Capitalists, Workers, and Fiscal Policy

by Michl, Thomas R.

• ISBN13: 9780674031678
• ISBN10: 0674031679
• Format: Hardcover
• Copyright: 2009-01-31
• Publisher: Harvard Univ Pr

Summary

Drawing on the work of the classical-Marxian economists and their modern successors, Capitalists, Workers, and Fiscal Policy sets forth a new model of economic growth and distribution, and applies it to two major policy issues: public debt and social security.The book homes in specifically on the problem of fiscal policy, examining the ways that taxation and government spending affect the distribution of wealth and income as well as the rate of economic growth. Thomas Michlrs"s model shows that public debt has a regressive effect on wealth distribution. It also demonstrates that the accumulation of wealth by public authorities, for example, in the form of a pension reserve such as the U.S. social security trust fund, can have a progressive effect on wealth distribution, both directly (since it represents ownership by the citizenry) and indirectly through its general equilibrium effects on the structure of accumulation. The bookrs"s findings provide an analytical foundation for a macroeconomic policy of using fiscal surpluses to accumulate a public pension reserve fund that serves to effect a progressive redistribution of wealth.

Table of Contents

List of Figures	p. xi
List of Tables	p. xiii
Preface	p. xv
Main Symbols	p. xvii
From the Short Run to the Long
Introduction: Toward a Classical Growth Model	p. 3
Elements of the Classical Approach	p. 5
Harrod and Modern Growth Theory	p. 8
Rethinking Fiscal Surpluses	p. 13
The Nature of the Long Run	p. 17
Effective Demand and Say's Law	p. 18
The Paradox of Thrift	p. 19
The Problem of Excess Capacity	p. 22
A Classical-Kaleckian Model	p. 29
Capital-Constrained Growth	p. 29
Labor-Constrained Growth	p. 35
An Intellectual Division of Labor	p. 39
Long-run Models of Fiscal Policy
A Two-Class Model	p. 43
Elements of the Growth Models	p. 44
Wages and Profits	p. 45
Capitalists	p. 46
Workers	p. 48
Endogenous Growth	p. 50
Dynamics of Capital Accumulation	p. 52
Comparative Dynamics	p. 56
Exogenous Growth	p. 58
Temporary Equilibrium	p. 59
Dynamics of Wealth Distribution	p. 60
Comparative Dynamics	p. 68
Intuition and Alternative Closures	p. 71
Appendix: Dynamic Programming	p. 72
Saving and the Class Structure	p. 77
Critical Values of the Discount Factor	p. 77
Saving	p. 79
Saving Motives	p. 79
Saving Propensities	p. 80
The Institutional Structure of Saving	p. 80
The Distribution of Wealth	p. 81
On Class Analysis	p. 84
Debt and Endogenous Growth	p. 87
Public Debt in a Growth Model	p. 88
Government	p. 88
On the Government Budget Constraint	p. 91
Capitalists with Infinite Horizon	p. 94
Capitalists with Finite Horizons	p. 97
Workers	p. 98
Debt in the Infinite Horizon Case	p. 99
Temporary Equilibrium	p. 99
Steady State	p. 100
Comparative Dynamics	p. 101
Transitional Dynamics and Class Structure	p. 102
Debt in the Finite Horizon Case	p. 106
Temporary Equilibrium	p. 106
Steady State	p. 107
Comparative Dynamics	p. 108
Transitional Dynamics and Class Structure	p. 111
Debt in the Endogenous Growth Models	p. 113
Appendix: Elements of A and B Matrices	p. 114
Debt and Exogenous Growth	p. 116
Debt in the Infinite Horizon Case	p. 116
Temporary Equilibrium	p. 117
Steady State	p. 118
Comparative Dynamics	p. 119
Transitional Dynamics and Fiscal Policy	p. 120
Welfare Effect of Demographic Shock	p. 124
Debt in the Finite Horizon Case	p. 124
Temporary Equilibrium	p. 124
Steady State	p. 125
Comparative Dynamics	p. 126
Transitional Dynamics and Fiscal Policy	p. 129
Debt in the Exogenous Growth Models	p. 131
Fiscal Policy and Wealth Inequality in the United States	p. 132
Pensions and Endogenous Growth	p. 139
Elements of a Public Pension System	p. 140
Government	p. 140
Workers	p. 141
Money's Worth and Funding Systems	p. 143
Endogenous Growth with a Public Pension	p. 147
Steady State	p. 147
Dynamics	p. 149
Conditions for Two-Class Regime	p. 152
Policy Issues	p. 153
Policy Design	p. 154
Policy Reform	p. 163
Pensions and Exogenous Growth	p. 168
Preliminary Issues	p. 168
Exogenous Growth with a Public Pension	p. 170
Temporary Equilibrium	p. 170
Steady State	p. 171
Comparative Dynamics	p. 174
Transitional Dynamics and Expectations	p. 177
Stable Expectations	p. 177
Adaptive Expectations	p. 179
Perfect Foresight	p. 181
Demographic Shocks	p. 182
PAYGO Case	p. 183
Funded Case	p. 184
Transitional Dynamics	p. 185
The Old-Age Crisis	p. 186
Policy Issues	p. 187
Policy Design	p. 187
Policy Reform	p. 190
Optimal Policy	p. 197
Natural Rate of Growth	p. 198
One-Class Regime	p. 198
Two-Class Regime	p. 201
Optimal Public Pension	p. 204
One-Class Case	p. 204
Policy Dilemmas in the Two-Class Model	p. 211
Conclusion	p. 216
Technical Change and the Production Function
Fossil Production Function: Theory	p. 221
Theory of Production	p. 222
Biased Technical Change	p. 224
Fossil Production Function	p. 227
Viable Technical Changes	p. 228
Biased Technical Change and Growth	p. 233
Endogenous Growth	p. 234
Exogenous Growth	p. 236
Total Factor Productivity?	p. 239
Appendix: Control Theory	p. 240
Fossil Production Function: Evidence	p. 243
The Aggregate Data	p. 245
Adjustments	p. 245
Technical Change	p. 248
Profit Share	p. 249
Viability: A First Pass	p. 251
The Wage-Profit Curves	p. 253
Cross-Sectional Data	p. 253
Pooled Data	p. 258
Country Studies	p. 260
Conclusion	p. 265
Summary
Fiscal Policy Reconsidered	p. 269
The Burden of Public Debt	p. 270
Pensions and the Nation as Rentier	p. 271
The Production Function	p. 273
A Final Admonition	p. 274
References	p. 277
Author Index	p. 289
Subject Index	p. 293
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