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The theory of economic policy: from a theory of control to a theory of conflict (resolutions)

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  • Nicola acocella

    ()
    (Department of Methods and Models for Economics, Territory and Finance MEMOTEF, Sapienza University of Rome (Italy))

  • Giovanni Di Bartolomeo

    ()
    (Department of Economics and Law - Sapienza University of Roma (Italy))

  • Andrew Hughes Hallett

    ()
    (School of Public Policy, George Mason University, Arlington, Virginia, Usa)

Abstract

The theory of economic policy has its roots in the contributions of Tinbergen and Theil, who solved the problem of a policymaker aiming to achieve certain values for his policy targets, or to minimize a loss function defined on those targets, by using the available policy instruments. After Lucas raised the issue that the private sector could react to the policymaker’s decisions the theory developed by Tinbergen and Theil lost its appeal and most policy problems have been discussed in terms of policy games, thus introducing the possibility of conflicts among different players. The new theory of economic policies revisits the Tinbergen and Theil approach, by applying some concepts and tools introduced by them in order to develop a theory of conflicts, able to assert conditions under which policy neutrality, game equilibrium existence, and policy uniqueness or multiplicity appear.

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File URL: http://www.memotef.uniroma1.it/sites/dipartimento/files/wpapers/documenti/FullTextWP91.pdf
File Function: December 2011
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Bibliographic Info

Paper provided by Sapienza University of Rome, Metodi e modelli per l'economia, il territorio e la finanza MEMOTEF in its series Working Papers with number 91/11.

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Handle: RePEc:rsq:wpaper:7/11

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Web page: http://www.memotef.uniroma1.it/RePEc/index.html
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Related research

Keywords: controllability; conflict; policy games; policy neutrality; equilibrium existence; decentralization; centralization; rational expectations; time inconsistency.;

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References

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  1. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  2. Fabrizio Coricelli & Alex Cukierman & Alberto Dalmazzo, 2006. "Monetary Institutions, Monopolistic Competition, Unionized Labor Markets and Economic Performance," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(1), pages 39-63, 03.
  3. Nicola Acocella & Giovanni Di Bartolomeo, 2005. "Tinbergen And Theil Meet Nash: Controllability In Policy Games," Macroeconomics 0504036, EconWPA, revised 06 Sep 2005.
  4. Hughes Hallett Andrew & Acocella Nicola & Di Bartolomeo Giovanni, 2012. "Expectations Dynamics: Policy, Announcements and Limits to Dynamic Inconsistency," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 16(2), pages 1-25, April.
  5. Jordi Galí, 2008. "Introduction to Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework
    [Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Ke
    ," Introductory Chapters, Princeton University Press.
  6. Giovanni Di Bartolomeo & Nicola Acocella, 2005. "Non-Neutrality Of Monetary Policy In Policy Games," Macroeconomics 0504026, EconWPA.
  7. ACOCELLA, Nicola & DI BARTOLOMEO, Diovanni & PIACQUADIO, Paolo G., . "Conflict of interests, (implicit) coalitions and Nash policy games," CORE Discussion Papers RP -2236, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Richard Bellman, 1957. "On a Dynamic Programming Approach to the Caterer Problem--I," Management Science, INFORMS, vol. 3(3), pages 270-278, April.
  9. Acocella, Nicola & Di Bartolomeo, Giovanni & Hallett, Andrew Hughes, 2007. "Dynamic Controllability With Overlapping Targets: Or Why Target Independence May Not Be Good For You," Macroeconomic Dynamics, Cambridge University Press, vol. 11(02), pages 202-213, April.
  10. Acocella, Nicola & Ciccarone, Giuseppe, 1997. " Trade Unions, Nonneutrality and Stagflation," Public Choice, Springer, vol. 91(2), pages 161-78, April.
  11. Christian Merkl, 2008. "Galí J: Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework," Journal of Economics, Springer, vol. 95(2), pages 179-181, November.
  12. Di Bartolomeo, Giovanni & Hughes Hallett, Andrew & Acocella, Nicola, 2011. "Tinbergen controllability and n-player LQ-games," Economics Letters, Elsevier, vol. 113(1), pages 32-34, October.
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Cited by:
  1. Candela, Guido & Castellani, Massimiliano & Mussoni, Maurizio, 2012. "Clashes and compromises: Investment policies in tourism destinations," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 6(23), pages 1-25.

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