Blanchard's paper examines how the finite horizon of economic agents influences macroeconomic issues such as steady-state interest rates and the dynamic effects of government deficits. The paper develops a simple analytical model where the horizon of agents is a parameter that can be chosen arbitrarily. It explores the dynamics and steady-state behavior of an economy without government, focusing on the effects of the horizon index. The paper clarifies the separate roles of finite horizons and declining labor income in determining steady-state interest rates. The paper then studies the effects and role of fiscal policy, focusing on the effects of deficit finance in closed and open economies. It clarifies the respective roles of government spending, deficits, and debt in determining interest rates. The paper characterizes the dynamic behavior of an economy where agents have finite horizons, analyzing the effects and role of government debt and deficits, as well as intertemporal reallocations of taxes. The paper discusses the implications of finite horizons on aggregate consumption, noting that there is no simple aggregate consumption function in an economy with finitely lived agents. It introduces the concept of a constant instantaneous probability of death, p, which determines the expected life of agents. The paper also considers the effects of declining labor income throughout life and the role of life insurance companies in providing risk-free insurance. The paper analyzes the effects of fiscal policy in closed and open economies, focusing on the steady-state and dynamic effects of government debt and deficits. It discusses the role of fiscal policy in smoothing aggregate consumption and the effects of different fiscal policies on capital accumulation and consumption. The paper concludes that the effects of finite horizons on capital accumulation are ambiguous, and the effects of declining labor income can be significant. The paper also highlights the importance of considering the finite horizon aspect in the analysis of government debt and fiscal policy.Blanchard's paper examines how the finite horizon of economic agents influences macroeconomic issues such as steady-state interest rates and the dynamic effects of government deficits. The paper develops a simple analytical model where the horizon of agents is a parameter that can be chosen arbitrarily. It explores the dynamics and steady-state behavior of an economy without government, focusing on the effects of the horizon index. The paper clarifies the separate roles of finite horizons and declining labor income in determining steady-state interest rates. The paper then studies the effects and role of fiscal policy, focusing on the effects of deficit finance in closed and open economies. It clarifies the respective roles of government spending, deficits, and debt in determining interest rates. The paper characterizes the dynamic behavior of an economy where agents have finite horizons, analyzing the effects and role of government debt and deficits, as well as intertemporal reallocations of taxes. The paper discusses the implications of finite horizons on aggregate consumption, noting that there is no simple aggregate consumption function in an economy with finitely lived agents. It introduces the concept of a constant instantaneous probability of death, p, which determines the expected life of agents. The paper also considers the effects of declining labor income throughout life and the role of life insurance companies in providing risk-free insurance. The paper analyzes the effects of fiscal policy in closed and open economies, focusing on the steady-state and dynamic effects of government debt and deficits. It discusses the role of fiscal policy in smoothing aggregate consumption and the effects of different fiscal policies on capital accumulation and consumption. The paper concludes that the effects of finite horizons on capital accumulation are ambiguous, and the effects of declining labor income can be significant. The paper also highlights the importance of considering the finite horizon aspect in the analysis of government debt and fiscal policy.