Approach: -Show that the profit function is a multiple of kapital input. Call this multiple R_k(z,w) -Give a label to the natural borrowing limit -rewrite consumer problem to take advantage of these substitutions -make assumptions on optimum and verfiy them somehow The Recursive equilibirum, given intital asset distribution, is -value function -policy functions -pricing kernels -beliefs about the evolution of the overall asset distribution such that -v achieves the maximum in the the consumer's FE, given beliefs -the policy functions solve the same FE -markets clear -beliefs are accurate (how?!) If time, rewrite problem by putting R on the left hand side