The theory of economic policy has its roots in the contributions of Tinbergen and Theil, who solved the problem of a policymaker aiming to achieve certain values for his policy targets, or to minimize a loss function defined on those targets, by using the available policy instruments. After...

This paper outlines contents of the new theory of economic policy that has emerged recently with reference to situations of strategic interaction. The new theory of economic policy is rooted in the classical contributions of Ragnar Frisch, Jan Tinbergen, Bent Hansen and Henri Theil, while being...