Economic Policy when Models Disagree

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Economic Policy when Models Disagree

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Pauline Barrieu
Bernard Sinclair-Desgagné ()

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Bernard Sinclair-Desgagné

Abstract

This paper proposes a general way to craft public policy when there is no consensual account of the situation of interest. The design builds on a dual extension of the traditional theory of economic policy. It does not require a representative policymaker’s utility function (as in the literature on ambiguity), a reference model (as in robust control theory) or some prior probability distribution over the set of supplied scenarios (as in the Bayesian model-averaging approach). The obtained policies are shown to be robust and simple in a precise and intuitive sense.

Ce texte propose une nouvelle approche du design des politiques publiques, quand il n'y pas de consensus entre experts sur une représentation adéquate de la situation. Techniquement parlant, nous adoptons pour ce faire une version généralisée de la théorie traditionnelle de la politique économique, telle que développée il y a plusieurs décennies par Jan Tinbergen. Contrairement aux solutions existantes à l'incertitude sur les modèles, notre approche ne demande pas de connaître la fonction d'utilité des décideurs politiques (à l'inverse de la littérature sur l'ambigüité), ni d'avoir un modèle de référence (par contraste avec la théorie du contrôle robuste), ni de posséder une distribution de probabilité sur l'ensemble des scénarios proposés (a contrario de l'approche bayesienne). Nous montrons que les politiques obtenues possèdent plusieurs propriétés que la littérature souvent postule a priori, comme la robustesse et la simplicité.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2009s-03.

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Date of creation: 01 Mar 2009
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Handle: RePEc:cir:cirwor:2009s-03

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Find related papers by JEL classification:
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
C60 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - General

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-04-05 (All new papers)
NEP-CBA-2009-04-05 (Central Banking)

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This page was last updated on 2009-11-20.

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