Towards a Theory of Policy Making
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The paper presents a theory of policy timing that relies on uncertainty and transaction costs to
explain the optimal timing and length of policy reforms. Delaying reforms resolves some
uncertainty by gaining valuable information and saves transaction costs. Implementing reforms
without waiting increases welfare by adjusting domestic policies to changed market
parameters. Optimal policy timing is found by balancing the trade-off between delaying
reforms and implementing reforms without waiting. Our theory offers an explanation of why
countries differ with respect to the length of their policy reforms, and why applied studies often
judge agricultural policies to be inefficient.