Social Science Applied to the Economy : How Can Economic Expertise Help Government Policy and Running a Nation?

Government policy can greatly benefit from the insights of economic science, in particular when the specific national circumstances and preferences are taken into account. This chapter shows that this does not only apply to traditional topics of economic science like fiscal policy (the government budget) and monetary policy (organizing the supply of money), but also to a wide range of other policy areas. Cases in point are flood risk management, health care policy, criminal justice, labor market policy and climate policy. Furthermore, the economic analysis of election manifesto’s in advance of the elections (election costing) can be a great help to better inform voters about the policy plans of political parties and improve in this way government policy. In our examples of applying economic science to government policy, four basic ideas are used. The first basic idea is to formulate, measure and monitor explicit targets. The second basic idea is to investigate the effects, cost-effectiveness and trade-offs of various decisions. The third basic idea is that financial incentives can have great private and public benefits, but may also have major perverse effects. The fourth basic idea is to separate responsibilities in order to guarantee the scientific quality of public decision-making. These basic ideas about economic science and policy can also be applied to run a family, a business or a non-profit organization. Several examples are provided to illustrate this