Martin David, Increased Taxation with Increased Acceptability-A Discussion of Net Worth Taxation as a Federal Revenue Alternative, The Journal of Finance, Vol. 28, No. 2, Papers and Proceedings of the Thirty-First Annual Meeting of the American Finance Association Toronto, Canada, December 28-30, 1972 (May, 1973), pp. 481-495

[A lesson of the recent financial crisis is that the interbank market is crucial for banks facing uncertainty regarding their liquidity needs. This article studies the efficiency of the interbank market in allocating funds. We show that the central bank should lower the interbank rate when confronted with a crisis that causes a disparity in the liquidity held among banks. This suggests that the traditional tenet prescribing the separation between prudential regulation and monetary policy should be abandoned. We also show that failure to cut interest rates during a crisis erodes financial stability by increasing the risk of bank runs.]

R EAL disposable income is the measure generally accepted by economists as an indicator of the welfare of a household. Were we living in a world in which each individual formed a household and in which everyone required exactly the same goods to maintain himself, real disposable income might be an adequate measure. However, households are generally complex, and the income of a household must support a number of individuals whose daily requirements range from the nominal demands of a young child to the ample needs of an adolescent. Thus the welfare of a household must be measured not only by its income but also by the size of the household and the variety of needs of its members. This paper discusses a measure of welfare which relates the resources of a household to its needs. Estimates of welfare levels in the United States population based on this measure show that disposable income and per capita disposable income are extremely crude measures of welfare. Both overstate or understate the standard of living of an appreciable fraction of the United States population. The paper concludes with a few notes on the need for more accurate measures of welfare.

Robert M. Coen, Martin David, Session Topic: Tax Depreciation Reform: Discussion, The Journal of Finance, Vol. 27, No. 2, Papers and Proceedings of the Thirtieth Annual Meeting of the American Finance Association, New Orleans, Louisiana, December 27-29, 1971 (May, 1972), pp. 534-541

This paper investigates whether there are simple versions of the permanent income hypothesis which are consistent with the aggregate U.S. consumption and output data. Our analysis is conducted within the confines of a simple dynamic general equilibrium model of aggregate real output, investment, hours of work and consumption. We study the quantitative importance of two perturbations to the version of our model which predicts that observed consumption follows a random walk: (i) changing the production technology specification which rationalizes the random walk result, and (ii) replacing the assumption that agents' decision intervals coincide with the data sampling interval with the assumption that agents make decisions on a continuous time basis. We find substantially less evidence against the continuous time models than against their discrete time counterparts. In fact neither of the two continuous time models can be rejected at conventional significance levels. The continuous time models outperform their discrete time counterparts primarily because they explicitly account for the fact that the data used to test the models are tine averaged measures of the underlying unobserved point-in-time variables. The net result is that they are better able to accommodate the degree of serial correlation present in the first difference of observed per capita U.S. consumption.