Rational expectations and the control of the economy

Some issues germane to the controversy surrounding the applicability of control theory in problems of economic policy are highlighted. Most derive from an assertion that economic policy problems, of necessity, deal with fundamentally different systems than those physical systems so often the subject of applied control theory. In particular, the ability of economic agents to base their behavior on expectations is seen to generate models which can display noncausal behavior. This problem and the possibly variable structure of these systems appear to confound contemporary control theory techniques. The theory of state estimation, and the descriptor variable representation, however, hold great potential in overcoming these problems.