Myopia and Inconsistency in the Neoclassical Growth Model
The neoclassical growth model is modified to allow for a non-constant rate of time" preference. If the household cannot commit future choices of consumption and if utility is" logarithmic, then an equilibrium is found that resembles the standard results of the neoclassical" model. In this solution, the effective rate of time preference is high model has potentially important implications for institutional design and other policies because" households would benefit from an ability to commit future consumption there is a sense in" which the results are observationally equivalent to those of the conventional model. When the" framework is extended to allow for partial commitment ability, some testable hypotheses emerge" concerning the link between this ability and the rates of saving and growth. Steady-state results" are obtained for general concave utility functions, and some properties of the dynamic paths are" worked out for the case of isoelastic utility.
|Date of creation:||Dec 1997|
|Date of revision:|
|Publication status:||published as Barro, Robert J. "Ramsey Meets Laibson In The Neoclassical Growth Model," Quarterly Journal of Economics, 1999, v114(4,Nov), 1125-1152.|
|Note:||EFG ME PE|
|Contact details of provider:|| Postal: |
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.:
- Fishburn, Peter C & Rubinstein, Ariel, 1982. "Time Preference," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 677-94, October.
- Victor R. Fuchs, 1982.
"Time Preference and Health: An Exploratory Study,"
in: Economic Aspects of Health, pages 93-120
National Bureau of Economic Research, Inc.
- Laibson, David, 1997.
"Golden Eggs and Hyperbolic Discounting,"
The Quarterly Journal of Economics,
MIT Press, vol. 112(2), pages 443-77, May.
- Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation for Research in Economics, Yale University.
- Akerlof, George A, 1991. "Procrastination and Obedience," American Economic Review, American Economic Association, vol. 81(2), pages 1-19, May.
- Becker, Gary S & Barro, Robert J, 1988.
"A Reformulation of the Economic Theory of Fertility,"
The Quarterly Journal of Economics,
MIT Press, vol. 103(1), pages 1-25, February.
- Gary S. Becker & Robert J. Barro, 1986. "A Reformulation of the Economic Theory of Fertility," NBER Working Papers 1793, National Bureau of Economic Research, Inc.
- Gary S. Becker & Robert J. Barro, . "A Reformulation of the Economic Theory of Fertility," University of Chicago - Population Research Center 85-11, Chicago - Population Research Center.
- Tjalling C. Koopmans, 1959. "Stationary Ordinal Utility and Impatience," Cowles Foundation Discussion Papers 81, Cowles Foundation for Research in Economics, Yale University.
- Goldman, Steven M, 1980. "Consistent Plans," Review of Economic Studies, Wiley Blackwell, vol. 47(3), pages 533-37, April.
- Epstein, Larry G & Hynes, J Allan, 1983. "The Rate of Time Preference and Dynamic Economic Analysis," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 611-35, August.
- Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
- Loewenstein, George & Prelec, Drazen, 1992. "Anomalies in Intertemporal Choice: Evidence and an Interpretation," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 573-97, May.
- David I. Laibson, 1996. "Hyperbolic Discount Functions, Undersaving, and Savings Policy," NBER Working Papers 5635, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:6317. 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.