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This paper provides a critical survey of the large literature on the life cycle model of consumption, both from an empirical and a theoretical point of view. It discusses several approaches that have been taken in the literature to bring the model to the data, their empirical successes, and their failures. Finally, the paper reviews a number of changes to the standard life cycle model that could help solve the remaining empirical puzzles.

The literature on cooperation acknowledges different forms of cooperation and their corresponding forms of reciprocity. This paper goes further and shows that most of these different forms are indeed distinct types; hence, the terms “cooperation” and “reciprocity” are portmanteau. This paper proposes a taxonomy of ten types: i) quid pro quo ; ii) intertemporal allocation; iii) altruism; iv) formal obligations (justice); v) informal obligations (repayment of favors); vi) gifts; vii) allegiance; viii) hegemony; ix) grants; and x) philanthropy. Nonetheless, “beneficence”, defined as the promotion of the good, is common to all ten types. The promotion of the good entails actions that are free from i) opportunism and deception; ii) self-aggrandizement; and iii) malevolence (envy, schadenfreude, etc.). One payoff of the proposed ten-type taxonomy of cooperation/reciprocity is the delineation of five disciplines: anthropology, economics, political science, sociology, and psychology. Each discipline is suitable for the study of one or two types of cooperation/reciprocity. This raises a question: how does each discipline conceive of the other types appropriate for adjacent disciplines? This paper finds that each discipline effectively sculptures the other types after its own preconceived mode of conception (toolkit)—amounting to “interdisciplinary social science imperialism.” The proposed ten-type taxonomy promises a transdisciplinary platform that is impartial, i.e., able to help researchers avoid interdisciplinary imperialism. This payoff shows the possibility of unifying the social sciences without interdisciplinary imperialism, i.e., reducing all types of cooperation/reciprocity to one’s favored preconceived toolkit.

Hiring is a costly activity reflecting firms' investment in their workers. Microdata show that hiring costs involve production disruption. Thus, cyclical fluctuations in the value of output, induced by price frictions, have consequences for the optimal allocation of hiring activities. We outline a mechanism based on cyclical markup fluctuations, placing emphasis on hiring frictions interacting with price frictions. This mechanism generates strong propagation and amplification of all key macroeconomic variables in response to technology shocks and mutes the traditional transmission of monetary policy shocks. A local projection analysis of aggregate U.S. data shows that the empirical results, including the cyclicality of markups, are consistent with the model's impulse response functions.

We present a novel structural estimation procedure for models of intertemporal allocation. This is based on modelling expectations errors directly; we refer to it as synthetic residual estimation (SRE). The flexibility of SRE allows us to account for measurement error in consumption and for heterogeneity in intertemporal allocation parameters. An investigation of the small sample properties of the SRE estimator indicates that it dominates generalized method of moments (GMM) estimation of both exact and approximate Euler equations in the case when we have short panels and noisy consumption data. We apply SRE to two panels drawn from the Panel Study of Income Dynamics (PSID) and estimate the joint distribution of the discount factor and the elasticity of intertemporal substitution. We reject strongly homogeneity of the discount factor and the elasticity of intertemporal substitution. We find that, on average, the more educated are more patient and less willing to substitute intertemporally than the less educated. Within education strata, patience and willingness to substitute are positively correlated.

This study presents an analytical model of budget allocation into military and civilian expenditures within an arms race between two rival countries and compares the consequences of shortsighted (period-by-period) planning versus forward-looking (long-term) planning. The authors show that although shortsighted planning is favorable for both countries, they are likely to be locked in a prisoner's dilemma in which both overinvest in arms procurement. The likelihood of overinvestment in arms procurement is higher when the perceived benefit from security is higher and when future benefits from existing arms stocks are \"high\"; that is, when the rate of technology improvement over time is lower, the depreciation rate of existing arms is lower and the discount factor is higher. A dynamic version of Kagan et al., employing real-world data, finds evidence for the existence of a prisoner's dilemma in the Israeli—Syrian arms race.

Short-term reductions in social welfare, expected to be caused by a currently imposed carbon tax, are among the obstacles to a rapid transition to a low-carbon economy. Using an extended DICE model, we studied the potential of green bonds to both accelerate this transition and smoothen welfare losses and gains in a socially optimal way. We showed that green bonds can indeed accelerate the transition to a low-carbon economy and that lower interest rates on bonds speed up this acceleration. Moreover, bonds can reduce short-term welfare losses; however, to eliminate welfare losses, additional compensation mechanisms are needed. For example, bonds at a 3% interest rate can decrease the peak atmospheric carbon concentrations by about 20% and shorten the initial time, during which society is worse off from 75 to 45 years. Retaining at least the same consumption level as in the no-mitigation scenario, without using bonds, is possible only through a decrease in abatement efforts. Green bonds of sufficiently low interest rates allow improving intertemporal welfare as well as achieving a more pronounced climate change mitigation with respect to both mitigation and no-mitigation scenarios without bonds.

The purpose of this paper is to explain the marginal efficiency of capital. The net present value diagram is derived and used to illustrate how the interest rate regulates the intertemporal allocation of resources. The net present value diagram is then used to show that the marginal efficiency of capital contradicts the net present value method of ranking investment projects. The net present value diagram is integrated into the capital-based framework to demonstrate that the interest rate cannot regulate the intertemporal allocation of resources in Keynes's theory of investment.

This study investigates the voluntary allocation of monetary resources to future food consumption by customers of campus cafeterias. A rich dataset allows us to infer social proximity of cafeteria customers and to measure social spillovers in allocation decisions. We show that individuals tend to imitate directly observed behavior and that close social proximity further encourages imitation.

This paper analyzes the optimal intertemporal control of a biological invasion. The invasion growth function is non-convex and control costs depend on the invasion size, resulting in a non-classical dynamic optimization problem. We characterize the long run dynamic behavior of an optimally controlled invasion and the corresponding implications for public policy. Both control and the next-period invasion size may be non-monotone functions of the current invasion size; the related optimal time paths may not be monotone or convergent. We provide conditions under which eradication, maintenance control, and no control are optimal policies.

We study the long-term behavior of the optimal harvesting policies for a mixed forest composed by multiple species of different maturity ages. This model is a prototype for the exploitation of a finite resource such as land or space, which can be allocated to different activities that produce their revenue after certain delays at which the resource is liberated for reuse. We prove the existence and uniqueness of a sustainable state , and we discuss the conditions under which an optimal trajectory converges in the long run toward this state or toward the set of optimal periodic cycles. We also analyze different situations in which the convergence occurs in finite time.