DECISION RULES AND SIMULATION
TECHNIQUES IN DEVELOPMENT
PROGRAMMING
HENRI THEIL (*)
Nederlandsche Economische Hoogeschool - Econometyisch Instituut
Rotterdam - Nederland
NTRODUCTIG
Many underdeveloped countries, all Communist countries,
and some developed Western countries have their Economic
Plans nowadays. Such Plans may differ considerably as to
character and scope, but it is quite generally true that they are
based on certain considerations as to the goals to be pursued,
as to the relationships between certain noncontrolled key va-
riables on the one hand and the variables controlled by the
decision-making authority on the other hand, as to the impact
of outside forces, and as to the likely development of such out-
side forces over time. Given a number of assumptions one will
arrive at a certain Plan, which specifies that this is to be done
in year 1, that in year 2, and so on. In principle the Plan is
optimal in the sense that it pursues the goals as well as possible
subject to the constraints under which the economy operates.
But there is the problem of uncertainty. The development
of outside forces over time has to be predicted, which cannot
(*) The author is indebted to Mr. J. Boas of the Econometric Institute
Rotterdam, who carried out the simulation experiment described in Sec
tion 6
"71 Theil - pag.