ABSTRACT
In Part 2 of this volume we have outlined the main dynamic interrelationships which may be expected to exist in a modern developed economy. We ended with a structure in which there are certain environmental events and certain governmental controls continually affecting a number of economic variables (inside events) which in turn affect each other as they move through time. The problem of optimal control of this system is to devise that movement of the governmental controls through time which, given the expected future movements of the outside events and given the interrelationships between the various events, will make the system move through time in what the policy-makers judge to be the socially most desirable way. We will consider this problem of the optimal use of governmental controls in Part 4 of this volume. There is, however, a preliminary question of governmental policy to be considered, namely whether governmental action can be taken to improve the institutional framework in which economic decision-makers attempt to foresee future developments.
