A note on heterogeneity, inefficiency, and indeterminacy with Ricardian preferences

The main issue raised in this note is the nonequivalence between the infini te-horizon model where agents are infinitely lived and the successive gener ations model with altruistic finitely lived agents: in the presence of a no nnegative bequest requirement, endowment heterogencity imposes a revision o f the acritical adoption of the infinitely lived agent representation in mo dern macro-economics. By analysing nonstationary monetary equilibria in a r einterpretation of Townsend's "tumpike" model. this paper shows how the tra ditional issues of market inefficiency and indeterminacy of overlapping gen erations models carry over into modern macroeconomics through the natural f initeness or human lives despite "well behaved" Ricardian altruism. (C) 200 1 Academic Press.