The application of econometric analysis to the process of economic policy formulation is considered. A framework is provided by the theory of reduction, specifically reductions where key information losses would invalidate policy. Consequently, model evaluation; the role of econometric models; forecasting; exogeneity; causality; constancy and invariance; unobservables; seasonality; and data integrability are considered, together with specific policy issues where econometrics can clarify the problems.