The allowance for low-probability disasters, suggested by Rietz (1988), explains a lot of puzzles related to asset returns and consumption. These puzzles include the high equity premium, the low risk-free rate, the volatility of stock returns, and the low values of typical macro-econometric...

Some previous analyses have suggested that the smoothing of tax rates over time would be a desirable guide for public debt management. One implication of this viewpoint is that future changes in tax rates would be unpredictable based on current information. This proposition is tested by...