[75] This means that causality runs from money to inflation, to unemployment, to the wage.
[76] The short run is defined as the period in which there is no capacity effect from investments on the stock of capital. After a year there generally is such an effect. The medium run is about 5 years, and the long run might be taken as 10 years or more.
[77] This relationship now is dropped from the model, however. While Graafland & Huizinga (1999) include the marginal tax rate, Broer c.s. (1999) don’t, and only use the average tax rate. From a personal conversation with Broer, I understand that this is because their relationship is to be used in a smaller model that will be used for policy simulations (and that has to drop some variables in order to be smaller). This again shows that some choices can be irrational even though circumstances may make them seem rational.
[78] (I) Professor Oort is indeed related to the discoverer of the astronomical “Oort cloud”. Perhaps we might speak about an “Oort Cloud” in economics too: big misconceptions and misunderstandings flying about in professorial minds, occasionally hitting Earth to great disaster. (II) A member of the Oort commission was professor dr. C.A. (Flip) de Kam, who was also an assistant to the social-democratic fraction in Parliament at the time of the ‘Duisenberg Disaster’, see chapter 14. Around 1997 we had a chat, and he still didn’t understand the issue - and thus it doesn’t help to explain it. De Kam is now at the OECD, it seems in an important position. I highly appreciate some his work, like De Kam & Van Herwaarden (1989), and I regret his misunderstanding. Should he once understand it, he would become a welcome and powerful ally in explaining matters to a larger audience. Still, De Kam’s omnipresence reminds one of Ira Magaziner’s, vide Barro (1996:xii), Krugman (1994b:298) and Galbraith (1998:201), to apparently similar destructive effect.
[79] We don’t perform a statistical test though. We just plot these graphs, and are satisfied by a rough lognormal approximation. For real tax experiments, we would use the original income class data.
[80] Lambert (1985:31) mentions that a Pareto distribution - close to the lognormal - has a nice property with regards to taxes. This should be investigated.
[81] An alternative interpretation of ms and md is to take them as the minimal levels for which the density shows positive values. The table then remains the same - though of course with a different interpretation.
[82] Borjas (1996:167) notes that the US minimum wage may have a noncompliance of 40%.
[83] From discussion with others I understand that Juliet Schor has made an issue of the high Dutch percentage of parttime work, presenting it as a social advancement. It likelier comes from the distortions of the tax system and social laws that force people into less working hours and lower wages. I have not read Schor, so my comment here is only a hypothesis, something to be surely checked.
[84] See Barro (1996:96-98) for some entertaining pages. That chapter also throws some useful light on the US CEA. Curious his statement however: “(…) we are still waiting for the first sighting of the Keynesian demand multiplier.” (p111), i.e. curious in the light of the structure of macro-economic models.