ECONOMIC-POLICY PRECOMMITMENT AND SOCIAL-WELFARE

The claim that economic policy precommitment is advantageous is investigated in a context in which the welfare basis of the government's objectives is explicit. Three results are demonstrated, each one defining a class of welfare functions and a class of models such that precommitment would not raise welfare in models of that class. It is concluded that, if a purely welfare economic argument for precommitment is to be found, attention will have to be paid either to conflicts, asymmetries and differences within the private sector, or to multiple equilibria.