Minimize regulations to regulate -- Extending the Lucas Critique

Sugata Marjit, Amit K. Biswas and Hamid Beladi

Economic Modelling, 2008, vol. 25, issue 4, 623-627

Abstract: Lucas [Lucas, Robert, E., Jr. (1976), "Econometric Policy Evaluation: A Critique", Carnegie-Rochester Conference Series on Public Policy, 1, pp 19-46] had argued that interventionist macroeconomics policies may fail because policies themselves affect the optimal behaviour of private agents and hence the associated response parameters. We extend Lucas argument and propose that highly controlled and regulated environment leads to misinterpretation of official statistics and therefore distort policy predictions based on such information. In a way policies will have predictability in a more open and less regulated environment.

Date: 2008
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Working Paper: Minimize Regulations to Regulate - Extending the Lucas Critique (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:25:y:2008:i:4:p:623-627

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