The Quality of Quantitative Economic Policy-making when Targets and Costs of Change are Mis-specified
In a series of well-known works , , , , Tinbergen has made pioneering and outstanding contributions to the theory and application of quantitative economic policy-making (Q.E.P.).Tinbergen’s approach to Q.E.P. involves the following elements: (a) a criterion or welfare function that depends on certain economic variables, (b) a classification of variables into categories, target and non-target endogenous variables and instrumental and non-instrumental exogenous variables, (c) an econometric model involving relationships for variables and (d) boundary conditions for selected variables. Within this framework, which resembles closely the framework of modern control theory, Tinbergen provided simple, operational procedures for solving for values of policy instrument variables at a time when modern control theory was in its infancy.
KeywordsCovariance Income Mellon
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