On the General Relativity of Fiscal Language
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.
|Date of creation:||Jun 2006|
|Date of revision:|
|Publication status:||published as Auerbach, Alan J. and Daniel Shaviro (eds.) Key Issues in Public Finance – A Conference in Memory of David Bradford. Harvard University Press, 2009.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
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.:
- Kotlikoff, Laurence J., 2002.
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 27, pages 1873-1932
- Slemrod,Joel, 1997.
"Tax Progressivity and Income Inequality,"
Cambridge University Press, number 9780521587761, December.
- Fischer, Stanley, 1980. "Dynamic inconsistency, cooperation and the benevolent dissembling government," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 93-107, May.
- J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
- William G. Gale & Peter R. Orszag, 2004. "Budget Deficits, National Saving, and Interest Rates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2), pages 101-210.
- R. Glenn Hubbard & Eric M. Engen, 2004. "Federal Government Debt and Interest Rates," AEI Economics Working Papers 50018, American Enterprise Institute.
- K. J. Arrow, 1964. "The Role of Securities in the Optimal Allocation of Risk-bearing," Review of Economic Studies, Oxford University Press, vol. 31(2), pages 91-96.
- James Banks & Richard Blundell & James P. Smith, 2000. "Wealth inequality in the United States and Great Britain," IFS Working Papers W00/20, Institute for Fiscal Studies.
- Guido Tabellini, 1989.
"The Politics of Intergenerational Redistribution,"
NBER Working Papers
3058, National Bureau of Economic Research, Inc.
- Fumio Hayashi, 1985. "Tests for Liquidity Constraints: A Critical Survey," NBER Working Papers 1720, National Bureau of Economic Research, Inc.
- Robert B. Barsky & N. Gregory Mankiw & Stephen P. Zeldes, 1984.
"Ricardian Consumers With Keynesian Propensities,"
NBER Working Papers
1400, National Bureau of Economic Research, Inc.
- David Hauner, 2006. "Fiscal Policy and Financial Development," IMF Working Papers 06/26, International Monetary Fund.
- Barry P. Bosworth & Lisa Bell, 2005. "The Decline in Household Saving: What Can We Learn from Survey Data?," Working Papers, Center for Retirement Research at Boston College wp2005-15, Center for Retirement Research, revised Dec 2005.
- Blanchard, Olivier J, 1985.
"Debt, Deficits, and Finite Horizons,"
Journal of Political Economy,
University of Chicago Press, vol. 93(2), pages 223-47, April.
- Eric M. Engen & R. Glenn Hubbard, 2004. "Federal Government Debt and Interest Rates," NBER Working Papers 10681, National Bureau of Economic Research, Inc.
- Craig Burrnside, 2005. "Fiscal Sustainability in Theory and Practice : A Handbook," World Bank Publications, The World Bank, number 7495, July.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:12344. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.