Journal ArticleDOI
Rules Rather than Discretion: The Inconsistency of Optimal Plans
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TLDR
In this paper, it was shown that discretionary policy does not result in the social objective function being maximized, and that there is no way control theory can be made applicable to economic planning when expectations are rational.Abstract:
Even if there is an agreed-upon, fixed social objective function and policymakers know the timing and magnitude of the effects of their actions, discretionary policy, namely, the selection of that decision which is best, given the current situation and a correct evaluation of the end-of-period position, does not result in the social objective function being maximized. The reason for this apparent paradox is that economic planning is not a game against nature but, rather, a game against rational economic agents. We conclude that there is no way control theory can be made applicable to economic planning when expectations are rational.read more
Citations
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Journal ArticleDOI
Macroeconomics and reality
TL;DR: In this article, the authors argue that the style in which their builders construct claims for a connection between these models and reality is inappropriate, to the point at which claims for identification in these models cannot be taken seriously.
Journal ArticleDOI
Discretion versus policy rules in practice
TL;DR: In this article, the authors examine how recent econometric policy evaluation research on monetary policy rules can be applied in a practical policymaking environment, and the discussion centers around a hypothetical but representative policy rule much like that advocated in recent research.
Book
Interest and prices : foundations of a theory of monetary policy
TL;DR: Woodford as discussed by the authors proposes a rule-based approach to monetary policy suitable for a world of instant communications and ever more efficient financial markets, arguing that effective monetary policy requires that central banks construct a conscious and articulate account of what they are doing.
Book
Interest and Prices: Foundations of a Theory of Monetary Policy
TL;DR: Woodford as mentioned in this paper proposes a rule-based approach to monetary policy suitable for a world of instant communications and ever more efficient financial markets, arguing that effective monetary policy requires that central banks construct a conscious and articulate account of what they are doing.
Journal ArticleDOI
The Science of Monetary Policy: A New Keynesian Perspective
TL;DR: In this article, a review of the recent literature on monetary policy rules is presented, and the authors exposit the monetary policy design problem within a simple baseline theoretical framework and consider the implications of adding various real word complications.
References
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Journal ArticleDOI
Rational Expectations and the Theory of Price Movements
TL;DR: In this article, the Stockholm School hypothesis is used to explain how expectations are formed in the context of an isolated market with a fixed production lag, and commodity speculation is introduced into the system.
Journal ArticleDOI
Investment Under Uncertainty
TL;DR: This article defined investment as the act of incurring an immediate cost in the expectation of future rewards, i.e., the payments it must make to extract itself from contractual commitments, including severance payments to labor, are the initial expenditure, and the prospective reward is the reduction in future losses.
Journal Article
Capital Theory and Investment Behavior
TL;DR: Jorgenson and Jorgenson as mentioned in this paper applied the theory of optimum capital accumulation to tax policy and investment behavior, estimating the impact of tax policy on investment behavior. But their analysis was limited to the first year of the first-year system, and they did not consider the second year.
Journal ArticleDOI
On Second-Best National Saving and Game-Equilibrium Growth
TL;DR: In this article, the authors highlight the question whether second-best saving is greater or smaller than first-best savings when given future saving is non-optimal from the standpoint of the present generation.
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