What are the methods to influence the decision making process of the govt?
Answers
The traditional view of the role of government in a market economy is that the government is attempting to maximise social welfare. It is an exogenous agent acting to correct market failures and its role is to provide a legal, regulatory and institutional framework. To do this, it defines: the political rules needed for decision-making; the economic rules, such as those concerning property rights and the rules for contracts, enabling exchanges to take place. However, there are now many theories which have been put forward to explain how political and economic decisions are actually taken and you may come across these in the literature, so we will mention some of them briefly.
In these new theories, government is not taken to be a single, exogenous entity, but is viewed as a collective form of a number of legislative and institutional groups, such as bureaucrats and political parties, each of which has its own set of objectives.
These theories may help us understand why certain policies are in place, and why others, which are more desirable from an economic point of view, are not attractive to policy-makers.
One of the main models is the rational choice model, which is based on the idea that the individual actors in the decision-making process act rationally and are trying to achieve their own aims in competition with one another. We will concentrate on this model later in this section.
At the other end of the spectrum is the systems model, which treats the whole social system as the basic unit for analysis and is concerned with how the component parts of the system respond to the constraints of the system.
One example of this is the neo-Marxist approach where the state and the economy are viewed as a system of relationships. The state is in a contradictory position as it needs both to spend to achieve its aims and to control its spending. In this model there may be close links between the state bureaucracy and the industries needing regulating, which may be reflected in the choice of policy instruments. State subsidies may well be chosen as the appropriate instrument, as these will not cause conflicts between the bureaucracy and the regulated industry.
In between the rational choice and the systems models is the institutions model. Here the emphasis is placed on the institutions in place in the society and their influence on the groups pursuing environmental aims. The institutions in society affect which policies are likely to be implemented. One example of an institution is the capitalist corporation, and in the institutions approach, the modern corporation may have different long-term aims from the neoclassical profit-maximising firm of the rational choice model. It may prefer certainty of future operations to profit maximisation and therefore prefer command-and-control instruments which are more likely to stabilise the market. In other words, the institutional factors affect the objectives of polluters. These factors vary between countries and may help to explain why different instruments are favoured by different countries.