Active Intermediation in Overlapping Generations Economies with Production and Unsecured Debt

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1997-04-01
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Pingle, Mark
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Tesfatsion, Leigh
Professor Emeritus
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Economics

The Department of Economic Science was founded in 1898 to teach economic theory as a truth of industrial life, and was very much concerned with applying economics to business and industry, particularly agriculture. Between 1910 and 1967 it showed the growing influence of other social studies, such as sociology, history, and political science. Today it encompasses the majors of Agricultural Business (preparing for agricultural finance and management), Business Economics, and Economics (for advanced studies in business or economics or for careers in financing, management, insurance, etc).

History
The Department of Economic Science was founded in 1898 under the Division of Industrial Science (later College of Liberal Arts and Sciences); it became co-directed by the Division of Agriculture in 1919. In 1910 it became the Department of Economics and Political Science. In 1913 it became the Department of Applied Economics and Social Science; in 1924 it became the Department of Economics, History, and Sociology; in 1931 it became the Department of Economics and Sociology. In 1967 it became the Department of Economics, and in 2007 it became co-directed by the Colleges of Agriculture and Life Sciences, Liberal Arts and Sciences, and Business.

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1898–present

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  • Department of Economic Science (1898–1910)
  • Department of Economics and Political Science (1910-1913)
  • Department of Applied Economics and Social Science (1913–1924)
  • Department of Economics, History and Sociology (1924–1931)
  • Department of Economics and Sociology (1931–1967)

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It is well known that the first welfare theorem fails for the pure exchange^overlapping generations economy studied by Samuelson (1958) and for the private production overlapping generations economy studied by Diamond (1965). Tirole (1985) combines and extends the Samuelson and Diamond frameworks by permitting both unsecured debt and private pro duction and shows that the first welfare theorem stillfails to hold. This paper shows that the reason for this failure is that intermediation is niodelled as a purely passive coordination ac tivity implemented by a Walrasian Auctioneer.

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