Altering aggregate consumption by changing government expenditures. See pages 392–399 for the Shapley-Folkman-Starr results and see page 188 for applications in Arrow & Hahn: Pages 52–55 with applications on pages 145–146, 152–153, and 274–275 in.  Others however, have called Hauser's Law "misleading" and contend that tax changes have had large effects on tax revenues.. See section 7.2 Convexification by numbers in Salanié: An "informal" presentation appears in pages 63–65 of Laffont: • Robert W. Clower (1965). To assist those most impacted by the recession. In new classical models, the macroeconomy is assumed to be at its unique equilibrium, with full employment and potential output, and that this equilibrium is assumed to always have been achieved via price and wage adjustment (market clearing). The Laffer curve assumes that no tax revenue is raised at the extreme tax rates of 0% and 100%, and that there is a tax rate between 0% and 100% that maximizes government tax revenue. Some have questioned the practical applicability of the general equilibrium approach based on the possibility of non-uniqueness of equilibria. The company’s executives typically own shares themselves and want to see the price rise. low-interest rates, rising incomes) which lead to a rise in demand for buying a house, this will push up house prices. This suggests that the issues of efficiency and equity can be separated and need not involve a trade-off. The statement of purpose of the Recovery Act included: The offers that appear in this table are from partnerships from which Investopedia receives compensation. "The Keynesian Counter-Revolution: A Theoretical Appraisal," in, general equilibrium models of macroeconomic fluctuations, Fundamental theorems of welfare economics, Competitive equilibrium#Existence of a competitive equilibrium, "Quasi-equilibria in markets with non-convex preferences", "A General Equilibrium Calculation of the Effects of Differential Taxation of Income from Capital in the U.S.", "Debunking the Myths of Computable General Equilibrium Models", "Computation of general equilibria (new developments)", "The Classical Theorem on Existence of Competitive Equilibrium", "Turnpike Theory, Discounted Utility, and the von Neumann Facet", "Arrow–Debreu model of general equilibrium", "non-clearing markets in general equilibrium", overlapping generations model of general equilibrium", https://en.wikipedia.org/w/index.php?title=General_equilibrium_theory&oldid=983011316, Articles with unsourced statements from August 2009, Creative Commons Attribution-ShareAlike License, This page was last edited on 11 October 2020, at 18:29. According to the model, the shape and position of the Laffer Curve depend upon the strength of supply side effects, the progressivity of the tax system and the size of the unobserved economy. Once the price fell below the appropriate level, other investors would spot a bargain and buy, and that demand would cause the price to stabilize or rise, preventing a run. But there’s much research still to be done, he added. The Feedback Effect The informativeness of prices is important, since it helps facilitate the efficient allocation of resources: An efficient market “has a very desirable feature. CS1 maint: multiple names: authors list (, European Union Common Consolidated Corporate Tax Base, Institute on Taxation and Economic Policy, taxes borne relatively evenly by all taxpayers, Economic Growth and Tax Relief Reconciliation Act of 2001, Jobs and Growth Tax Relief Reconciliation Act of 2003, "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review", "The Laffer Curve: Past, Present, and Future", "Trump is giving Arthur Laffer the Presidential Medal of Freedom. Typical supply-side policy would advocate generally lower income tax and capital gains tax rates (to increase the supply of labor and capital), smaller government and a lower regulatory burden on enterprises (to lower costs). “If prices were uninformative, shareholders would not tie managerial compensation to stock prices, and so managers would not care about them.”, In the traditional view of market efficiency, it is assumed that investors digest all information available about a company and, through the push and pull of supply and demand, arrive at a price that reflects the firm’s true value.