52 Power and Taxes with
نویسنده
چکیده
Perhaps the most fundamental element in the theory of the public sector is the view that the government is an exogenous, benevolent economic agent. The benevolence of the government is often expressed by assuming it to maximize a ‘‘social welfare’’ function of the form Ð utðxðtÞÞmðdtÞ, where the ut are utility functions, x is an allocation of consumption bundles and m is a distribution of agent types; in other words, simply the sum of individual utilities. With such a social welfare function Arrow and Kurz [2] were able to derive optimal investment and taxation programs while Mirrlees [13], Sheshinski [19] and others were able to derive optimal tax policies for a population with heterogeneous endowment. We do not think that this view is without merit. There are perhaps some public issues with regard to which a consensus may be reached, and then such an approach may su‰ce to explain the behavior of the government. But more often, redistributive e¤ects are a central issue; and then the actions of the government, and in particular its tax policies, can be understood only as an endogenous consequence of the political forces that enable it to maintain power. For this reason one should investigate the connection between tax policies and the political forces that shaped those policies to begin with. We propose to regard income distribution, taxation, the production of public goods and other actions of the public sector as determined by a political process simultaneously with the economic process of exchange and production. This means that we propose to study an economicpolitical equilibrium where the power of each individual is reflected both in the political and the economic spheres. The present is our first paper on this subject, where we formulate the basic structure and motivate it. All of our work in this paper deals with a world in which there is only one commodity (‘‘money’’), to be thought of as an aggregate of all real commodities. This enables us to focus on the purely redistributive aspect of government policy. In another paper [4] we treat a more complex and realistic multi-commodity model in which we
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