Comments on ‘‘Optimal fiscal and monetary policy under imperfect competition’’

There are many avenues to studying or recommending economic policy. Most common in public debates is an approach, where someone offers some amazingly precise policy conclusion (‘‘the age of mandatory retirement should be 67’’) based on an equally amazingly vague or secondary policy objective (‘‘financial viability of the pension system in the long run’’). Similar examples abound in monetary policy analysis (‘‘lower interest rates so as to help Europe restore growth’’). With little discipline to the debate, anyone can float his or her personal favorite recommendation. The debate then seems to generate many different recommended solutions to choose from or to be debated. Closer examination often reveals that the different recommendations are simply either solutions to different problems or that there is no reasonable problem that these recommendations might be a solution for. The only way to restore discipline is to agree on the objective first, and to make sure that it is the appropriate one. Regrettably, in the circles of practical policy, there often is too little patience or too little depth to pursue such an approach. Lobbyists have a keen interest in hiding their objectives. And often, experts are called in to offer advice on problems which bizarrely are never fully articulated. What to do? The expert might know that he or she does not know and stay quiet––but then risk that the debate is ruled by those who do not even know that. Alternatively, the expert might offer seemingly precise advice, hoping that a blurry vision is still better than none at all for the purpose of recommending a direction to take (thus, the recommendation of retirement at age 67).