Capitalists, Workers, and Fiscal Policy

Thomas R. Michl is Professor of Economics at Colgate University.

• I. From the Short Run to the Long 1. Introduction * The classical approach * Harrod and modern growth theory * Rethinking fiscal surpluses 2. The nature of the long run * Effective demand and Say's Law * The paradox of thrift * The problem of excess capacity * A classical-Kaleckian model * Capital-constrained growth * Labor-constrained growth * An intellectual division of labor II. Long-run Models of Fiscal Policy 3. A two-class model * Elements of the growth models * Wages and profits * Capitalists * Workers * Endogenous growth * Dynamics of capital accumulation * Comparative dynamics * Exogenous growth * Temporary equilibrium * Dynamics of wealth distribution * Comparative dynamics * Intuition and alternative closures * Appendix: Dynamic programming 4. Saving and the class structure * Critical values of the discount factor * Saving * Saving motives * Saving propensities * The institutional structure of saving * The distribution of wealth * On class analysis 5. Debt and endogenous growth * Public debt in a growth model * Government * On the government budget constraint * Capitalists with infinite horizon * Capitalists with finite horizons * Workers * Infinite horizon case * Temporary equilibrium * Steady state * Comparative dynamics * Transitional dynamics and class structure * Finite horizon case * Temporary equilibrium * Steady state * Comparative dynamics * Transitional dynamics and class structure * Model comparison * Appendix: Elements of A and B matrices 6. Debt and exogenous growth * Infinite horizon case * Temporary equilibrium * Steady state * Comparative dynamics * Transitional dynamics and fiscal policy * Welfare effect of demographic shock * Finite horizon case * Temporary equilibrium * Steady state * Comparative dynamics * Transitional dynamics and fiscal policy * Model comparison * U.S. fiscal policy 7. Pensions and endogenous growth * Elements of a public pension system * Government * Workers * Money's worth and funding systems * Endogenous growth with a public pension * Steady state * Dynamics * Conditions for two-class regime * Policy issues * Policy design * Policy reform 8. Pensions and exogenous growth * Preliminary issues * Exogenous growth with a public pension * Temporary equilibrium * Steady state * Comparative dynamics * Transitional dynamics and expectations * Stable expectations * Adaptive expectations * Perfect foresight * Demographic shocks * PAYGO case * Funded case * Transitional dynamics * The old-age crisis * Policy issues * Policy design * Policy reform 9. Optimal policy * Natural rate of growth * One-class regime * Two-class regime * Optimal public pension * One-class case * Policy dilemmas in the two-class model * Conclusion III. Technical Change and the Production Function 10. Fossil production function: theory * Theory of production * Biased technical change * Fossil production function * Viable technical changes * Biased technical change and growth * Endogenous growth * Exogenous growth * Total factor productivity? * Appendix: Control theory 11. Fossil production function: evidence * The aggregate data * Adjustments * Technical change * Profit share * Viability: a first pass * The wage-profit curves * Cross sectional data * Pooled data * Country studies * Conclusion IV. Summary 12. Fiscal Policy Reconsidered * The burden of public debt * Pensions and the nation as rentier * The production function * A final admonition * Author Index * Subject Index

A chief message of the book is that fiscal debt redistributes wealth in favor of the already wealthy and thus increases the polarization of society between rich and poor. An original and thought-provoking treatise.