Friedrich L. Sell, Universität der Bundeswehr MünchenBrief review of: The Impact of Entrepreneurial Risk Aversion on Wages in General Equilibrium. By Ying Feng, National University of Singapore, and James E. Rauch, UC San Diego, NBER, and CESifo.I confess (and I know: Qeios wants us to be friendly reviewers): if you read such a pregnant title of a paper as the authors present here, then you almost expect something like the “liquidity trap” of John Maynard Keynes and not – sorry – a "note," which is what it is ultimately about, of just under 8 pages. Why not: “a short supplement to Kihlstrom and Laffont (1979)….”?And in fact, “In this note… “ (page 2), the authors later truly acknowledge their genre.  Central hypothesis of Kihlstrom and Laffont (1979): “an increase in risk aversion lowers the equilibrium wage. This result is intuitive: greater risk aversion causes agents to prefer wage work over entrepreneurship, and also causes entrepreneurs to hire fewer workers” (page 2). Already in a simple supply-demand framework of the labour market, this result is replicable: supply increases, demand decreases, which leads to a lower wage rate, ceteris paribus. Do we truly need all that math to sort of “prove” this result?The authors:  “We hope to increase the usefulness of KL for other researchers and to facilitate improvement in its exposition for the many graduate courses in which it is taught” (page 2). I am not sure whether this aim is accomplished in the note. The lack of simple numerical examples, illustrating graphs, etc., etc., is evident. This applies foremost to section 4! The formal generalisation, extension, and clarification of the Kihlstrom and Laffont (1979) results presented by the authors is creditable.  Literature: I would like to refer the authors to H.-W. Sinn’s “Risiko als Produktionsfaktor” (Risk as a Factor of Production), Jahrbücher für Nationalökonomie und Statistik, 1986, Vol. 201/6, https://doi.org/10.1515/jbnst-1986-0602, in which the impact of risk on entrepreneurial decisions is carefully addressed and from which further arguments supplementary to Kihlstrom and Laffont (1979) can be won. Sinn, who earlier and later published widely in international journals, is a sort of victim of the “lost in translation problem” (see, for example: Sauer, B./Sell, F. L, Lost in Translation - a revival of Wolfgang Stützel´s Balances Mechanics. In: European Journal of the History of Economic Thought, Vol. 25, Nr. 3, 2018, S. 401-427). Many of his far-reaching theoretical results have therefore not been received enough in the international community of economists. I make this remark also because one of the authors “recalls” his affiliation to CESifo (Sinn, for that matter, was president of this institution during the period of 1999-2016)!

A Dynamic Model for an Optimal Consumption Tax Rate Muhammad Ashfaq Ahmed∗ Nasreen Nawaz† Federal Board of Revenue Report by Friedrich L. SellIntroductionThe authors´ problem/challenge: Existing literature ignores efficiency losses on the adjustment path of the market to the final equilibrium after the imposition of a consumption tax. (p. 3) Comment: The authors should, in my view, dedicate much more text in the introduction to the issue of dynamic adjustment paths (outside equilibrium) than to exhaustively reporting literature/country studies on consumption taxing. The modelIs it really indispensable to consider three different types of agents: producer, consumer, and middleman? For example, is the producer himself not capable of handling inventories (as a shock absorber)? But if so, the authors should make it clear right from the beginning why this is important for their exposition (p. 4//5). How important/relevant are middlemen in times of B2C transactions? Is “just-in-time production,” which minimizes inventories, considered in the paper at all? Consumption tax/ad valorem taxThe intuition of the problem is easy. There exist - beyond the comparison of initial (before the consumption tax) and final equilibrium (after the introduction of the new consumption tax) – adjustment paths of consumption in between associated with disequilibrium and efficiency costs. They could be minimized by gradually decreasing the consumption tax vis-à-vis to its initial (newly introduced) value. This sounds nice, but I know not a single contribution in the political economy of taxation literature that would recommend such a strategy. You may either announce this procedure as a government, then consumers will  postpone initial purchases with logical negative consequences for the economic cycle, or you do not, and then the government pays the bill in terms of severe reputation losses. ConclusionsApparently, the authors have not the slightest interest in the question of the political practicability of their proposal.