Traditional economics views the economy in a fairly mechanistic way. If people are rational and we want to change their behavior then we just need to change their incentives. Thus, a lot of policy is conducted through tinkering with the tax code or subsidies, for example if one wants more innovation, give an R&D tax credit; if one wants less smoking, tax it heavily. Of course people aren’t immune to such incentives, but often the response is far less than policymakers would like.
Likewise, traditional economics views the economy as naturally being in a state of efficiency, and so by definition any interventions move it away from that state, making it less efficient. Thus, interventions are justified by market failures, the need to create some public good, or the need to avoid some negative spillover effects or externalities. For example, state support of R&D might be justified if there are market failures, or taxing smoking might be justified to reduce the externalities smokers create for non-smokers.
Finally, policies are evaluated through the lens of cost–benefit analysis, where future benefits and costs are projected and compared. For example, much of the debate on climate change policy has been over competing forecasts of future costs from climate damage and their likelihood of occurring, versus the potential benefits of action to avoid those costs.
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