Diamonds Are a Government's Best Friend: Burden-Free Taxes on Goods Valued for Their Values: Comments
One of the most startling tax policy prescriptions to appear in recent years is the "diamond good" tax of Yew-Kwang Ng (1987). Diamond goods are goods, such as diamonds, precious stones and metals, expensive fur coats, and luxurious cars, which are valued for their values more than for their intrinsic consumption effects. Consumers of diamond goods are viewed as deriving utility from exhibiting their wealth and/or by using these goods as a store of value and/or giving them as gifts of value. In these cases it is the value of the good that matters most. After analyzing the taxation of diamond goods, Ng formally asserts three propositions and a corollary. His principal findings are that "a change in the price of a diamond good leaves its value and the amounts of all other goods consumed, and hence the utility level of the consumer unaffected" (Proposition 1) and that " the demand curve for a diamond good is a rectangular hyberbola with unit elasticity throughout the whole range where it remains a pure diamond good" (Corollary 1). These findings form the basis for his conclusion that "a pure diamond good has an infinite tax in an optimal tax system" (Proposition 3). The taxation of diamond goods thus represents a burdenless tax policy panacea. The purpose of this paper is to reconsider the microeconomic analysis of the taxation of diamond goods. We show that the striking results of Ng depend on the particular way in which the diamond good is specified. We demonstrate that an alternative-and eminently reasonable -specification yields drastically different results, in that Ng's principal findings do not hold. Ng considers a representative consumer choosing among a single pure diamond good and n -1 ordinary consumption goods. The utility function is assumed to be well behaved and is written
Prices in the utility function and demand monotonicity
We analyze utility functions when they depend both on the quantity of the goods consumed by the agent and on the prices of the goods. This approach allows us to model price e¤ects on agents’ preferences (e.g. the so-called Veblen e¤ect and the Patinkin formulation). We provide su‰cient conditions to observe demand monotonicity and substitution among goods. Power utility functions are investigated: we provide examples of price dependent utility functions that cannot be written as an increasing transformation of a classical utility function dependent only upon quantities.
Career Choice Inclination of the College Graduates——under the Analytic Framework on the Basis of LMS Theory
Employment difficulty of college graduates has become a social problem in China today.The research group has found that college graduates have a strong inclination in career choice considering units and regions.In terms of China's manpower market and the segmented labor market theory,it is found that their inclination is caused by the great income gap of different regions,the high cost of job transfer,and the sharp differences in social welfare.It is thus obvious that solution to the problem lies with the gradual breakdown of the institutional segment of labor market.