Economic Policy

A set of governmental choices affecting resource allocation, incentives, financing and economic activity.

Source: Arrow KJ. Uncertainty and the welfare economics of medical care. American Economic Review. 1963;53(5):941-973.

Economic policy consists of a set of governmental choices affecting resource allocation, incentives, financing and economic activity. These choices, taken by government, shape how resources are used and how the economy behaves. Being such a set of governmental choices with these effects is what economic policy is Because it directs limited resources and shapes the incentives people face, economic policy carries wide effects, and every allocation it makes implies the alternatives that were given up.

Source: Arrow KJ. Uncertainty and the welfare economics of medical care. American Economic Review. 1963;53(5):941-973.

Economic policy affects resource allocation, incentives, financing and economic activity, influencing how resources are distributed, how people and organisations are motivated, how spending is funded and how the wider economy performs. These are the channels through which governmental choices take effect. Affecting resource allocation, incentives, financing and economic activity is central to economic policy Because it directs limited resources and shapes the incentives people face, economic policy carries wide effects, and every allocation it makes implies the alternatives that were given up.

Source: Arrow KJ. Uncertainty and the welfare economics of medical care. American Economic Review. 1963;53(5):941-973.

The choices in economic policy are made by government, since economic policy is a set of governmental choices affecting resource allocation, incentives, financing and economic activity. It is the state, rather than private actors, that sets these policies. This governmental origin of the choices defines economic policy Because it directs limited resources and shapes the incentives people face, economic policy carries wide effects, and every allocation it makes implies the alternatives that were given up.

Source: Arrow KJ. Uncertainty and the welfare economics of medical care. American Economic Review. 1963;53(5):941-973.

Economic policy influences incentives as one of the areas its governmental choices affect, alongside resource allocation, financing and economic activity. By shaping the rewards and costs individuals and organisations face, policy alters how they are motivated to act. This effect on incentives is part of what economic policy does Because it directs limited resources and shapes the incentives people face, economic policy carries wide effects, and every allocation it makes implies the alternatives that were given up.

Source: Arrow KJ. Uncertainty and the welfare economics of medical care. American Economic Review. 1963;53(5):941-973.

Economic policy is a set of governmental choices affecting resource allocation, incentives, financing and economic activity, while opportunity cost is the value of the next best alternative forgone when a resource is used one way. Because economic policy allocates limited resources, each choice carries an opportunity cost. The two are connected, since policy decisions about resource allocation entail the opportunity cost of the alternatives given up Because it directs limited resources and shapes the incentives people face, economic policy carries wide effects, and every allocation it makes implies the alternatives that were given up.

Source: Arrow KJ. Uncertainty and the welfare economics of medical care. American Economic Review. 1963;53(5):941-973.