Is Everything Neutral?

B. Douglas Bernheim, Kyle Bagwell

NBER Working Paper No. 2086 (Also Reprint No. r1235)
Issued in December 1986
NBER Program(s):   PE

In his well-known analysis of the national debt, Robert Barro introduced the notion of a "dynastic family." This notion has since become a standard research tool, particularly in the areas of public finance and macroeconomics. In this paper, we critique the assumptions upon which the dynastic mode1 is predicated, and argue that this framework is not a suitable abstraction in contexts where the objective is to analyze the effects of public policies. We reach this conclusion by formally considering a world in which each generation consists of a large number of distinct individuals, as opposed to one representative individual. We point out that family linkages form complex networks, in which each individual may belong to many dynastic groupings. The resulting proliferation of linkages between families gives rise to a host of neutrality results, including the irrelevance of all public redistributions, distortionary taxes, and prices. Since these results are not at all descriptive of the real world, we conclude that, in some fundamental sense, the world is not even approximately dynastic. These observations call into question all policy related results based on the dynastic framework, including the Ricardian equivalence hypo thesis.

download in pdf format
   (539 K)

download in djvu format
   (396 K)

email paper

This paper is available as PDF (539 K) or DjVu (396 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w2086


  • Journal of Political Economy, Vol. 96, No. 2, pp. 308-338, (April 1988). Reprinted in K.D. Hoover (ed.) the New Classical Macroeconomics, Edward citation courtesy of
  • Elger Publishing Ltd: London, 1992

Users who downloaded this paper also downloaded these:
Angrist and Krueger w3572 Does Compulsory School Attendance Affect Schooling and Earnings?
Barro and Redlick w15369 Macroeconomic Effects from Government Purchases and Taxes
Bernheim w2330 Ricardian Equivalence: An Evaluation of Theory and Evidence
Abel and Bernheim w2613 Fiscal Policy With Impure Intergenerational Altruism
Salisbury w20201 Women's Income and Marriage Markets in the United States: Evidence from the Civil War Pension
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us