Definition & Reality in the General Theory of Political Economy

by Thomas Cool

Y(t)

h H + t l L + b 0 (3-t)

Relation (4-t) states the condition of a balanced budget. National income equals the sum of net incomes after redistribution. The condition may be called “Walras’ Law”.

Y(0) = h H = h N(0) + (l + b) B (4-0)

or h T(H, 0) = (l + b) B

Y(1) = h H + l L = h N(1) + l K(1) + b B (4-1)

or h T(H, 1) + l T(L, 1) = b B

The budget condition implies that the tax ‘parameters’ are functions of each other. Per regime, a higher exemption means a higher marginal tariff, and vice versa. The regime switch itself might, but need not, be the exception. Given that marginal rates R are generally regarded as policy variables, we solve for X. With X(1)