Taxes, Profits, and Employment: A Structural Axiomatic Analysis

Abstract

Standard economics is regarded as the theory of the market system. Profit is the pivotal phenomenon of this system. Contrary to expectations, though, profit is neither well defined not fully understood. The frailty of the theoretical core is passed on to the subfields. This paper provides a consistent definition of profit and applies it to the analysis of the effects of the government sector’s budget on employment and the profitability of the business sector. Since the formal point of departure is different from the standard approach it is quite natural that we arrive at new conclusions in some fundamental issues.

Keywords: new framework of concepts, structure-centric, axiom set, profit ratio, market clearing prices, consumer optimum, balanced budget, budget deficit, full employment, Haavelmo-Theorem

JEL Classification: E20, E24, H20, H40