Power and Linear Income Taxes: An Example

Peck, Richard M.

doi:10.2307/1914158

Cited by 15 publications

(5 citation statements)

References 7 publications

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“…A first example that comes to mind concerns taxation. In fact, the game can be seen as an elementary version of the tax model of Aumann and Kurz (1977, 1978) (see also Gardner, 1981; Peck, 1986). The take authority can be regarded, in an admittedly simplistic way, as a majority coalition (government) that by means of taxation can appropriate a part of the endowment of the minority (the responders).…”

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confidence: 99%

Emotional Hazard in a Power‐to‐Take Experiment

Bosman

Winden

2002

The Economic Journal

309

259

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In this experimental study of a two player power-to-take game, players earn an income in an individual effort task preceding the game. The game has two stages. First, one player can claim any part of the other's income (take rate). Then, the latter player can respond by destroying own income. We focus on how emotions in¯uence responses and show: (1) a higher take rate increases (decreases) intensity of negative (positive) emotions; (2) negative emotions drive destruction; (3) at high emotional intensity, responders destroy everything; (4) expectations affect the probability of punishment. Emotional hazard is identi®ed as a new source of ef®ciency costs.Many people would agree that emotions play a very important role in the decisions they make. Extensive research by psychologists over the last two decades has provided a lot of supportive evidence. It appears that emotions play a signi®cant role in matters like attention, learning, and memory (Izard et al., 1984). Recent neuroscienti®c research even suggests that emotions are essential for rational decision making (Damasio, 1994; Picard, 1997). If emotions play such an important role in psychological processes, they are also likely to be relevant for understanding economic decision making. Frank (1988) argues that emotions are relevant for economics because they can help us solve important commitment problems. He shows, for example, that players endowed with the emotion guilt can sustain the co-operative outcome of a prisoner's dilemma game. 1 Other recent economic studies focus on the effects of emotions on preferences (Hirshleifer, 1987;Loewenstein, 1996) or on the implications for rationality (Elster, 1996(Elster, , 1998. However, as yet little work has been done to integrate emotion theory in economic research. Elster (1998) addresses this neglect and hypothesises that it may have to do with the different explananda of psychology and economics:`Whereas economists mainly try to explain behaviour, emotion theorists try to explain emotions. By and large, psychological studies of the emotions have not focused on how emotions generate behaviour' (p. 47).The object of this study is to investigate how emotions generate behaviour in a laboratory experiment. As our vehicle of research we use a simple * This paper is part of the EU-TMR Research Network Endear (FMRX-CT98-0238). We are grateful to Joep Sonnemans, Theo Offerman, and Arno Riedl for discussions and comments, Jos Theelen for developing the laboratory software, and Jens Grosser for his assistance in the experiment. We are also grateful for the remarks made by participants of the ESA conference in Mannheim (1998), the IAAP conference in San Francisco (1998), and the ENDEAR Workshop in Bari (1999). Finally, we thank the editor David De Meza and three anonymous referees for their helpful comments.1 Frank (1988) assumes that people give signals about their emotional commitments or dispositions (for example, via facial expression or the pitch of the voice) that are dif®cult to simulate. In his prisoner's dilemma mo...

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confidence: 99%

Emotional Hazard in a Power‐to‐Take Experiment

Bosman

Winden

2002

The Economic Journal

309

259

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“…The second type of model is presented by Aumann and Kurz (1977); see also Gardner (1981 ), Peck (1986). Attention is again focused on pure redistribution, but now within a n-person cooperative game framework.…”

Section: Political Economics Of Taxationmentioning

confidence: 99%

“…Gardner, 1981), for example by assigning greater political influence to the rich, or by allowing for a negative impact of taxation on labour supply as in the Meltzer and Richard model (cf. Peck, 1986).…”

Section: Political Economics Of Taxationmentioning

confidence: 99%

A positive model of tax reform

Velthoven

Winden

1991

Public Choice

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This paper is devoted to the explanation of tax policy from a behavioural-theoretic point of view. It, for the first time, brings together within a unified framework behavioural determinants of government expenditure, taxation, and tax reform. Administrative and compliance costs associated with taxation (factors generally neglected in models of taxation), as well as tax avoidance/evasion, deadweight losses, and the costs that are involved in the tax reform process itself, play a crucial role in the model. The paper investigates how these factors influence the development of taxation and expenditure, and the occurrence of tax reform.

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“…Carter failed to achieve his objectives; Reagan succeeded. From a formal perspective, Aumann and Kurz (1977) present a cooperative game solution to the tax-transfer problem; see also Gardner (1981) Osborne (1984, and Peck (1986).…”

Section: Public Borrowingmentioning

confidence: 99%

The Political Economy of Fiscal Policy

Ingberman¹,

Inman²

1987

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If there has been a dominant trend in the evolution of the modern industrial societies of this century it has been the growing importance of government in the allocation of social resources. It is important that we appreciate the fundamentally political nature of the formation of government economic policy. This survey reviews and assesses our present understanding of how the political system might shape a nation's fiscal policy. Our approach is eclectic, drawing both from economics and political science, and decidedly micro-analytic in its orientation. From economics we adopt the perspective of utility maximizing agents and the analytics of trade, agreement, and market failure. From political science we learn just how and when these individual agents might act collectively to provide public goods, redistribute income, or issue government debt. Together the micro-analytics of economics and political science form the core theory of the 'new' political economy and provide a framework for understanding the emergence, and the performance, of governments. There is no more important test for the new discipline than providing a compelling explanation for the formation of fiscal policy in democratic societies.

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Power and Linear Income Taxes: An Example

Cited by 15 publications

References 7 publications

Emotional Hazard in a Power‐to‐Take Experiment

Emotional Hazard in a Power‐to‐Take Experiment

A positive model of tax reform

The Political Economy of Fiscal Policy

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