Social Ordering Functions

Mapping Intimacies ◽

10.1093/oxfordhb/9780199325818.013.30 ◽

2016 ◽

Cited By ~ 1

Author(s):

François Maniquet

Keyword(s):

Economic Model ◽

Income Taxation ◽

Labor Income ◽

Policy Assessment ◽

Social Ordering ◽

Complete Ranking ◽

The Relationship ◽

Labor Income Taxation ◽

Measurement Of Poverty

This chapter presents the fair social ordering approach to policy assessment. In an economic model, a social ordering function (SOF) associates each economy in the domain with a complete ranking of the allocations. This chapter describes the main achievements of the SOF theory. It presents two applications, which show how SOF’s can be used to evaluate policies. The first application concerns labor income taxation. The second application concerns the measurement of poverty. Finally, This chapter discusses the relationship between the SOF approach and some other approaches to the construction of criteria to evaluate policies.

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Ramsey Strikes Back: Optimal Commodity Taxes and Redistribution in the Presence of Salience Effects

AEA Papers and Proceedings ◽

10.1257/pandp.20181040 ◽

2018 ◽

Vol 108 ◽

pp. 88-92 ◽

Cited By ~ 1

Author(s):

Hunt Allcott ◽

Benjamin Lockwood ◽

Dmitry Taubinsky

Keyword(s):

Broad Class ◽

Utility Functions ◽

Income Taxation ◽

Labor Income ◽

Commodity Taxes ◽

Optimal Tax ◽

Making Choices ◽

Labor Income Taxation ◽

Optimal Commodity ◽

Ramsey Rule

An influential result in modern optimal tax theory, the Atkinson and Stiglitz (1976) theorem, holds that for a broad class of utility functions, all redistribution should be carried out through labor income taxation, rather than differential taxes on commodities or capital. An important requirement for that result is that commodity taxes are known and fully salient when consumers make income-determining choices. This paper allows for the possibility consumers may be inattentive to (or unaware of) some commodity taxes when making choices about income. We show that commodity taxes are useful for redistribution in this setting. In fact, the optimal commodity taxes essentially follow the classic “many person Ramsey rule” (Diamond 1975), scaled by the degree of inattention. As a result, to the extent that commodity taxes are not (fully) salient, goods should be taxed when they are less elastically consumed, and when they are consumed primarily by richer consumers. We extend this result to the setting of corrective taxes, and show how non-salient corrective taxes should be adjusted for distributional reasons.

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