In economic literature policy instrumentation has usually been discussed from normative point of view. In particular, the analytical apparatus of welfare theory is well equipped to evaluate the advantages and disadvantages of alternative instruments to attain a given policy objective. The fundamental criterion then is allocative efficiency.

In an economy where agents or actors, whatever you call, have infinite horizon life span, the social welfare function naturally coincides with the utility functions of those agents. But when reality is allowed to play, we see that where agents do not have infinite horizon life span, and moreover, they are not homogeneous, it becomes difficult defining a social or community welfare function. That is why, the practice we often observe that policy makers often go for Pareto inferior alternatives from welfare theoretical point of view. The reason being the fact that  policy makes have interests and associated criteria that are inconsistent with the Pareto allocative efficiency.