Satisficing And Sequential Targets In Economic Policy: A Politico-Economic Approach

The standard optimising framework has difficulties in explaining macroeconomic policy phenomena in some countries, such as long-term spiralling public debts and sequential setting of policy targets. Moreover, it has not responded convincingly to some common criticisms, such as the question of symmetry, and the failure to account for the existence of policy-lobbying groups. This paper suggests that a satisficing approach to economic policy is a possible way of accommodating all the above. This approach combined with priority target setting has been used in other social sciences. It concentrates on the concepts of sequential attention to policy objectives and 'satisfactory' macroeconomic targets. It also provides a choice theoretical framework as a foundation of the satisficing approach to economic policy. A simple example of a satisficing sequential target model is presented. There is also an attempt to link other alternative approaches, such as politico-economic models, with this framework. Copyright 2004, Oxford University Press.