Structure-Conduct-Performace

One way I've found that's helpful in organizing information for doing policy analysis is using this Structure-Conduct-Performance (SCP) framework.  One thing I like about it is I'm able to use economic principles and purge out all the material like dead weight loss, inefficiency of government 'intervention' and so forth.  There's a great deal of micro principles that are useful in helping evaluate possible impacts of a policy.  For example, we can still use all the price analysis, elasticity concepts, the crucial concept of opportunity cost, and the notions of inter-dependence between markets as well as using these tools to predict who might win and who might lose.

The Structure pertains to the rules, laws, prices, and so forth that are relevant to the policy you are examining.  What gets included under Structure is quite flexible.  Generally, think of it as whatever you understand as important to the evaluation you are conducting that is presently in existence and considered critical to describing the problem you're hoping to solve.

The Conduct pertains to the choices that various players make in response to the Structure as it currently exists.  For example, by choice we could be referring to how much electricity a customer uses given the prices, technology, income, and other traits that are known to affect consumption.

The Performance pertains to what are the value of key outcomes you are concerned with.  For example, the amount of electricity used at a given time of day, or month of the year and so forth.

Note that there's some flexibility between what you consider Conduct and what you consider Performance.  One way to think about this distinction is the Performance are the dependent variables that you would like to impact and the Conduct are the independent variables that pertain to actions by one or more parties.  In my example, it would be the consumer's use of electricity.  Note also that there may be other variables, and virtually always will be other variables, that influence the dependent variable(s).  If they are not associated with choices by some party, then they describe aspects of the Structure that are considered important.  I use this equation structure loosely as a way to give you a sense of how to organize the SCP concepts.

Then, we can use analysis, information, theory and so forth to test various hypotheses.  For example, let's say we want to reduce electric use overall.  If we have information from some studies on electric use and prices, we might be able to propose how to change the current Structure in order to affect consumer Conduct sufficient to after Performance by reducing electric use by the desired amount.

As you can see, the SCP is a shell that has great flexibility.  What I like about it is it's provides a systematic way to gather and organize information.  It doesn't tell you what to do or what not to do.  That's one of it's benefits over the partial equilibrium comparative statics model (PECS) from micro economics, although we still need to rely on the analysis tools of the  PECS model that helps us predict impacts.  Another aspect of the SCP framework that I like is it allows for all sorts of information to be combined.  This might include assessment of the how receptive consumers might be to the proposed prices change.  Or, what consumers might support it and what consumers might oppose it.  It also allows for consideration of the chance of confronting a legal challenge on procedural and/or substantive grounds, for example.

I've seen decision-makers discuss and reach decisions, often in a convoluted way.  This SCP framework can also be helpful to the analyst responsible for organizing information for both analysis and presentation.

Economics and Policy

Economists, or many of us, LOVE to tell decision-makers what they ought to do.  Though, far too many of those in the profession also want to cling to the illusion that they are also being 'objective.'  Oh, yes, don't you know that economics is a 'positive' science?  Positive as in 'objective' and 'value neutral.'

One might reasonably ask how a profession that deals to such a degree with money, and writes so extensively about what does and does not constitute value, can possibly think of itself as being value neutral.  Thankfully, there are esteemed practitioners of the craft who know otherwise.  Of course, they are seen as being a minority of crack pots.  Or worse, they are labeled as journalists or sociologists.  But whose complaining?

Sadly for those who continue to swallow the cool aid, such eminent economists as Joan Robinson are among the ranks of economists who understood how economics can better serve society.  Stiglitz has written cogently about development after his stint as the chief economist of the World Bank and it's senior vice president.  Baumol wrote years ago that economics is more like biology than physics even though physics type models were more the type employed in the profession.

What has worked for me is to borrow the structure-conduct-performance framework from Industrial Organization and apply it to policy.  I'll describe how I use this approach in a subsequent post.