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Look how much influence the Laffer Curve has had on economic policy, when in fact it is a pretty boring observation that taxation at a rate of 0% produces no in

Look how much influence the Laffer Curve has had on economic policy, when in fact it is a pretty boring observation that taxation at a rate of 0% produces no income for the government, and taxation at a rate of 100% produces no income for the government (because of the lack of incentive to work), therefore the optimum is somewhere between those two points. That broad idea was enough to argue that the highest tax rates were way too high and had to be cut substantially.

MagnumOpus 10y ago
And that is a good example of the disconnect between economics as a social science and politicians instrumentalising some sound bites from economics profs and selling it as "what the economists tell us". There are numerous economics papers studying exactly what is the shape of the Laffer curve both from historical analysis as well as trying to find natural experiments. (IIRC tax revenue peaks at 50-65% tax rates, at least in the short run.) None of the politicians actually know or care about the results of these studies - as long as the sound bite is convenient as a rhetoric device to support their ideology (cutting taxes or raising taxes or whatever, it gets trotted out by politicians. Sadly, ex-economists who definitely do know better are instrumental in this as well. People like Krugman, Mankiw or indeed Laffer got a large audience based on genuine rigorous contributions from 10 or 20 years ago - and then promptly ignore all that rigor, uncertainty and intellectual honesty when they get the offer of a $10million/year payday and a chance to mold the world according to their ideology from politicians and media. It is the same thing with international trade, it is the same thing with state-vs-private ownership and natural monopolies, it is the same thing with costs/benefits of demographic change and migration.

MagnumOpus 10y ago

And that is a good example of the disconnect between economics as a social science and politicians instrumentalising some sound bites from economics profs and selling it as "what the economists tell us". There are numerous economics papers studying exactly what is the shape of the Laffer curve both from historical analysis as well as trying to find natural experiments. (IIRC tax revenue peaks at 50-65% tax rates, at least in the short run.) None of the politicians actually know or care about the results of these studies - as long as the sound bite is convenient as a rhetoric device to support their ideology (cutting taxes or raising taxes or whatever, it gets trotted out by politicians. Sadly, ex-economists who definitely do know better are instrumental in this as well. People like Krugman, Mankiw or indeed Laffer got a large audience based on genuine rigorous contributions from 10 or 20 years ago - and then promptly ignore all that rigor, uncertainty and intellectual honesty when they get the offer of a $10million/year payday and a chance to mold the world according to their ideology from politicians and media. It is the same thing with international trade, it is the same thing with state-vs-private ownership and natural monopolies, it is the same thing with costs/benefits of demographic change and migration.