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Abstract
The policy preference function (PPF) approach has become popular with economists
seeking to explain the origin of government policies. In this paper, a distinction between
positive and normative work with the PPF concept is made. Positive work is shown to suffer
from a variety of shortcomings including the misspecification of traditional PPFS and the
failure to consider the importance of institutions, constraints and the interaction between
different commodity policies. These weaknesses are reflected in the counter-intuitive results
of a simple PPF model designed to reflect the interaction between the EC's wheat and barley
policies. Furthermore, it is demonstrated that PPF weights change as a result of both
political preferences and market parameters. Hence, changes in PPF weights cannot be
attributed to changes in preferences alone. Tests of the axioms of revealed preference
theory are used to demonstrate that even though PPF weights derived for the EC's wheat
and barley markets have fluctuated considerably since the early 1970s, we are not able to
conclude that there has been a shift in political preferences. The paper concludes with some
comments about the use of PPFS in a normative framework. The underlying assumption that
policy-makers optimise seems, not surprisingly, often to lead practitioners to the conclusion
that observed policies are not so bad after all. Economists should also beware of the
tendency to overlook possible differences between the PPF and the social welfare function.