The authors study social security legislated endogenously by altruistic, overlapping generations. Starting from a steady-state equilibrium without social security, both generations living in a period can gain from legislation that mandates transfers from young to old in that and all subsequent periods. The social security allocation is Pareto optimal. Later living pairs of generations may lose, but do not amend the law.

The two most common approaches to analyzing behavior under uncertainty are the expected utility model (EU) and the meanstandard deviation model (MS). Jack Meyer (1987) has recently established in this Review that when the choice set consists of random variables which are represented by distribution functions that differ from one another only by location and scale parameters, EU and MS are consistent in the sense that any EU ranking of elements of a choice set can also be represented by an MS ranking. No claim has been made by Meyer regarding the EUand MS-efficient sets. However, it can be easily shown that with no additional restrictions, risk-averters' EUefficient set is a subset (in the weak sense) of the MS-efficient set. In this note we extend Meyer's work and prove that under a certain restriction on the support of the distribution, random variables which are MS efficient are also EU efficient, namely, MS and EU yield identical efficient sets. We analyze separately the relationship of MSand EU-efficient sets for all unrestricted (with U'> 0), and alternatively for all risk-averse (with U'> 0 and U < 0). Only pairwise comparisons of risky options are considered

Under the traditional interpretation of macroeconomic fluctuations, aggregate demand shocks move output and prices in the same direction, while aggregate supply shocks move output and prices in opposite directions. This paper examines the joint behavior of U.S. output, unemployment, prices, wages, and nominal money and asks whether it is consistent with this interpretation. The answer is a qualified yes

This paper examines the problem faced by the Federal Reserve in announcing its private information about its future policies. Because it would like to manipulate expectations and pursue a time-inconsistent policy, the Fed cannot reveal its policy objectives precisely and credibly. It can, however, communicate some information about its goals through the cheap talk mechanism of Vincent Crawford and Joel Sobel: making announcements that are imprecise, and only giving ranges within which these goals may lie

This paper examines effects of the legal rules for property division at divorce on investment in human capital during marriage. The authors show that current rules generally lead to suboptimal levels of investment and spousal support, or to inequitable distribution of the returns from such investment, or both. They propose a new rule that performs better than the existing rules on both efficiency and equity criteria and that requires no more information than the existing rules

This paper estimates and evaluates monetary policy rules within the context of a structural open economy macroeconomic model of the United States under flexible exchange rates. The major result is that a monetary policy rule, which stabilizes the rate of growth of nominal GNP, receives considerable empirical support. The rule provides a better fit than a number of alternatives, including strict inflation stability, strict output stability, and real exchange rate stabilization