Browsing by Subject "Time preference"

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Essays on the history of dynamic economic analysis
(2013) Molavi Vasséi, Arash; Hagemann, Harald
The subsequent three studies in the history of economic analysis ranges over a wide area of subjects. Part one, raises the following questions: To what extent is axiomatic general equilibrium analysis a rational reconstruction of ?Scottish Political Economy? as defined by the writings of David Hume and Adam Smith? How much is gained and how much lost by the axiomatic transformation of the invisible-hand proposition? What are the implications of negative results like the Sonnenschein-Mantel-Debreu demonstrations for the Scottish point of view? Did it reach deadlock, or is there still hope for the dominant trajectory in the history of economics? In contrast to the rich historical literature on the invisible-hand proposition, the present study does not level any paradigmatic criticism at neo-Walrasian analysis. Rather, by focalizing the most important results against the backdrop of Scottish Political Economy, it may inform theory choice within the neo-Walrasian paradigm. Part two translates F.A. Hayek?s informal capital theory into a dynamic equilibrium model. The focus is restricted to Hayek?s largely unrecognized contribution in Utility Analysis and Interest, being restated in The Pure Theory of Capital. The underlying premise is that Hayek adopts infant versions of modern analytical tools during his time at the London School of Economics such that a rational reconstruction of his capital theory by established neoclassical tools is admissible. The major result is that UAI and PTC contain a generalization of the Ramsey-Cass-Koopmans model. In concrete, Hayek provides the solution to an infinite-horizon deterministic social planner optimization problem in a one-sector economy such that the rate of pure time preference encapsulated in the discount factor increases in prospective utility. The endogeneity of myopia is due to intertemporal complementarities and accounted for by the modified Uzawa aggregator. A partial alliance with Frank Knight is established. Part three addresses Ludwig von Mises?s business cycle theory at maturity, as advanced in his opus magnum Human Action. In this work, Mises embeds the business cycle theory which he initially developed in Theorie des Geldes und der Umlaufmittel into the broad context of his methodological convictions. Whereas the initial outline of his cycle theory strongly relies on Böhm-Bawerk?s capital theory, its mature version is built upon a significantly altered framework of real analysis. The paper describes and evaluates the impact of Mises?s praxeology on his conceptualization of real analysis; it provides a simple model to depict and clarify Mises?s outline; it draws implications for his business cycle theory and its core prediction that ?any money-induced traverse by necessity reverses?; it argues that Mises?s core prediction ultimately depends on his barren analytical device; it concludes that Mises?s mature business cycle theory is a regression.
Fairness, efficiency, risk, and time
(2007) Seidel, Gerald
We present a model of a 2-person-2-period-economy with specific (human) capital. Although the individuals are purely selfish, the outcome is seemingly guided by pro-social behavior. We find in our model economy that fairness and efficiency are positively related whereas risk aversion seems to have no major impact on the seemingly fair behavior. A rise in the time preference increases the disadvantaged subject?s aspiration for equal outcomes but reduces the advantaged subject?s willingness to accept them.