TY  - JOUR
AU  - Kotlikoff,Laurence J.
AU  - Persson,Torsten
AU  - Svensson,Lars E.O.
TI  - Laws as Assets:  A Possible Solution to the Time Consistency Problem
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2068
PY  - 1988
Y2  - December 1988
UR  - http://www.nber.org/papers/w2068
L1  - http://www.nber.org/papers/w2068.pdf
N1  - Author contact info:
Laurence J. Kotlikoff
Department of Economics
Boston University
270 Bay State Road
Boston, MA 02215
Tel: 617/353-4002
Fax: 617/353-4001
E-Mail: kotlikoff@gmail.com

Torsten Persson
Torsten and Ragnar Soderberg Chair in Economic Sci
Institute for International Economic Studies
Stockholm University
SE-106 91 Stockholm
SWEDEN
Tel: +46 8 163066
Fax: +46 8 6747801
E-Mail: Torsten.Persson@iies.su.se

Lars E.O. Svensson
Sveriges Riksbank
SE-103 37 Stockholm
SWEDEN
Tel: +46 8 787 0107
Fax: +46 8 21 0531
E-Mail: lars.svensson@iies.su.se
AB  - This paper presents a new solution to the time-consistency problem that appears capable of enforcing ex ante policy in a variety of settings in which other enforcement mechanisms do not work. The solution involves formulating a law, institution, or agreement that specifies the optimal ex ante policy and that can be sold by successive old generations to successive young generations. Each young generation pays for the law through the payment of taxes. Both old and young generations have an economic incentive to obey the law. For the old generation that owns the law, breaking the law makes the law valueless, and the generation suffers a capital loss. For the young generation the economic advantage of purchasing the existing law exceeds its cost as well as the economic gain from setting up the law.
ER  -