*In Time* (spoilers about the macroeconomic model)

It is rare to see a movie with such a perfectly realized economic model, albeit one pulled from such exotic territory.  Imagine a Keynes chapter 17 world where the “own rate of interest” on time — which can be borrowed and lent — rules the roost.  Many people are at or near subsistence in their time endowments, and there are economies of scale in supply, so short rates on these loans are high.  Those high rates choke off other investments and a version of TGS ensues.  Medium-term rates, however, are negative in real terms.  Carry around too much time and it will be stolen and you die.  The economy has a strongly inverted yield curve and that discourages traditional financial intermediation and investment.  Wealth continues to fall, which exacerbates security problems, in turning lowering the negative medium-term real rates even further.  A downward spiral ensues.  The only way to make money is to buy marginal security (for time endowments) and spend less on that security than you earn on short loans of time.  More and more resources go into security, again exacerbating the inverted yield curve.  The economics of producing security are also the fundamental source of market power in the economy.  Market segmentation reigns and the marginal rates of substitution on time loans are not equated across different social classes.

The hero has read Kalecki (1943) and he operates under the assumption that a redistribution will prove isomorphic to an “Operation Twist” and restore full employment equilibrium, and positive economic growth, by fixing the inverted yield curve.  But is that policy commitment credible?  Does he have the support of the heroine?  You have to watch the movie to find out…

In Time also raises questions about why we find time inequality more objectionable than money inequality.  You also can interpret it as a model of a world where health care really works.

This is by no means a flawless film but conceptually it was stronger than I had been expecting.  Kudos again to Andrew Niccol, Gattaca is a worthwhile movie too.

Here is Robin Hanson’s review, he liked it less than I did.


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