Barrieu, Pauline 
ORCID: 0000-0001-9473-263X and Desgagne, Bernard Sinclair
(2009)
Economic policy when models disagree.
Centre for Climate Change Economics and Policy and Grantham Research Institute on Climate Change and the Environment (4).
Centre for Climate Change Economics and Policy and Grantham Research Institute on Climate Change and the Environment, London, UK.
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Abstract
This paper proposes a general way to conceive public policy when there is no consensual 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 policymaker’s 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 policy’s 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.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Official URL: | http://www2.lse.ac.uk/GranthamInstitute/Home.aspx |
| Additional Information: | © 2009 The Author |
| Divisions: | Grantham Research Institute Statistics Centre for Analysis of Time Series |
| Subjects: | H Social Sciences > HB Economic Theory |
| JEL classification: | C - Mathematical and Quantitative Methods > C6 - Mathematical Methods and Programming > C60 - General D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D80 - General E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination |
| Date Deposited: | 26 Jul 2011 15:23 |
| Last Modified: | 01 Oct 2024 04:03 |
| URI: | http://eprints.lse.ac.uk/id/eprint/37607 |
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