The industrial organisation of economic policy preparation in the Netherlands

Abstract

Introduction The ultimate aim of (economic) policy is to enhance social welfare. In an ideal world with perfect competition, no externalities and transaction costs, and with a perfect distribution of property rights, the optimal path of social welfare is reached automatically when all individuals maximise their own welfare. There is no need for coordination by the government since the market mechanism will do the job. However, the real world is not ideal. Various externalities, the provision of public goods and problems of distribution require government intervention. The discipline of public economics provides the theoretical foundation and practical solutions as to how to deal with problems of market failure and redistribution of income and wealth. Policy prescriptions on the most efficient ways for governments to intervene and solve the coordination problem at the macro level are widely discussed in the literature. Moreover, the problems of government failure, and of politicians and civil servants seeking to serve their own interests instead of the public interest of enhancing social welfare, are also subject of much academic debate. However, the (economic) literature has paid far less attention to the way the process of policy preparation is organised. In democratic societies, the final step for policy measures to be implemented is that they are legitimised according to the existent democratic rules. However, before policy measures obtain parliamentary approval, a long and often winding road has to be followed to move from the first ideas about the policy measures to their final formulation.

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