ABSTRACT
Until very recently, the theory of macroeconomic policy dealt with the economic consequences of given policy rules. Knowing these consequences and the policy objectives, one would then select the optimal policy rule. Implicit in this approach to policy design is a particular view of the policymaker, namely that he is a passive agent that can be programmed like a machine. Once the optimal rule is identified, the policymaker implements it and the private sector adapts to it.
