I. Introduction, 464. — II. Test of alternative principles in taxation, 467. — III. The social value of government expenditure, 474. — Appendix, 476.

An intertemporal optimization condition follows from any model of optimal growth. Such an equation usually contains two parameters which cannot be directly observed: the discount rate of future utility and the elasticity of marginal utility. These two parameters can be empirically estimated if they remain constant over time and if the assumed criterion function is maximized in the real economic system. In this paper a method of estimating these two parameters is presented and it is applied to the United States, Japan, and Canada. Although the results are not conclusive, in view of the assumptions involved, they tend to confirm the hypothesis that they are fairly stable over time, at least during a sociologically well-defined short period.

I. Introduction, 658. — II. General methodology, 659. — III. Transformation analysis with fixed coefficient production functions, 663. — IV. Numerical examples with Cobb-Douglas production functions, 666. — V. Conclusions, 673. — Appendix, 674.