Overlapping Generations Model of General Equilibrium
The consumption loan model that Paul Samuelson introduced in 1958 to analyse the rate of interest, with or without the social contrivance of money, has developed into what is without doubt the most important and influential paradigm in neoclassical general equilibrium theory outside of the Arrow—Debreu economy. A vast literature in public finance and macroeconomics is based on the model, including studies of the national debt, social security, the incidence of taxation and bequests on the accumulation of capital, the Phillips curve, the business cycle, and the foundations of monetary theory. In the following pages I give a hint of these myriad applications only in so far as they illuminate the general theory. My main concern is with the relationship between the Samuelson model and the Arrow—Debreu model.
KeywordsManifold Income Volatility
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