we must consider the conditions of economic

As a rule, an increase in a nation's physical product results either from more labor, more capital, better techniques (or the adaptation of more knowledge), or a combination of these factors, with natural resources treated as a constant. The effects of taxation on economic growth, therefore, can be analyzed in terms of its influence on labor supply, on capital formation, and on technological change or increased knowledge. Thus our study is confined primarily to the following fields: effects of taxation on the incentive to work, on the desire and ability to invest (or to save), and on the modernizing and rationalizing of production. Since we are interested in the total product, we must consider the conditions of economic growth for the economy as a whole. This means that total output not only depends on the supply of labor, capital equipment, and the state of knowledge, but also on other conditions such as the mobility of production factors, the degree of competition, the optimal allocation of resources, etc. Thus we have to see if tax policy contributes to higher factor mobility and if it either helps or hinders resources from being more effectively allocated.