Modeling Development Policies with Multiple Objectives

In recent years, policymakers have become more insistent in seeking advice on policies targeting multiple objectives in addition to the traditional economists’ concerns for economic efficiency and equity. Dealing with multiple goals in a serious manner is quite challenging given that it generally requires roughly as many instruments as goals, each instrument typically affects multiple goals, and the effects of instruments on goals are typically non-linear. Economists have adapted to the need to incorporate multiple goals using simple devices such as radar diagrams to highlight the local impacts of individual instruments on all goals. While useful in understanding these differential impacts, these approaches do not take us far in terms of designing policy packages needed to best achieve multiple goals. This paper proposes using programming approaches based on quantitative models to design policy packages for multiple goals. Two illustrative applications are provided—one to the setting of carbon tax rates for agricultural commodities and one to the allocation of R&D resources across agricultural activities in Ethiopia.