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This article briefly summarizes and judges recent experimental developments exploring the predictions of dynamically inconsistent models. An opinion is provided as to how the literature may evolve given these recent advances.

What discount rate should be applied to social investments? It is standard to use the market interest rate, thereby respecting private preferences. We show that application of this “revealed preference” criterion rests on faith, not on logic. It is justified only if preferences over all choices, including past choices, are time invariant. The conditions for this to be true are stringent. Under more reasonable conditions, policy makers should be more patient than private citizens, whose choices define the most short‐sighted Pareto optimum.

This editorial presents a critical review of the health model pioneered by Michael Grossman (MGM) in 1972 [8]. It argues that whereas the MGM has great charm for economists, it fails to achieve acceptance by interested laypersons and policy makers. The main reasons for this failure are: (1) the assumption of a long and fixed planning horizon, (2) a fixed ratio between individuals healthcare expenditure and the cost of their own health-enhancing efforts regardless of their state of health, and (3) their presumed ability to restore the state of health deemed optimal at a speed that does not depend on their state of health. An alternative formulation emphasizing the stochastic nature of health production is sketched that conceptually provides solutions to these three problems. In addition, it permits discarding a popular medical argument that seems to undermine the very basis of welfare analysis applied to health by claiming preferences to be unstable: \"As long as you are healthy, you don't give a damn, but as soon as you are sick, you are prepared to sacrifice everything to restore your health.\" The editorial concludes by outlining a research program that may help health economists break away from their MGM fixation.

This paper offers a discussion about the macroeconomics of exhaustible resources. In a resource-based economy, long-term sustainability is an obvious issue. This paper outlines some ideas on how to treat issues related to exhaustible resources in a macroeconomic context. Based on a small dynamic general equilibrium model, the approach is demonstrated with the help of some simple numerical examples.

We consider a general model of pure exchange economies with consumption externalities. Households may have different consumption sets and each consumption set is described by a function called the possibility function. Utility and possibility functions depend on the consumptions of all households. Showing by means of an example that basic assumptions are not enough to guarantee generic regularity, we provide sufficient conditions for generic regularity in the space of endowments and possibility functions.

Olson examines variations in the construction and graphical depiction of consumption possibility frontiers in principles of economics textbooks. The consequence of textbook authors' failing to recognize that producers can get the good in which they lack a comparative advantage either through trade or internal production is explored.

This paper analyzes a general-equilibrium model in which each person can choose to be either a producer or a predator. This model shows how predation breaks the link between the interpersonal distribution of productive resources and the interpersonal distribution of consumption. Specifically, we find that in this model the Rawlsian criterion of maximizing the expected consumption of the least advantaged person selects an unegalitarian distribution of productive resources in which a positive fraction of people have only the minimum possible endowment of productive resources. Also, an egalitarian distribution of productive resources is not even Pareto efficient.

Seen from the offices of the Finance Ministry of Nepal or Tanzania, aid is something quite different from what it appears in Washington or Tokyo. For the donor, aid is an expenditure designed to further objectives of foreign and commercial policy; for the recipient, it is an inflow, designed to relieve a financial constraint. In the past a clear perception of the aid process has been made difficult by the tendency of many authors to portray one or other party as the sole controller of the manner in which aid is used.¹ To do this is, of course, as misleading

Seen from the offices of the Finance Ministry of Nepal or Tanzania, aid is something quite different from what it appears in Washington or Tokyo. For the donor, aid is an expenditure designed to further objectives of foreign and commercial policy; for the recipient, it is an inflow, designed to relieve a financial constraint. In the past a clear perception of the aid process has been made difficult by the tendency of many authors to portray one or other party as the sole controller of the manner in which aid is used.¹ To do this is, of course, as misleading

I. The isolation paradox and the assurance problem, 112. — II. Optimum savings, 116. — III. The rate of discount, 120. — IV. Rich they, poor us, 121. — V. Conclusions, 122.