A fresh look on economic evolution from the kinetic viewpoint

Abstract.

Dynamic economic theory and evolutionary economics are both subject to the trade-off between explanation power and accounting for novelty. The present paper makes a contribution to filling in this gap basing on a general equilibrium model including production and taxes. Our notion of an "open loop evolution equilibrium" is based on arguments from the gradual vs. bang-bang tax reform controversy and from the debate on optimal macroeconomic policy design. The term "kinetic" indicates that, in contrast to traditional comparative statics, our approach neither hinges on the uniqueness of equilibria, nor is confined to the analysis of prescribed parameter variations.