Model Uncertainty and the Rationality of Economic Policy

presented at the annual conference of the European Association for Evolutionary Political Economy at Siena, Italy, November 8-11, 2001. (available upon request)#### This paper examines the process of economic policy-making under conditions of model uncertainty. We assume a median voter model where the electorate is uncertain of the policy measures available as well as their respective outcomes and where opinion formation is a social process of communication and contagion. Learning from experience is also considered. It is shown that economic policy-making under uncertainty produces novel policy routines, but that a mechanism of efficiently utilising the generated knowledge is missing.