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
The Real-Balance Effect and the Slutsky Equation
THE purpose of this paper is to provide an explicit mathematical statement of Patinkin's real-balance effect (R.B.E.) and to point out certain rather surprising properties of the Patinkin model.2 It has been shown that a "consistent monetary theory" may be constructed in which there are no monetary terms in the consumer's utility function.' Here, however, we will accept the R.B.E. as defined in Patinkin's Money Interest and Prices. There, and in the literature that has followed, the real-balance term is assumed to appear in the utility function. Archibald and Lipsey have shown that two types of consumer equilibrium exist in the
On the Role of Professional Sports in the National Economy Under the Market Economy Conditions
Through the research of the present situations of the professional sports at home and abroad and its influence on economy, this paper points out the opportunities, challenges and the exist- ing main problems that the professional sports faces in the transitional peried-from plan economy to market economy, then elucidates that the professional sports can becompletely developed and improved and play an important role in the national economy under the market economy conditions.