This paper derives a single-beta asset pricing model in a multi-good, continuous-time model with uncertain consumption-goods prices and uncertain investment opportunities. When no riskless asset exists, a zero-beta pricing model is derived. Asset betas are measured relative to changes in the aggregate real consumption rate, rather than relative to the market. In a single-good model, an individual's asset portfolio results in an optimal consumption rate that has the maximum possible correlation with changes in aggregate consumption. If the capital markets are unconstrained Pareto-optimal, then changes in all individuals' optimal consumption rates are shown to be perfectly correlated.

This paper investigates the conjecture that oligopolistic pricing behavior will invalidate the Lucas-Sargent policy-ineffectiveness proposition even if expectations are formed rationally. The procedure is to examine the properties of an analytical macroeconomic model that incorporates a simplified version of the MPS wage-price sector. It is shown that the validity of the conjecture depends upon the precise manner in which lags are built into the price adjustment equation. A crucial condition is isolated and used to motivate an empirical test. The results, based on quarterly U.S. data, are predominantly consistent with the ineffectiveness proposition.

The secondary benefit structure of the Old Age, Survivors, and Disability Insurance system (OASDI) transfers $25 billion per year to families of retired, deceased, and disabled workers without appreciable regard to past contributions or to need. Since these benefits are financed through payroll taxes, the insurance premiums of larger families are subsidized by the contributions of individuals and smaller families, regardless of ability to pay. This subsidy exists even with the strong weighting of the system in favor of lower income workers. The present research indicates that returns on Social Security contributions vary more by family pattern than by any other variable. Moreover, the enactment of several recent congressional bills would further expand the transfer among family types. Research suggests that if equity among families and individuals is an issue of concern, then alternative means of financing Social Security cost increases should be implemented.

A simple test for heteroscedastic disturbances in a linear regression model is developed using the framework of the Lagrangian multiplier test. For a wide range of heteroscedastic and random coefficient specifications, the criterion is given as a readily computed function of the OLS residuals. Some finite sample evidence is presented to supplement the general asymptotic properties of Lagrangian multiplier tests.