Cecil E. Bohanon

Product Quality and Taxation: a Reconciliation

Within the last few years, two articles in this journal (one ours) have discussed the relationship between product quality, excise taxes, and tax revenue. The articles are marked by seemingly contradictory results regarding the effect specific taxes and ad valorem taxes have on product quality. This article reconciles the contradiction. The authors show that the difference stems from opposite assumptions about the substitutability between physical units and their quality attributes. For all intermediate substitutabilities, the tax-quality relationship of this article is relevant for specific taxes, while the tax-quality relationship of the other article is relevant for ad valorem taxes.

Specific Taxes, Product Quality, and Rate-Revenue Analysis

The effect that specific taxes have on product quality has been a question of interest to economists over the last few years. The problem arises because while goods and services are multidimensional in terms of utility generating characteristics, specific taxes are almost always levied on just one of the characteristics. The effect of quality adjustment on tax revenue has not yet been examined in any detail. Quality adjustment is no doubt a change that occurs over a longer-run time frame. Heretofore, the only attempts at adding a temporal dimension to rate-revenue analysis distinguish between the short run and long run in terms of supply and demand elasticities. In the previous analysis the tax rate at which revenue is maximized and the tax rate at which revenue reaches zero are both lower in the long run. What makes the analysis presented here interesting is that when product quality accounts for the intertemporal distinction, the revenue maximizing tax rate and the tax rate that yields zero revenue are both higher in the long run.

Persistent Themes in Colleges of Business.

In this article, the author examines a number of issues in colleges of commerce in their formative period from 1900 to 1930. He discusses 4 areas: content of business curriculum, professional nature of business and business schools, social responsibility of corporate managers, and integration of the business curriculum. Many of the topics are still important today and can arguably be considered persistent themes in colleges of business.

Using Illustrations from American Novels to Teach about Labor Markets

This article illustrates how literature can bring models to life in undergraduate courses on labor market economics. The authors argue that economics instructors and students can benefit from even small doses of literature. The authors examine excerpts from five American novels: Sister Carrie by Theodore Drieser (1900/2005); The Grapes of Wrath by John Steinbeck (1939/1967); McTeague: A Story of San Francisco by Frank Norris (1899/2006); Moby Dick by Herman Melville (1852/2003); and Seraph on the Suwanee by Zora Neale Hurston (1948). Examples from these works cover five labor market themes: (1) reservation wages and the supply of labor, (2) surplus labor and low wages, (3) demand for labor and marginal productivity, (4) the economic model of discrimination, and (5) search versus random matching in labor markets (a critique of neoclassical labor theory).

Income redistribution: An international perspective

Many view global income inequality as a problem. Income redistribution from the rich countries to poor countries is often offered as a solution. However, such redistribution would have to be politically acceptable to voters in rich countries to occur. Using a constructed distribution of world income we show that even modest income redistribution efforts would impose significant costs on taxpayer-voters in rich countries. We conclude such income redistribution is unlikely.

A Comment on “Economic Inefficiency: A Failure of Economists”

This comment argues that the Staten-Umbeck critique of welfare economics, published earlier in this journal, is useful in that it challenges economists to carefully specify the assumptions of welfare analysis, but its primary point is only that welfare analysis is not methodologically positive.

A Supply and Demand Exposition of the Operation of a Gold Standard in a Closed Economy.

Neither short-run nor long-run price stability is a necessary state of affairs under a gold standard, according to the authors. This conclusion results from an examination of possible differential rates of productivity growth in the gold and non-gold producing sectors.

Externalities: A Note on Avoiding Confusion

In distinguishing the difference between a genuine externality and a pecuniary externity, Bohanon observes that the latter never enters third-party utility (or production) functions, whereas this is always the case with technical externalities.

Taxes, welfare costs, and public consumption: The case of the unwitting monopsonist*

Concluding remarksOur analysis provides some initial insight into the distributional consequences of alternative tax structures. It has been shown that tax distortions, when incorporated into an expenditure framework, drive a wedge between the price paid by consumers for government goods and the explicit price received by producers. Such a wedge operates as a monopsonistic device that, in the final analysis, can improve the well being of public consumers. Whether this result emerges depends not only on the relative elasticity of demand and supply but also on the institutional setting in which public spending decisions are made.