FLEXIBLE PUBLIC-POLICY - THE CASE OF THE UNITED-STATES WHEAT SECTOR

This paper tests the proposition that flexible policy rules that tie p rogram instrument settings to changes in market conditions can improve economic welfare compared to the prevailing practice in the United St ates of setting agricultural policy instruments at fixed levels once e very 4 years. Flexible policy rules are obtained for the U.S. wheat se ctor using stochastic control methods. A constraint structure represen ting producer and consumer behavior and a policy criterion function re presenting society's weighting of various groups are estimated. It is shown that the flexible policy rules developed in this paper outperfor m historic policy instrument settings across a wide spectrum of econom ic conditions. (C) Society for Policy Modeling, 1997.