Discretionary Policy versus Non-Discretionary Policy in the Economic Adjustment Process

The study aims to examine the concept of automatic fiscal stabilization in the context of macroeconomic adjustment policies. To this end, first a conceptual distinction between discretionary public adjustment policies and non-discretionary ones is achieved. Second, sufficient and necessary attributes for an automatic fiscal stabilizer are identified and examined, in order to obtain a definition of this instrument. The whole research approach is characterized by a logical and abstract way of thinking, to provide a general and non-contextual result. Finally, a general mechanism of action of automatic fiscal stabilizers is proposed, by introducing the basic concepts of action base and of action rate of such an instrument.

Keywords: sustainability, fiscal policy, automatic fiscal stabilizers, discretionary versus nondiscretionary, principle of the minimal action
JEL Classification: E62, E63, H3