Saving and Investment in the Twenty-First Century : The Great Divergence.

By: von Weizs�acker, Carl ChristianContributor(s): Kr�amer, Hagen MMaterial type: TextTextPublisher: Cham : Springer International Publishing AG, 2021Copyright date: {copy}2021Edition: 1st edDescription: 1 online resource (351 pages)Content type: text Media type: computer Carrier type: online resourceISBN: 9783030750312Genre/Form: Electronic books.Additional physical formats: Print version:: Saving and Investment in the Twenty-First CenturyLOC classification: HB172.5Online resources: Click to View
Contents:
Intro -- Preface -- Contents -- About the Authors -- Symbols -- List of Figures -- List of Tables -- 1 Introduction: Private Wealth and Public Debt -- 1.1 Overture -- 1.2 The Welfare State and the Concept of Private Wealth -- 1.3 The Ambiguous Image of Public Debt -- 1.4 The Secular Growth of Prosperity -- 1.5 The Limits of Complexity: The Capital Coefficient Has Remained Constant for the Last One Hundred Years -- 1.6 Digitalization -- 1.7 The Consequence: Low Interest Rates, Today and Tomorrow -- 1.8 "Secular Stagnation" -- 1.9 "Dynamic Inefficiency" and the Concern for Future Generations -- 1.10 A Brief Overview of the Following Chapters -- References -- Theory and Empirical Evidence -- 2 The Natural Rate of Interest and the Optimal Rate of Interest in the Steady State -- Abstract -- 2.1 Definition of the Natural Rate of Interest -- 2.2 Profit, Risk, Interest and Overall Economic Returns -- 2.3 Capital-Theoretical Foundations -- 2.4 The Generalized Golden Rule of Accumulation -- 2.5 The Public Debt Ratio and the Period of Production -- 2.6 Private Wealth T + D -- 2.7 The Golden Rule for the Lifetime Utility of the Representative Household -- 2.8 At the Optimum, the Overall Economic Period of Production = The Overall Economic Waiting Period -- 2.9 Deviations from the Steady State: The Interest Rate as Price Signal and the Risk Premium -- 2.10 What if the Interest Rate Represents a Biased Price Signal? -- 2.11 Calibrating Welfare Losses for {{\varvec r}}\ne {{\varvec g}}: An Example -- 2.12 Conclusion -- References -- 3 Wealth and Desired Wealth -- Abstract -- 3.1 The Concept of Desired Wealth -- 3.2 Demographics: The Example of the Savings Triangle -- 3.3 The Savings Triangle Closely Fits the Saving Rate of the Members of the German Social Security System -- 3.4 The Law of Increasing Relative Desired Wealth.
3.5 Demographics: The Third Stage of Life Is Increasing Around the World -- 3.6 The Inheritance of Wealth -- 3.7 With Increasing Prosperity, the Future-Directedness of Human Action Increases -- 3.8 Overcoming Poverty Leads to Increasing Future-Directedness -- 3.9 The Separation of Saving and Investment Results in Greater Provision for the Future -- 3.10 The Measure Z of Relative Effective Provision for the Future -- 3.11 The Assumption of a Closed Economy for the OECD Plus China Economic Area -- 3.12 The Gist -- References -- 4 Real Capital -- Abstract -- 4.1 Real Capital: Theoretical Foundations -- 4.1.1 The Point of Differentiating Between Real Capital and Land -- 4.1.2 The Capital-Output Ratio Does Not Exhibit Any Trend -- 4.1.3 Prefabricated Thought 1: Marx -- 4.1.4 Prefabricated Thought 2: B�ohm-Bawerk -- 4.1.5 Prefabricated Thought 3: The CES Production Function -- 4.1.6 The Coefficient of Intertemporal Substitution -- 4.1.7 An Application of the Coefficient of Intertemporal Substitution -- 4.1.8 A Model with Constant Intertemporal Substitution -- 4.1.9 And What, then, of the "Greater Productivity of More Roundabout Production"? -- 4.1.10 Roundaboutness of Production, Division of Labor and Complexity -- 4.1.11 Real Interest Rates of Zero as Price Signal for the Negative Marginal Productivity of More Roundabout Production -- 4.2 Determining the Value of Private Real Capital in the OECD Plus China Region -- 4.2.1 Definitions and Concepts -- 4.2.2 Data -- 4.2.3 Determining the Value of Real Capital -- 4.2.4 The Value of Private Real Capital -- References -- 5 Land -- Abstract -- 5.1 Land: Theoretical Foundations -- 5.1.1 The Formal Model -- 5.1.2 The Golden Rule of Accumulation Is Preserved -- 5.1.3 Is the Steady-State Interest Rate Always Greater Than the Growth Rate? -- 5.1.4 Ponzi Scheme -- 5.1.5 Financial Risks of Land Ownership 1: Agriculture.
5.1.6 Financial Risks of Land Ownership 2: Urban Land -- 5.1.7 A Dual Model of Land Use -- 5.1.8 Macrorisks of Urban Land Ownership 1: Taxation or Increasing Supply -- 5.1.9 Macrorisks of Urban Land Ownership 2: Restrictions on the Freedom of Contract-In Particular, Rent Control -- 5.1.10 Rent Control as Shared Land Rent -- 5.1.11 The Role of Interest Rate Risk in the Capitalization of Land Rents -- 5.1.12 Distributive Aspects of Land Rent -- 5.1.13 The Real Estate Inheritance Rate -- 5.2 Determining the Value of Privately-Owned Land in the OECD Plus China Region -- 5.2.1 Concepts and Data Sources -- 5.2.2 Land Values and Land Use in Germany -- 5.2.3 Land as a Component of Real Assets: A Franco-German Comparison -- 5.2.4 The Value of Privately Owned Land -- References -- 6 Public Debt -- Abstract -- 6.1 Public Debt: Theoretical Foundations -- 6.1.1 Introduction -- 6.1.2 Explicit Net Public Debt -- 6.1.3 Implicit Public Debt 1: Social Security Retirement Benefits -- 6.1.4 Implicit Public Debt 2: Public Health Insurance -- 6.1.5 Implicit Public Debt 3: An Exotic Example in the Form of Germany's Renewable Energy Act -- 6.1.6 Public Debt When the Real Interest Rate Is Zero -- 6.1.7 The Discounting Discrepancy Problem -- 6.1.8 The Relative Size of the Public Sector -- 6.1.9 Refining the Concept of the Relative Size of the Public Sector -- 6.1.10 Shiller's "TRILLS" Proposal -- 6.1.11 TRILLs When the Interest Rate Is a Biased Price Signal -- 6.1.12 Central Bank Money -- 6.2 Determining the Value of Explicit and Implicit Public Debt in the OECD Plus China Region -- 6.2.1 Explicit Public Debt -- 6.2.2 Implicit Public Debt -- 6.2.2.1 Public Retirement Schemes -- 6.2.2.2 Public Health Insurance -- 6.2.2.3 Implicit Public Debt from Health Insurance in the OECD Plus China Region.
6.2.3 Explicit and Implicit Public Debt in the OECD Plus China Region: Summary of Estimates -- References -- 7 Investment, Saving and Stagnation from a Keynesian Perspective -- Abstract -- 7.1 The Disparity Between Capital Supply and Capital Demand and the Divergence Between Saving and Investment -- 7.2 Public and Private Saving and Public and Private Investment in a Macroeconomic Context -- 7.3 The Adjustment Mechanism in Disequilibrium -- 7.4 John Maynard Keynes as Spiritual Father of the Modern Theory of Stagnation -- 7.5 Alvin Hansen and Secular Stagnation -- 7.6 Larry Summers' Rediscovery of Alvin Hansen's Stagnation Thesis -- 7.7 Keynes and the New Capital-Theoretical Approach -- References -- 8 Concluding Remarks on the Negative Natural Rate of Interest -- Abstract -- 8.1 The Great Divergence -- 8.2 Implicit Public Debt -- 8.3 The Natural Rate of Interest Is Negative -- 8.4 The Distribution of Wealth -- 8.5 Private Wealth at a Real Interest Rate of Zero -- 8.6 The Shift in Optimal Public Debt After COVID-19 -- 8.7 Real Assets in Comparison with an Estimate by Jord�a et al. (2019) -- 8.8 Total Private Wealth at a Real Interest Rate of Zero -- 8.9 Recent "Secular Stagnation" Literature: An Example -- 8.10 Sensitivity Analysis on the Negative Natural Rate of Interest -- 8.11 A Summary of the Results of Our Empirical Estimates -- References -- Economic Policy -- 9 Monetary Stability and the Stability of the Open Society -- Abstract -- 9.1 Authoritarian Tendencies, Complexity and Simplicity -- 9.2 Irenicism: The Symbiosis of Democracy and Market Economy I -- 9.3 Irenicism: The Symbiosis of Democracy and Market Economy II-The Welfare State -- 9.4 The Intertemporal Aspect of Social Insurance -- 9.5 Subsidiarity and Stable Money: A "Stability Pact" -- 9.6 A Culture of Personal Responsibility and Future-Directedness -- 9.7 Inflation or Public Debt?.
9.8 The Aspect of Freedom -- References -- 10 A New Era of International Economic Policy -- Abstract -- 10.1 Free Trade in Modernity -- 10.2 Free Trade or Import Barriers as Nash Equilibrium -- 10.3 "Friedman World" or "Keynes World" -- 10.4 The Natural Rate of Interest, the Friedman World and the Keynes World -- 10.5 Unilateral Action and the Rules of Free Trade -- 10.6 The New Protectionism -- 10.7 A Multilateral Balanced Account Agreement -- References -- 11 Europe, the Euro and German Demographic Renewal -- Abstract -- 11.1 The Single Market -- 11.2 Europe's Global Political Environment: International Demand Power -- 11.3 The Euro and the Single Market -- 11.4 The Euro as Pillar of the Single Market -- 11.5 The Problem of National Current Account Balances -- 11.6 Investment Promotion as the Solution? -- 11.7 A European Balanced Account Agreement, but "No Bailouts" -- 11.8 The Result for Germany: Demographic Renewal -- 11.9 A "Just" Distribution of Employment Opportunities -- References -- 12 The Global Economy After the End of Capital Scarcity: A Utopian Proposal -- Abstract -- 12.1 From Fairy Tale to Political Economy in Ten Years -- 12.2 The End of Capital Scarcity is Not the End of Time Scarcity -- 12.3 The Chinese Economic Miracle -- 12.4 Friedrich List and the Chinese Economic Miracle -- 12.5 A Two-Country Thought Experiment -- 12.6 The Utopia of a Demand-Oriented Growth Strategy for Developing Countries -- 12.7 A Utopian Look into the Future -- 12.8 The Gist of the Argument -- References -- 13 Concluding Remarks on Economic Policy -- Abstract -- 13.1 Summary Part 1: Economic Policy in Germany, Europe and the World -- 13.2 Summary Part 2: Stability and Utopia -- 13.3 Fiscal Policy as Steering Instrument: The Appropriate Real Interest Rate -- 13.4 Fiscal Policy as Steering Instrument: The National Level.
13.5 A Replacement for the Debt Brake.
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Intro -- Preface -- Contents -- About the Authors -- Symbols -- List of Figures -- List of Tables -- 1 Introduction: Private Wealth and Public Debt -- 1.1 Overture -- 1.2 The Welfare State and the Concept of Private Wealth -- 1.3 The Ambiguous Image of Public Debt -- 1.4 The Secular Growth of Prosperity -- 1.5 The Limits of Complexity: The Capital Coefficient Has Remained Constant for the Last One Hundred Years -- 1.6 Digitalization -- 1.7 The Consequence: Low Interest Rates, Today and Tomorrow -- 1.8 "Secular Stagnation" -- 1.9 "Dynamic Inefficiency" and the Concern for Future Generations -- 1.10 A Brief Overview of the Following Chapters -- References -- Theory and Empirical Evidence -- 2 The Natural Rate of Interest and the Optimal Rate of Interest in the Steady State -- Abstract -- 2.1 Definition of the Natural Rate of Interest -- 2.2 Profit, Risk, Interest and Overall Economic Returns -- 2.3 Capital-Theoretical Foundations -- 2.4 The Generalized Golden Rule of Accumulation -- 2.5 The Public Debt Ratio and the Period of Production -- 2.6 Private Wealth T + D -- 2.7 The Golden Rule for the Lifetime Utility of the Representative Household -- 2.8 At the Optimum, the Overall Economic Period of Production = The Overall Economic Waiting Period -- 2.9 Deviations from the Steady State: The Interest Rate as Price Signal and the Risk Premium -- 2.10 What if the Interest Rate Represents a Biased Price Signal? -- 2.11 Calibrating Welfare Losses for {{\varvec r}}\ne {{\varvec g}}: An Example -- 2.12 Conclusion -- References -- 3 Wealth and Desired Wealth -- Abstract -- 3.1 The Concept of Desired Wealth -- 3.2 Demographics: The Example of the Savings Triangle -- 3.3 The Savings Triangle Closely Fits the Saving Rate of the Members of the German Social Security System -- 3.4 The Law of Increasing Relative Desired Wealth.

3.5 Demographics: The Third Stage of Life Is Increasing Around the World -- 3.6 The Inheritance of Wealth -- 3.7 With Increasing Prosperity, the Future-Directedness of Human Action Increases -- 3.8 Overcoming Poverty Leads to Increasing Future-Directedness -- 3.9 The Separation of Saving and Investment Results in Greater Provision for the Future -- 3.10 The Measure Z of Relative Effective Provision for the Future -- 3.11 The Assumption of a Closed Economy for the OECD Plus China Economic Area -- 3.12 The Gist -- References -- 4 Real Capital -- Abstract -- 4.1 Real Capital: Theoretical Foundations -- 4.1.1 The Point of Differentiating Between Real Capital and Land -- 4.1.2 The Capital-Output Ratio Does Not Exhibit Any Trend -- 4.1.3 Prefabricated Thought 1: Marx -- 4.1.4 Prefabricated Thought 2: B�ohm-Bawerk -- 4.1.5 Prefabricated Thought 3: The CES Production Function -- 4.1.6 The Coefficient of Intertemporal Substitution -- 4.1.7 An Application of the Coefficient of Intertemporal Substitution -- 4.1.8 A Model with Constant Intertemporal Substitution -- 4.1.9 And What, then, of the "Greater Productivity of More Roundabout Production"? -- 4.1.10 Roundaboutness of Production, Division of Labor and Complexity -- 4.1.11 Real Interest Rates of Zero as Price Signal for the Negative Marginal Productivity of More Roundabout Production -- 4.2 Determining the Value of Private Real Capital in the OECD Plus China Region -- 4.2.1 Definitions and Concepts -- 4.2.2 Data -- 4.2.3 Determining the Value of Real Capital -- 4.2.4 The Value of Private Real Capital -- References -- 5 Land -- Abstract -- 5.1 Land: Theoretical Foundations -- 5.1.1 The Formal Model -- 5.1.2 The Golden Rule of Accumulation Is Preserved -- 5.1.3 Is the Steady-State Interest Rate Always Greater Than the Growth Rate? -- 5.1.4 Ponzi Scheme -- 5.1.5 Financial Risks of Land Ownership 1: Agriculture.

5.1.6 Financial Risks of Land Ownership 2: Urban Land -- 5.1.7 A Dual Model of Land Use -- 5.1.8 Macrorisks of Urban Land Ownership 1: Taxation or Increasing Supply -- 5.1.9 Macrorisks of Urban Land Ownership 2: Restrictions on the Freedom of Contract-In Particular, Rent Control -- 5.1.10 Rent Control as Shared Land Rent -- 5.1.11 The Role of Interest Rate Risk in the Capitalization of Land Rents -- 5.1.12 Distributive Aspects of Land Rent -- 5.1.13 The Real Estate Inheritance Rate -- 5.2 Determining the Value of Privately-Owned Land in the OECD Plus China Region -- 5.2.1 Concepts and Data Sources -- 5.2.2 Land Values and Land Use in Germany -- 5.2.3 Land as a Component of Real Assets: A Franco-German Comparison -- 5.2.4 The Value of Privately Owned Land -- References -- 6 Public Debt -- Abstract -- 6.1 Public Debt: Theoretical Foundations -- 6.1.1 Introduction -- 6.1.2 Explicit Net Public Debt -- 6.1.3 Implicit Public Debt 1: Social Security Retirement Benefits -- 6.1.4 Implicit Public Debt 2: Public Health Insurance -- 6.1.5 Implicit Public Debt 3: An Exotic Example in the Form of Germany's Renewable Energy Act -- 6.1.6 Public Debt When the Real Interest Rate Is Zero -- 6.1.7 The Discounting Discrepancy Problem -- 6.1.8 The Relative Size of the Public Sector -- 6.1.9 Refining the Concept of the Relative Size of the Public Sector -- 6.1.10 Shiller's "TRILLS" Proposal -- 6.1.11 TRILLs When the Interest Rate Is a Biased Price Signal -- 6.1.12 Central Bank Money -- 6.2 Determining the Value of Explicit and Implicit Public Debt in the OECD Plus China Region -- 6.2.1 Explicit Public Debt -- 6.2.2 Implicit Public Debt -- 6.2.2.1 Public Retirement Schemes -- 6.2.2.2 Public Health Insurance -- 6.2.2.3 Implicit Public Debt from Health Insurance in the OECD Plus China Region.

6.2.3 Explicit and Implicit Public Debt in the OECD Plus China Region: Summary of Estimates -- References -- 7 Investment, Saving and Stagnation from a Keynesian Perspective -- Abstract -- 7.1 The Disparity Between Capital Supply and Capital Demand and the Divergence Between Saving and Investment -- 7.2 Public and Private Saving and Public and Private Investment in a Macroeconomic Context -- 7.3 The Adjustment Mechanism in Disequilibrium -- 7.4 John Maynard Keynes as Spiritual Father of the Modern Theory of Stagnation -- 7.5 Alvin Hansen and Secular Stagnation -- 7.6 Larry Summers' Rediscovery of Alvin Hansen's Stagnation Thesis -- 7.7 Keynes and the New Capital-Theoretical Approach -- References -- 8 Concluding Remarks on the Negative Natural Rate of Interest -- Abstract -- 8.1 The Great Divergence -- 8.2 Implicit Public Debt -- 8.3 The Natural Rate of Interest Is Negative -- 8.4 The Distribution of Wealth -- 8.5 Private Wealth at a Real Interest Rate of Zero -- 8.6 The Shift in Optimal Public Debt After COVID-19 -- 8.7 Real Assets in Comparison with an Estimate by Jord�a et al. (2019) -- 8.8 Total Private Wealth at a Real Interest Rate of Zero -- 8.9 Recent "Secular Stagnation" Literature: An Example -- 8.10 Sensitivity Analysis on the Negative Natural Rate of Interest -- 8.11 A Summary of the Results of Our Empirical Estimates -- References -- Economic Policy -- 9 Monetary Stability and the Stability of the Open Society -- Abstract -- 9.1 Authoritarian Tendencies, Complexity and Simplicity -- 9.2 Irenicism: The Symbiosis of Democracy and Market Economy I -- 9.3 Irenicism: The Symbiosis of Democracy and Market Economy II-The Welfare State -- 9.4 The Intertemporal Aspect of Social Insurance -- 9.5 Subsidiarity and Stable Money: A "Stability Pact" -- 9.6 A Culture of Personal Responsibility and Future-Directedness -- 9.7 Inflation or Public Debt?.

9.8 The Aspect of Freedom -- References -- 10 A New Era of International Economic Policy -- Abstract -- 10.1 Free Trade in Modernity -- 10.2 Free Trade or Import Barriers as Nash Equilibrium -- 10.3 "Friedman World" or "Keynes World" -- 10.4 The Natural Rate of Interest, the Friedman World and the Keynes World -- 10.5 Unilateral Action and the Rules of Free Trade -- 10.6 The New Protectionism -- 10.7 A Multilateral Balanced Account Agreement -- References -- 11 Europe, the Euro and German Demographic Renewal -- Abstract -- 11.1 The Single Market -- 11.2 Europe's Global Political Environment: International Demand Power -- 11.3 The Euro and the Single Market -- 11.4 The Euro as Pillar of the Single Market -- 11.5 The Problem of National Current Account Balances -- 11.6 Investment Promotion as the Solution? -- 11.7 A European Balanced Account Agreement, but "No Bailouts" -- 11.8 The Result for Germany: Demographic Renewal -- 11.9 A "Just" Distribution of Employment Opportunities -- References -- 12 The Global Economy After the End of Capital Scarcity: A Utopian Proposal -- Abstract -- 12.1 From Fairy Tale to Political Economy in Ten Years -- 12.2 The End of Capital Scarcity is Not the End of Time Scarcity -- 12.3 The Chinese Economic Miracle -- 12.4 Friedrich List and the Chinese Economic Miracle -- 12.5 A Two-Country Thought Experiment -- 12.6 The Utopia of a Demand-Oriented Growth Strategy for Developing Countries -- 12.7 A Utopian Look into the Future -- 12.8 The Gist of the Argument -- References -- 13 Concluding Remarks on Economic Policy -- Abstract -- 13.1 Summary Part 1: Economic Policy in Germany, Europe and the World -- 13.2 Summary Part 2: Stability and Utopia -- 13.3 Fiscal Policy as Steering Instrument: The Appropriate Real Interest Rate -- 13.4 Fiscal Policy as Steering Instrument: The National Level.

13.5 A Replacement for the Debt Brake.

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Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2023. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.

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