The Making of Optimal and Consistent Policy: An Analytical Framework for Monetary Models

This paper shows that optimal policy and consistent policy outcomes require the use of control-theory and game-theory solution techniques. While optimal policy and consistent policy often produce different outcomes even in a one-period model, we analyze consistent policy and its outcome in a simple model, finding that the cause of the inconsistency with optimal policy traces to inconsistent targets in the social loss function. As a result, the central bank should adopt a loss function that differs from the social loss function. Carefully designing the central bank s loss function with consistent targets can harmonize optimal and consistent policy. This desirable result emerges from two observations. First, the social loss function reflects a normative process that does not necessarily prove consistent with the structure of the microeconomy. Thus, the social loss function cannot serve as a direct loss function for the central bank. Second, an optimal loss function for the central bank must depend on the structure of that microeconomy. In addition, this paper shows that control theory provides a benchmark for institution design in a game-theoretical framework.

The Making of Optimal and Consistent Policy: An Implementation Theory Framework for Monetary Policy

This paper shows that optimal policy and consistent policy outcomes require the use of control-theory and game-theory solution techniques. While optimal policy and consistent policy often produce different outcomes even in a one-period model, we analyze consistent policy and its outcome in a simple model, finding that the cause of the inconsistency with optimal policy traces to inconsistent targets in the social loss function. As a result, the social loss function cannot serve as a direct loss function for the central bank. Accordingly, we employ implementation theory to design a central bank loss function (mechanism design) with consistent targets, while the social loss function serves as a social welfare criterion. That is, with the correct mechanism design for the central bank loss function, optimal policy and consistent policy become identical. In other words, optimal policy proves implementable (consistent).

Political institutions and policy outcomes : effects of presidential vetoes on budget making

The article examines how the power distribution between the executive and the legislature under the Presidential system affects policy outcomes. We focus in particular on the presidential veto, both package and partial. Using a simple game theory model, we show that the presidential partial veto generally yields a result in favor of the President, but that such effects vary depending on the reversion points of the package veto and the Congress's possible use of sanctions against the President. The effects of the Presidential partial veto diminish if the reversion point meets certain conditions, or if the Congress has no power to impose sufficient sanctions on the President when the President revises the outcome ex-post. To clarify and explain the model, we present the case of budget making in the Philippines between 1994 and 2008. In the Philippines, the presidential partial veto has been bringing expenditure programs closer to the President's ideal point within what may be called the Congress's indifference curve. The Congress, however, has not always passed budget bills and from time to time has carried over the previous year's budget, in years when the budget deficit increased. This is the situation that the policy makers cannot retrieve from the reversion point.

Raiders of the Lost Art: Strategy-Making in Europe. Security Policy Brief No. 40, November 2012

Have Europeans lost the art of making grand strategy? In a reflection process initiated by Sweden, Poland, Italy and Spain, they are invited to rediscover it and draft a “European Global Strategy”. This policy brief argues that what the EU needs most is a short set of priorities for collective action, to be reassessed for each term of the High Representative.

The EU-Central Asia Human Rights Dialogues: Making a Difference? EUCAM Policy Brief No. 16, April 2011

Structured human rights dialogues are held with each of the five Central Asian republics. They are designed to discuss questions of mutual interest and enhance cooperation on human rights as well as to raise the concerns of the EU on human rights in Central Asia. In addition, the dialogues seek to involve human rights activists, NGO members, and academia representatives from both Europe and Central Asia through civil society seminars. But is this working? Is improvement in human rights noticeable in the region? This policy brief reviews and evaluates the performance of the dialogues to date, paying specific attention to the shortcomings of the existing practices, and provides recommendations for what could be improved with regard to planning and procedures.

Making low-carbon technology support smarter. Bruegel Policy Brief 2015/02, 18 August 2015

This Policy Brief describes the interaction between three approaches that are effective in driving innovation in low-carbon technologies. Based on that, the author provides four recommendations for making low-carbon technology support smarter. THE ISSUE Combating climate change on the global level will be much easier when abundant low-carbon technologies that are competitive in their cost and capabilities are available. But private companies underinvest in low-carbon innovation because they cannot capture the climate benefits. There are three policies to address this issue: pricing carbon, supporting deployment of as-yet uncompetitive technologies and supporting research and development.

Reactive, Slow and...Innovative? Decision-making Structures and Policy Outputs

Consensus democracies like Switzerland are generally known to have a low innovation capacity (Lijphart 1999). This is due to the high number of veto points such as perfect bicameralism or the popular referendum. These institutions provide actors opposing a policy with several opportunities to block potential policy change (Immergut 1990; Tsebelis 2002). In order to avoid a failure of a process because opposing actors activate veto points, decision-making processes in Switzerland tend to integrate a large number of actors with different - and often diverging - preferences (Kriesi and Trechsel 2008). Including a variety of actors in a decision-making process and taking into account their preferences implies important trade-offs. Integrating a large number of actors and accommodating their preferences takes time and carries the risk of resulting in lowest common denominator solutions. On the contrary, major innovative reforms usually fail or come only as a result of strong external pressures from either the international environment, economic turmoil or the public (Kriesi 1980: 635f.; Kriesi and Trechsel 2008; Sciarini 1994). Standard decision-making processes are therefore characterized as reactive, slow and capable of only marginal adjustments (Kriesi 1980; Kriesi and Trechsel 2008; Linder 2009; Sciarini 2006). This, in turn, may be at odds with the rapid developments of international politics, the flexibility of the private sector, or the speed of technological development.

Who's making foreign agricultural policy? : Hearings before the Subcommittee on Foreign Agricultural Policy of the Committee on Agriculture and Forestry, United States Senate, Ninety-fourth Congress, second session, January 22 and 23, 1976.

Includes bibliographical references.

Public opinion and the making of foreign policy in the 'New Europe':a comparative study of Poland and Ukraine

Since 1989, by drawing a new boundary between the EU and its eastern neighbours, the European Union has created a frontier that has been popularly described in the frontier states as the new 'Berlin Wall'. This book is the first comparative study of the impact of public opinion on the making of foreign policy in two eastern European states that live on either side of the new European divide: Poland and Ukraine. Focusing on the vocal, informed segment of public opinion and drawing on results of both opinion polls and a series of innovative focus groups gathered since the Orange Revolution, Nathaniel Copsey unravels the mystery of how this crucial segment of the public impacts on foreign policy-makers in both states. In developing this argument, Copsey takes a closer look at the business community and how important economic factors are in forming public opinion. Filling a gap in the literature currently available on the topic, this book presents a fresh approach to our understanding of Polish-Ukrainian relations and how the public's view of the past influences contemporary politics. It is an ideal resource for those researching in the field of Russian and Eastern European Studies.

Making policy in theory and practice:by Hugh Bochel and Sue Duncan (eds)

Book review: Hugh Bochel and Sue Duncan (eds), Policy Press, 2007, 251 pp. (including references and index), £23 (pb), ISBN: 1861349033

Price policy and price decision making in small companies

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