We offer a new proof of the maximum principle, by using the envelope theorem that is frequently used in the standard microeconomic theory. Copyright Springer-Verlag Berlin Heidelberg 2003

Consider the optimal time path of a tax on capital income, the proceeds of which are transferred to labor in a lump sum. It is known from earlier open-loop formulations that, if the optimal rate of tax converges to a point, it converges to zero, implying that, in the long run, a tax on capital...

We derive a new transversality condition (which we prove to be necessary) for a class of infinite horizon optimal control problems.