Jun 6, 2011

Macroeconomic Policy and the Optimal Destruction of Vampires

This is the title of a 1982 JPE article by Dennis Snower. Here's the intro:

Although human beings have endured the recurring ravages of vampires for centuries, scarcely any attempts have been made to analyze the macroeconomic implications of this problem and to devise socially optimal policy responses. Despite the increasing incidence of vampire epidemics in recent years (in Transylvania, Hollywood, and elsewhere), vampirism remains a thoroughly neglected topic in the theory of macroeconomic policy. The "vampires" considered in this paper are not the blood-sucking bats (e.g., Desmodus rotundus or Diphylla ecaudata) to be found in the forests of tropical America, but the blood-sucking ghosts of dead Homo sapiens. The bats are comparatively innocuous; aside from taking their occasional blood sample from missionaries asleep in the jungle, they have had no measurable influence on human welfare. The blood-sucking ghosts, on the other hand, have periodically provided grave threats to human populations; their most conspicuous macroeconomic impact arises from their detrimental effect on the labor force.

The author does not provide empirical evidence but builds a model of human-vampire dynamics. One derived theorem, illustrated in Figure 2, is the Vampire Neutrality Theorem:
The spontaneous generation of vampires (i.e., the appearance of vampires ex nihilo) affects the optimal x and s in the short run but not in the long run. In other words, vampires are neutral in the long run.

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