Skip to main content Accessibility help
×
Home
Hostname: page-component-768dbb666b-l8xdn Total loading time: 0.401 Render date: 2023-02-06T01:13:40.956Z Has data issue: true Feature Flags: { "useRatesEcommerce": false } hasContentIssue true

4 - Commodity taxation

Published online by Cambridge University Press:  05 June 2012

Gareth D. Myles
Affiliation:
University of Exeter
Get access

Summary

INTRODUCTION

This chapter is the first to consider policy analysis and to arrive at characterisations of optimal policies. The ideas that it surveys have developed over a considerable period, beginning with the seminal contribution of Ramsey (1927). One important feature of this development is the gradual increase in generality and the recent move towards applying the theoretical analysis to data. This has moved the theory closer to practical application.

The initial literature on commodity taxation focused upon the following simple problem. There is a given level of government revenue to be raised which must be financed solely by taxes upon commodities: how should these taxes be set so as to minimise the cost to society of raising the required revenue? If a social welfare function is adopted to represent the state's preferences, the problem can be conveniently rephrased as that of choosing the commodity tax rates to maximise social welfare subject to the revenue constraint.

The first solution to this problem was given by Ramsey (1927) following its proposal to him by Pigou. This contribution appears to have been overlooked for the following forty years during which time the less general inverse elasticities rule became a standard feature of textbooks. The results of Ramsey were rediscovered by Samuelson (1986) in a 1951 memo to the US Treasury. The theory of commodity taxation was given its modern form by Diamond and Mirrlees (1971) in an analysis that made much use of the emerging duality methods and results in general equilibrium theory.

Type
Chapter
Information
Public Economics , pp. 99 - 130
Publisher: Cambridge University Press
Print publication year: 1995

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Save book to Kindle

To save this book to your Kindle, first ensure coreplatform@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

  • Commodity taxation
  • Gareth D. Myles, University of Exeter
  • Book: Public Economics
  • Online publication: 05 June 2012
  • Chapter DOI: https://doi.org/10.1017/CBO9781139170949.005
Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

  • Commodity taxation
  • Gareth D. Myles, University of Exeter
  • Book: Public Economics
  • Online publication: 05 June 2012
  • Chapter DOI: https://doi.org/10.1017/CBO9781139170949.005
Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

  • Commodity taxation
  • Gareth D. Myles, University of Exeter
  • Book: Public Economics
  • Online publication: 05 June 2012
  • Chapter DOI: https://doi.org/10.1017/CBO9781139170949.005
Available formats
×