Home > income redistribution, Uncategorized > Piketty on ‘Ricardian equivalence’ and representative agent models

Piketty on ‘Ricardian equivalence’ and representative agent models

from Lars Syll

For far too long, economists have neglected the distribution of wealth … partly because of the profession’s undue enthusiasm for simplistic mathematical models based on so-called representative agents …

Thomas-Piketty-capitalBy totally avoiding the issue of inequality in the distribution of wealth and income, these models often lead to extreme and unrealistic conclusions and are therefore a source of confusion rather than clarity. In the case of public debt, representative agent models can lead to the conclusion that government debt is completely neutral, in regard not only to the total amount of national capital but also to the distribution of the fiscal burden. This radical reinterpretation of Ricardian equivalence … fails to take account of the fact that the bulk of public debt is in practice owned by a minority of the population … so that the debt is the vehicle of important internal redistributions when it is repaid as well

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  1. F. Beard
    June 3, 2014 at 11:45 am

    … fails to take account of the fact that the bulk of public debt is in practice owned by a minority of the population … so that the debt is the vehicle of important internal redistributions when it is repaid as well Lars Syll

    Yes! Professor Bill Mitchell calls the debt of a monetary sovereign “corporate welfare.” Let’s end it. Welfare should be proportional to one’s need, not to the size of one’s money hoard.

    Ethics is the lost key to resolving economic problems and isn’t, as some insist, to be deliberately ignored. Our money system, based on usury for stolen purchasing power*, is INHERENTLY unethical.

    * via extensive government privileges for the creation of private credit such as a default monopoly on the risk-free storage of and transactions with fiat by the banks; this is properly a function of the monetary sovereign itself.

  2. originalsandwichman
    June 3, 2014 at 2:20 pm

    “…economists have neglected the distribution of wealth … partly because of the profession’s undue enthusiasm for simplistic mathematical models based on so-called representative agents…”

    But mainly because the mainstream “profession” is partisan, on behalf of the wealthy, and unprincipled about it. There is some “methodological” or “theoretical” excuse for ignoring certain issues that does not stand up to close scrutiny.

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