By positing learning and a pessimistic initial prior, we build a model that disconnects a representative consumer's subjective attitudes toward risk from the high price of risk that a rational-expectations econometrician would deduce from financial market data. We follow Friedman and Schwartz...

In 1790, a U.S. paper dollar was widely held in disrepute (something shoddy was not ‘worth a Continental’). By 1879, a U.S. paper dollar had become ‘as good as gold’. These outcomes emerged from how the U.S. federal government financed three wars: the American Revolution, the War of...

An incomplete-market life-cycle model with indivisible labor makes career lengths and human capital accumulation respond to labor tax rates and government supplied non-employment benefits. We compare aggregate and individual outcomes in this individualistic incomplete-market model with those in...