Dani Rodrick in 2007 had a fascinating post on the different groups of economists when looking at policy problems. He divided them into two basic mindsets:
You can tell what kind of an economist someone is by the nature of the response s/he offers when confronted with a policy issue. The gut instinct of the members of the first group is to apply a simple supply-demand framework to the question at hand. … No matter how technical, complex, and full of surprises these economists’ own research might be, their take on the issues of the day are driven by a straightforward, almost knee-jerk logic….
the second group are inclined to see all kinds of complications, which make the textbook answers inappropriate. In their world, the economy is full of market imperfections ….
Policy making has the same type of division. There are those who advocate for the most efficient and effective policies as first best solutions, and there are those who acknowledge the possibility of first best solutions but are also aware of other strong constraints so sub-optimal improvements to policy can be implemented. Finally there is a school of policy making which can only be described as WTF avant garde experimentalism.
Risk corridors in PPACA are a good example of these three schools of thought. The point of risk corridors to is to minimize the cost to an insurer of it getting stuck with an especially sick pool of people it has to cover. Read more