Preemptive Policy Experimentation
Venue
Econometrica, vol. 82 (2014), pp. 1509-1528
Publication Year
2014
Authors
Steven Callander, Patrick Hummel
BibTeX
Abstract
We develop a model of experimentation and learning in policymaking when control of
power is temporary. We demonstrate how an early office holder who would otherwise
not experiment is nonetheless induced to experiment when his hold on power is
temporary. This preemptive policy experiment is profitable for the early office
holder as it reveals information about the policy mapping to his successor,
information that shapes future policy choices. Thus policy choices today can cast a
long shadow over future choices purely through information transmission and absent
any formal institutional constraints or real state variables. The model we develop
utilizes a recent innovation that represents the policy mapping as the realized
path of a Brownian motion. We provide a precise characterization of when preemptive
experimentation emerges in equilibrium and the form it takes. We apply the model to
several well known episodes of policymaking, reinterpreting the policy choices as
preemptive experiments.
