However, these informational restrictions do impose limits on social insurance and redistribution, and so may well affect societal preferences over aggregate outcomes. 10  I’m assuming that the government has access to affine taxes, so that potential budget imbalances can be solved through an appropriate choice of an intercept for the tax system (as in Werning 2007).
I’m also ignoring the potentially important issue of implementation (to guarantee that there is no other undesirable equilibrium allocation). BIS central bankers’ speeches  3  implications for appropriate taxes and subsidies. Given the current economic situation, I would – overly crudely – divide the empirically relevant models into two classes: demandconstrained and supply-constrained.