When will the optimal mix of a constant income tax with a constant consumption tax involve a positive income tax? The assumptions of the model in which this question is asked include (1) identical individuals with coincident lifetimes who work in every period; (2) initial endowments of physical...

The general equilibrium models in this paper, with complete markets, can give the major features of business cycles. The models include real investment, but information is costless and is available to everyone at the same time. Fluctuations in the match between resources and wants across many...

Since people can hold currency at a zero nominal interest rate, the nominal short rate cannot be negative. The real interest rate can be and has been negative, since low risk real investment opportunities, like filling in the Mississippi delta, do not guarantee positive returns. The inflation...

Investors like to speculate. Financial institutions accommodate them, often hedging to reduce the risk of insolvency. Neither investors nor financial institutions create systemic risk. Governments do that, by refusing to enforce contracts, and by guaranteeing private debt without charging market...