Title: The old and the new theory of economic policy

Authors: Andrew Hughes Hallett, Giovanni Di Bartolomeo, Nicola Acocella

Addresses: School of Public Policy George Mason University, Fairfax, VA 22030, USA. ' Facolta di Scienze della Comunicazione, Universita di Teramo, Coste S.Agostino, 64100 Teramo, Italy. ' Dipartimento di Economia Pubblica, Universita degli Studi di Roma 'La Sapienza', Via Castro Laurenziano 9, I-00161 Roma, Italy

Abstract: This paper outlines contents of the new theory of economic policy that has emerged recently with reference to situations of strategic interaction. The new theory of economic policy is rooted in the classical contributions of Ragnar Frisch, Jan Tinbergen, Bent Hansen and Henri Theil, while being consistent with rational expectations (RE). It is based on a game-theoretic approach, and is particularly important for model and institution-building, as it states general conditions for the effectiveness of economic policy and the existence of equilibrium.

Keywords: policy games; policy effectiveness; controllability; equilibrium existence; rational expectations; economic policy theory; strategic interaction; game theory.

DOI: 10.1504/IJPP.2010.031212

International Journal of Public Policy, 2010 Vol.6 No.1/2, pp.154 - 165

Published online: 25 Jan 2010 *

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