Optimal Control, Expectations and Uncertainty

The rational expectations revolution and other developments in economics (notably game theory) have fundamentally altered the application of optimal control theory to economic forecasting and planning. In particular, they have shown that economic systems cannot be modeled simplistically on physical systems. However, as the authors show, these developments have greatly enhanced our understanding of how an economy functions, and now make it possible for optimal control theory to be applied much more effectively to economic modeling and planning.

The rational expectations revolution (notably game theory) has fundamentally altered the application of optimal control theory to economic forecasting and planning. In particular, it has shown that economic systems cannot be modelled simplistically on physical systems. However, as the authors of this volume show, this and other economic developments have greatly enhanced our understanding of how an economy functions.