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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/53139
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| Title: | | The macroeconomics of TANSTAAFL  |
| Authors: | | Grossmann, Volker Steger, Thomas Trimborn, Timo |
| Issue Date: | | 2011 |
| Series/Report no.: | | CESifo working paper: Fiscal Policy, Macroeconomics and Growth 3651 |
| Abstract: | | This paper shows that dynamic inefficiency can occur in dynamic general equilibrium models with fully optimizing, infinitely-lived households even in a situation with underinvestment. We identify necessary conditions for such a possibility and illustrate it in a standard R&D-based growth model. Calibrating the model to the US, we show that a moderate increase in the R&D subsidy indeed leads to an intertemporal free lunch (i.e., an increase in per capita consumption at all times). Hence, Milton Friedman's conjecture There ain't no such thing as a free lunch (TANSTAAFL) may not apply. |
| Subjects: | | intertemporal free lunch dynamic inefficiency R&D-based growth transitional dynamics |
| JEL: | | E20 H20 O41 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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