Book Summary of A Primer for Policy Analysis by Edith Stokey and Richard Zeckhauser

A Primer for Policy Analysis is built on the implicit assumption that policy-making decisions are economic decisions. Thus, it is an exposition of economic theory applied to policy-making.

A Primer for Policy Analysis will be of interest to those who wish to understand market approaches to policy-making decisions. Stokey's and Zeckhauser's work is divided into three parts: the foundations of an economic framework for policy analysis, models and methods of analysis, and the goals of policy-making. Each chapter is followed by exercises, the answers to which are at the end of the text.

Part I discusses the authors' approach to policy-making and offers a framework and practical advice. A discussion of: types of models, advice on choosing the right model and the advantages and limitations of models concludes this part.

Part II constitutes the bulk of the book. A lengthy discussion of difference equations is offered, which focuses on a general description of such equations, their use in modeling and consideration of equilibrium and stability. Three models are then explored. First, a queing model is presented after a basic explanation of queing theory. Computer simulation models are discussed and asserted to be a valuable analytic tool. Finally, Markov models are considered. Markov chains and processes are considered in relation to long-term analysis and long-run equilibrium probabilities.

The authors devote a chapter to the problem of defining preferences. This is followed by standard discussions of: benefit-cost analysis and the mechanics of discounting. The last two chapters of Part II of A Primer for Policy Analysis are devoted to the examination of linear programming and decision analysis respectively. The elements and techniques of linear programming as a general approach as well as its limitations are presented. The Decision Tree as a descriptive model is discussed as well as the use of decision analysis in policy issues.

Part III examines the goals of policy-making. Brief discussions of the nature of society and social choice from an economic perspective precede consideration of the complexities of evaluating social welfare and the use of Pareto criteria in making social welfare responsive to individual welfare. This chapter is appended by an examination of Arrow's Impossibility Theorem. A chapter devoted to the discussion of achieving desirable outcomes addresses the role of government in: market system and efficiency, and in dealing with market failure. The final chapter offers practical advice on putting analysis to work. A lengthy section on suggested reading will be useful to the serious pursuer of market approaches to environmental problems.

A Primer for Policy Analysis is an overview of economic theory as it is applied to environmental problems. It does not, however, consider other approaches to such problems.