The Profitable Theory of User Cost and Public Finance

26 Pages Posted: 7 Oct 2008

See all articles by Hak Choi

Hak Choi

Chienkuo Technology University - Department of International Business; Chung-Hua Institution for Economic Research

Date Written: October 7, 2008

Abstract

Dale W. Jorgenson's user cost is a concept widely applied, especially, in public finance, but such applications seem incomplete when there is no supply curve. His model also requires knowledge of future incomes, without which there is not even a demand for capital. This paper detects a mathematical error of the Jorgenson model, and derives an investment criterion that does not recourse to future incomes. Such criterion helps develop a strictly Walrasian general equilibrium q-theory of investment. With this model, this paper then derives an extended Coase Theorem on taxation, shows the butterfly effects of tax policy, streamlines the entanglement among various tax policies, including those aimed at solving the double taxation problem, and confirms that optimal taxation is essentially a random walk. It also shows how the Solow equation is wrong, and that capital formation must be determined by demand and supply.

Keywords: User cost, public finance, bilateral trade, gain from trade, Walras' law, Central Limit Theorem, Coase Theorem, butterfly effects, double taxation, capital formation, optimal tax policy, opportunity income

JEL Classification: D24, E60

Suggested Citation

Choi, Hak, The Profitable Theory of User Cost and Public Finance (October 7, 2008). Available at SSRN: https://ssrn.com/abstract=1280026 or http://dx.doi.org/10.2139/ssrn.1280026

Hak Choi (Contact Author)

Chienkuo Technology University - Department of International Business ( email )

No.1, Chiehsou N. Road
Changhua City, 500
Taiwan
+886 91 901-4618 (Phone)

HOME PAGE: http://euntold.wordpress.com

Chung-Hua Institution for Economic Research ( email )

75, Changhsin St.
Taipei
Taiwan

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
98
Abstract Views
658
Rank
485,733
PlumX Metrics