Optimal policy choice under uncertainty


Journal Article

Neutrality is shown to be the appropriate goal of policy in the class of realistic policy situation in which allocative decisions are taken with virtually no knowledge of the direction or magnitude of pre-existing resource misallocation. This follows as the principal corollary of the central theorem of the paper which states that with linear demand and constant marginal cost schedules, the appropriate excise tax under uncertainty is equal to the expected value of the market distortion. This theorem is proved and its major implications for corrective fiscal policy are discussed. © 1975.

Full Text

Duke Authors

Cited Authors

  • Brennan, G; McGuire, T

Published Date

  • January 1, 1975

Published In

Volume / Issue

  • 4 / 2

Start / End Page

  • 205 - 209

International Standard Serial Number (ISSN)

  • 0047-2727

Digital Object Identifier (DOI)

  • 10.1016/0047-2727(75)90018-3

Citation Source

  • Scopus