Applied Decision Analysis and Economic Behaviour

The optimisation of economic systems over time, and in an uncertain environment, is central to the study of economic behaviour. The behaviour of rational decision makers, whether they are market agents, firms, or governments and their agencies, is governed by decisions designed to seeure the best outcomes subject to the perceived information and economic responses (inlcuding those of other agents). Economic behaviour has therefore to be analysed in terms of the outcomes of a multiperiod stochastic optimisation process containing four main components: the economic responses (the dynamic constraints, represented by an economic model); the objec­ tive function (the goals and their priorities); the conditioning information (expected exogenous events and the expected future state of the economy); and risk manage­ ment (how uncertainties are accommodated). The papers presented in this book all analyse some aspect of economic behaviour related to the objectives, information, or risk components of the decision process. While the construction of economic models obviously also has a vital role to play, that component has received much greater (or almost exclusive) attention elsewhere. These papers examine optimising behaviour in a wide range of economic problems, both theoretical and applied. They reflect a variety of concerns: economic responses under rational expectations; the Lucas critique and optimal fiscal or monetary poli­ eies; market management; partly endogenous goals; evaluating government reactions; locational decisions; uncertainty and information structures; and forecasting with endogenous reactions.

Inhalt

I: Expectations.- 1. Optimal Stabilisation Policies under Perfect Foresight.- 2. Towards the Resurrection of Macroeconomic Policies.- 3. Optimal Feedback and Feedforward Stabilisation of Exchange Rates, Money, Prices and Output.- II: Uncertainty.- 4. Adaptive Econometric Forecasting using an Approximate Filtering-Smoothing Algorithm: the Case of the Israeli Meat Sector.- 5. Controlling an Econometric Model using Different Coefficient Sets.- 6. The Uncertainty Frontier as a Global Approach to the Efficient Stabilisation of Economic Systems: Experiments with the MICRO-DMS Model.- III: Policy Analysis and Decision Models.- 7. Incomes Policy in a Political Business Cycle Environment: a Structural Model for the UK 1961-1980.- 8. Multiperiod Prediction for Dynamic Models with Autocorrelated Errors Conditional on Feedback Rules for Future Policy Variables.- 9. The Evaluation of Historical Policy via Optimal Control Techniques.- IV: Market Management.- 10. Endogenous vs. Exogenous Targets for Commodity Market Stabilisation.- 11. Simple and Optimal Control Rules for Stabilising Speculative Commodity Markets.- V: Decentralisation and Multi-Sector Planning.- 12. Behavioural Assumptions in Decentralised Stabilisation Policies.- 13. Stability Analysis of Large Scale Economic Systems which have a Multi-time Scale.- 14. The Location of a Firm on a Network.- Epilogue.- 15. Style in Multisectoral Modelling.