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Should Generational Accounts Replace Public Budgets and Deficits?

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  • Robert Haveman

Abstract

The author assesses the concept of 'generational accounts' and the specific accounts constructed by Alan Auerbach, Jagadeesh Gokhale, and Laurence Kotlikoff (1991). Although these accounts support the assertion of present-orientation in fiscal policy, they rest on numerous assumptions based on judgments that are open to question. These involve the treatment of the public budget constraint, the benefits from public exhaustive expenditures, economic and population projections, the discount rate, and fiscal incidence. Alternative and equally reasonable assumptions could yield radically different conclusions. The author concludes that the Auerbach, Gokhale, and Kotlikoff accounts should not replace the annual public budget, as they argue.

Suggested Citation

  • Robert Haveman, 1994. "Should Generational Accounts Replace Public Budgets and Deficits?," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 95-111, Winter.
    • Handle: RePEc:aea:jecper:v:8:y:1994:i:1:p:95-111
    Note: DOI: 10.1257/jep.8.1.95
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    References listed on IDEAS

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    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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