Even if there is an agreed-upon, fixed social objective function and policymakers know the timing and magnitude of the effects of their actions, discretionary policy, namely, the selection of that decision which is best, given the current situation and a correct evaluation of the end-of-period position, does not result in the social objective function being maximized. The reason for this apparent paradox is that economic planning is not a game against nature but, rather, a game against rational economic agents. We conclude that there is no way control theory can be made applicable to economic planning when expectations are rational.

Even if there is an agreed-upon, fixed social objective function and policymakers know the timing and magnitude of the effects of their actions, discretionary policy, namely, the selection of that decision which is best, given the current situation and a correct evaluation of the end-of-period position, does not result in the social objective function being maximized. The reason for this apparent paradox is that economic planning is not a game against nature but, rather, a game against rational economic agents. We conclude that there is no way control theory can be made applicable to economic planning when expectations are rational.

Optimal tolls, capacities, and service levels for highways can be determined jointly by way of an integrated peak-load pricing model. In this paper, such a model is developed and estimated with data for roads in the San Francisco Bay Area. The results suggest optimal peak user tolls of 2-7 cents per automobile mile on rural highways, 2-9 cents on suburban highways, and 6-35 cents on central city highways. Although our results are to some degree dependent on the interest rate, time value, and peak demand configuration assumed, one basic conclusion holds up under all alternative assumptions: current user charges are well below optimal peak tolls. However, our results also suggest considerably higher rush-hour speeds than currently prevail on Bay Area roads, and the lower travel time costs suggested by our analysis (relative to the current situation) should to some degree offset the corresponding higher user charges.

Optimal tolls, capacities, and service levels for highways can be determined jointly by way of an integrated peak-load pricing model. In this paper, such a model is developed and estimated with data for roads in the San Francisco Bay Area. The results suggest optimal peak user tolls of 2-7 cents per automobile mile on rural highways, 2-9 cents on suburban highways, and 6-35 cents on central city highways. Although our results are to some degree dependent on the interest rate, time value, and peak demand configuration assumed, one basic conclusion holds up under all alternative assumptions: current user charges are well below optimal peak tolls. However, our results also suggest considerably higher rush-hour speeds than currently prevail on Bay Area roads, and the lower travel time costs suggested by our analysis (relative to the current situation) should to some degree offset the corresponding higher user charges.