 Auerbach and Kotlikoff devised an iterative solution method that entails guessing how the economy's ratio of capital to labor will evolve and then updating the guesses based on deviations of annual capital and labor supplies from their respective annual demands and continuing in this manner until the economy's capital-labor transition path converges to a fixed-point path (more precisely, until the guessed ratio of the annual demands for capital relative to labor equal the annual supplies of capital relative to labor).Prior to the development of the Auerbach-Kotlikoff model, economists had no means of assessing how a realistic life-cycle economy would evolve, including the timing of its responses to a wide range of fiscal and demographic changes.For example, economists had no means of saying how much capital would be available to the economy in each future year were the government to increase its consumption on a permanent basis and finance that higher level of consumption by raising income tax rates.