Comments and Questions

1. I should indeed refer to the papers by Guesnerie.2. I want to point out that the main point of the paper is to illustrate how the kauffman idea that greater complexity and greater interaction between units leads to "rugged landscapes", i.e. a large number of local optima, can be applied to economics in a context where the local interactions between units come from rational behavior by optimizing agents rather than being exogenous. I use the tax brackets example because there is a natural counter part to the interaction between adjacent units, which is the elasticity of supply by agents. So the tax example is just one example, I actually believe the argument is more relevant for other kinds of reforms, but it is easier (at least for me) to understand and spell these effects out in this context.3. Moving the kink points allows us to change the tax schedule locally; on the other hand, moving the marginal tax rate for one bracket would in fact imply changing the whole tax schedule for the upper brackets. To avoid that, one could change the marginal tax rate for the next bracket and let the tax schedule unchanged for subsequent brackets, but that is exactly what changing disposable income at the kink while leaving other kinks unchanged achieves. So the government does focus on marginal tax rates, but it can only change the tax schedule for two consecutive brackets at the same time.4. As the paper's focus is on a positive theory of taxation, I was not careful in relating the SW function to individual utilities. And one may argue that the disutility of labor is not oberved to the social planner. But I can try to run simulations with a utilitarian SW function.