The Traditional Theory of Economic Policy
The theory of economic policy can be said to have its origin with the seminal contribution by Tinbergen (1952). In its broadest sense “economic policy” may stand for the acts of economic behaviour by any agent whichsoever; in its more specific sense, however, the expression refers to the behaviour of governments. Tinbergen distinguishes between two different kinds of economic policy, quantitative and qualitative policy. By qualitative economic policy is meant the changing of certain qualitative aspects of the economic structure, such as for instance the introduction of a customs union or the nationalisation of an industry. Interesting and important as this qualitative economic policy may be, it is — because of its nature and long term relevance — not very easy to investigate and to quantify its effects. The analysis of Tinbergen, and of the researchers following him, focusses almost entirely on quantitative economic policy. By this is meant the changing, within the qualitative framework of the given structure, of certain (political) parameters or instruments.
KeywordsEconomic Policy Monetary Policy Fiscal Policy Government Expenditure Preference Function
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