The principle of political-economic assignment

Abstract

This paper formulates a macroeconomic model of disposable income, unemployment, inflation, and the balance of payments; a theory of qualitative choice to explain government popularity in terms of these variables; and a satisficing formulation of political-economic policy. This approach to economic policy relies on the promotion of ideology and satisficing popularity and gives rise to an interdependent system of political-economic reaction functions for the tax rate and state spending. Using a theorem for the stability of “patched-up” systems, the principle of political-economic assignment is derived.