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No attempt need be, made at a comprehensive survey of the extensive and growing on the modem institutional approach to the analysis of economic policy. The economic policy concerns itself with the maximization of "economic welfare" which is to be optimized by free-market forces in a position of general equilibrium. In the world, market failures and imperfections occur, such as sharp fluctuations in prices, which give wrong signals to producers, and "externalities", which are costs that individual producers impose on the rest of the economy but that play no part in their output decisions.The policy is to be judged as efficient in so far as its costs are minimized whilst the benefits of increased net income overall are maximized.his kind of thinking as a method of analysis is recognizable as one applied by most practicing economists and also as one that politicians for their part have come to expect of their advisers.
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