We mentioned in the introduction to the economic policy that economic policy is a purposeful action (or purposeful non-action) by the government with the intent to affect economic behavior with the goal of achieving certain outcomes which will improve the material well-being of society. However, of what does government consists? Who really makes the decisions on economic policy?

It is generally accepted in the conventional economic theory that economists (technocrats) advice politicians with regard to the economic policy choices. Politicians than make economic policy choices which are implemented by public workers (bureaucrats).

Each of these sub-groups of the government have their own motivation behind making certain policy decisions and their motives must be recognized. A political leader (policy maker), for example, is generally motivated to increase his or her votes and to stay in the power. A bureaucrat is usually motivated to increase his or her budget which will increase his or her power.

Government sub-groups consist of real people with their own agendas, motives and goals, which are sometimes not aligned with the assumption the government always acts in the national interest with the goal of achieving economic stability and prosperity. This will distort the effectiveness and appropriateness of the economic policy choices.

Now let’s take a look at some sub-groups of the government which are involved in economic policy decision making.

In the articles that follow we will take a closer look at different groups which influence economic policy decisions. We will particularly discuss a political leader’s role and political business cycle theories. We will also take a closer look at the role of a bureaucrat, including the role of a technocrat, and their role in the economic policy decision making. Lastly we will address the role of the special interest groups within the context of their influence on the economic policy decision making.

Later, when we will discuss four models of economic policy making, we will look at the role of each constituent within each model in more aggregated format. However, we will start from looking at their roles in isolation:

The role of a political leader in setting economic policy is very prominent. According to standard economic theory, technocrats (economists) provide recommendations on economic policy choices to a political leader or group of politicians who, in turn, make economic policy choices which are implemented by bureaucrats.

The role of a bureaucrat in setting economic policy is instrumental. A bureaucrat is an individual who essentially implements economic policy set by politicians.

Special interest groups that exert an influence on economic policy decision-making include three main sub-groups: organized business groups, non-governmental organizations and organized labor groups.

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You may read this related article entitled “Who is behind Bush economic policy” for deeper understanding of how economic policy decisions are made in the real world.

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