Abstract
AbstractAn area of difficulty in the effective application of econometric models to determine optimal macroeconomic policy is the specification of the welfare functional. In such models it is required to synthesize a scalar‐valued criterion which properly relates tho joint effects of various economic factors. This paper develops a systematic procedure for treating (his problem when the several variables of the criterion are set forth in preference by a lexicographic ordering. In capsule, the procedure gives sequential attention to the various factors, with the constraint set at a given optimization stage determined by the characteristics of the solution at all prior stages.
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