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Satisficing Solutions To A Monetary Policy Problem

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  • Krawczyk, Jacek
  • Kim, Kunhong

Abstract

Herbert A. Simon, 1978 Economics Nobel Prize laureate, talked about satisficing (his neologism) rather than optimizing as being what economists really need. Indeed, optimization might be an unsuitable solution procedure (in that it suggests a unique “optimal” solution) for problems where many solutions could be satisfactory. We think that looking for an applicable monetary policy is a problem of this kind because there is no unique way in which a central bank can achieve a desired inflation (unemployment, etc.) path. We think that it is viability theory, which is a relatively young area of mathematics, that rigorously captures the essence of satisficing. We aim to use viability analysis to analyze a simple macro policy model and show how some robust adjustment rules can be endogenously obtained.

Suggested Citation

  • Krawczyk, Jacek & Kim, Kunhong, 2009. "Satisficing Solutions To A Monetary Policy Problem," Macroeconomic Dynamics, Cambridge University Press, vol. 13(1), pages 46-80, February.
    • Handle: RePEc:cup:macdyn:v:13:y:2009:i:01:p:46-80_07
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    Cited by:

    1. Krawczyk, Jacek B & Pharo, Alastair & Simpson, Mark, 2011. "Approximations to viability kernels for sustainable macroeconomic policies," Working Paper Series 1531, Victoria University of Wellington, School of Economics and Finance.
    2. Girol Karacaoglu & Jacek B. Krawczyk, 2021. "Public policy, systemic resilience and viability theory," Metroeconomica, Wiley Blackwell, vol. 72(4), pages 826-848, November.
    3. Gunaratna, Thakshila, 2014. "Differences in monetary policies between two hypothetical closed economies:one which is concerned with avoiding a large negative output gap and the other which is not," MPRA Paper 61826, University Library of Munich, Germany, revised 03 Feb 2015.
    4. Jacek Krawczyk & Rishab Sethi, 2007. "Satisficing Solutions for New Zealand Monetary Policy," Reserve Bank of New Zealand Discussion Paper Series DP2007/03, Reserve Bank of New Zealand.
    5. Krawczyk, Jacek B & Townsend, Wilbur, 2015. "Viability of an economy with constrained inequality," Working Paper Series 4689, Victoria University of Wellington, School of Economics and Finance.
    6. Michel de Lara & Vincent Martinet & Luc Doyen, 2010. "Risk and Sustainability: Is Viability that far from Optimality?," Working Papers hal-04140924, HAL.
    7. Michel de Lara & Vincent Martinet & Luc Doyen, 2015. "Satisficing versus optimality: criteria for sustainability," Post-Print hal-01123050, HAL.
    8. Jacek Krawczyk & Christopher Sissons & Daniel Vincent, 2012. "Optimal versus satisfactory decision making: a case study of sales with a target," Computational Management Science, Springer, vol. 9(2), pages 233-254, May.
    9. Krawczyk, Jacek B & Pharo, Alastair S, 2014. "Manual of VIKAASA 2.0: An application for computing and graphing viability kernels for simple viability problems," Working Paper Series 3432, Victoria University of Wellington, School of Economics and Finance.
    10. Krawczyk, Jacek B & Pharo, Alastair S, 2011. "Manual of VIKAASA: An application capable of computing and graphing viability kernels for simple viability problems," Working Paper Series 1878, Victoria University of Wellington, School of Economics and Finance.
    11. Krawczyk, Jacek B & Pharo, Alastair & Simpson, Mark, 2011. "Approximations to viability kernels for sustainable macroeconomic policies," Working Paper Series 18551, Victoria University of Wellington, School of Economics and Finance.
    12. Krawczyk, Jacek B & Townsend, Wilbur, 2015. "Viability of an economy with constrained inequality," Working Paper Series 19335, Victoria University of Wellington, School of Economics and Finance.
    13. Jacek Krawczyk & Kunhong Kim, 2014. "Viable Stabilising Non-Taylor Monetary Policies for an Open Economy," Computational Economics, Springer;Society for Computational Economics, vol. 43(2), pages 233-268, February.

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