This article examines the process of policy analysis in the Israeli Ministry of Finance, which plays a central role in initiating, shaping and implementing economic policy. Previous studies showed that the Ministry of Finance has relatively greater power than finance ministries in most developed countries. The article describes three modes of policy analysis that are used in the Budget Department or on its behalf: in-house work, interministerial committees and public committees. An examination of the three modes of policy analysis indicates that the major weakness of policy analysis is more evident in the in-house work of the Budget Department, which does not systematically evaluate the expected effects of policy proposals on benefits and costs. A professional infrastructure has not been laid for using standard prediction techniques. The interministerial committees or the public committees do not work according to a fixed methodology, and the quality of their analytical work is therefore arbitrary, depending on the people heading the committee. A tradition of presenting a menu of alternatives to policy makers has not been found in all three modes of policy analysis that were researched here. In addition, the decision rule according to which the preferred alternative is chosen is unclear.

Introduction

This article describes the policy analysis that is conducted in practice in the Budget Department of the Israeli Ministry of Finance, and compares it with decision making in the spirit of bounded rationality model proposed in standard textbooks on policy analysis, such as Weimer and Vining (2011), Bardach (2011) and Dunn (2012). This model includes a clear formulation of the undesirable phenomena, problem definition, presenting a limited number of alternatives, and evaluating them according to a limited number of major criteria, and evaluation research that accompanies the policy. The importance of an analysis of this kind is that it forces the policy analyst and the decision makers to pass through key stations, thereby reducing the chances of making bad decisions.

A standard policy analysis makes it possible to see also whether the overall expected benefits exceed the costs, while explicitly taking into account the risks. Such policy analysis should also reveal the theoretical assumptions underlying the policy proposals, initially for the policy analyst, then for the decision makers, and finally for the public at large.