Macroeconomics

This paper examines Ricardian equivalence in a world in which taxes are not lump sum, but are levied on risky labor income. It shows that the marginal propensity to consume out of a tax cut, coupled with a future income tax increase, can be substantial under plausible assumptions. Indeed, the MPC out of a tax cut can be closer to the Keynesian value that ignores the future tax liabilities than to the Ricardian value that treats future taxes as if they were lump sum.

For a collection of agents with von Neumann-Morgenstern preferences, a price-independent income distribution, and identical probability beliefs, there exists a von Neumann-Morgenstern approximate aggregator. The risk tolerance of the approximate aggregator is equal to the sum of the individual agent risk tolerances at prices which yield constant, "risk-free," contingent consumption. The application of the approximate aggregator to standard asset pricing models in finance is discussed briefly.

Improvements in computational methods have resulted in the faster solution of general equilibrium economic models This paper gives a nontechnical introduction to the octahedral algorithm for the solution of economic models.

The currently fashionable credit scoring systems are described and subjected to critical analysis. Public policy issues concerning the use of these systems are discussed.

This paper demonstrates that it will be impossible, by observing an agent's demand behavior, to either refute or confirm the general taste change hypothesis without substantially restricting the class of eligible preferences.

The last ten years have seen extensive research effort devoted to problems of multiperiod resource allocation in an uncertain setting. Two primary areas of study have been the theory of optimal growth (e.g., Brock and Mirman, Mirrlees and Mirman and Zilcha) and the multiperiod consumption/savings (portfolio) problem (e.g., Levhari and Srinivasan, Han, Hakansson, Samuelson and Merton).

The purpose of this paper is to investigate relationships among three types of preferences and their associated utility representations in a two-period context.

Information provision in games influences behavior by affecting agents' beliefs about the state, as well as their higher-order beliefs. We first characterize the extent to which a designer can manipulate agents' beliefs by disclosing information. We then describe the structure of optimal belief distributions, including a concave-envelope representation that subsumes the single-agent result of Kamenica and Gentzkow (2011). This result holds under various solution concepts and outcome selection rules.