Behavioral macroeconomics discussed in Cambridge.

• Position: National Bureau of Economic Research conference

Members and guests of the NBER's Project on Behavioral Macroeconomics gathered in Cambridge on November 15 to discuss a number of recent papers. The meeting, organized by George A. Akerlof of University of California, Berkeley, and Robert J. Shiller of NBER and Yale University, centered on these topics:

2. Douglas Bernheim, NBER and Stanford University; Jonathan Skinner, NBER and Dartmouth College; and Steven Weinberg, Stanford university, "What Accounts for the Variation in Retirement Wealth Among U.S. Households?" (NBER Working Paper No. 6227)

Discussant: Laurence J. Kotlikoff, NBER and Boston University

Peter A. Diamond, NBER and MIT, and Daniel Kahneman, Princeton University, "Wealth Illusion"

Discussant: Richard H. Thaler, NBER and University of Chicago

Rafael Di Tella, Harvard University; Robert MacCulloch, Oxford University; and Andrew Oswald, University of Warwick, "The Macroeconomics of Happiness"

Discussant: Benjamin M. Friedman, NBER and Harvard University Robert J. Shiller, "Indexed Units of Account: Theory and Assessment of Historical Experience"

Discussant: Gil Mehrez, Georgetown University

David Laibson, NBEr and Harvard University, "Hyperbolic Discount Functions and Time Preference Heterogeneity"

Discussant: John Shea, NBER and University of Maryland

Ernst Fehr, University of Zurich, and Jean Robert Tyran, University of St. Gallen, "Does Money Illusion Matter?"

Discussant: George A. Akerlof

Household survey data consistently depict large variations in saving and wealth, even among households with similar socioeconomic characteristics. Within the context of the life cycle hypothesis, families with identical lifetime resources might choose to accumulate different levels of wealth for a variety of reasons, including variation in time preference rates, risk tolerance, exposure to uncertainty, relative tastes for work and leisure at advanced ages, income replacement rates, and so forth. These factors can be divided into a small number of classes, each with a distinctive implication concerning the relation between accumulated wealth and the shape of the consumption profile. By examining this relation empirically, one can test for the presence or absence of these particular explanations for differences in wealth. Using the Panel Study of Income Dynamics and the Consumer Expenditure Survey, Bernheim, Skinner, and Weinberg find very little support for life cycle models that rely on the above factors to explain wealth variation. The...