Bounded rationality and altruism: behaviourism in economics

This essay is intended to respond to the criticism of economic science that it builds its models on unrealistic assumptions from the start. Perfect rationality and the axiom of self-interest are indeed two of the main tenets of neoclassical economics. In this paper, however, we argue that the application of these doctrines is far from exclusive. Indeed, with the achievements of the behaviourist approach and behavioural economics, the theory of bounded rationality was accepted as early as the last century in this scientific area, along with the recognition of altruistic behaviour. Many of these achievements have been more or less integrated into mainstream thinking by now, and once applied, by relying on more psychologically realistic assumptions they may significantly contribute to improving the forecasting power of economic models

Pareto efficient income tax schedules and numerical solutions to Mirrlees’ optimal income tax model: A critical survey

This paper aim is to study the Pareto efficient income taxation schedules in Mirrlees’ optimal tax model. These Pareto efficient income tax schedules reveal the famous zero-at- the- top results. Namely that marginal tax rates should be low where probability density function of the distribution of income falls rapidly. Propositions for optimal Pareto income taxation are: There should be no distortionary taxation on the individual with the highest ability while the labor supply of the less able is distorted, there should be no commodity taxation on either high or low ability individuals if leisure and consumption are separable. Atkinson-Stiglitz theorem provides different result than Ramsey (1927) about the commodity taxation but also about optimal taxes on labor income change when in presence of commodity taxes