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Chap 4 Policy Forecasting and Formulation
Chap 4 Policy Forecasting and Formulation
STAGE 2 OF
POLICY PROCESS
TOPIC 5
/ POLICY CYCLE
POLICY
FORECASTING AND
FORMULATION
ADS 514: Introduction to Public Policy, FSPPP, UiTM
Content:
• Meaning of policy forecasting
• Purpose of forecasting
• Methods of forecasting and their advantages
and disadvantages
• Problems of forecasting
• Deciding and formulating type / category of
policy options
ADS 514: Introduction to Public Policy, FSPPP, UiTM 3
Meaning 4 Meaning
FORMS OF FORECASTING
• Projection.
• Prediction.
• Conjecture: A forecast based on informed or expert
judgments about future states of society.
ADS 514: Introduction to Public Policy, FSPPP, UiTM 6
WHY FORECASTING?
• Forecasts provide information about future changes in
policies and their consequences.
• Forecasting permits greater control through
understanding past policies and their consequences,
implying that the future is determined by the past.
• Forecasting helps to shape the future in an active
manner, irrespective of what has happened in the past.
• Forecast provides insight into uncertainty
ADS 514: Introduction to Public Policy, FSPPP, UiTM 7
PURPOSE / OBJECTIVES OF
FORECASTING
• To plan for the best possible course of action
among the various alternatives which the future
may offer
• To use the past and present situation to determine
the future states of a problem.
• To shape the future in an active manner in relations
to what has happened in the past.
ADS 514: Introduction to Public Policy, FSPPP, UiTM 8
METHODS OF FORECASTING
Methods of making decision for future actions / directions
1. Quantitative methods:
Time Series, Regression Analysis
2. Qualitative methods:
Judgmental
1. Consensus
Face to face meeting
Delphi Technique
2. Genius forecasting
ADS 514: Introduction to Public Policy, FSPPP, UiTM 9
Quantitative methods:
• Method that relies on hard data / statistics and
statistical model to predict and project future direction
• Example:
• Time series methods – using of past values data of variables
to predict future (to make decision for future)
• Exponential smoothing method – using statistical model:
New Forecast = (most recent observation) + (1 - (last
forecast)
ADS 514: Introduction to Public Policy, FSPPP, UiTM 10
• Objective
• Data is costly
• Need persons who are good with statistics /
mathematics – difficult to get & costly to pay for their
expertise
ADS 514: Introduction to Public Policy, FSPPP, UiTM 11
1. Consensus
Face to face meeting
Delphi Technique
2. Genius forecasting
ADS 514: Introduction to Public Policy, FSPPP, UiTM 13
Consensus Method
Consensus Techniques
2. Delphi Technique
GENIUS FORECASTING
Meaning:
•a subjective approach where intuition or gut
feeling are used in making decision about
future direction
•an unspecified set of processes used by
geniuses to arrive at statements about the
future.
•The processes need not be the same for any
two geniuses.
ADS 514: Introduction to Public Policy, FSPPP, UiTM 24
WHO IS GENIUS
• a single expert or expert panels with considerable
experience
• They forecasts the future based on knowledge,
intuition, insight and luck.
ADS 514: Introduction to Public Policy, FSPPP, UiTM 25
Advantages and
disadvantages of Qualitative
Methods
• Although qualitative method can be costly (to
pay for expertise), it may ultimately yield the
most accurate and unbiased results
• Allow human input in the decision-making
process,
• Subjective
ADS 514: Introduction to Public Policy, FSPPP, UiTM 30
PROBLEMS OF FORECASTING
1. In-accuracy of info / data
2. Data is expensive & difficult to access
3. Limitation of forecasting methods and techniques
4. Invalid experts opinion
5. Personal bias
6. In-accuracy of forecast
ADS 514: Introduction to Public Policy, FSPPP, UiTM 31
PROBLEMS OF FORECASTING
In-accuracy of info / data
•The extent of accuracy of info / data limits accuracy
of forecasting policy future.
•For example, the Treasury may underestimate the
federal budget deficit based on extrapolation of trends
using single variable or models incorporating
hundreds of variables.
PROBLEMS OF FORECASTING
Limitation of forecasting methods and techniques
Quantitative method
•Highly dependent on data and model to predict future.
Forecasting models are develop base on assumption.
Assumption may not be true, data may not sufficiently available
Qualitative method
•Highly dependent on personal opinion to predict future. Experts
and genius is not easily available, and if they are available
within the policy making institutions, their numbers may not be
enough
ADS 514: Introduction to Public Policy, FSPPP, UiTM 33
PROBLEMS OF FORECASTING
Invalid experts opinion
PROBLEMS OF FORECASTING
Personal bias
Example,
Panel, who tend to be optimists, will likely develop a
forecast that is overly optimistic
ADS 514: Introduction to Public Policy, FSPPP, UiTM 35
PROBLEMS OF FORECASTING
In-accuracy of forecast
•all qualitative forecasts assume that certain
characteristics that existed in the past will exist in the
future.
•Unfortunately, sometime unexpected occurrences
happen, such as changes in weather, social and
economic factors
•Each of these occurrences can affect decision and the
accuracy of a forecast.
•For this reason, the longer the forecasting period, the less
accurate the forecast will be
ADS 514: Introduction to Public Policy, FSPPP, UiTM 36
End of Forecasting
• Once forecasting is done, administrator will
starts formulating / drafting the relevant policy
options / courses of action to resolve problem
ADS 514: Introduction to Public Policy, FSPPP, UiTM 37
POLICY FORMULATION
Meaning:
•Process of formulating (drafting) / developing
acceptable courses of action / options for the selected
policy agenda
Policy Formulation
Administrators
Politicians
Policy maker
Administrators
ADS 514: Introduction to Public Policy, FSPPP, UiTM 39
Analysis:
Which policy option to choose?
• In deciding which courses of action / policy option
to choose for a selected policy agenda, policy
maker (administrators) will be doing 2 main tasks:
i. Analyzing the courses of action
ii. Deciding which type / category of policy option to
introduce
ADS 514: Introduction to Public Policy, FSPPP, UiTM 40
Analysis techniques:
Cost benefit analysis:
Refer Anderson (2011, pp. 292-297)
•Consider the direct & indirect benefit of addressing the problem(valid)
•Consider the direct & indirect benefit should new policy is introduced or
existing policy is modified (valid & implementable)
•Consider direct & indirect cost (financial and non-financial) for the
actions to be taken (implementable & efficient) in addressing the problem
•Discount future net benefits – to reduce future direct & indirect benefit
and cost to the present value
•Compare direct & indirect and present and future cost and benefits of
policy alternative
ADS 514: Introduction to Public Policy, FSPPP, UiTM 42
Analysis is done
Authorization:
Which courses of action to accept?
• At this stage, assuming the course of action is able
to resolve problem and is cost effective, now the
political actor / policy maker will be deciding on
which policy recommendation / causes of action
proposed to be accepted / authorized.
• This is done through political process (first reading)
ADS 514: Introduction to Public Policy, FSPPP, UiTM 46
Reflection:
Who are actors involved in policy
formulation stage?
Two groups of actors:
•Analyist (policy analyist) / administrators
•Decision maker (policy maker)
ADS 514: Introduction to Public Policy, FSPPP, UiTM 48
END OF LECTURE
Thank You