This paper reviews recent advances in the theory of optimal policy in a dynamic Mirrlees setting, and contrasts this approach to the one based on the representative-agent Ramsey framework. We revisit three classical issues and focus on insights and results that contrast with those from the Ramsey approach. In particular, we illustrate, using a simple two period economy, the implications for capital taxation, tax smoothing, and time inconsistency.
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Golosov et al. (2006) studied this question.
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