tag:blogger.com,1999:blog-5362801348602268473.post1215471205880711124..comments2023-11-22T00:49:32.887-08:00Comments on Reflections on Monetary Economics: A Simplified Look at Samuelson's Overlapping Generations ModelNick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-5362801348602268473.post-87269328985420791682013-12-14T06:20:10.533-08:002013-12-14T06:20:10.533-08:00Hi Stone,
You did mention it before and I think i...Hi Stone,<br /><br />You did mention it before and I think it's important. I'm not trying to argue here that this OLG pattern is a complete description of how households behave. I don't think it is. However, I do think it represents the way a material part of behaviour and that has important consequences, particularly that many of the conclusions based on agents with infinite horizons break down. The type of behaviour you describe is also, of course, not consistent with the standard representative agent. But it also means, as you say, that this type of OLG model is not enough to describe everything that is going on.<br />Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-7183728785416290122013-12-14T03:33:30.419-08:002013-12-14T03:33:30.419-08:00Nick, I can't remember whether I previously me...Nick, I can't remember whether I previously mentioned this link on comments here:<br />Why Do the Rich Save So Much?<br />Christopher D. Carroll<br />http://www.econ2.jhu.edu/people/ccarroll/why.pdf<br /><br />It finds that a sizable chunk of assets are held by people with a "capitalist spirit" motivation -that is they NEVER intend for those assets to be dissaved either by them or their heirs. That kind of throws a spanner in the works because the yield from those assets causes more and more to be gathered.<br />I also worry that calls for population growth and migrations are actually motivated by the wish to inflate asset prices. The motivation is to benefit current holders of wealth at the expense of those who don't (yet) hold wealth.<br />I had a go trying to get to grips with this in a couple of posts<br />http://directeconomicdemocracy.wordpress.com/2013/07/28/demographics-migration-and-fiscal-sustainability/<br />http://directeconomicdemocracy.wordpress.com/2013/06/09/sustainability-of-economic-growth-and-debt/stonehttp://directeconomicdemocracy.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-67445753904419750062013-12-12T11:32:07.780-08:002013-12-12T11:32:07.780-08:00Yes, sensible behavioural assumptions puts RE into...Yes, sensible behavioural assumptions puts RE into doubt. The behaviour at infinity is another issue. It's less cut and dried than the problem with the term premium, and so I will have to think about how to explain it properly.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-20835408116218781712013-12-12T00:48:10.536-08:002013-12-12T00:48:10.536-08:00Yes. The OLG pattern of behaviour does of course p...Yes. The OLG pattern of behaviour does of course produce a spending pattern quite similar to that in standard SFC models, but because it is also a type of micro-founded approach, you can incorporate rationality assumptions and utility maximisation, if you wish. Sometimes it's instructive to do so and I have actually done quite a bit of playing around with models like that. The most interesting thing that comes out of it, to my mind, is that the results are still very different to those of the standard NK model.<br /><br />I saw your recent post on Ricardian Equivalence and it's worth noting as well that the possibility that at least some households are acting like OLG agents is another reason why RE won't hold.Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-21718407334113902182013-12-11T10:04:21.506-08:002013-12-11T10:04:21.506-08:00One of the things you can do with the OLG models i...One of the things you can do with the OLG models is get a handle on how wealth and spending inter-relate under the assumption of rationality. You could then try to fit this behaviour with a simple function that you can then use inside a Stock-Flow Consistent model. You end up with a hybrid model, with DSGE elements, but it is a model that you can actually solve.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.com