Government policies are the legal tools that governments use to address social issues, including providing public goods and services, maintaining law and order, regulating the economy, and protecting the environment. These efforts are a key part of ensuring the well-being of citizens and the long-term sustainability of societies.
These policies are shaped by a variety of factors that converge to guide policymakers as they craft and execute them, such as:
For example, when faced with an economic slowdown, a government may try to stimulate the economy with increased spending or tax cuts. But that choice will depend on the amount of fiscal space available (that is, whether it’s possible to add stimulus without adding pressure on inflation or external vulnerabilities). And when deciding on what mix of spending and taxes to choose, they’ll have to weigh the impact on their economies’ productivity multipliers.
Other government policies include regulating the safety of consumer products, such as setting limits on contaminants like pesticides in food; implementing worker safety standards, such as mandating that employers provide workers with protective equipment; enforcing anti-discrimination laws, such as requiring that employees be paid a minimum wage; and establishing banking regulations to ensure transparency for consumers. Some policies are aimed at specific problems and targets, such as the aforementioned ones; others are broad in scope, such as requiring that banks report customer transactions to a central database.
Some scholars distinguish between politics and policy, although both are closely intertwined; they see this distinction as a way to separate political decisions that shape the economy and society from the administrative processes and systems that take those policies and turn them into practical solutions in the real world.