Notches

Economists have an instinctively negative reaction to any government program that creates a "notch," that is, a discontinuity in a budget constraint. For example, welfare programs like public housing are structured so that a finite lump of benefits is lost all at once when a household's income crosses a certain threshhold. Such notches deserve their bad reputation --they effectively impose a high marginal tax rate over a small income range, which no doubt discourages work and promotes welfare dependency. However,this paper argues that in other contexts, tax and subsidy plans with notches should at least be considered as serious contenders when public policy seeks to encourage or discourage some activity. Using simulations,we show how notch schemes can dominate traditional linear schemes using a standard efficiency criterion.

Will the Real Excess Burden Please Stand Up? (Or, Seven Measures in Search of a Concept)

It is well understood that a tax which distorts relative prices generates a welfare cost or "excess burden" in addition to any associated transfer of resources, but there remains considerable controversy and confusion with respect to procedures for measuring this excess burden. The purpose of this paper is to clarify matters concerning what is one of the most basic concepts in welfare economics. We describe and evaluate a number of alternative conceptual experiments which might lie behind an excess burden calculation, showing how these notions can be represented graphically and algebraically and how they can be approximated numerically.

Plague, Fire, and Typology in Defoe's A Journal of the Plague Year

The essay examines Daniel Defoe's A Journal of the Plague Year in light of Thomas Vincent's treatise God's Terrible Voice in the City (1667). Rosen argues that Defoe subverts the typological framework of plague and fire by suppressing the fire in order to supply a tragic mode rather than a redemptive one