entitlements missing markets and environmental policy abstract it is argued that while environmental damage may impose a cost on future generations this is not due to failure of entitlements nor due entirely to missing markets environmental damage may be viewed as nonconvexities which result in intertemporal externalities one such nonconvexity is missing markets and the implications of incorporating these are considered three simple models identify the essential policy issues namely the problem of incentives legal liability and the divergence between private and social costs

intergenerational equity and sustainability abstract this paper explores the limitations of conventional economic analysis of intergenerational problems and examines some of the alternatives suggested in the literature it is argued that proper consideration of future generations has at least three requirements first when future costs and benefits are considered it should be taken into account that they are to be enjoyed by different generations second the sustainability requirement should be adopted this represents an equity commitment to the future and implies the recognition that future generations have the right to nondeteriorated ecological and economic capacity the paper studies the ways in which the recognition of these rights might be incorporated into economic evaluation and management third an appropriate institutional network to enforce the recognition of these rights in decision making processes should be constituted its design and necessary functions are also analyzed

efficiency considerations and the exemption of food from sales and value added taxes we evaluate efficiency considerations underlying the widespread exemption of food from sales and value added taxes and the implications for tax policy household and restau rant meals and both constant and increasing returns cases are examined higher taxes on food offset the non taxation of time inputs into household production even under constant returns to scale with increasing returns gains from taxing food are higher and amplified by subsidizing restaurant food and all marginal cost components of restaurant meals on effi ciency grounds exemption of food from sales and value added taxes emerges as socially costly policy especially under increasing returns

ecosystem services from eye opening metaphor to complexity blinder abstract what started as a humble metaphor to help us think about our relation to nature has become integral to how we are addressing the future of humanity and the course of biological evolution the metaphor of nature as a stock that provides a flow of services is insufficient for the difficulties we are in or the task ahead indeed combined with the mistaken presumption that we can analyze a global problem within a partial equilibrium economic framework and reach a new economy project by project without major institutional change the simplicity of the stock flow framework blinds us to the complexity of the human predicament the ecosystem services approach can be a part of a larger solution but its dominance in our characterization of our situation and the solution is blinding us to the ecological economic and political complexities of the challenges we actually face

the effects of taxation price control and government contracts in oligopoly and monopolistic competition abstract many government contracts with or policies towards oligopolistic sectors essentially involve private firms selling a given proportion or quantity of output to the government at a fixed price p r with the remainder being sold on the open market often this is combined with consumer rationing examples include cement and sugar in india and health housing and defence in many countries the paper investigates the effects of these schemes including sales and excise taxation on prices output and household welfare under oligopoly and monopolistic competition less government control reduced may raise prices and tax shifting can be above or below 100 percent

sustainability and externalities is the internalization of externalities a sufficient condition for sustainability in an important contribution in ecological economics van de bergh 2010 correctly concludes that sustainability does not imply zero externalities however he continues with the delphic statement delphic statements were uttered by the renowned oracle of ancient greece at delphi they were phrased in such a way as to be self fulfilling because alternative interpretations covered every possibility without externalities the problem of sustainability vanishes if this statement refers to an impossible economic process that produces no externalities then he is right however it might be interpreted as stating that whenever environmental policy internalizes environmental externalities then sustainability will be ensured in this note i assert that in the real world where externalities prevail their internalization or neutralization in the traditional way cannot lead to sustainability only if internalization takes a very specific form that results in the inviolable preservation of environmental rights of future generations in pure biological terms can sustainability be ensured after revised the original commentary i resubmit it the issues raised by the editor have been carefully considered

how should commodities be taxed market structure product heterogeneity and the optimal structure of commodity taxes abstract this paper is concerned with the form in which commodity taxes are best imposed and particularly with the appropriate balance between specific and ad valorem components this neglected issue is of policy importance in relation to the harmonization of tax structures within the eec and of theoretical interest as a point of contact between optimal tax theory and models of non price competition the roles of the two taxes as purely corrective devices under a variety of market forms are established and discussed the analysis suggests that heavily taxed commodities should normally be subject to high specific rather than high ad valorem taxes

the political economics of redistribution inequality and tax avoidance a central result in the political economy of taxation is that the degree of redistribution is positively linked to income inequality however empirical evidence supporting such a relationship turns out to be mixed this paper shows how the different empirical reactions can be rationalized within a simple model of tax avoidance and costly tax enforcement by focusing on structure induced equilibrium in which taxpayers vote over the size of the income tax and the level of tax enforcement we show that more inequality may well reduce the extent of redistribution depending on two opposing effects the standard political effect and a negative tax base effect working through increases in the average level of tax avoidance and the share of enforcement expenditures in total tax revenue

efficient black markets abstract this paper investigates analytically the welfare effects of black market activities that firms undertake to evade taxes the desirability of a black market is linked to the attributes of the goods supplied by black market firms the analysis identifies cases where a black market reduces increases the distortionary impact of taxation on the allocation of resources across the goods that the government is attempting to tax leading to a welfare gain loss

towards an operational sustainability criterion abstract this paper examines the concept of sustainability and its implications for environmental policy analysis it builds on the premise that present society holds a moral obligation to pass on a world of undiminished life opportunities to members of future generations maintaining life opportunities in turn can be achieved by maintaining or improving a diverse set of resources and capabilities that support a person s freedom to define and pursue her own conception of the good life on an operational level this framework points to the following guideline for environmental policy protecting the rights of future generations requires either the conservation of environmental resources or compensatory measures including the provision of substitute technologies that ensure the fair and proportionate sharing of net benefits over intergenerational time scales in this framework resource depletion is permissible only if with reasonable certainty it would generate a pareto improvement relative to a baseline scenario involving strict resource conservation

double co2 and beyond benefits costs and compensation abstract economic decisions over what action if any to take concerning the greenhouse effect tend to revolve around the social discount rate implicitly the debate concerns how to attribute intertemporal weights to welfare and implies a moral stance that is rarely given explicit recognition refocusing on the outcomes of current actions emphasises the role of compensation a conflict is apparent between the view that the current generation need be unconcerned over the loss or injury caused to future generations because they will benefit from advances in technology investments in both man made and natural capital and direct bequests and the requirement to avoid harming the innocent changes in units of welfare cannot be viewed as equivalent regardless of their direction in general doing harm is not cancelled out by doing good the result is a rejection of the potential compensation principle which underlies the current economic stance and a reconsideration of the acceptability of compensation altogether the concept of human rights and a non utilitarian perspective are used to show how cost benefit analysis denies the existence of inalienable rights and economics limits the moral considerability of harm

management ownership and market valuation an empirical analysis we investigate the relationship between management ownership and market valuation of the firm as measured by tobin s q in a 1980 cross section of 371 fortune 500 firms we find evidence of a significant nonmonotonic relationship tobin s q first increases then declines and finally rises slightly as ownership by the board of directors rises for older firms there is evidence that q is lower when the firm is run by a member of the founding family than when it is run by an officer unrelated to the founder

taxes and transaction costs in asset market equilibrium abstract this paper examines the effects of capital taxation in an imperfect capital market in which acquiring risky assets incurs costs individual portfolio choice has two distinct aspects the extensive choice of which assets to hold in the portfolio and the intensive choice of what fraction of wealth to invest in each asset held the traditional assumption of zero transaction costs obscures the extensive choice this paper shows that if trading in assets is costly capital taxes have extensive effects as well as the intensive effects previously studied

sustainability and the intergenerational distribution of natural resource entitlements abstract the paper describes an olg economy with a single exhaustible resource that has amenity value the steady states of this economy form a continuum implying path dependency we compare three policy scenarios first a zero extraction policy of enforced conservation that avoids environmental degradation possibly at the expense of intertemporal efficiency second a grandfathering policy that endows the present generations with all resources and that ensures efficiency but cannot prevent a persistent decline in lifetime utility from one generation to the next third a trust fund policy where future generations receive claims for the natural resource of the three only the trust fund ensures efficiency and protects welfare of all generations

sustainability as opportunity this paper explores the relationship between sustainability concepts and contractarian principles of distributional fairness a commitment to equality of opportunity between contemporaries entails that life opportunities should be nondiminishing from generation to generation defining sustainability as nondeclining utility is analytically suggestive but practically problematic given the uncertainties that surround future preferences and technologies life opportunities may be sustained however by providing future generations with specific endowments of reproduced capital technological capacity natural resources and environmental quality in this setting capital resource substitutions are defensible only if there is compelling evidence that they would benefit both present and future generations

the value and applicability of bargaining in an intergenerational setting abstract this paper considers the effectiveness of a variation of coasian bargaining as a policy instrument for internalizing one or multiple intergenerational externalities the variation involves appointing a contemporary party to represent the interests of the affected parties who are currently unable to represent themselves potential criticisms of such a policy are considered and addressed and precedents to such a policy are put forth to test the value of such a policy a two period model in which two externalities exist in the production consumption decisions and with representative agents is used to compare the welfare effects of four scenarios 1 agents in each period optimize their period specific utility 2 a benevolent social planner chooses allocations in both periods to maximize a social welfare function 3 the externalities are internalized using a bargaining policy and 4 the externalities are internalized using a tax and subsidy policy i find that contrary to general consensus in the literature coasian bargaining can be adapted in such a way as to make it applicable in an intergenerational framework

economics and sustainability balancing trade offs and imperatives the concept of sustainability has been increasingly invoked in scholarly and public policy debates discussion has been hampered however by uncertainty and lack of uniformity in the meaning of sustainability this paper seeks to identify some common ground among economists ecologists and environmen tal ethicists two issues seem salient require ments for intergenerational and the defi nition of social capital to be provided to future generations a concept of safe minimum standard which has received at least some recognition in the ecology philosophy and eco nomics literatures may provide the beginnings of a common ground for debate about sus tainability jel q2

resource use institutions and sustainability a tale of two pacific island cultures this paper examines two pacific island cultures easter island and tikopia and the relationship between natural resource systems human made capital population growth and institutional change easter island followed a preindustrial society pattern of overshoot and collapse however tikopia evolved cultural practices leading to zero population growth and sustainable resource use using a modified lotka volterra predator prey model we find 1 investment in human made capital does not necessarily eliminate the boom and bust cycles of economic activity and population observed in many past societies and 2 institutional adaptation and resource conservation can be critical in achieving population stability

marginal q revisited two measures of firm investment behaviour used in the empirical research are tobin s q average q and marginal q the marginal q is a more recently introduced measure than tobin s q and is not as well known this article aims to demonstrate the advantages of using marginal q as a performance measure and is a response to an earlier critical article berglund 2011 claiming an elusiveness bias the pro arguments made in response are that the claimed elusiveness is not a problem furthermore many of the evaluation problems inherent in the empirical use of tobin s q like estimation of replacement cost of assets can be avoided from a pure theoretical standpoint it has long been recognized that marginal q is superior to an average measure of investment behaviour such as tobin s q

taxation with costly administration the concept of a tax technology is used here as providing a unified framework for analyzing both administrative activity by tax authorities and tax resisting activity by taxpayers this framework provides a simple formalization of adam smith s four components of tax costs administration substitution active noncompliance and passive compliance the model is used to derive policy implications concerning the proper measurement of the cost of public funds and concerning the criterion for optimal administration

the optimal elasticity of taxable income abstract the strength of the behavioral response to a tax rate change depends on the environment individuals operate in and may be manipulated by instruments controlled by the government we first derive a measure of the social benefit to affecting this elasticity the paper then examines this effect in the solution to the optimal income taxation problem when such an instrument is available first in a general model and then in an example when the government chooses the income tax base

commodity taxation in a differentiated oligopoly the authors introduce commodity taxation into a vertical differentiation model with endogenous product selection they show that a uniform ad valorem tax lowers both qualities distorts the allocation of consumers between firms and lowers the consumer prices of both variants a small uniform tax is always welfare improving over the no tax equilibrium a differentiation of tax rates may or may not be desirable on welfare grounds if a welfare improvement is possible through a nonuniform tax it is always the high quality variant that must be taxed at a higher rate copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

vat base broadening when the location of some consumption is mobile abstract if consumption can take place offshore for some items such as banking services the general presumption in favour of a broadly based vat at a single rate in the no labour leisure choice case breaks down for such items consumption taxes vat are shifted backward to domestic producers while for non mobile consumption taxes are shifted forward to consumers and a broadly based single rate vat will distort border tax propositions no longer hold and income and sales taxes are no longer equivalent no data are available which classifies consumption activity into mobile non mobile so numerical calculations are presented for a stylized economy showing the configuration of optimal tax rates these features can yield we provide examples of cases where a move from a narrow based tax to a lower rate equal yield broadly based tax is welfare worsening this underscores the theme of the paper that in such cases a broadly based single rate vat is typically not first best policy

the comparison between ad valorem and specific taxation under imperfect competition abstract this paper compares ad valorem and specific taxation in two models of oligopoly with and without free entry predominantly ad valorem taxation implies a relatively low consumer price high tax revenue and when entry is precluded low profits ad valorem taxation dominates specific taxation from the welfare perspective the set of circumstances under which with free entry specific taxation raises welfare is a strict subset of that in which ad valorem taxation is welfare improving and in both models the maximisation of consumer welfare subject to a binding revenue constraint requires maximum reliance on ad valorem taxation

environmental issues and economic decisions in developing countries abstract this paper explains the key role of environmental economics in incorporating environmental concerns into decision making and in facilitating the more efficient management of natural resources as a step toward sustainable development it reviews concepts and techniques for valuation of environmental impacts for use in conventional cost benefits analysis as well as key related aspects including environmental impacts of economywide policies multicriteria analysis risk and uncertainty and discount rate issues several developing country case studies are summarized which cover a range of practical valuation methods the evidence presented suggests that the valuation techniques for determining use values may be applied successfully in appropriate cases but examples involving nonuse values are rare the use of multiobjective desicion methods also needs to be explored where economic valuation is not feasible

a characteristics approach to optimal taxation line drawing and tax driven product innovation real world tax legislation assigns goods to different categories of tax rates on the basis of observable characteristics allowing the tax system to handle a constantly evolving set of available goods we recast the theory of optimal taxation in the language of characteristics and we show how to optimally draw lines that delineate tax rate regimes such lines are associated with notches in tax liability as a function of characteristics creating incentives to introduce goods with new combinations of characteristics in order to reduce tax liability with a restricted set of tax instruments such notches are in general part of the second best optimal tax system

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

the ideology of efficiency searching for a theory of policy analysis the potential pareto improvement criterion and other measures of economic efficiency do not pass the test of consistency and coherence within economic theory nor do such measures accord with what public decision makers seek in policy advice from economists such efficiency measures are nonetheless durable components of the ideology of economics in general and benefit cost analysis in particular the objectivity of the policy scientist has been confused with the objectivity of the science while economic efficiency has no claim to objectivity the policy scientist can be an objective analyst of policy choices

average q marginal q and the relation between ownership and performance abstract using average performance measures as the literature does to investigate the relation between ownership structure and performance suffers from severe drawbacks we propose a marginal tobin s q and argue for its superiority

policies for sustainability lessons from an overlapping generations model discounting is often considered inimical to sustainability reliance on the assumption that endowments regulate the transfer of assets to the future in standard growth models interprets the interest rate in the intergenerational context as a partial reflection of myopia a more complete market model that allows agents from different generations to engage in long term contracts with one another severs the movement of capital to the future from the endowment assumption adherence to the endowment assumption as a de facto market structure not simply a modeling convenience endorses sustainability policies that injure the future

on the optimal tax base for commodity taxation taxed considerable effort has been devoted to characterizing the manner in which the optimal tax rates differ across the taxable commodities but the literature has rarely addressed the issue of which commodities should be included in the tax base in fact the standard optimal tax model cannot provide a useful answer to this question because it does not contain any of the resource costs normally associated with the collection of taxes an omission that seriously diminishes the policy relevance of the model 2

welfare effects of changing commodity tax rates toward uniformity abstract this paper presents a theory of tax reform that is applicable to a many good economy where i the initial tax structure is arbitrarily given ii no lump sum tax exists and iii the initial tax revenue must be maintained after the reform sufficient conditions are established under which tax changes definitely result in increases in welfare they indicate that in a wide class of situations the uniform tax structure can be a useful intermediate target on the way to optimum

comparing futures a positional approach to population ethics abstract major questions in environmental economics concern choices about the future sensible decisions thus require rules for comparing the well being of potentially different sets of people in terms of both numbers and identities under different futures the central problem of normative population theory is that basic ethical principles that individually claim widespread acceptance yield unpalatable conclusions when combined no approach currently on offer is able to overcome all theoretical objections but decision making goes on and needs ethical guidance this paper proposes a practical approach to the welfare comparison of competing futures as a matter of expedience it accepts that some choices may be incommensurable and therefore unrankable but its defining characteristic is its recognition that the evaluation of well being is typically a momentary phenomenon dependent on an individual s position or reference frame a critical positional change arises from the very act of being brought into existence social welfare thus has to be continually re evaluated and the welfare basis for new decisions is subject to a ratchet effect although this approach abandons time consistency it does so without apology and since time flows in one direction without inconsistency in decision making

oligopolistic competition and economic welfare a general equilibrium analysis of entry regulation and tax subsidy schemes abstract two contributions to the general equilibrium analysis of an oligopolistic economy with free entry are intended first we generalize the excess entry theorem to the effect that a marginal decrease in the number of oligopolistic firms from the free entry equilibrium level improves economic welfare second we explore the pareto improving tax subsidy schemes in an oligopolistic economy several self financing and pareto improving tax subsidy schemes will be identified in contrast with the preceding analysis by atkinson and stiglitz which focused on the long run incidence of corporate taxation we analyse the short run as well as long run welfare implications of various policies under generalized conditions

the value of biodiversity markets society and ecosystems the value of biodiversity is discussed at different levels including market value non market values to humans and the value of biodi versity to ecosystems the main conclusion is that although market exchange values of environmental services may be used to justify biodiversity protec tion measures it must be stressed that exchange value constitutes a small portion of total biodiver sity value the total value of existing biodiversity is largely unknown but indications are that it is essen tial to human existence the various levels of biodi versity value point to the need for a hierarchical and pluralistic methodology to determine appropri ate policies for its preservation jel q21 i introduction among ecologists there is a general con sensus that biodiversity1 is of critical impor tance to the health of ecosystems and even for the long term survival of the human species there is also a consensus that bio diversity is being lost at a rate which is a cause for concern 2 economists on the other hand generally view biodiversity as just an other good which is to be placed in the basket of market choices just as any other the discussion of the specifics of biodiver sity policy has been unsatisfactory partly because of the different meanings of the word value used by economists and ecolo gists many ecologists fail to understand the logic of market allocation and why biologi cal resources are used in seemingly irra tional ways many economists fail to ap preciate the narrowness of the concept of economic value as indicated by relative prices determined by market exchange fol lowing anderson 1966 and brown 1984 the discussion below considers economic measures of value to be species of the genus assigned value which belongs to the family value many biologists and paleontologists be lieve that we are at a critical point in the history of the human species and perhaps even in the 600 million year history of com plex multicelled life on earth if the paleon tologists and biologists who study the phe nomenon of mass extinction are correct the current human induced mass extinction may be of the same order of magnitude as the five other major extinction episodes which destroyed between 20 and 96 percent of existing species on the planet ehrlich and ehrlich 1992 ward 1994 wilson 1992 we are living in a truly remarkable period in earth s 41 billion year history the valua tion decisions our species has made in the recent past and will make during the next few decades will determine the fate of life on earth for the next tens of millions of years it is critical to clarify the language and concepts we use to estimate the value of biodiversity and thus policies leading to its destruction or preservation the importance attached to the issue of biodiversity preservation necessarily in volves ethical judgments about duty to fu ture generations and responsibility toward the nonhuman natural world although in dividuals hold a variety of conflicting beliefs about human responsibility to the natural world this does not mean that policy choices

entitlements missing markets and environmental uncertainty reply abstract at one level dore and ward seem intent on immunizing received doctrine they say that i did not prove that rights violated nozick s principles of justice and that i did not prove that missing markets were the problem more telling they allege i did not prove that my story was better than the particular story favored by dore and ward that is they argue that there is an alternative approach based on the theory of public economics which is indeed operational 3 they then use the bulk of their comment to explain and defend this alternative model they hope to convince the reader that the model of public economics survives intact in the face of my alternative model to the extent that their model allows one to define the problem away it is not difficult to see why they find it so compelling more seriously dore and ward fail to make a coherent argument about the concept of rights and duties and the logic of a particular rights structure that happens to prevail they seem concerned that my article was tampering with some sacred social construct the status quo rights structure and that my article threatened the received wisdom of both public economics and paretian walrasian bliss indeed theirs seems to be a genuine fear that if economists release their grip on the certitude of received orthodoxy the floodgates will be open to all manner of bumbling regulators seeking to shift rights and wealth positions across generations my article is apparently threatening because it seems to suggest that the received wisdom may at times be misleading

taxing leisure complements i introduction income taxation distorts labor effort downward accordingly it tends to be optimal on second best grounds to set other policy instruments so as to introduce additional distortions if though only if doing so helps to mitigate the excessive consumption of leisure this principle has been considered most extensively with regard to differential commodity taxation in a ramsey setting corlett and hague 1953 showed that it is optimal to tax complements to leisure and to subsidize substitutes relatively speaking which serves to offset the distorting effect of taxation on labor supply consider a simple example for concreteness begin with a labor income tax which as is well known induces individuals to reduce labor effort increasing leisure this is the substitution effect even if the income effect is so large that uncompensated labor supply does not fall it is the substitution effect that matters for efficiency ideally we would like to tax leisure directly or otherwise adjust the income tax to avoid this inefficiency but this is assumed to be impossible because the government can only observe income and not the amount of labor effort that contributed to producing it this preexisting inefficiency raises the possibility that other more indirect instruments may have a role to play and indeed they do specifically with regard to commodity taxation to develop this possibility further suppose that disposable income is spent on two goods pizza and swimsuits think of pizza as a benchmark good that produces utility equally well in all settings whether at work or at play including at the beach or swimming pool swimsuits are classic leisure complements having more swimsuits enhances utility to a greater extent the more time one has to swim whereas swimsuits produce no additional value while at work in this setting the corlett hague argument suggests the optimality of a relative tax on swimsuits to be sure this will impose an efficiency cost by distorting individuals consumption too few swimsuits too much pizza but that cost is second order as the tax is imposed starting at a level of 0 the other effect of the tax will be to make leisure less attractive now that individuals consume fewer swimsuits this in turn will raise labor effort since labor is distorted downward by the income tax this effect entails a first order efficiency gain therefore it is indeed the case that imposing some positive relative tax on swimsuits the leisure complement is optimal analysis of these matters became more formal with atkinson and stiglitz s 1976 seminal examination of the simultaneous optimization of a nonlinear income tax and commodity taxes the article is most famous for its uniformity result if labor is weakly separable in the utility function the optimum is characterized by no differential commodity taxation 1 although many ramsey principles e g the inverse elasticity rule do not survive the introduction of an income tax the corlett hague result that it tends to be optimal to tax leisure complements and subsidize substitutes is widely understood to remain intact 2 surprisingly this generally accepted understanding seems to be contradicted by atkinson and stiglitz 1976 their central analytical contribution in the relevant part of the article is their derivation of an expression for optimal taxation of any given commodity relative to the tax rate on commodity 1 arbitrarily set equal to 0 as a benchmark first they use their derivation to establish their uniformity result in the case of weak separability when the utility function has the stated feature one of the terms in their expression for the optimal commodity tax rate on good i equals 0 and this is true for all i so no commodity taxation is optimal however regarding the more general case atkinson and stiglitz 1976 state from the results given above it follows that goods which are complementary

sustainability as intergenerational fairness efficiency uncertainty and numerical methods this paper presents an economic model of sustainability defined as intergenerational fairness assuming that intergenerational fairness is an obligation of each generation a recursive optimization problem is obtained the problem has the advantage that uncertainty can readily be incorporated in the model and it can be solved numerically for a wide range of specifications the possibility of trade offs between efficiency and sustainability are discussed under plausible conditions it is shown that a sustainability obligation is met only if there is the expectation of economic growth

efficiency sustainability and global warming abstract economic analyses of global warming have typically been grounded in the theory of economic efficiency such analyses may be inappropriate because many of the underlying concerns about climate change are rooted not in efficiency but in the intergenerational allocation of economic endowments a simple economic model is developed which demonstrates that an efficient economy is not necessarily a sustainable economy this result leads directly to questions about the policy relevance of several economic studies of the issue we then consider policy alternatives to address global warming in the context of economies with the dual objectives of efficiency and sustainability with particular attention to carbon based taxes

taxes and time allocation evidence from single women and men the classic model of becker 1965 suggests that labor supply decisions should be analyzed within the broader context of time allocation and market good consumption choices but most empirical work on policy has focused exclusively on measuring impacts on market work this paper examines how income taxes affect time allocation during the entire day and how these time allocation decisions interact with expenditure patterns using the panel study of income dynamics from 1975 to 2004 we analyze the response of single women s housework labor supply and other time to variation in tax and transfer schedules across income levels number of children states and time we find that when the economic reward to participating in the labor force increases market work increases and housework decreases with the decrease in housework accounting for approximately two thirds of the increase in market work analysis of repeated cross sections of time diary data from 1975 to 2004 shows that home production decreases substantially when market hours of work increase in response to policy changes data on expenditures from the consumer expenditure survey from 1980 to 2003 show some evidence that expenditures on market goods likely to substitute for housework increase in response to a greater incentive to join the labor force the baseline estimates imply that the elasticity of substitution between consumption of home and market goods is 2 61 the results are consistent with the becker model meanwhile single men show little response to changes in tax policy and we are able to rule out an elasticity of substitution between home and market goods for this group of more than 1 52

source of income effects for demand decisions and taxable consumption the relationship between sources of income and demand decisions by the household is examined here with an eye toward the ramifications on consumption tax bases income sources may be important when households attach psychic and transaction costs to individual purchases or when sources are assigned via a mental accounting process in either case general and specific sales tax bases may be affected by changes in income composition empirical results indicate two important findings first tax exemptions can introduce significant income source effects for a general consumption tax base second the importance of differential tax rates for gasoline and food at home strongly depends on the mix of labour capital retirement and non retirement transfer pay

entitling the pollutee liability versus standard under private information this paper considers and compares two different legal means full liability and standard to reduce and to regulate pollution at a local level accounting for private information about benefits and costs the familiar polluter pays principle makes the polluter liable for any damage since the courts lack information about the true damage the pollutee can and presumably will overstate this damage nevertheless voluntary arrangements bypassing the courts exist e g for coasean reasons however such out of court arrangements fail to improve in many cases the inefficient allocation of pollution due to agency costs given these unsatisfactory consequences of the polluter pays principle even after allowing for contracts around the law we propose a modification of standards the pollutee is entitled that a certain standard is satisfied yet can trade this right for financial compensations contracts induced by this legal rule are countervailing the optimal mechanism switches between subsidies and payments and first best efficiency holds at both ends and this characteristic allows such a privatized standard to track the first best quite well and often better than the polluter pays principle this relative ranking under private information is the opposite of the one that holds under uncertainty here liability dominates the standard

tax reform and the political economy of the tax base abstract this paper studies the political prospects for reform in a model where the tax base and statutory rate are separate instruments of tax policy the model suggests that large changes in the tax code may be easier to enact than marginal reforms the tax base faces a tipping point where even the beneficiaries from tax exemptions support reform at this tipping point tax reform is pareto improving politically feasible tax reform occurs when fiscal needs are large but may nonetheless involve reductions in marginal tax rates there is strategic complementarity in lobbying for tax exemptions resulting in multiple equilibria the model s main predictions are consistent with recent tax reforms in oecd countries

environmental regulations and the problem of sustainability moving beyond market failure abstract the standard metaphor of market failure is an impediment to the crafting of environmental policy that can escape policy lock in sustainability requires a policy process that can avoid this lock in sustainability concerns the creation of dynamic human processes that can respond to indeed anticipate unanticipated feedback from biological processes

on the desirability of input taxes abstract if it is not possible to tax all final goods and it is considered desirable to impose positive taxes on currently untaxed goods then it is desirable to tax inputs and intermediate goods at positive rates

final and intermediate goods taxation in an oligopolistic economy with free entry abstract optimal tax rules are analyzed in an oligopolistic economy with free entry the initial market allocation has two types of distortion price is set above marginal cost by the oligopolistic behavior and the advantage of increasing returns to scale is left to be unexploited by excessive entry of oligopolists with production subsidy accompanied by a self financing lump sum franchise tax on oligopolistic firms pareto efficient allocation could be restored without a lump sum tax on oligopolists however the second best optimum requires taxing intermediate inputs used in the oligopolistic industry the optimal intermediate goods taxation follows the production side ramsey rule to encourage the use of intermediate inputs elastic to output level and vice versa

reformulating the foundations of consumer choice theory and environmental valuation abstract the burgeoning field of environmental valuation has raised serious doubts about the fundamental axioms of consumer choice theory the general validity of the walrasian system and methodological individualism this paper examines these aspects of consumer choice theory paying particular attention to the pioneering contributions of georgescu roegen we argue that evidence from psychology game theory anthropology and contingent valuation surveys reveals a more complex pattern of decision making than that described by neoclassical utility theory we discuss the notions of the invariance of preferences non satiation the principle of complementarity lexicographic preferences and the hierarchy of wants with reference to environmental valuation we also discuss the notion of marginal utility of money the validity of the walrasian system and methodological individualism using scaling concept in hierarchy theory we then address the conflict between theory and reality by introducing a probabilistic binary choice scheme under uncertainty about environmental attributes we argue that these extensions are necessary to account for consumer choices revealed in environmental valuation surveys we conclude with the hope that a reformulation of consumer choice theory based on realistic models of human behavior can be the basis for a viable alternative to neoclassical welfare economics

trust law sustainability and responsible action abstract the problem of managing for sustainability is marked by the need to make decisions on behalf of others and by the uncertainties that attend such decisions however the economic literature on sustainability has paid scant attention to how decisions on behalf of others might differ from decisions on behalf of oneself and when risk has been modeled explicitly the expected utility hypothesis has generally been used a generation acts sustainably if the expected value of the next generation s utility is not less than the present s this paper investigates how we think about responsibly acting on another s behalf by looking to the united states law of trusts because in important respects the current generation views its responsibility to the future as a trust relationship trust law illuminates responsible decision making under both risk and uncertainty even under conditions of risk more conservative action than would be suggested by the expected utility hypothesis is warranted because it emphasizes preservation of trust principal and disavows profit maximization trust doctrine indicates that special caution should be exercised in conditions of uncertainty finally resource economic concepts of strong sustainability the precautionary principle and the safe minimum standard of conservation are interpreted according to trust principles

searching for sustainability the poverty of spontaneous order abstract traditional approaches to sustainability rely on models that depend upon judgments of welfare across future generations right prices and some sense as to what future persons will find giving of utility these models both accept the spontaneous order of market processes and rely on that order to derive optimal consumption paths into the future sustainability is however not a problem of divining optimal paths predicated upon right prices rather sustainability to be operational requires a prior constructed order predicated upon rights for future persons and duties for those now living who sit in a position as dictator over the settings and circumstances that will be passed on to future persons rights based approaches to sustainability do not rely upon unknowable preferences of future persons but rather upon an environmental regency in which those now living agree to preserve settings and circumstances for the future this reminds us that the issue of sustainability concerns not how much to preserve but what to preserve

a reconsideration of the sugar sweetened beverage tax in a household production model abstract we study the impact of a hypothetical tax on sugar sweetened beverages ssbs on the u s households nutrients purchase welfare change and health benefit differently from the traditional approach food at home fah is here defined as a home good instead of a market good and consumers demands derived under the assumption that households maximize utility subject to both a money and a time constraint the model is estimated by using an incomplete approximate exact affine stone index easi demand system on a data set built by merging the u s consumer expenditure and time use surveys results show that a ssb tax would be much more effective in decreasing household nutrients purchase than it would appear by estimating a model neglecting time costs in home food production due to a lesser compensation of calories from increasing fah consumption a tax induced 38 increase in ssb price is predicted to decrease the per capita energy purchase by 41 kcal day

governance of the commons a role for the state the paper examines property regimes and common pool resources using examples and case studies the relative merits of private community and state based rights are detailed the insights from the case studies and an analysis of institution costs provide a tentative framework for understanding the role of the state in the governance of the commons

tax bases tax rates and the elasticity of reported income abstract tax reforms usually change both tax rates and tax bases using a panel of income tax returns spanning the two major u s tax reforms of the 1980s and a number of smaller tax law changes i find that the elasticity of income reported on personal income tax returns depends on the available deductions this highlights that this key behavioral elasticity is not an immutable parameter but rather that it can be to some extent controlled by policy makers one implication is that base broadening reduces the marginal efficiency cost of taxation the results are very similar for all income categories indicating that the rich are more responsive to tax rates because tax rules that apply to them are different their tax base is narrower the point estimates indicate that the tax reform act of 1986 reduced the marginal cost of collecting a dollar of tax revenue with roughly half of this reduction due to the base broadening and the other half due to the tax rate reduction as a by product the analysis in this paper offers a reconciliation of disparate estimates obtained by previous studies of the tax responsiveness of income

commodity taxation and imperfect competition a note on the effects of entry abstract this paper looks at the effects of allowing the number of firms to vary in seade s model of oligopoly and taxation we show that the normative and positive consequences of a specific commodity tax are affected by entry in significant ways

the vermont common assets trust an institution for sustainable just and efficient resource allocation both private and public sectors have failed to adequately provide critical ecosystem goods and services or an equitable distribution of wealth and income to address this problem the vermont legislature is considering the creation of a vermont common assets trust vcat that would make the state s atmosphere aquifers and other resources created by nature or by society as a whole the common property of all vermonters present and future under the trust a board of trustees would have the legal obligation to manage these assets for the benefit of all vermonters including future generations this paper first explains why certain resources are likely to be managed more sustainably fairly and efficiently as common property than as private property it then discusses mechanisms for integrating assets into the trust estimates of potential revenue from a vcat suggest that it could eliminate the state budget deficit contribute to a better distribution of wealth and resources and help address critical ecological problems survey results suggest that a vcat is politically feasible the vcat promises to be an important pilot project that could later be scaled up to a national or global level

will destination based taxes be fully exploited when available an application to the u s commodity tax system abstract we develop a tax competition model that allows for the setting of both an origin based and a destination based commodity tax rate in the presence of avoidance and evasion in the presence of evasion jurisdictions will give cross border shoppers tax preferential treatment thus not fully exploiting the potential of destination based taxation moreover the divergence between origin based and destination based taxes is stronger when the incentives for consumers tax arbitrage opportunities increase the united states is one example of many such systems while sales taxes are due at the point of sale use taxes are due on goods purchased out of state we document that when able to set both rates a majority of jurisdictions levy destination based use taxes at a lower rate than origin based sales taxes in response to changes in state level policies that increase tax avoidance opportunities the results of the empirical model broadly confirm our theory

unit versus ad valorem taxes monopoly in general equilibrium abstract we show that if a monopoly sector is imbedded in a general equilibrium framework and profits are taxed at one hundred percent then unit specific taxation and ad valorem taxation are equivalent on the set of pareto optima

ramsey tax rules for economies with imperfect competition abstract this paper derives optimal commodity tax rules for a general equilibrium model with imperfect competition to achieve this functions are constructed that describe the effects of taxation upon the equilibrium prices and profit levels of imperfectly competitive industries the use of these functions allows existing tax rules to be generalised to accommodate imperfect competition

the impact of corporate governance on investment returns in developed and developing countries we shed light on three conundrums in the literature on investment why investments out of different sources of finance earn different returns why different studies report different patterns of returns across sources of finance and why companies in developing countries make greater use of external equity capital to finance their investment than do companies in developed countries we show that the strength of corporate governance systems affects the preferred source of financing which in turn helps to explain why investments financed in different ways exhibit significantly different rates of return we find considerable differences between developed and developing countries in the effectiveness of corporate governance systems in aligning managers and shareholders interests

the paretian liberal paradox and ecological economics abstract two of the most basic considerations in collective choice are the pareto principle and some minimal protection of individual rights in his impossibility theorem sen 1970 shows that there is a potential inconsistency between preference sovereignty as expressed by the pareto condition and the protection of minimal rights a liberal or liberty condition the paretian liberal paradox plp and the extensive debate surrounding it prompts serious reconsideration of the traditional welfare economics approach the critique of welfarism made by the plp is of central importance for environmental issues given pervasive externalities missing markets uncertainty and potential irreversibilities making collective choice decisions on these issues may require using explicit non utility information and restricting individual preference sovereignty we explore the implications of the plp for long term environmental policy and the transdisciplinary field of ecological economics as a simple pedagogical device relying on sparse principles the plp stimulates an increased awareness of the potential conflict between preferences and rights recognition of the plp focuses attention on what counts as admissible information in collective choice rules for example consideration of the plp illuminates differences in the informational requirements of alternative sustainability concepts

rates of return on corporate investment in the last two decades productivity has lagged in the united states markets have been lost to foreign competition real income per capita has grown slowly this experience has led to considerable discussion of possible causes 7 one possible cause often mentioned is the quality of managerial investment decisions managers have been accused of overinvesting in obsolete technologies of underinvesting in risky projects with long run payoffs of undertaking unprofitable mergers and of overall poor judgment in their investment policies 39 this paper presents evidence on the returns on investment over the 1970 88 period for a sample of 699 large corporations that is consistent with this view

intergenerational resource rights efficiency and social optimality the discipline of economics is generally defined as the science of the allocation of scarce resources between competing social objectives given an initial distribution of resources between economic agents how would they behave so as to improve their welfare according to the pareto criterion the agents would exchange commodities until the opportunities for fruitful exchange were fully exhausted and no agent could be made better off without rendering at least one other agent worse off pareto efficiency is a powerful concept in microeconomic analysis provided that the initial distribution of property rights is equitable allocative efficiency gives rise to the best of all possible worlds acknowledging that the assumptions of perfect competition are often violated firms are monopolistic information is incomplete and externalities exist economists have argued for the modification of institutions so that economic reality will conform more closely to the assumptions of the model that yields such gratifying results but microeconomic theory has always maintained that allocative efficiency is in itself insufficient to maximize social welfare bator 1957 a social welfare function is required to discriminate a social optimum among the array of efficient allocations that correspond to alternative assignments of property rights though economists have posited alternative functional forms for the sake of pursuing conceptual arguments welfare functions have remained elusive constructs for well known theoretical and practical reasons consequently a sharp line of demarcation has been drawn between questions of efficiency the province of economics and equity the principal focus of ethical and political discourse in resource economics however the line demarcating efficiency and equity is often crossed the term optimal depletion appears regularly where only efficient depletion is meant while political debates about resource exploitation over time are laden with questions of the proper distribution of our natural patrimony between generations resource economists have predominantly espoused particular use rules that guarantee efficiency but overlook potential improvements in social welfare achievable through the reassignment of property rights across generations we document the evolution and current status of the misuse of the term optimal depletion in section ii we develop a simple two generation three period general equilibrium model in section iii to illustrate how alternative distributions of resource rights between generations relate to alternative pareto efficient solutions in section iv we demonstrate how different social welfare functions affect the optimal solution and associated assignment of resource rights between generations

sector level decisions in a sustainability constrained economy despite two decades of debate there remains little consensus about what sustainability is and how it should be achieved economists primarily portray sustainability as a macro level concern but there has been less attention on the implications of this social objective for policies related to the management of individual resources this paper derives guidance for sector level planning and project analysis from a macro level norm of intergenerational fairness optimal sustainable management involves making tradeoffs between sectors we derive a criteria for sector level planning and project analysis that help make those tradeoffs without losing site of the sustainability goal

political economy of ramsey taxation abstract we study the dynamic taxation of capital and labor in the ramsey model under the assumption that taxes and public good provision are decided by a self interested politician who cannot commit to policies we show that as long as the politician is as patient as the citizens the chamley judd result of zero long run taxes holds in contrast if the politician is less patient than the citizens the best subgame perfect equilibrium from the viewpoint of the citizens involves long run capital taxation

willingness to pay and compensation demanded experimental evidence of an unexpected disparity in measures of value aside from possible income effects measures of the maximum amounts people will pay to avoid a loss and the minimum compensation necessary for them to accept it are generally assumed to be equivalent unexpectedly wide variations between these sums however have been noted in survey responses to hypothetical options this paper reports the results of a series of experiments that confronted people with actual money payments and cash compensations the results indicate that the compensation measure of value seems to exceed significantly the willingness to pay measure which would appear to call into some question various rules of entitlement damage assessments and interpretations of indifference curves

indirect taxation and cournot equilibrium we analyse a cournot model of oligopoly in an industry which is subject to indirect taxation we consider value added as well as excise taxes we allow for various types of demand and cost conditions as well as cost differences across firms as the tax is raised two types of outcomes can prevail on the one hand the net price can increase which is shown to lead to an increase in market share of high cost firms on the other hand the net price can fall in which case efficiency is rewarded in that low cost firms gain market share this latter outcome which accords with intuition will obtain in most instances it is more likely to occur i with vat rather than with an excise tax ii with concave rather than convex demand and iii with decreasing rather than increasing marginal cost finally we show that an increase in vat can lead to higher profits for low cost firms provided cost differences across firms are large enough