Criticism
Although Hall's proof, is extremely short, just nine lines, Hall's corollary 4, can be found in Flavin. Wu has shown that changes in consumption being zero is the result of an error. Wu's proof is shown below applying the same definitions and techniques found in Sargent.
A consumer maximizes
- subject to
- , where, under a stochastic process, is
- where is consumption, is non-human assets, is labor income, is gross rate of return (all at the beginning of period). is expectation, is time.
Under the "Euler equation approach," optimal consumption for period t is given by
- , where, is the lag operator
Repeating Euler optimization, one should find that consumption, should be given by
- . . .
Assuming ,
Since can be expanded as
and by definition of lag operator
implies
thus for any n
then
and for n = 1
Read more about this topic: Consumption Smoothing
Famous quotes containing the word criticism:
“It is from the womb of art that criticism was born.”
—Charles Baudelaire (1821–1867)
“A bad short story or novel or poem leaves one comparatively calm because it does not exist, unless it gets a fake prestige through being mistaken for good work. It is essentially negative, it is something that has not come through. But over bad criticism one has a sense of real calamity.”
—Rebecca West (1892–1983)
“It is ... pathetic to observe the complete lack of imagination on the part of certain employers and men and women of the upper-income levels, equally devoid of experience, equally glib with their criticism ... directed against workers, labor leaders, and other villains and personal devils who are the objects of their dart-throwing. Who doesn’t know the wealthy woman who fulminates against the “idle” workers who just won’t get out and hunt jobs?”
—Mary Barnett Gilson (1877–?)