son), require that the system be stable no matter which subsets of market variables are held constant. Alternatively, we could use conditions that the roots be real or complex according to whether we observe cycles in the system under investigation.17 If, for example, we observe an absence of cycles in the real world, we know at once that the Hicks conditions are sufficient conditions for dynamic stability.
In the theory of policy (under incomplete information) the problem is often to choose among different dynamic systems, or different degrees of centralization of a given dynamic system; this is often expressed in terms of allocating, dynamically, instruments to targets (the problem of effective market classification), and we may want to construct strongly stable systems: first, because systems near the borderline of stability may become unstable if disturbed by outside shocks; second, because the cost of adjustment may be higher if the system, even though stable, oscillates in its approach to equilibrium; third, because slight errors in manipulating rates of changes in instrumental variables (interest rates, exchange rates, and so on) may turn a weakly stable system into an unstable system; and, finally, because the time involved in approaching equilibrium may be less under strongly stable systems and rapid adjustment may be preferred to slow adjustment.
We can consider, therefore, the problem of choosing a dynamic control mechanism with "hyperstable" properties, in the sense that variables rise or fall whenever they are out of equilibrium, and show how the Hicks conditions can be of some help in constructing such a system when the precise location of an equilibrium is not known.
We take again as our example an international currency system. In a general hyperstable system it will be necessary to vary exchange rates, taking into account the balances of payments of each country. The problem is to find the weights each central bank should give their own balance of payments disequilibrium and that of the other cou