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There are different conceptions of the policy cycle, but a typical one works like this.
First, there is the stage of agenda setting. Here, various interest groups or "policy entrepreneurs" (people who advocate some particular policy) try to get people to perceive some condition as a problem. For example, Occupy Wall Street is trying hard to get people to feel that unequal wealth is a real problem.
Second, there is the stage of policy formulation. Going with our previous example, someone would have to come up with specific recommendations for how to reduce wealth inequality.
Third, these policies must be adopted. This is the job of the legislature, but interest groups and political parties work to try to get the legislature to do what they want.
Fourth, once the policy is passed, it must be implemented by bureaucrats. If we were going to regulate the banking industry, for example, some government agency would have to do that. As they did, interest groups would be pushing at them to do so in the ways that the groups wanted.
Finally, policies are (we hope) evaluated to see if they work. If they do, they should continue. If they do not, they should be dumped and the policy cycle should start again.
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