As there are limitations of cybernetic method of policy analysis it is pertinent to discuss other alternatives. The welfare optimising model is one such method that has been proposed by some policy analysts. This model has been developed in pursuance of the individualistic tradition of neo-classical economics.
Theorists of public policy have used social welfare functions in ranking society's preferences among alternatives. The preferences of government are often taken as a proxy for social welfare function. It shows how governments in some cases make their decisions regarding policy making. The government here adumbrates technocrats, bureaucrats and economist consultants besides politicians in power who initiate the process of policy making through declaration of intent. The criteria used in policy making analysis in the instance mentioned is described as a 'welfare optimising model' which is closely related to and based on social welfare function. It bears directly on the theory of consumer behaviour. It's main characteristics are: 1) the task of government is taken to be the maximisation of community or social welfare based on utilitarian principles; (2) government interaction is considered necessary because of the market failure in ensuring social welfare of the majority in society (the degree of market failure determines the economic role of the government over the whole economy or in any particular sector); (3) the overall objective of maximising social welfare is given concrete expression in sectoral policies that have subsidiary objectives, such as alleviation of poverty, reduction of unemployment, gender equality, maximising rate of investment for growth, promoting exports for a healthy balance of payments, etc.; (4) the subsidiary objectives are clearly defined with potential conflicts among them removed applying a set of priorities; (5) this set of preferences as an expression of popular demand is described the 'social welfare function.'
The social goal having been established, the task of a government is to review all alternative lines of action and then to select the policy which will achieve the objectives of 'social optimising' with efficiency (cost) and meeting the criteria of feasibility (implementation). The result of this process in policy making is an optimum solution of the problem at issue. If it is successfully applied to all problem areas (sectors) the result will be the achievement of what is known in economics as 'Pareto optimality' in the whole economy or a particular sector, in which it is only possible to make one person better of by making someone else at least as much worse off. So Pareto optimality ensures equilibrium in society or in parts of it where the policy leads to optimum solution.
The nature of the welfare optimising model will be familiar to those who are conversant with the theory of consumer demand. As an illustration, the case of making a choice between consumption decisions of individuals and those made by the government can be cited. In other words, the choice between the kinds of things on which individual consumers spend and items of collective consumption of public goods such as education, health services, etc. showcases the potential (very often actual) conflict of interests between private and public interests. Taking this possible (often real) conflict of interests into account the model assumes the existence of a mechanism through which the government can translate society's preferences into a social welfare function. As a corollary to this it is further assumed that the government will adopt the mechanism to achieve the policy objectives for a particular sector or the whole economy. In other words, policy decisions by government are always meant to promote public interest through the above process of translating community (collective) preferences into a social welfare function.
The social model requires that the community or the stakeholders in a particular sector for which policy is being formulated have reached a consensus regarding the objectives and priorities enunciated in the policy based on the model. Unless such a consensus exists it will be difficult to ensure 'social welfare function.' Policy making process, therefore, has to start with clear knowledge about community's preferences. It is obvious from this that the welfare optimising model requires a huge volume of information and data about the problem that is sought to be met through policy making. The alternative ways of addressing these problems have to be the focus of analysis at the first stage of policy making process. The corollary of this will be to analyse the consequences of adopting each of these objectives. Finally, the model requires that governments must have sufficient power to ensure that public interests prevail over private interests of powerful groups. In a democratic dispensation the exercise of such power is often problematic and therefore, cannot be taken for granted. Dominant interest groups can derail or waylay a policy meant to promote greater public interest. There is always the possibility of a gap between declaration of intent by politicians for policy making in certain cases and actual adoption of one.
The implications and requirements of the welfare optimising model make it an uncertain method for policy making in the public realm. Besides, there are theoretical objections also to the model. Being a normative model purporting to show how a government ought to make policy decisions, it is not realistic in judging how governments actually function under constraints of various types. The notion of social welfare function also gives rise to practical difficulties. It is supposed to represent collective preferences of society (promoting public interest). But scepticism has been expressed as to whether public interest can be given operational meaning. Is it supposed to be the sum of individual preferences? Is it wants that should be measured or only demands made effective by purchasing power? What should be done when there are major disagreements among various groups in society? These are the questions that also beg for answers.
For the above reasons and criticisms political scientists have shown little interests or faith in common goods or public interests. But economists continue to believe that the social welfare function is meaningful and can be made operational. The problem can be simplified by defining social welfare function as the revealed preference of the political party elected with majority seats and assuming that once in power the politicians will remain committed to the promotion of public interest as articulated in the revealed preferences. But these are heroic assumption which even representative democracies will find it difficult to accommodate. One of the merits of the welfare maximising model, however, is that it at least recognises the importance of taking politics into consideration when examining issues of public policy. Disregarding the political context within which policies are made will be the easy way out. In the final analysis, all public policies made by the government are exercises in political economy.
