. ▁ ▁If ▁the ▁assumptions ▁are ▁reasonable , ▁then ▁the ▁model ▁is ▁an ▁acceptable ▁approximation ▁of ▁reality ; ▁if ▁they ▁are ▁not , ▁then ▁better ▁models ▁should ▁be ▁developed . ▁ ▁C ES ▁production ▁function ▁ ▁Now ▁let ' s ▁assume ▁that ▁instead ▁of ▁the ▁C obb - D oug las ▁production ▁function ▁we ▁have ▁a ▁more ▁general ▁constant ▁el astic ity ▁of ▁substitution ▁( CES ) ▁production ▁function : where ▁; ▁ ▁is ▁the ▁el astic ity ▁of ▁substitution ▁between ▁capital ▁and ▁labor . ▁The ▁relevant ▁quantity ▁we ▁want ▁to ▁calculate ▁is ▁, ▁which ▁may ▁be ▁derived ▁as : There fore , ▁we ▁may ▁use ▁this ▁to ▁find ▁that : There fore , ▁under ▁a ▁general ▁C ES ▁model , ▁the ▁dynamic ▁effect ▁of ▁a ▁capital ▁tax ▁cut ▁on ▁w ages ▁is : We ▁recover ▁the ▁C obb - D oug las ▁solution ▁when ▁. ▁ ▁When ▁, ▁which ▁is ▁the ▁case ▁when ▁perfect ▁subst it utes ▁exist , ▁we ▁find ▁that ▁ ▁- ▁there ▁is ▁no ▁effect ▁of ▁changes ▁in ▁capital ▁tax es ▁on ▁w ages . ▁ ▁And ▁when ▁, ▁which ▁is ▁the ▁case ▁when ▁perfect ▁comple ments ▁exist , ▁we ▁find ▁that ▁ ▁- ▁a ▁cut ▁in ▁capital ▁tax es ▁increases ▁w ages ▁by ▁exactly ▁one ▁doll ar . ▁ ▁Classification ▁ ▁According ▁to ▁the ▁Mathemat ics ▁Sub ject ▁Classification ▁( MS C ), ▁mathematical ▁econom ics ▁falls ▁into ▁the ▁App lied ▁mathematics / other ▁classification ▁of ▁category ▁ 9 1 : ▁Game ▁theory , ▁econom ics , ▁social