Policy analysis is "determining which of various alternative policies will most achieve a given set of goals in light of the relations between the policies and the goals". However, policy analysis can be divided into two major fields. Analysis of policy is analytical and descriptive—i.e., it attempts to explain policies and their development. Analysis for policy is prescriptive—i.e., it is involved with formulating policies and proposals (e.g., to improve social welfare). The area of interest and the purpose of analysis determines what type of analysis is conducted. A combination of policy analysis together with program evaluation would be defined as Policy studies.
Policy Analysis is frequently deployed in the public sector, but is equally applicable to other kinds of organizations. Policy analysis has its roots in systems analysis as instituted by United States Secretary of Defense Robert McNamara during the Vietnam War.
Although various approaches to policy analysis exist, three general approaches can be distinguished: the analycentric, the policy process, and the meta-policy approach.
The analycentric approach focuses on individual problems and their solutions; its scope is the micro-scale and its problem interpretation is usually of a technical nature. The primary aim is to identify the most effective and efficient solution in technical and economic terms (e.g. the most efficient allocation of resources).
The policy process approach puts its focal point onto political processes and involved stakeholders; its scope is the meso-scale and its problem interpretation is usually of a political nature. It aims at determining what processes and means are used and tries to explain the role and influence of stakeholders within the policy process. By changing the relative power and influence of certain groups (e.g., enhancing public participation and consultation), solutions to problems may be identified.
The meta-policy approach is a systems and context approach; i.e., its scope is the macro-scale and its problem interpretation is usually of a structural nature. It aims at explaining the contextual factors of the policy process; i.e., what are the political, economic and socio-cultural factors influencing it. As problems may result because of structural factors (e.g., a certain economic system or political institution), solutions may entail changing the structure itself.
Policy analysis is methodologically diverse using both qualitative methods and quantitative methods, including case studies, survey research, statistical analysis, and model building among others. One common methodology is to define the problem and evaluation criteria; identify all alternatives; evaluate them; and recommend the best policy agenda per favor.
Many models exist to analyze the creation and application of public policy. Analysts use these models to identify important aspects of policy, as well as explain and predict policy and its consequences.
Some models are:
Institutional model 
Public policy is determined by political institutions, which give policy legitimacy. Government universally applies policy to all citizens of society and monopolizes the use of force in applying policy. The legislature, executive and judicial branches of government are examples of institutions that give policy legitimacy.
Process model 
Policy creation is a process following these steps:
- Identification of a problem and demand for government action.
- Formulation of policy proposals by various parties (e.g., congressional committees, think tanks, interest groups).
- Selection and enactment of policy; this is known as Policy Legitimation.
- Implementation of the chosen policy.
- Evaluation of policy.
This model, however, has been criticized for being overly linear and simplistic. In reality, stages of the policy process may overlap or never happen. Also, this model fails to take into account the multiple factors attempting to influence the process itself as well as each other, and the complexity this entails.
Rational model 
See Rational planning model for a fuller discussion
The rational model of decision-making is a process for making logically sound decisions in policy making in the public sector, although the model is also widely used in private corporations. Herbert A. Simon, the father of rational models, describes rationality as “a style of behavior that is appropriate to the achievement of given goals, within the limits imposed by given conditions and constraints”. It is important to note the model makes a series of assumptions in order for it to work, such as:
- The model must be applied in a system that is stable,
- The government is a rational and unitary actor and that its actions are perceived as rational choices,
- The policy problem is unambiguous,
- There are no limitations of time or cost.
Indeed, some of the assumptions identified above are also pin pointed out in a study written by the historian H.A. Drake, as he states:
In its purest form, the Rational Actor approach presumes that such a figure [as Constantine] has complete freedom of action to achieve goals that he or she has articulated through a careful process of rational analysis involving full and objective study of all pertinent information and alternatives. At the same time, it presumes that this central actor is so fully in control of the apparatus of government that a decision once made is as good as implemented. There are no staffs on which to rely, no constituencies to placate, no generals or governors to cajole. By attributing all decision making to one central figure who is always fully in control and who acts only after carefully weighing all options, the Rational Actor method allows scholars to filter out extraneous details and focus attention on central issues.
Furthermore, as we have seen, in the context of policy rational models are intended to achieve maximum social gain. For this purpose, Simon identifies an outline of a step by step mode of analysis to achieve rational decisions. Ian Thomas describes Simon's steps as follows:
- Intelligence gathering— data and potential problems and opportunities are identified, collected and analyzed.
- Identifying problems
- Assessing the consequences of all options
- Relating consequences to values— with all decisions and policies there will be a set of values which will be more relevant (for example, economic feasibility and environmental protection) and which can be expressed as a set of criteria, against which performance (or consequences) of each option can be judged.
- Choosing the preferred option— given the full understanding of all the problems and opportunities, all the consequences and the criteria for judging options.
In similar lines, Wiktorowicz and Deber describe through their study on ‘Regulating biotechnology: a rational-political model of policy development’ the rational approach to policy development. The main steps involved in making a rational decision for these authors are the following:
- The comprehensive organization and analysis of the information
- The potential consequences of each option
- The probability that each potential outcome would materialize
- The value (or utility) placed on each potential outcome.
The approach of Wiktorowicz and Deber is similar to Simon and they assert that the rational model tends to deal with “the facts” (data, probabilities) in steps 1 to 3, leaving the issue of assessing values to the final step. According Wiktorowicz and Deber values are introduced in the final step of the rational model, where the utility of each policy option is assessed.
Many authors have attempted to interpret the above mentioned steps, amongst others, Patton and Sawicki  who summarize the model as presented in the following figure (missing):
- Defining the problem by analyzing the data and the information gathered.
- Identifying the decision criteria that will be important in solving the problem. The decision maker must determine the relevant factors to take into account when making the decision.
- A brief list of the possible alternatives must be generated; these could succeed to resolve the problem.
- A critical analyses and evaluation of each criterion is brought through. For example strength and weakness tables of each alternative are drawn and used for comparative basis. The decision maker then weights the previously identified criteria in order to give the alternative policies a correct priority in the decision.
- The decision-maker evaluates each alternative against the criteria and selects the preferred alternative.
- The policy is brought through.
The model of rational decision-making has also proven to be very useful to several decision making processes in industries outside the public sphere. Nonetheless, many criticism of the model arise due to claim of the model being impractical and lying on unrealistic assumptions. . For instance, it is a difficult model to apply in the public sector because social problems can be very complex, ill-defined and interdependent. The problem lies in the thinking procedure implied by the model which is linear and can face difficulties in extra ordinary problems or social problems which have no sequences of happenings. This latter argument can be best illustrated by the words of Thomas R. Dye, the president of the Lincoln Center for Public Service, who wrote in his book `Understanding Public Policy´ the following passage:
There is no better illustration of the dilemmas of rational policy making in America than in the field of health…the first obstacle to rationalism is defining the problem. Is our goal to have good health — that is, whether we live at all (infant mortality), how well we live (days lost to sickness), and how long we live (life spans and adult mortality)? Or is our goal to have good medical care — frequent visits to the doctor, wellequipped and accessible hospitals, and equal access to medical care by rich and poor alike?
The problems faced when using the rational model arise in practice because social and environmental values can be difficult to quantify and forge consensus around. Furthermore, the assumptions stated by Simon are never fully valid in a real world context.
However, as Thomas states the rational model provides a good perspective since in modern society rationality plays a central role and everything that is rational tends to be prized. Thus, it does not seem strange that “we ought to be trying for rational decision-making”.
Decision Criteria for Policy Analysis — Step 2 
As illustrated in Figure 1, rational policy analysis can be broken into 6 distinct stages of analysis. Step 2 highlights the need to understand which factors should be considered as part of the decision making process. At this part of the process, all the economic, social, and environmental factors that are important to the policy decision need to be identified and then expressed as policy decision criteria. For example, the decision criteria used in the analysis of environmental policy is often a mix of —
- Ecological impacts — such as biodiversity, water quality, air quality, habitat quality, species population, etc.
- Economic efficiency — commonly expressed as benefits and costs.
- Distributional equity — how policy impacts are distributed amongst different demographics. Factors that can affect the distribution of impacts include location, ethnicity, income, and occupation.
- Social/Cultural acceptability — the extent to which the policy action may be opposed by current social norms or cultural values.
- Operational practicality — the capacity required to actually operationalize the policy. For example,
- Legality — the potential for the policy to be implemented under current legislation versus the need to pass new legislation that accommodates the policy.
- Uncertainty — the degree to which the level of policy impacts can be known.
Some criteria, such as economic benefit, will be more easily measurable or definable, while others such as environmental quality will be harder to measure or express quantitatively. Ultimately though, the set of decision criteria needs to embody all of the policy goals, and overemphasising the more easily definable or measurable criteria, will have the undesirable impact of biasing the analysis towards a subset of the policy goals.
The process of identifying a suitably comprehensive decision criteria set is also vulnerable to being skewed by pressures arising at the political interface. For example, decision makers may tend to give "more weight to policy impacts that are concentrated, tangible, certain, and immediate than to impacts that are diffuse, intangible, uncertain, and delayed."^8. For example, with a cap-and-trade system for carbon emissions the net financial cost in the first five years of policy implementation is a far easier impact to conceptualise than the more diffuse and uncertain impact of a country's improved position to influence global negotiations on climate change action.
Decision Methods for Policy Analysis — Step 5 
Displaying the impacts of policy alternatives can be done using a policy analysis matrix (PAM) such that shown in Table 1. As shown, a PAM provides a summary of the policy impacts for the various alternatives and examination of the matrix can reveal the tradeoffs associated with the different alternatives.
Table 1. Policy analysis matrix (PAM) for SO2 emissions control.
Once policy alternatives have been evaluated, the next step is to decide which policy alternative should be implemented. This is shown as step 5 in Figure 1. At one extreme, comparing the policy alternatives can be relatively simple if all the policy goals can be measured using a single metric and given equal weighting. In this case, the decision method is an exercise in benefit cost analysis (BCA).
At the other extreme, the numerous goals will require the policy impacts to be expressed using a variety of metrics that are not readily comparable. In such cases, the policy analyst may draw on the concept of utility to aggregate the various goals into a single score. With the utility concept, each impact is given a weighting such that 1 unit of each weighted impact is considered to be equally valuable (or desirable) with regards to the collective well-being.
Weimer and Vining also suggest that the "go, no go" rule can be a useful method for deciding amongst policy alternatives^8. Under this decision making regime, some or all policy impacts can be assigned thresholds which are used to eliminate at least some of the policy alternatives. In their example, one criterion "is to minimize SO2 emissions" and so a threshold might be a reduction SO2 emissions "of at least 8.0 million tons per year". As such, any policy alternative that does not meet this threshold can be removed from consideration. If only a single policy alternative satisfies all the impact thresholds then it is the one that is considered a "go" for each impact. Otherwise it might be that all but a few policy alternatives are eliminated and those that remain need to be more closely examined in terms of their trade-offs so that a decision can be made.
Case Study Example of Rational Policy Analysis Approach 
To demonstrate the rational analysis process as described above, let’s examine the policy paper “Stimulating the use of biofuels in the European Union: Implications for climate change policy” by Lisa Ryan where the substitution of fossil fuels with biofuels has been proposed in the European Union (EU) between 2005–2010 as part of a strategy to mitigate greenhouse gas emissions from road transport, increase security of energy supply and support development of rural communities.
Considering the steps of Patton and Sawicki model as in Figure 1 above, this paper only follows components 1 to 5 of the rationalist policy analysis model:
- Defining The Problem – the report identifies transportation fuels pose two important challenges for the European Union (EU). First, under the provisions of the Kyoto Protocol to the Climate Change Convention, the EU has agreed to an absolute cap on greenhouse gas emissions; while, at the same time increased consumption of transportation fuels has resulted in a trend of increasing greenhouse gas emissions from this source. Second, the dependence upon oil imports from the politically volatile Middle East generates concern over price fluctuations and possible interruptions in supply. Alternative fuel sources need to be used & substituted in place of fossil fuels to mitigate GHG emissions in the EU.
- Determine the Evaluation Criteria – this policy sets Environmental impacts/benefits (reduction of GHG’s as a measure to reducing climate change effects) and Economical efficiency (the costs of converting to biofuels as alternative to fossil fuels & the costs of production of biofuels from its different potential sources)as its decision criteria. However, this paper does not exactly talk about the social impacts, this policy may have. It also does not compare the operational challenges involved between the different categories of biofuels considered.
- Identifying Alternative Policies – The European Commission foresees that three alternative transport fuels: hydrogen, natural gas, and biofuels, will replace transport fossil fuels, each by 5% by 2020.
- Evaluating Alternative Policies – Biofuels are an alternative motor vehicle fuel produced from biological material and are promoted as a transitional step until more advanced technologies have matured. By modelling the efficiency of the biofuel options the authors compute the economic and environmental costs of each biofuel option as per the evaluation criteria mentioned above.
- Select The Preferred Policy – The authors suggest that the overall best biofuel comes from the sugarcane in Brazil after comparing the economic & the environmental costs. The current cost of subsidising the price difference between European biofuels and fossil fuels per tonne of CO2 emissions saved is calculated to be €229–2000. If the production of European biofuels for transport is to be encouraged, exemption from excise duties is the instrument that incurs the least transactions costs, as no separate administrative or collection system needs to be established. A number of entrepreneurs are producing biofuels at the lower margin of the costs specified here profitably, once an excise duty rebate is given. It is likely that growth in the volume of the business will engender both economies of scale and innovation that will reduce costs substantially.
Group model 
The political system's role is to establish and enforce compromise between various, conflicting interests in society.
Elite model 
Policy is a reflection of the interests of those individuals within a society that have the most power, rather than the demands of the mass.
Six-step model 
- Verify, define and detail the problem
- Establish evaluation criteria
- Identify alternative policies
- Evaluate alternative policies
- Display and distinguish among alternative policies
- Monitor the implemented policy
See policy cycle for a five-step and an eight-step approach.
See also 
- Policy studies
- Political Analysis
- Public policy
- Advocacy Evaluation
- National Graduate Institute for Policy Studies
- Harris School of Public Policy Studies
- Think tanks
- Eightfold Path (policy analysis)
- Governmental Learning Spiral an 8 step process for citizen participation in the policy process approach of Policy analysis.
- Nagel, Stuart S., ed. (1999). Policy Analysis Methods. New Science Publishers.
- Bührs, Ton; Bartlett, Robert V. (1993). Environmental Policy in New Zealand. The Politics of Clean and Green. Oxford University Press. ISBN 0-19-558284-5.
- Hambrick, Ralph Jr.; Bardach, Eugene; Chelimsky, Eleanor; Shadish, William R.; Deleon, Peter; Fischer, Frank; MacRae, Duncan; Whittington, Dale (November–December 1998). "Review: Building the Policy Studies Enterprise: A Work in Progress". Public Administration Review 58 (6): 533–9. doi:10.2307/977580. JSTOR 977580.
- Radin, Beryl (2000). Beyond Machiavelli : Policy Analysis Comes of Age. Georgetown University Press. ISBN 0-87840-773-1.
- Young, John and Enrique Mendizabal. Helping researchers become policy entrepreneurs, Overseas Development Institute, London, September 2009.
- Herbert, Simon (1976). Administrative Behavior (3rd ed.). New York: The Free Press. ISBN 0-684-83582-7.
- Drake, H.A., ed. (2002). Constantine and the Bishops: The Politics of Intolerance. Baltimore: Johns Hopkins University Press.
- Thomas, Ian, ed. (2007). Environmental Policy: Australian Practice in the Context of Theory. Sydney: Federation Press. ISBN 1-86287-603-7.
- Wiktorowicz, Mary ;Deber, Raisa (May 1997). "Regulating biotechnology: a rational-political Model of policy development". Health Policy Journal 40 (2): 115–138. doi:10.1016/S0168-8510(96)00889-5.
- Patton, C., Sawicki, D. (1986). Basic methods of policy analysis and planning. NJ: Prentice-Hall. ISBN 0-13-060948-X.
- Dye, Thomas R. (2007). Understanding Public Policy (12th ed.). Prentice Hall. ISBN 0-13-936948-1.
- Morgan M.G., Kandlikar M., Risbey J., Dowlatabadi H. (19 March 1999). "Why Conventional Tools for Policy Analysis Are Often Inadequate for Problems of Global Change". Climatic Change 41 (3-4): 271–281. doi:10.1023/A:1005469411776.
- Loomis, John; Helfand, Gloria (2001). Environmental Policy Analysis for Decision Making. Kluwer Academic. ISBN 0-7923-6500-3.
- Wiemer & Vining 1989
- Ryan L., Convery F., Ferreira S. (November 2006). "Stimulating the use of biofuels in the European Union: Implications for climate change policy". Energy Policy 34 (17): 3184–94. doi:10.1016/j.enpol.2005.06.010.
Further reading 
- Eugene Bardach, A Practical Guide for Policy Analysis: The Eightfold Path to More Effective Problem Solving
- Wiemer, David L.; Vining, Aidan R. (1989). Policy Analysis Concepts and Practice. Prentice Hall.
- Fischer, Frank; Miller, Gerald J.; Sidney Mara S. (2006). Handbook of Public Policy Analysis: Theory, Methods, and Politics. New York: Marcel Dekker. ISBN 1-57444-561-8.
- Dunn, William (2003). Public Policy Analysis: An Introduction. Prentice Hall. ISBN 0-13-183993-4.
- Policy Analysis for School Districts — from the Education Resources Information Center Clearinghouse on Educational Management, Eugene, Oregon.