Introduction

The most persuasive criticism levelled at the static theory of policy is that it is indeed static. Even if a major preoccupation of the theory of the trade cycle – namely, the inherent stability or otherwise of the economic system – is nowadays resolved in the affirmative, the work of Phillips (1954, 1957) and many others since points to other factors denying the adequacy of a purely static formulation of the theory of policy. For example, the speed of adjustment to the equilibria of the static formulation may be so sluggish as to render static policy implementation impracticable; and, apart from this, adjustment paths may possess undesirable characteristics such as excessive oscillations. If, in common with Phillips for example, it is inquired how the Tinbergen fixed-target problem might be directly embedded within a dynamic context, so as to answer its critics and yet keep faith with the basic Tinbergen conception, a major conceptualisation of the dynamic policy problem is obtained: the stationarity objective as defined in Chapter 4.

Given a dynamic policy model, this objective entails the hitting and holding of a desired stationary point of the system. The stationary points of the dynamic policy model are the target/instrument solution pairs of the steady-state model embedded in the dynamic model; thus the Tinbergen fixed objective remains the focus of the stationarity objective but with adjustment dynamics superimposed. So defined, many authors have implicitly utilised this objective.