IN 1986 we celebrated the 50th anniversary not only of the publication of Keynes' General Theory, but also of the world's first econometric model. Between them, these two developments have probably had a greater impact on the scope of economic analysis than any other innovation this century. Keynes' contribution was the start of modern macroeconomics and, despite a major challenge from neoclassical economics, it remains the dominant paradigm in macroeconomic thinking. Tinbergen's econometric models of the Dutch and the US economies (Tinbergen 1936, 1939),1 built up from his business cycle research, started a revolution by opening up the possibility of forecasting analysis and policy evaluation with empirical models. Now there is hardly a government or agency, investment bank or market analyst without access to such models. At the time Tinbergen was writing a few empirical studies of the demand for agricultural products had been constructed in the US (Schultz, 1938), but the ability to use their results for policy purposes still lay in the future (Waugh, 1944). Tinbergen's models were therefore the first of a whole economy and the first to be aimed specifically at policy analysis (see Klaassen et al., 1959). At that time many countries were faced with major problems of unemployment, inadequate demand and investment. Tinbergen introduced his models to help him formulate corrective policies that were consistent across sectors and expenditure groups. From all this activity emerged Tinbergen's theory of economic policy. Every student now knows that an equal number of instruments and targets is a necessary condition for the existence of policies capable of reaching specified targets. But more significantly, his theory obliges policy makers to make an efficient, and consistent, use of their policy instruments. The crucial question then was, how should those targets be chosen? To resolve that, Theil introduced the flexible target approach: first you decide where you would like to go, and then you pick policies to steer the economy as