The beginning of all policy studies involves defining and analyzing a problem. Analysts must first define the topic at hand, a task that often can be fraught with politics. Issue framing is a key part of the agenda-setting stage of policy development in which interest groups try to define problems in their own way. The major components of problem analysis include defining the problem, measuring the problem, determining the magnitude of the problem, considering the causes of the problem, setting goals or objectives, and determining what can be done about it. Key quantitative indicators, or operational measures, are developed for use in understanding the scope and impact of public problems. Policy researchers anticipate the future by making forecasts and projections. Although most policy analysis focuses on proximate causes, assessment of public problems requires consideration of possible root causes. Many policy problems are impacted by long-standing public attitudes and habits that are resistant to change. Many, too, have multiple causes. Finally, analysts will want to describe the benefits and costs of trying to solve the problem.

One must obtain reliable information to analyze problems, and a good beginning strategy is to find overviews of the topic in news sources or through an Internet search. To prepare a literature review, or a summary of what is known about the problem, libraries provide strong research databases and government agencies related to the problem often provide additional information.

Once a problem has been defined and summarized through data, analysts then construct policy alternatives (part of the policy formulating stage of public policy). This is referred to as policy design. Governments have numerous policy tools to help them develop these designs. Some key tools and ways government can formulate public policy are to regulate, subsidize, ration, tax and spend, contract out, use market incentives, privatize, charge fees for service, educate, create public trusts, and commission research. For many policy areas, government may attempt to solve a problem utilizing a supply-and-demand perspective, to increase the supply of or demand for an item. Policy design must calculate how people affected by the policy will behave.

Beyond considering typical policy instruments, analysts can apply creative thinking and brainstorming to develop new policy strategies. No-action analysis is a strategy that calls for continuing with the current policy regime. Quick surveys can be done to learn what experts in the policy network think about the policy options. Analysts might also ask what has worked well in specific or real-world situations. Passive collection means finding out what others have suggested in a given policy area (including program stakeholders) while a review of parallel situations seeks workable policy options by examining a related policy area. Sometimes analysts compare policy alternatives with an ideal situation to generate strategies that move in the desired direction.