Searching for Good Policies∗

I study a model of dynamic policy making in which citizens do not have complete knowledge of how policies are mapped into outcomes. They learn about the mapping through repeated elections as policies are implemented and outcomes observed. I characterize for this environment the policy trajectory with impatient voters. I find that through experimentation good policies are frequently found. However, I show that this is not always the case and I demonstrate how policy making can get stuck at unappealing outcomes, revealing a novel informational failure of policy making. The model also provides insight into the size, direction, and sequencing of optimal policy experiments. Finally, I consider how the structure of political competition affects experimentation and learning. ∗I thank Martin Osborne, Abhinay Muthoo, AlanWiseman, Mike Ting, Bard Harstad, and numerous seminar audiences for helpful comments, and Guillermo Diaz for research assistance. †Managerial Economics and Decision Sciences, Kellogg School of Management, Northwestern University, Evanston, IL 60208; [email protected].