Time inconsistency, is with nothing has changed, such as preferences or technology, but the choices which were made today and tomorrow weren't equal.
The policymaker want to fool the people for their own good, i.e. they want to reach an optimal point by fooling people.
Is time inconsistency really a problem? First, time inconsistency is in practice not so strong than models suggest. Second, if time inconsistency is a real problem society would have create institution's to prevent it. Third, the costs of a solution of a time inconsistiency.
4.2 Capital Taxation
Tax the factor whose supply is inelastic.
4.3 Time Inconsistency as a conflict of Interests
Representative agent is atomistic.
4.4 The Barro-Gordon Model
N.N.
4.5 Seigniorage Revenue and the Optimum Quantity of Money
N.N.
4.6 Commitment versus Flexibility
Escape clauses, if the world is normal, normal means here without shocks,
politican are following there rule, but if there are unforseen negative shocks they revert to discretion policy.
If the variance of et(s2) is high enough, then a discretion dominates a rule, if it is low a rule dominates discretion.
Sascha Frank
Last modified: Wed Nov 16 19:06:08 MET 2005