Showing papers on "Golden Rule (fiscal policy) published in 1972"

On Golden Rules, the "Biological Theory of Interest," and Competitive Inefficiency

Abstract: A general model of intertemporal distribution is developed; and its implications, discussed It is shown that Samuelson's concept of social optimality corresponds to the golden rule of production theory A more general model of intertemporal distribution efficiency (which would correspond to the Malinvaud concept for production) is suggested, and it is shown that the production and distribution models behave analogously; in particular, for the case of proportional growth, both models are efficient if the interest rate exceeds the growth rate and inefficient if it falls short Since Malinvaud's landmark paper in 1953, economists have understood that the price system of allocation will not always guarantee efficient production decisions over time even if all the usual competitive assumptions about economic behavior are satisfied For the case of balanced growth in the neoclassical one-sector model, Phelps (1961) showed that inefficiency would always result when the interest rate was below the growth rate Elsewhere, I (1969a) have extended this result to the general Malinvaud model While the production model has received wide attention, the problem of efficiency of distribution has been largely overlooked Assuming that all goods available are consumed, there is no danger of indefinitely postponing consumption, so that we might expect competition to be efficient in its distribution role even though it were inefficient in organizing production However, in a series of papers beginning with Samuelson (1958), it was suggested that such a distribution model would almost surely be inefficient Unfortunately, the sense in which this statement is true has remained murky because of confusion as to what was meant by the terms