Working Paper: NBER ID: w12344
Authors: Jerry Green; Laurence J. Kotlikoff
Abstract: A century ago, everyone thought time and distance were well defined physical concepts. But neither proved absolute. Instead, measures/reports of time and distance were found to depend on one's reference point, specifically one's direction and speed of travel, making our apparent physical reality, in Einstein's words, "merely an illusion."\n\tLike time and distance, standard fiscal measures, including deficits, taxes, and transfer payments, depend on one's reference point/reporting procedure/language/labels. As such, they too represent numbers in search of concepts that provide the illusion of meaning where none exists.\n\tThis paper, dedicated to our dear friend, David Bradford, provides a general proof that standard and routinely used fiscal measures, including the deficit, taxes, and transfer payments, are economically ill-defined. Instead these measures reflect the arbitrary labeling of underlying fiscal conditions. Analyses based on these and derivative measures, such as disposable income, private assets, and personal saving, represent exercises in linguistics, not economics.
Keywords: No keywords provided
JEL Codes: H3; H6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| standard fiscal measures (E62) | economic interpretation (D46) |
| fiscal measures reporting (E62) | economic interpretation (D46) |
| fiscal measures (E62) | economic meaning (A13) |
| analyses based on fiscal measures (H39) | economic implications (F69) |