effects are also manifold. Some examples of these are:

  1. Prices of goods and services – such as regulated taxi fares or wartime rationing.
  2. Actual distribution of produced goods and services – affecting the location and types of schools or hospitals, forest tenures or leases.
  3. Level of consumer demand for specific goods – for example, through information release, nutritional and dangerous goods labelling (cigarettes), export and import taxes and bans and similar activities.
  4. Level of consumer demand in general – via interest rate, monetary and fiscal policy.

Procedurally oriented implementation tools, on the other hand, affect production, consumption and distribution processes only indirectly, if at all. Rather they instead affect the behaviour of actors involved in policy implementation. Policy actors are arrayed in various kinds of policy communities, and just as they can alter or affect the actions of citizens in the productive realm, so too can they affect and alter aspects of policy-making behaviour (Knoke 1987; 1991; 1993). Procedural implementation tools are an important part of government activities aimed at altering policy interaction within policy subsystems but, as Klijn et al. (1995) put it, they ‘structure . . . the game without determining its outcome’ (441). That is, these behavioural modifications affect the manner in which implementation unfolds but without predetermining the results of substantive implementation activities.

Some of the kinds of implementation-related activities that can be affected by the use of procedural tools (Klijn et al. 1995; Goldsmith and Eggers 2004; Klijn and Koppenjan (2006) include:

  1. changing actor policy positions
  2. setting down, defining or refining actor positions
  3. adding actors to policy networks
  4. changing access rules for actors to governments and networks
  5. influencing network formation
  6. promoting network self-regulation
  7. modifying system-level policy parameters (e.g. levels of market reliance)
  8. changing evaluative criteria for assessing policy outcomes, success and failure
  9. influencing the pay-off structure for policy actors
  10. influencing professional and other codes of conduct affecting policy actor behaviour
  11. regulating inter-actor policy conflict
  12. changing policy actors’ interaction procedures
  13. certifying or sanctioning certain types of policy-relevant behaviour
  14. changing supervisory relations between actors.

Policy designs typically contain ‘bundles’ or ‘mixes’ of procedural and substantive implementation tools (Howlett 2000; 2002). Procedural implementation tools and their effects are not as well studied or understood as are substantive instruments, although several procedural techniques, such as the use of specialized investigatory commissions and government reorganizations, are quite old and well-used and have been the objects of study in fields such as public administration, public management and organizational behaviour (Woodley 2008; Schneider and Sidney 2009). Nevertheless, like their substantive counterparts, they are a key part of policy designs and policy design activity.

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