Dynamic Rawlsian Policy

Martin Ellison, Charles Brendon and Martin Ellison
Authors registered in the RePEc Author Service: Martin Ellison and Paul Klemperer

No 595, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: A well-known time-inconsistency problem hinders optimal decision-making when policymakers are constrained in their pesent choices by expectations of future outcomes. The time-inconsistency problem is caused by differences in the preferences of policymakers who exist at different points in time. Adapting the arguments of Rawls (1971), we propose that these differences can be eliminated if policy is set from behind a 'veil of ignorance', without knowledge of when the policy will be implemented. We set up a well-defined choice problem that captures this normative perspective. The policies that it generates have a number of appealing properties.

Keywords: Macroeconomic policy; Rawls; Time inconsistency; Veil of ignorance (search for similar items in EconPapers)
JEL-codes: E52 E61 (search for similar items in EconPapers)
Date: 2012-03-01
New Economics Papers: this item is included in nep-mac and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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