A century ago, everyone thought time and distance were well defined physical concepts. But neither proved absolute. Instead, measures/reports of time and distance were found to depend on one%u2019s reference point, specifically one%u2019s direction and speed of travel, making our apparent physical reality, in Einstein%u2019s words, %u201Cmerely an illusion.%u201D Like time and distance, standard fiscal measures, including deficits, taxes, and transfer payments, depend on one%u2019s reference point/reporting procedure/language/labels. As such, they too represent numbers in search of concepts that provide the illusion of meaning where none exists. This paper, dedicated to our dear friend, David Bradford, provides a general proof that standard and routinely used fiscal measures, including the deficit, taxes, and transfer payments, are economically ill-defined. Instead these measures reflect the arbitrary labeling of underlying fiscal conditions. Analyses based on these and derivative measures, such as disposable income, private assets, and personal saving, represent exercises in linguistics, not economics.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
12344.
Length: Date of creation: Jun 2006 Date of revision: Handle: RePEc:nbr:nberwo:12344
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Find related papers by JEL classification: H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents H6 - Public Economics - - National Budget, Deficit, and Debt
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Kotlikoff, Laurence J., 2002.
"Generational policy,"
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 27, pages 1873-1932
Elsevier.
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Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Alexander W. Blocker & Laurence J. Kotlikoff & Stephen A. Ross, 2008.
"The True Cost of Social Security,"
NBER Working Papers
14427, National Bureau of Economic Research, Inc.
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