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Quantitative Determination of an Optimum Economic Policy

C. J. van Eijk and J. Sandee
Econometrica
Vol. 27, No. 1 (Jan., 1959), pp. 1-13
Published by: The Econometric Society
DOI: 10.2307/1907774
Stable URL: http://www.jstor.org/stable/1907774
Page Count: 13
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Quantitative Determination of an Optimum Economic Policy
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Abstract

To determine an optimum economic policy one needs: (a) a welfare function valuing "target" variables; (b) a model, describing the effect of policy "instruments" on the targets; and (c) limits within which the variables are allowed to vary. The welfare function is derived by "imaginary interviewing of the policy-makers." It is linearized in intervals or "facets." Linear programming indicates the optimum policy within each facet of the welfare function. A policy optimal with respect to all facets around it is the absolute optimum. By way of an appendix, a survey is given of the Multiplex Method of programming, developed by Professor R. Frisch, and particularly suited to this type of analysis.

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