Vagueness, Credibility, and Government Policy
نویسنده
چکیده
Should the Federal Reserve or any other government agency make precise statements about its policy objectives? Determining the proper amount of secrecy in government generates controversy whether the agency involved undertakes espionage, banking, or monetary policy. Between the broad areas of agreement (classifying military strategies, publishing legislation) lie equally broad areas of contention. This article explores the economic reasons why a government agency may find it in its own and society's interest to be vague about policy objectives. Circumstances arise in which it is optimal for agencies to release only partial information about their decisions. For that reason, vagueness, and the secrecy necessary to preserve it, represent an accommodation with an imperfect world rather than a conspiracy of silence. Joseph G. Haubrich is an economist and consultant at the Federal Reserve Bank of Cleveland. The author thanks Loretta Mester for helpful comments.
منابع مشابه
Social Institutions for Overcoming Monetary Policy Credibility Problems
Macroeconomic theorists have devoted considerable attention to designing optimal rules for government policy. The arguments for why governments should set policy in terms of rules are well known. However, until recently, there has been very little formal analysis devoted to asking how macroeconomists’ policy (regime) prescriptions can be adopted in a way which is credible. This seems quite impo...
متن کاملCheap Talk and Climate Change: A Theory of Discordant Climate Change Policies
A political party’s ideological position regarding climate change can be either progrowth or pro-environment. However, the ideological position itself does not sufficiently explain climate change denial. To study this issue, I develop a cheap-talk game of the three parties associated with climate change: the government, the climate scientist, and the median voter. I show that a credibility gap ...
متن کاملGovernment credibility and policy choice : evidence from the Pennsylvania earned income tax *
This paper considers the decision of Pennsylvania communities whether to levy a 1% wage tax. While a simple political economy model suggests this tax should be enacted when many residents are exempted from the tax, the opposite pattern seems to hold. One explanation is that residents may mistrust their government and fear that the new tax monies will be spent unwisely. Several implications of t...
متن کاملOn the Credibility of Macroeconomic Reform and Stabilization Policies A Game-theoretical Perspective
The formation of macroeconomic policy is conceptualized as on-going process of interaction between private individuals and a centralized policymaker. This interaction is inherently strategic in nature and lends itself to a gametheoretical treatment. Starting from the basic principle of rational expectations, the analysis advances a theoretical perspective on the related concepts of macroeconomi...
متن کاملOptimal policy with credibility concerns
This paper considers a reputation model of optimal taxation in which the public is unsure about the government type. A long-lived government can be trustworthy (meaning that it commits to its announced tax rate) or opportunistic (meaning that it retains the ability to change its tax rate after announcing it). Unlike in most prior studies, the committed strategy in this model is optimally chosen...
متن کامل