Concluding Comments

The thrust of policy analysis with the PAM approach is to identify the efficiency effects of a policy first and then to look for nonefficiency goals that might or might not justify incurring any efficiency losses associated with distorting policy. In the absence of market failures, all price policies create production or consumption efficiency losses, because the policies cause departures from optimal amounts of international trade. The most efficient levels of imports or exports are altered by policy, and the efficiency losses arise when too little or too much is traded. These trade effects of price policy are also of major interest to the country's international trading partners.

Analysts attempt to measure feasibility, implementation costs, budget transfers, efficiency losses, trade effects, and, finally, the impact on government objectives. In this way, the links between PAM budgets and price policy analysis can be drawn fully. However, policy analysis focused on a single commodity requires two critical extensions-examination of feedback in product and factor markets in the context of macroeconomic price and macroeconomic policy and consideration of the long-run dynamic effects of policies.