Tax policy and innovation: A search for common ground

Abstract

The paper is motivated by a desire to find common ground between mainstream and post-Keynesian approaches to fiscal policy. A post-Keynesian approach with origins in Kalecki offers a promising line of enquiry which is developed here. The paper identifies the principal differences between the Keynesian and Kaleckian approaches. The possibilities are explored of finding accommodation between the mainstream and Kaleckian approaches to the taxation of greenhouse gases. The macroeconomic implications of taxing greenhouse gases are identified. However, these may be thwarted by the emergence of ›political aspects of innovation‹, akin to Kalecki’s ›political aspects of full employment‹. A Kaleckian balanced budget approach allied to fiscal incentives to innovate offers some prospect of common ground with the mainstream.