Economic policy when models disagree
This paper proposes a general way to conceive public policy when there is noconsensual account of the situation of interest. The approach builds on an extension and dual formulation of the traditional theory of economic policy. It does not need a representative policymakerï¿½s 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 Bayesian model-averaging). The method requires instead that the willingness to accept a policyï¿½s projected outcomes coincide with the willingness to pay to correct the current situation. Policies constructed in this manner are shown to be e ective, robust and simple in a precise and intuitive sense.
|Date of creation:||Jul 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/grantham.
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Geoffrey Heal, 2009. "Climate Economics: A Meta-Review and Some Suggestions for Future Research," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 3(1), pages 4-21, Winter.
- Antoine Billot & Itzhak Gilboa & Dov Samet & David Schmeidler, 2004.
"Probabilities as Similarity-Weighted Frequencies,"
122247000000000696, UCLA Department of Economics.
- Mark Gertler & Jordi Gali & Richard Clarida, 1999.
"The Science of Monetary Policy: A New Keynesian Perspective,"
Journal of Economic Literature,
American Economic Association, vol. 37(4), pages 1661-1707, December.
- Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
- Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
- Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc.
- Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University.
- Vardas, Giannis & XEPAPADEAS, Anastasios, 2008.
"Model Uncertainty, Ambiguity and the Precautionary Principle: Implications for Biodiversity Management,"
10236, University Library of Munich, Germany.
- Giannis Vardas & Anastasios Xepapadeas, 2010. "Model Uncertainty, Ambiguity and the Precautionary Principle: Implications for Biodiversity Management," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 45(3), pages 379-404, March.
- Acocella, N. & Di Bartolomeo, G., 2006.
"Tinbergen and Theil meet Nash: Controllability in policy games,"
Elsevier, vol. 90(2), pages 213-218, February.
- Nicola Acocella & Giovanni Di Bartolomeo, 2005. "Tinbergen And Theil Meet Nash: Controllability In Policy Games," Macroeconomics 0504036, EconWPA, revised 06 Sep 2005.
- Giovanni Di Bartolomeo & Nicola Acocella, 2005. "Tinbergen and Theil Meet Nash: Controllability in Policy Games," Working Papers 2005.132, Fondazione Eni Enrico Mattei.
- Manne, Alan & Mendelsohn, Robert & Richels, Richard, 1995. "MERGE : A model for evaluating regional and global effects of GHG reduction policies," Energy Policy, Elsevier, vol. 23(1), pages 17-34, January.
- Andrew T. Levin & John C. Williams, 2003.
"Robust monetary policy with competing reference models,"
Working Paper Series
2003-10, Federal Reserve Bank of San Francisco.
- Levin, Andrew T. & Williams, John C., 2003. "Robust monetary policy with competing reference models," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 945-975, July.
- John C. Williams & Andrew T. Levin, 2003. "Robust Monetary Policy with Competing Reference Models," Computing in Economics and Finance 2003 291, Society for Computational Economics.
- Rama Cont, 2006. "Model Uncertainty And Its Impact On The Pricing Of Derivative Instruments," Mathematical Finance, Wiley Blackwell, vol. 16(3), pages 519-547.
- Acocella Nicola & Di Bartolomeo Giovanni, 2007.
"Towards a new theory of economic policy: Continuity and innovation,"
0020, Department of Communication, University of Teramo.
- Acocella, Nicola & Di Bartolomeo, Giovanni, 2007. "Towards a new theory of economic policy: Continuity and innovation," MPRA Paper 4419, University Library of Munich, Germany.
- Dieter Helm, 2008. "Climate-change policy: why has so little been achieved?," Oxford Review of Economic Policy, Oxford University Press, vol. 24(2), pages 211-238, Summer.
- Thibault Gadjos & Jean-Marc Tallon & Jean-Christophe Vergnaud, 2002.
"Decision Making with Imprecise Probabilistic Information,"
2002-33, Centre de Recherche en Economie et Statistique.
- Gajdos, Thibault & Tallon, Jean-Marc & Vergnaud, Jean-Christophe, 2004. "Decision making with imprecise probabilistic information," Journal of Mathematical Economics, Elsevier, vol. 40(6), pages 647-681, September.
- Thibault Gajdos & Jean-Marc Tallon & Jean-Christophe Vergnaud, 2002. "Decision Making with Imprecise Probabilistic Information," ICER Working Papers - Applied Mathematics Series 18-2003, ICER - International Centre for Economic Research, revised May 2003.
- Thibault Gajdos & Jean-Marc Tallon & Jean-Christophe Vergnaud, 2004. "Decision Making with Imprecise Probabilistic Information," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00086021, HAL.
- Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2004.
"Ambiguity Aversion, Robustness, and the Variational Representation of Preferences,"
Carlo Alberto Notebooks
12, Collegio Carlo Alberto, revised 2006.
- Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2006. "Ambiguity Aversion, Robustness, and the Variational Representation of Preferences," Econometrica, Econometric Society, vol. 74(6), pages 1447-1498, November.
- Catarina Roseta-Palma & Anastasios Xepapadeas, 2004. "Robust Control in Water Management," Journal of Risk and Uncertainty, Springer, vol. 29(1), pages 21-34, 07.
When requesting a correction, please mention this item's handle: RePEc:lsg:lsgwps:wp04. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (The GRI Administration)
If references are entirely missing, you can add them using this form.