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Recursive Expectations Approach in Policymaking

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  • KOBAYASHI Keiichiro

Abstract

The primary contribution of modern economics to policy analysis may be the recognition of the crucial role of expectations in policy intervention. The essence of expectations is to think about others' thinking. We argue that policymakers need recursive thinking, that is, the ability to think about thinking and review three policy episodes related to the lack of recursive thinking. We see that the disciplinary divide or the limited scope of recursive thinking on the side of policymakers can cause huge damage to social welfare in times of crisis. Finally, we consider two examples of future agendas in the recursive approach.

Suggested Citation

  • KOBAYASHI Keiichiro, 2022. "Recursive Expectations Approach in Policymaking," Policy Discussion Papers 22028, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:polidp:22028
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    File URL: https://www.rieti.go.jp/jp/publications/pdp/22p028.pdf
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    References listed on IDEAS

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    Cited by:

    1. Tomomi Miyazaki, 2023. "Comment on “Recursive expectations approach in policymaking” by Professor Keiichiro Kobayashi," International Journal of Economic Policy Studies, Springer, vol. 17(2), pages 399-402, August.
    2. Tomoko Kinugasa, 2023. "Preface to the special feature on interdisciplinarity of economic policy studies," International Journal of Economic Policy Studies, Springer, vol. 17(2), pages 347-349, August.

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    More about this item

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • I00 - Health, Education, and Welfare - - General - - - General

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