In Praise of Frank Ramsey's Contribution to the Theory of Taxation

24 Pages Posted: 30 Sep 2014

See all articles by Joseph E. Stiglitz

Joseph E. Stiglitz

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2014

Abstract

Frank Ramsey's classic paper "A contribution to the theory of taxation" gave rise to the modern theory of optimal taxation. This paper traces the literature that grew out of Ramsey's 1927 paper and assesses which of its key insights has proven robust. Though the path breaking work of Peter Diamond and James Mirrlees showed that Ramsey's results could be generalized in some important ways, other work showed that the domain of applicability of Ramsey's original insights may be more limited: changes in assumptions about the set of feasible taxes (not allowing certain taxes, or allowing a progressive income tax or non-linear commodity taxes), and in particular about the taxation of pure rents, incorporating more explicitly distributional considerations, and/or recognizing the important ways in which our economy differs from the competitive model underlying Ramsey's analysis all change the optimal structure of commodity taxation in important ways.

Suggested Citation

Stiglitz, Joseph E., In Praise of Frank Ramsey's Contribution to the Theory of Taxation (September 2014). NBER Working Paper No. w20530. Available at SSRN: https://ssrn.com/abstract=2502712

Joseph E. Stiglitz (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
814 Uris Hall
New York, NY 10027
United States
(212) 854-0671 (Phone)
(212) 662-8474 (Fax)

HOME PAGE: http://www.josephstiglitz.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
24
Abstract Views
306
PlumX Metrics