Related papers: Land and Infinite Debt Rollover
We consider the problem of optimal consumption from labor income and investment in a general incomplete semimartingale market. The economic agent cannot borrow against future income, so the total wealth is required to be positive at (all or…
Various multi-agent models of wealth distributions defined by microscopic laws regulating the trades, with or without a saving criterion, are reviewed. We discuss and clarify the equilibrium properties of the model with constant global…
I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…
The scale and terms of aggregate borrowing in an economy depend on the manner in which wealth is distributed across potential creditors with heterogeneous beliefs about the future. This distribution evolves over time as uncertainty is…
Historical trends suggest the decline in importance of land as a production factor but its continued importance as a store of value. Using an overlapping generations model with land and aggregate uncertainty, we theoretically study the…
We study Pareto efficiency in a pure-exchange economy where agents' preferences are represented by risk-averse monetary utilities. These coincide with law-invariant monetary utilities, and they can be shown to correspond to the class of…
Financial markets display scale-free behavior in many different aspects. The power-law behavior of part of the distribution of individual wealth has been recognized by Pareto as early as the nineteenth century. Heavy-tailed and scale-free…
This paper provides a detailed analysis of the local determinacy of monetary and non-monetary steady states in Tirole (1985)'s classical two-period overlapping generations model with capital and production. We show that the sufficient…
This paper investigates the relevance of the No-Ponzi game condition for public debt (i.e. the public debt growth rate has to be lower than the real interest rate, a necessary assumption for Ricardian equivalence) and of the transversality…
This article is a supplement to my main contribution to the Routledge Handbook of Complexity Economics (2023). On the basis of three recent papers, it presents an unconventional perspective on economic inequality from a statistical physics…
We revisit the classic paper of Tirole "Asset Bubbles and Overlapping Generations" (1985, Econometrica), which shows that the emergence of asset bubbles solves the capital over-accumulation problem. While Tirole's main insight holds with…
We introduce a simple model of economy, where the time evolution is described by an equation capturing both exchange between individuals and random speculative trading, in such a way that the fundamental symmetry of the economy under an…
The distribution of wealth among the members of a society is herein assumed to result from two fundamental mechanisms, trade and investment. An empirical distribution of wealth shows an abrupt change between the low-medium range, that may…
The rich-get-richer mechanism (agents increase their ``wealth'' randomly at a rate proportional to their holdings) is often invoked to explain the Pareto power-law distribution observed in many physical situations, such as the degree…
Compound interest as well as inflation grows exponentially with time, whereas other means to repay debt grow polynomially. For this and other, mostly political, reasons, debt without inflation is unsustainable. We suggest a discontinuous…
We consider the relationship between economic activity and intervention, including monetary and fiscal policy, using a universal dynamic framework. Central bank policies are designed for growth without excess inflation. However,…
This paper develops a new model of business cycles. The model is economical in that it is solved with an aggregate demand-aggregate supply diagram, and the effects of shocks and policies are obtained by comparative statics. The model builds…
Solomon and Golo [1] have recently proposed an autocatalytic (self-reinforcing) feedback model which couples a macroscopic system parameter (the interest rate), a microscopic parameter that measures the distribution of the states of the…
A computational model for the distribution of wealth among the members of an ideal society is presented. It is determined that a realistic distribution of wealth depends upon two mechanisms: an asymmetric flux of wealth in trading…
We consider a frictionless constant endowment economy based on Leeper (1991). In this economy, it is shown that, under an ad-hoc monetary rule and an ad-hoc fiscal rule, there are two equilibria. One has active monetary policy and passive…