[Principled]

Do we get to allow wages to drop like Jorgenson and Wilcoxen did in their simulation even though it would be impossible to do in reality.

If the equation did not allow for increases or decreases in wages, you'd complain about the formula. As is, you assert that the formula permitting the wage to change must mean that wages fall.

Talk about misleading.

[Your Nightmare]

If the equation did not allow for increases or decreases in wages, you'd complain about the formula. As is, you assert that the formula permitting the wage to change must mean that wages fall.

Talk about misleading.

In the Jorgenson/Wilcoxen model, the price of labor goes down as the marginal tax rate on labor income goes down. So eliminating the income tax (reducing the marginal tax rate on labor income to zero) in favor of a NRST causes the price of labor to go down in the model.