Controllability and the theory of economic policy: A critical view

It is argued in this paper that the concept of controllability in spite of its intuitive appeal is of limited interest for the theory of economic policy. Controllability implies that a given target can be attained even if the number of instruments is less than the number of independent targets. But there is no guarantee that the economy will be able to stay there. Tirbergen's rule is concerned with the existence of a static equilibrium solution. The controllability concept is concerned with the existence of a dynamic path towards it. But it does not imply that controllability is a dynamic generalization of Tinbergen's rule.     

IS-LM stability and economic policy effectiveness: A note

Accepting the findings of Weber (1970) and Yarrow (1975), Cebula finds that conventional fiscal policy has its usual positive effect on the level of income while monetary policy has a negative impact. This paper shows that if a budget constraint of the specific, simplified form G ? T = ΔM is added to the model, the results differ from Cebula's.     

Issues in controllability and the theory of economic policy

The paper demonstrates that the concepts of dynamic controllability are useful for the theory of economic policy by establishing four propositions. First, dynamic controllability is a central concept in stabilization policy. Second, the ability to achieve a target state, even if it cannot be maintained, may be of economic interest. Third, dynamic controllability is of special interest for ‘historical’ models. Fourth, the conditions for any notion of dynamic controllability are distinct from and weaker than those for Tinbergen static controllability.     

Risk and decentralization in the theory of economic policy

In this note, uncertainty is incorporated into Tinbergen's model of economic policy. If the Central Planning Authority's preferences amomg subjective probability distributions can be described by a von Neumann-Morgenstern utility function, and if certain restrictions are imposed on these probability distributions, then the Authority can delegate control over partitions of the instrument vector to its Agencies and so decentralize its decision process.     

The prospects for caring: economic theory and policy analysis

This paper examines three distinguishing features of caring:that it involves the development of a relationship, that caringresponsibilities and needs are unequally distributed and thatsocial norms influence the allocation of care and caring responsibilities,to draw out their implications for analysing caring and itsmovement between unpaid and paid economies. Rising opportunitycosts of caring are found to produce pressures experienced indifferent ways across different sectors of the economy. These,coupled with inequalities in care responsibilities and labourmarket opportunities, influence the movement of care betweenpaid and unpaid economies. This analysis is then used to examinethe likely evolution of caring norms and practices and how policymight intervene to avoid an uncaring future.     

Channels of transmission of environmental policy to economic growth: A survey of the theory

Economists generally hold that environmental regulations impose constraints on the production possibilities set and are therefore potentially harmful to economic growth. In recent years, however, it has been recognized that environmental regulation can enhance the prospects for growth if improved environmental quality increases the productivity of inputs or the efficiency of the education system. It is also held that environmental regulation promotes pollution abatement activity and can lead to the exploitation of increasing returns to scale in abatement. Furthermore, expectations of a better environment may encourage households to save. Finally, it has been conjectured that environmental regulations can stimulate innovation because R&D is a relatively clean activity and because the market share of clean innovations increases. Future empirical research should shed light on the relative importance of these different channels of transmission of environmental policy to the growth rate of the economy.     

A note on the theory and measurement of trust in explaining differences in economic growth

This paper takes issue with the trend to attribute differencesin economic growth rates to differences in interpersonal trust.I discuss the World Values Survey (WVS) measure that is usedto operationalise trust at the macro level. I hypothesise thatthere is a mismatch between the theoretical argument and theempirical operationalisation of trust. Instead of measuringtrust, the WVS measure may instead proxy the well-functioningof institutions. I provide circumstantial evidence for thisthesis by a principal components analysis of trust and institutionsand a robustness test of Zak and Knack's (2001. Trust and growth,Economic Journal, vol. 111, 295–321) seminal study ontrust and economic growth.     

Quantifying economic sustainability: Implications for free-enterprise theory, policy and practice

In a previous paper (Ulanowicz, Goerner, Lietaer, and Gomez, 2009), we combined thermodynamic, network, and information theoretic measures with research on real-life ecosystems to create a generalized, quantitative measure of sustainability for any complex, matter/energy flow system. The current paper explores how this metric and its related concepts can be used to provide a new narrative for long-term economic health and sustainability. Based on a system's ability to maintain a crucial balance between two equally essential, but complementary factors, resilience and efficiency, this generic explanation of the network structure needed to maintain long-term robustness provides the missing theoretical explanation for what constitutes healthy development and the mathematical means to differentiate it quantitatively from mere growth. Matching long-standing observations of sustainable vitality in natural ecosystems and living organisms, the result is a much clearer, more accurate understanding of the conditions needed for free-enterprise networks to produce the kind of sustainable vitality everyone desires, one which enhances and reliably maintains the health and well-being of all levels of global civilization as well as the planet.     

A note on non-uniqueness and the role of policy

In general, models embodying rational expectations must have unstable roots in order that a unique non-explosive solution exists. Peel 1981 has identified a role for the authorities in ensuring uniqueness by judicious choice of their feedback policy parameter to influence the eigenvalues of the model. This may mean, however, a loss of degree of freedom in stabilizing the economy if the stability condition acts as a binding constraint on the policy parameter. This paper offers an alternative way in which the authorities can formulate policy and determine a well-defined solution but which leaves stabilization policy unconstrained.     

Appropriate technology assessment: A note on policy considerations

This paper summarizes various positions on appropriate technology and its relation to technological dependence, and certain contradictions within the concept are pointed out. An alternative approach to policy questions in appropriate technology assessment and independence is then proposed using a framework involving three economic sectors—the consumer goods sector, capital goods sector, and technological change sector.     

A theory of policy advice

This article analyzes a model of the policy decision processin ministerial governments. A spending minister and a financeminister are involved in making a decision concerning a publicproject. The two ministers have partially conflicting preferences.Policy decisions are made in two stages. In the first stagethe spending minister consults a technical expert to obtaininformation about the technical consequences of the project.If the technical consequences are favourable, in the secondstage the finance minister consults a financial expert to obtaininformation about the financial consequences. The finance ministercan veto a proposal for undertaking the project. This articleillustrates the consequences of specialization for informationtransmission. A drawback of specialization is that projectsare evaluated on the basis of their individual consequencesrather than on the basis of their total consequences.     

A note on economic freedom and political ideology

Within the field of public economics, there is the perception that Republicans are associated with ‘small government’ and Democrats with ‘big government’. We test this notion by examining whether economic freedom is affected when a single party is in control of the state legislature. We find no link between party control and our main economic freedom indicator, but we do find a positive link between Republican control and the taxation component of economic freedom, suggesting a Republican legislature leads to lower taxation.     

A note on redistributive fairness and economic reform

To understand reasons for possible failures of ‘good’ economic reforms, we consider an institution which is always successful in making the best public decision from the utilitarian perspective. We show it is bound to introduce inequality if costs of a reform are privately known: the losers can not be always compensated. Thus, if equity is a primary concern, then some reforms with positive aggregate net gain might not be undertaken. If the utilitarian welfare is the only guide for making public decisions, implementing a reform might require the ability to ignore the associated social costs of inequality.