I have a doubt regarding the interpretation of the outocome of the command “evaluate_planner_objective”. I have two different Ramsey policies in my model and I would like to rank them using a welfare measure. So, my questions are:
Can I simply use the outcome of “evaluate_planner_objective” to make a comparison between the two different policies? in other words, is this a good enough measure?
And, more specifically, how do I interpret the outcome? I have that, for one policy, the result is around -3 and for the other is -5. In your opinion, what is the meaning of these numbers, in terms of welfare ranking?
I guess it depends what you are trying to compare, but I think I’m trying to solve a similar problem right now and I don’t think it makes much sense to just compare the welfare from two different objectives. The result just tells you, that welfare, as defined by one objective, is higher, than welfare, as defined by another objective. So essentially you are comparing the length of two sticks but one time you use cm and on time you use inches and than you are trying to compare the numerical values of both measurements.
thank you very much for the answer. Actually, in my two different ramsey policies, the Planner’s objective function evaluated by the command is the same. What changes are just the instruments controlled by the Ramsey planner.
In that case, the comparison is valid. The big issue is the interpretation of the comparison, because utility numbers can be scaled arbitrarily. A common workaround is computing consumption equivalents. See e.g. the discussion in