Improving Tax-Based incomes Policies: the Lessons of the Environmental Literature

Abstract

The intuition of the environmental control literature is employed to study the Abstract various alternative tax-based incomes policies that have been proposed. It is noted that each trades off, to some degree, flexibility in wage settlement against effectiveness in controlling inflation. Mirroring some aspects of Abba Lerner's MA P plan, a proposal that would make a tax-based penalty for excessive wage settlement dependent upon both the degree of excessiveness and the actual observed ex post inflation rate is advanced as a superior player in this tradeoff.

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