Optimal tax the optimum. Stipulating this condition results in the following formula for the optimal top tax rate, if incomes are Pareto distributed: formula_1 where: Empirical estimation of the parameters of this equation suggests that the revenue-maximising top tax rate is between approximately 50% and 80%, although this estimate neglects long-run behavioural responses, which would imply higher elasticities and a lower optimal tax rate. Saez's analysis can also be generalised to tax rates other than the top rate. In the late 1970s, Arthur Laffer developed the Laffer curve, which demonstrates that there are two effects of changing tax rates: an arithmetic effect—if
Optimal foraging theory items that an animal should carry back to its nesting site or the optimal size of a food item that an animal should feed on. Figure 1, shows an example of how an optimal decision rule could be determined from a graphical model. The curve represents the energy gain per cost (E) for adopting foraging strategy x. Energy gain per cost is the currency being optimized. The constraints of the system determine the shape of this curve. The optimal decision rule (x*) is the strategy for which the currency, energy gain per costs, is the greatest. Optimal foraging models can