Ramsey's principle of optimal taxation

Ramsey's principle of optimal taxation states that the optimal tax rate on an activity should be inversely proportional to the price-elasticity of that activity (this is obtained by summing up the price-elasticity of demand and the price-elasticity of supply).

External links

• Optimal Taxation in Theory and Practice by N. Gregory Mankiw, Matthew Weinzierl, and Danny Yagan