SATISFICING SOLUTIONS TO A MONETARY POLICY PROBLEM

Herbert A. Simon, 1978 Economics Nobel Prize laureate, talked about satisficing (his neologism) rather than optimizing as being what economists really need. Indeed, optimization might be an unsuitable solution procedure (in that it suggests a unique "optimal" solution) for problems where many solutions could be satisfactory. We think that looking for an applicable monetary policy is a problem of this kind because there is no unique way in which a central bank can achieve a desired inflation (unemployment, etc.) path. We think that it is viability theory, which is a relatively young area of mathematics, that rigorously captures the essence of satisficing. We aim to use viability analysis to analyze a simple macro policy model and show how some robust adjustment rules can be endogenously obtained.