What is policy instruments theory in simple terms?

It classifies and compares the ways government pursues goals, such as banning by law, steering with money or persuading with information.

What are carrots, sticks and sermons?

Carrots are economic incentives like subsidies, sticks are regulation and penalties, and sermons are information and persuasion such as campaigns.

Policy Instruments

🏛️ Politics & Public Administration By CampusDown Wiki Editorial Team Last updated October 27, 2026

Policy instruments theory classifies the means governments use to reach policy goals, such as regulation, taxes and subsidies, information and public organizations and services, and studies why particular tools are chosen and what effects they have. Christopher Hood's 1983 book and Lester Salamon's 2002 volume are landmark works. It holds that 'how' government acts matters as much as 'what' it does.

Contents

1. Typologies
2. The logic of instrument choice
3. New directions and critiques
4. FAQ
5. References

Typologies

Hood (1983) classified tools by the resources government holds: Nodality (information), Authority, Treasure and Organization, the 'NATO' scheme. Vedung (1998) simplified this into regulation (sticks), economic means (carrots) and information (sermons). Salamon (2002) emphasized a 'new governance' in which governments increasingly act through third parties via indirect tools such as grants, vouchers, contracts and loan guarantees, comparing tools on coerciveness, directness, automaticity and visibility.

The logic of instrument choice

Linder and Peters (1989) argued that tool choice reflects not only technical efficiency but decision makers' perceptions, organizational culture and political context. Howlett (1991) found national patterns in tool choice tied to policy styles. Schneider and Ingram (1990) classified tools by their assumptions about why people do not act, such as lack of authority, incentives, capacity, shared values or certainty, work that led to the theory of the social construction of target populations.

New directions and critiques

Lascoumes and Le Galès (2007) argued that instruments are not neutral techniques but institutions carrying power relations and social meanings. Market-type tools spread in the New Public Management era, and nudges grounded in behavioural economics have drawn attention as a new kind of information tool. Critics say typologies are too static, since real policy works through 'policy mixes' of several tools.

FAQ

What is policy instruments theory in simple terms?: It classifies and compares the ways government pursues goals, such as banning by law, steering with money or persuading with information.
What are carrots, sticks and sermons?: Carrots are economic incentives like subsidies, sticks are regulation and penalties, and sermons are information and persuasion such as campaigns.

Sources reviewed: 2026-10-26

References

Hood, C. (1983). The tools of government. Macmillan. The classic NATO typology.
Salamon, L. M. (Ed.). (2002). The tools of government: A guide to the new governance. Oxford University Press. A comprehensive guide to tools.
Linder, S. H., & Peters, B. G. (1989). Instruments of government: Perceptions and contexts. Journal of Public Policy, 9(1), 35–58. Why governments pick particular tools.
Schneider, A., & Ingram, H. (1990). Behavioral assumptions of policy tools. The Journal of Politics, 52(2), 510–529. Behavioural assumptions behind tools.
Howlett, M. (1991). Policy instruments, policy styles, and policy implementation: National approaches to theories of instrument choice. Policy Studies Journal, 19(2), 1–21. National policy styles and tool choice.
Lascoumes, P., & Le Galès, P. (2007). Introduction: Understanding public policy through its instruments. Governance, 20(1), 1–21. Instruments as institutions carrying power.
Vedung, E. (1998). Policy instruments: Typologies and theories. In M.-L. Bemelmans-Videc, R. C. Rist, & E. Vedung (Eds.), Carrots, sticks, and sermons: Policy instruments and their evaluation (pp. 21–58). Transaction. Carrots, sticks and sermons.

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NudgeWhat is a nudge? Thaler and Sunstein’s choice architecture, how default settings boosted 401(k) enrollment and organ-donor consent, examples from public policy, the difference between nudges, sludge and dark patterns, and key criticisms.📈 Economics Social Construction of Target PopulationsWhat the social construction of target populations is: Schneider and Ingram's theory that policy benefits and burdens depend on how groups are portrayed and their political power. Covers the four types and feedback effects.🏛️ Politics & Public Administration New Public ManagementNew Public Management explained: its 1980s origins in UK and New Zealand reforms, Hood's seven doctrines, Osborne and Gaebler's entrepreneurial government, performance management, agencies and privatisation, and critiques such as the New Public Service.🏛️ Politics & Public Administration Behavioral EconomicsBehavioral economics explained: how it differs from standard economics, Simon's bounded rationality, Kahneman and Tversky's prospect theory and loss aversion, Thaler's mental accounting, present bias, nudges like auto-enrollment, and its critics.📈 Economics

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This article was last updated on October 27, 2026. It is based on widely recognized original works and textbooks; when citing it in a paper, please check the original sources listed in the references.