The Macroeconomics of TANSTAAFL

Volker Grossmann, Thomas Steger and Timo Trimborn

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

Abstract: Market imperfections may lead to underinvestment in dynamic general equilibrium models. An interesting but unexplored question is whether policy interventions which attenuate underinvestment gaps necessarily imply that consumption will initially decline. By employing a calibrated version of a standard R&D-based growth model, we show that raising the R&D subsidy rate may not only close the R&D underinvestment gap but also raise consumption per capita at all times ("intertemporal free lunch"). Hence, Milton Friedman’s conjecture 'There ain’t no such thing as a free lunch' (TANSTAAFL) may not apply. We also discuss the mechanics of an intertemporal free lunch and further examples.

Keywords: Intertemporal free lunch; Endogenous growth; R&D underinvestment; Transitional dynamics (search for similar items in EconPapers)
Pages: 30 pages JEL Classification: E20, H20, O41
Date: 2012-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://degit.sam.sdu.dk/papers/degit_17/C017_041.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to degit.sam.sdu.dk:80 (No such host is known. )

Related works:
Journal Article: The macroeconomics of TANSTAAFL (2013)
Working Paper: The Macroeconomics of TANSTAAFL (2011)
Working Paper: The Macroeconomics of TANSTAAFL (2011)
Working Paper: The macroeconomics of TANSTAAFL (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:deg:conpap:c017_041

Access Statistics for this paper

More papers in DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade Contact information at EDIRC.
Bibliographic data for series maintained by Jan Pedersen ().