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:
“However intense my experience, I am conscious of the presence and criticism of a part of me, which, as it were, is not a part of me, but a spectator, sharing no experience, but taking note of it, and that is no more I than it is you. When the play, it may be the tragedy, of life is over, the spectator goes his way. It was a kind of fiction, a work of the imagination only, so far as he was concerned.”
—Henry David Thoreau (1817–1862)
“When you overpay small people you frighten them. They know that their merits or activities entitle them to no such sums as they are receiving. As a result their boss soars out of economic into magic significance. He becomes a source of blessings rather than wages. Criticism is sacrilege, doubt is heresy.”
—Ben Hecht (1893–1964)
“The critic lives at second hand. He writes about. The poem, the novel, or the play must be given to him; criticism exists by the grace of other men’s genius. By virtue of style, criticism can itself become literature. But usually this occurs only when the writer is acting as critic of his own work or as outrider to his own poetics, when the criticism of Coleridge is work in progress or that of T.S. Eliot propaganda.”
—George Steiner (b. 1929)