This paper explores the econometric implications of learning behavior. In an illustrative model the government maximizes the discounted sum of tax revenues subject to the constraint imposed by a Laffer curve involving a parameter initially not perfectly known but about which Bayesian learning...

Imagine a very large town, at the centre of a fertile plain which is crossed by no navigable river or canal. Throughout the plain the soil is capable of cultivation and of the same fertility. Far from the town, the plain turns into uncultivated wildernesss which cuts off all communication...