The Basic Components of a Governmental Control Plan
In this chapter we will discuss briefly in turn each of the seven basic components of a governmental control plan which were enumerated at the end of the last chapter.
(1) THE ECONOMETRIC MODEL If the government intends to develop a comprehensive control strategy in the absence of an indicative plan, it must build an econometric model of the dynamic relationships in the economy. The nature of these relationships has been discussed in Part 2 of this volume. The construction of a dynamic econometric model of this kind presents a most formidable task of statistical investigation. But it is not proposed in this volume to discuss these problems. One particular aspect of this problem must, however, be borne in mind, namely the treatment of expectations and their effect upon the actions of private decision makers. In so far as present actions depend upon expectations about the future and in so far as present expectations are moulded by past experience, one must include in the econometric model behavioural relationships which make present actions depend in this indirect manner on past experience.