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Macro MarketsCreating Institutions for Managing Society's Largest Economic Risks$
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Robert J. Shiller

Print publication date: 1998

Print ISBN-13: 9780198294184

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198294182.001.0001

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National Income and Labor Income Markets

National Income and Labor Income Markets

(p.52) 4 National Income and Labor Income Markets
Macro Markets

Robert J. Shiller (Contributor Webpage)

Oxford University Press

For the purpose of hedging risks to standards of living, the logical place to look first would be to markets for claims on total income; but such markets do not exist, and they have apparently never even been proposed. By making it possible to hedge the capital value of a stream of aggregate income, markets in perpetual claims or perpetual futures, long‐term swap markets, or retail analogues of these would facilitate management of the kind of longer‐run income risk that really matters to individuals and organizations; nations or other groupings of people could also use such markets to insure themselves against the prospect of a declining standard of living or the prospect of relative poverty. By hedging such risks, these macro markets would allow the natural tendency for convergence of incomes to reduce inequality of incomes, and might make significant progress toward equalizing wealth across nations, regions, categories of people, and individuals. There could be markets for hedging the risk of fluctuations in aggregate income, national income, or aggregate labour income for each country (or even region) of the world, and these could be divided up in different ways—although since most people's income is labour income, creating markets for claims on total income means for the most part creating markets for claims on labour income. The different sections of the chapter consider possible hedging arrangements in perpetual claims or perpetual futures markets for national incomes (market structures and associated institutions), whether income markets should be in actual or full‐employment income, and various measurement issues associated with incomes (including uncertainty).

Keywords:   aggregate income, aggregate labour income, aggregate national income, equalizing wealth, futures markets, hedging, income markets, inequality of incomes, labour income, macro markets, national income, perpetual claims, perpetual futures, risk management, standards of living, swap markets, total income

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