The Old Theory of Economic Policy and the New Institutionalism

"In 1956 the Dutch economist Jan Tinbergen, who shared the first Nobel Prize for Economics, published his classic study Economic Policy: Theory and Design, which deeply affected and reinforced the way economists thought about the policy implications of their work. The volume, and related work, did not propose new economic theories or explicitly evaluate the state of economic science, but made a contribution at a different level. Tinbergen's approach had the flavor of systems analysis in engineering, and his aim was to show how economic knowledge could be organized to regulate and guide economic systems. Economic systems or sectors were represented by structural models, and subsets of variables were defined either as instruments or targets of policy. The theory of economic policy used general assumptions about the structure of economic systems to derive various rules for the optimal design of policy, and specific economic theories were cited only asillustrations."