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This is an old revision of this page, as edited by Gnomatic (talk | contribs) at 10:13, 11 February 2010 (→criticism). The present address (URL) is a permanent link to this revision, which may differ significantly from the current revision.

What is citation to Laffer's work?? And a summary of a literature search.

I came across this article, and I noticed that it didn't cite any particular paper or book by Laffer in which he proposed the idea. Having access to good databases and libraries, I thought I'd do a quick literature search and find it. Surprisingly, I can't find any recent economics paper (i.e. within the last 10 years, before which I can't get the papers electronically) that cites anything by Laffer—and this is in a search for "Laffer curve," so I'm only looking at articles with those words in the title or abstract.

It's very odd, and it makes me wonder: did Laffer himself actually publish his ideas in a peer-reviewed journal, or did he just pitch it to policy-makers? Or is it just so old that no one cites it any more? (I thought he was late 70's?)

Update: it turns out that Laffer does not claim to have originated the concept, but he seems to be responsible for promoting it to policy-makers, and the curve was indeed named after a presentation he gave directly to Dick Cheney rather than any academic publication. (I've updated the article.)

There is lots of academic research on the question of Laffer curves, by the way. (Mostly trying different economic models, including this factor or that factor, to try and analyze the effect of changes in tax rates.) Two of the most commonly cited papers from the last 11 years seem to be:

  • Paul Pecorino, "Tax rates and tax revenues in a model of growth through human capital accumulation," J. Monetary Economics 36, 527-539 (1995).
  • P. N. Ireland, "Supply-side economics and endogenous growth," J. of Monetary Economics 33, 559–572 (1994).

Pecorino cites earlier work by Fullerton (1982), Stuart (1981), Bender (1984), Malcomson (1986), and others, but no Laffer.

The basic question is summarized by Pecorino as:

Just about everyone can agree that if an increase in tax rates leads to a decrease in tax revenues, then taxes are too high. It is also generally agreed that at some level of taxation, revenues will turn down. Determining the level of taxation where revenues are maximized is more controversial.

Pecorino found optimal tax rates at around 64%, by the way (ranging from 54% to 70% depending upon the assumed parameters). Ireland, on the other hand, found the optimum at 15% (Pecorino attributes this difference to an oversimplified model on Ireland's part). One of his conclusions is:

The simulation results suggest that dynamic considerations will not overturn the conclusion that in 1980, the U.S. economy was, in some aggregate sense, on the upward-sloping portion of the Laffer curve (plotted with the presented value of tax revenue).

I'm not an economist, so I don't know quite how representative this view is, or how much it has changed. The Pecorino paper continues to be widely cited as of 2005, however, as far as I can tell.

—Steven G. Johnson 03:25, August 16, 2005 (UTC)

PS. Another interesting fact is that the term "Laffer curve" in economics and policy literature seems to have expanded far beyond its original meaning for taxation: I see usages for analyzing everything from prison sentencing to endangered-species laws. Some comment on this expanded meaning might be appropriate for the Wikipedia article.

Questionable assumptions

Do we really need this section? We are talking about capitalism here. Who gives a flying **** about macro communism? —Preceding unsigned comment added by 99.255.208.65 (talk) 19:24, 12 July 2009 (UTC)[reply]

Questionable assumptions, another viewpoint

I agree that this section is questionable but on different grounds than the previous post. If the taxation rate was truly 100 percent, then individuals would be providing work for absolutely no compensation. Lacking any form of compensation (including food) then an individual would perish and the tax income would of course be zero. In a communist state this is not the case since the population has retained some fruits of their labor in order to survive at some level. The curve reaches zero at 100 percent taxation precisely because an individual will perish with zero resources. — Preceding unsigned comment added by 71.238.173.224 (talk • contribs) 00:12, 26 September 2009

This section should probably go. It seems a misapplication of the Laffer curve to extend its use to a centralised economy, where people probably are not freely able to adjust their work output to economic inputs such as tax rate. In any case, there's a bit of journalistic licence in the article's representation of how the Soviet economy fared in the period and immediately afterwards - see Brezhnev Stagnation Gnomatic (talk) —Preceding undated comment added 13:04, 17 November 2009 (UTC).[reply]
It is wp:original research to say "it seems to me to be..." To reduce the possibility that any editor will bias an article, wikipedia employs a policy of reporting what wp:reliable sources state. If there is another source which claims what you state, we can add information from that source to the article; however removing sourced information with out a clear indication that the information is outright wrong is considered censorship. T34CH (talk) 15:57, 19 November 2009 (UTC)[reply]
Understand your point, maybe more information is required. The source article is weak and should be considered outright wrong when compared against the Brezhnev Stagnation article. Also, the source author is not trained in Economics. It somewhat a shame that some other edits which were not contentious and improved readability were also lost in the wash. In terms of other sourcing, Laffer himself seems a reasonable source if we say "Laffer said ..." Gnomatic (talk) 00:01, 20 November 2009 (UTC)[reply]
I was looking at the Heritage site article and saw assumptions which seemed questionable. Any statements about it's actual utility should be pulled from articles published in peer reviewed journals, or arenas with established editorial oversight. Nobel prize winning economists such as Krugman and Tobin put down the idea, and Robert Bartley, who Krugman ties directly to Laffer and the curves supporters, is quoted as saying "Economists still ridicule the Laffer Curve, but policymakers pay it careful heed." I think we can say that economists question the utility of the hypothesis. T34CH (talk) 19:05, 20 November 2009 (UTC)[reply]

I added the orginal article by Wanniski which also describes the Curve and is from such a source. I think one of the things we need to keep in mind in editing this article is that is an economic article about the Laffer Curve. As such, people looking for this article in Wikipedia would rightly be expecting it to explain what the Curve is and how it works, and that's what the article should mostly be about. The logic of the Curve itself is pretty bulletproof (0% tax = 0 revenue, 100% tax = 0 incentive, somewhere in between there is something different) and it would be a flat earth position to claim otherwise. There definitely are controversies over two things: a) where the maximum point on the Curve is (which nobody can really know) and b) the use (or abuse) of the Curve to justify tax cuts. It's fine to have a view on b), but this is not about the mechanics of the Curve itself. I would think most of that type of content belongs in the articles about the alleged abuse (eg Reaganomics). I guess an analogy would be an article on guns would mainly be about guns and how they work, rather than wars fought with guns. Just my 2c on the way to making a better article. Gnomatic (talk) 02:43, 21 November 2009 (UTC)[reply]

The use/abuse of the curve is important information about the curve... but you touch on a really important issue. This article should probably be merged with supply-side economics as most of the content is about that rather than the curve itself. As the article states, the curve isn't really a new idea, but rather a name used to popularize an application of the law of diminishing returns. There's not much more to say about it other than that and the popular usage of the term. Krugman gives an interesting overview of the curve and it's supporters in his book Peddling Prosperity. Are there other such overviews by economists that you can think of that could be used to flesh out this article (allowing extraneous info to be moved to other articles)? T34CH (talk) 19:38, 5 December 2009 (UTC)[reply]
I don't think it should be merged with supply side economics. Supply side economics has many other elements to it, such as regulation, and politics besides. The Laffer curve is, as you say, a simple but elegant thought experiment and that's what the article should be about. In itself, the curve is not really controversial. (By the way, Krugman does not argue with the basic principles of the Laffer curve. He argues with the assumed point on the curve and with policies such as Reaganomics which had many motives other than tax revenue for lowering taxes.) The Laffer curve is indeed not a new idea. In fact, the article should probably be called tax-income elasticity. Gnomatic (talk) —Preceding undated comment added 01:12, 6 December 2009 (UTC).[reply]
Changing the title might be a possibility. Perhaps merging it with elasticity (economics) makes the most sense (and what ever doesn't fit could be moved to supply-side economics). This isn't about Laffer at all, but rather about the supply-side economists adherents misusing/misunderstanding elasticity. Until then though, there's no reason to remove information about the controversies surrounding the use of the curve. That's just censorship. T34CH (talk) 01:54, 6 December 2009 (UTC)[reply]
This is an economic article and as such is primarily about how the Laffer curve (or tax-income elasticity) works. We should mention that there were controversies, which we do, and point to the main articles which discuss those controversies, which we also do. However, we must keep clear the differences between the curve itself (not controversial) and some contemporary policy (which some believe is controversial). Please see the "guns and war" comment a few above. Note there is also a section given to criticism of the use of the curve. Your point is fine, but it fits there. Regarding the ELNO, these are i) the original paper and ii) Laffer discussing his own work. They are definitely notable. I believe the other person who chipped in believed these were valid also. I agree the tax data one is fine to go, so it is gone. I'll try to adjust taking it all into account. Gnomatic (talk) —Preceding undated comment added 02:28, 6 December 2009 (UTC).[reply]

Requesting 3PO

I am requesting a third opinion because it seems Gnomatic and I are at an impasse. The Laffer Curve is a thought experiment used by supply-side economists to argue that taxes should be lowered. In the section above, Gnomatic states that the use of the curve should not be discussed here, while I think it should. This leads Gnomatic to remove sources such as this article, which states:

"If there's one thing that economists agree on, it's that these claims are false. We're not talking just ivory-tower lefties. Virtually every economics Ph.D. who has worked in a prominent role in the Bush Administration acknowledges that the tax cuts enacted during the past six years have not paid for themselves--and were never intended to. Harvard professor Greg Mankiw, chairman of Bush's Council of Economic Advisers from 2003 to 2005, even devotes a section of his best-selling economics textbook to debunking the claim that tax cuts increase revenues."

Also, I believe that these links violate wp:ELNO #1, while Gnomatic believes that they are notable. I am not aware of notability being a criteria for inclusion in the EL section. T34CH (talk) 18:20, 6 December 2009 (UTC)[reply]

As there are now more than 2 disputants I have declined to provide a 3rd opinion, via WP:3o. Consider filing an article WP:RFC if the dispute cannot be resolved. Hipocrite (talk) 16:14, 7 December 2009 (UTC)[reply]

Discussion from previously involved editor

I've been following this and I think it's an important distinction that Gnomatic is trying to make here, don't confuse Laffer Curve with how it may have been used/misued in the past (ala "Guns don't kill people"). The Laffer Curve is not a political stance so it should not be presented as such, nor is the Laffer Curve a thought experiment anymore than innumerable other propositions in economics. It is not unreasonable to mention its use/misuse by politicians (with references) but that should be short and clear that the curve itself is politically agnostic. As far as the external references, surely the original paper and Laffer himself discussing the curve only add to topic. Where those references are located in cyberspace is of no relevance. I appreciate the hard work I've seen both of you put into the page but it is essential to keep it apolitical. You can link to pages on Reagonomics etc. but again, this page should stick to the point ... citing a casual comment using terms like "ivory-tower lefties" really has no place in the article ... whatever claims the author is speaking about is not about anything said in the original paper or by Laffer himself ... that quote may or may not be appropriate in an article about Bush Admin tax cuts (although it is lacking in verifiability and mostly hearsay). I don't want to discourage your edits but there are very much misplaced on this particular page which should just stick to a textbook like description of the curve without any political overlay. BobKawanaka (talk) 21:21, 6 December 2009 (UTC)[reply]
Bob, I appreciate your help, but I was hoping for a fresh set of eyes on this topic (some one with no preconceived notions). For the record, I think you are misinterpreting the sources. Krugman does not see the curve as apolitical, and does not differentiate the curve from supply-side economics. The Time magazine article doesn't either (and the quote is about the practice of using the curve in general, not about the Bush administration specifically). A solution to this issue might be to create a small section in elasticity (economics) about Laffer, and merge the rest into supply-side economics, but much of the language here glorifies the usefulness of the curve. If this article says anything about how useful somebody thinks it is, it needs to also give appropriate wp:WEIGHT to how unuseful economists think it is (especially when Laffer himself says in the Time article that it shouldn't be used as it has in the past).
As for the ELs, I wasn't talking about where they were hosted. I was talking about the first line of wp:ELNO:"Any site that does not provide a unique resource beyond what the article would contain if it became a Featured article." The Heritage article is already used as a source, so I'm not sure what is accomplished by linking to it twice. The Public Interest article is not an academic journal article (the journal was quite political--further evidence against the curve being apolitical--and I don't see evidence of peer review). This was also not the first time the concept was described in the press. That link seems to be at odds with ELNO #2 as well as the WEIGHT section of wp:EL. T34CH (talk) 22:11, 6 December 2009 (UTC)[reply]
I have to strongly disagree on the EL. I honestly can't imagine two better links than those two. The original paper where it came to be and a paper by the "inventor" of the curve himself. Merely being a piece by Laffer isn't enough to warrant inclusion, but it is directly about the curve. Any theory in economics or physics or chemistry where the original work was available would surely be linked. Why would anyone interested in the Laffer curve not want to see the original work? We should be happy the links are both freely available on the web.
I don't see anything wrong with a section about its use/misuse ... it's a hot button and would be silly not to mention it (I haven't looked through everything but I don't get the sense Gnomatic is against that ... he/she only seems to want to make sure that we're clear that the curve is the curve, not the politics or past misappropriations of the curve).
This is a bit of semantics but extremely important: when economists make blanket statements about the curve, they are speaking of a particular policy implementation related to the idea that tax cuts can lead to higher revenues ... an administration can make a mistake about the true shape of the curve and where the economy lies on it. It is clearly true that there are instances where lowering taxes leads to higher revenue (in extremis, lowering from 100 to 99%) ... so this sort of commentary on the curve itself is misplaced. Commentary on the effective/ineffective use/misuse of the curve is reasonable. It's a difficult tightrope and one that partisan writings of all persuasions rarely try to get right. This is where Wikipedia should shine. BobKawanaka (talk)
Bob, I've made this into a subsection as the whole point of requesting a 3PO is to get the opinion of a totally uninvolved editor.
  • "The original paper where it came to be" - This is an untrue description of the Public Interest article. The term had been introduced long before this and used nonchalantly in the popular press at least 3 times before that article came out. Besides that, everyone including Laffer agrees that the concept isn't new at all, just the use of the name is. The concept was discussed countless times before this as tax elasticity as early as the 30s, and apparently even in Muqaddimah in the 1300s. And it violates ELNO #2.
  • "a paper by the "inventor" of the curve" - A) he's not the inventor (see above) B) it's already used as a source. What else is missing from this article that is in that source?
As for the rest, I think you are making a distinction that doesn't exist. The supply-siders just repackaged an old concept in a slick package to let them claim taxes could always be lowered. The "Laffer curve" is not separable from supply side economics. Tax-elasticity is. T34CH (talk) 02:13, 7 December 2009 (UTC)[reply]


Nowhere within the presentation of the Laffer Curve is the claim "taxes could always be lowered" ... it *clearly* never suggests such a thing, one need only look at the shape ... this is indeed the very reason for the care that must be taken in this article to distinguish between the Laffer Curve and the commonly held misinterpration of it that by itself, it suggests "taxes can always be lowered" ... I know for example that I grew up thinking that's what it meant ... I know some factions claim this and I know that they try to appropriate the Laffer Curve for their purposes ... and it is reasonable to mention this in this article, i.e., that historically people have mis/over/wrongly interpreted what the curve is ... but we simply can't say there is a one-to-one relationship between the curve and claims that taxes can always be lowered (and the attendant criticism that this is nonsense) ... I think this is the fundamental point that Gnomatic was probably trying to get across. The fact that many don't understand this presents a "teaching moment" for Wikipedia, again, I believe a perfect opportunity to keep this an NPOV article. BobKawanaka (talk) 02:37, 7 December 2009 (UTC)[reply]
Bob, the problem is that what you understand, and what Laffer was originally demonstrating in 1974(ish? he doesn't really remember this), is simply the law of diminishing returns. You're right, in that there is no one-to-one relationship between this and supply-side economics. However, it was the the so-called "Laffer curve" which was used (mis/over/wrongly) specifically for the purposes of supply-siders. It was a tool invented for this purpose (otherwise why would the supply-siders need a new name for something which already existed). The idea that "taxes could always be lowered" was simply the position that supply-siders always seemed to take, my point being a all-too-strong relationship between the curve and supply-siders, not between the curve and this one policy position of theirs. T34CH (talk) 18:52, 7 December 2009 (UTC)[reply]
It's exactly the point: this is an opportunity to present what the Laffer curve is and how it works in a factual and encyclopedic way. There are a lot of misconceptions which can be corrected with a good article. The "Laffer Curve shows that lower taxes always increase tax revenue" is one (it shows no such thing). The equivalence of the Laffer curve and Supply Side Economics is another (they are very different). Gnomatic (talk) 13:06, 7 December 2009 (UTC)[reply]
What is factual about the Laffer curve? There's a high probability that 0 revenue will be raised at 0% tax rate, and argument over whether 0 will be raised at 100% effective tax rate. The rest is totally ambiguous. There are those who argue for multi-peaked curves, double-peaked curves, and the "technosnarled" Neo-Laffer curve (with the only relatively understood regions being near 0 and 100%). This article should be about the social phenomenon and cultural history of the Laffer curve, not about the concept of elasticity or diminishing returns. T34CH (talk) 18:52, 7 December 2009 (UTC)[reply]
This article is an economic article about the concept of the Laffer curve. People searching for an article are looking for a clear explanation of the subject. It most certainly is about the concept of elasticity and diminishing returns because that's what the Laffer curve is. If you would like to start a separate article about "the social impact and cultural history of the Laffer curve" please feel free. A link to that article from here would be appropriate. Gnomatic (talk) 23:42, 7 December 2009 (UTC)[reply]
"It most certainly is about the concept of elasticity and diminishing returns because that's what the Laffer curve is." So why do we need multiple articles on the same concept? T34CH (talk) 23:50, 7 December 2009 (UTC)[reply]
I'm a bit confused. In the comment above you said the article should be "not about the concept of elasticity or diminishing returns."08:14, 8 December 2009 (UTC)~ —Preceding unsigned comment added by Gnomatic (talk • contribs)
That's right, I did say that. Why do we need multiple articles on the same subject? T34CH (talk) 21:40, 8 December 2009 (UTC)[reply]
I don't understand; are you ignoring the question? T34CH (talk) 17:45, 10 December 2009 (UTC)[reply]

(←) Not ignoring the question. Just a bit flumoxxed. As I said I would like to see an economic article and clear explanation of what the Laffer curve is. The Laffer curve is primarily about concepts of elasticity and diminishing returns. In response you replied "This article should be about the social phenomenon and cultural history of the Laffer curve, not about the concept of elasticity or diminishing returns." That is a different article. Also, from your edits, which I understand you feel passionate about, and your comments further up, I believe you may be confused about the difference between supply side economics and the laffer curve and view them as the same. They are not the same, although the Laffer curve was used, in part, in the package of measures comprising supply side economics. Further, the attacks of prominent economists (including Krugman, who is very careful in the exact words he chooses) are generally not of the basic concept of the Laffer curve, which they almost all accept as sound, but rather on users/abusers of the curve who claimed that lowering taxes always increased revenues (the Time article claims former president Bush was one of them). That lower taxes always increase revenue is patently in conflict with what the Laffer curve really says, however many people believe that's what it's about. Another misconception is that governments are always trying to raise more revenue with tax cuts. That is not always their aim (indeed raising more tax revenue is not the primary aim of tax cuts in supply side economics). I think we have a great opportunity to sort out the many misconceptions which are propogated time and time again by politicised interests or the uninformed press. Hope that helps. Gnomatic (talk) 23:57, 10 December 2009 (UTC)[reply]

The Laffer Curve is a term that a few journalists used to popularize supply-side economics. They claimed that it described a concept that had already held a place in economic theory. By giving a new name to an old idea, they could ignore the academically accepted theory and pretend as if there were no complexities involved, allowing them to spend 30 seconds explaining to a congressman something he would spend 6 months talking about. The curve is nothing more than that.
Trying to remove "the social phenomenon and cultural history of the Laffer curve" from this article is known as a wp:content fork. When someone looks up a subject on wikipedia, the article they arrive at should give them the whole picture, not some vision sanitized by anyone.
I am not confusing the Laffer curve with SSE, I am saying that Laffer curve was initially used almost exclusively to promote SSE. The L. curve isn't a new concept, but a term invented by and for SSE. It should be presented in context. Krugman does attack the L. curve, calling it "crude and silly". But to him it's biggest sin is what it was created to advocate. This is not something that can be removed from the concept.
Your comment on what the L. curve "says" or does not say is lost on me... there is no way to quantify anything by the 0 and 100% taxation rate (and again, event those are merely theoretical), so it really doesn't "say" anything. But the idea that a peak exists is key to a lot of policy decisions which, again, should not be whitewashed from this article because there are lots of RS and Notable sources which explain the connection. Your attempt "to sort out the many misconceptions which are propogated time and time again by politicised interests or the uninformed press" are commendable, but--given the lack of sources which back you up and wealth of sources which support a critical view of the history of the L. curve--are also wp:OR.
I agree that we can help clear things up here. To that end, I suggest writing a very short section called "Laffer curve" in elasticity (economics) or diminishing returns, redirecting this page to that section, and moving the critical stuff to SSE, Reaganomics, etc, and creating all the appropriate cross links. Simple, neutral, solves your problems with negative attribution towards the L. curve, and solves my problems with this article appearing to be a content fork. What do you say? T34CH (talk) 01:47, 11 December 2009 (UTC)[reply]
The concept is indeed not a new one. But that doesn't make it invalid or uninteresting. I think merging it with elasticity is not the right thing - this is a specific case of elasticity which has an independent existence. Again, merging with SSE is not the right thing. Laffer curve != SSE.
"The Laffer Curve is a term that a few journalists used to popularize supply-side economics. They claimed that it described a concept that had already held a place in economic theory. By giving a new name to an old idea, they could ignore the academically accepted theory and pretend as if there were no complexities involved, allowing them to spend 30 seconds explaining to a congressman something he would spend 6 months talking about. The curve is nothing more than that.". This is your POV, but it is not the only POV. Regardless, it can be resolved with valid supporting references. Again if journalists did or didn't do something, that doesn't make the concept invalid or uninteresting. In fact it makes it more important to show how it really works.
It's clear that the Laffer curve is a theory, nobody can know the peak etc. (I would say it is known that a 0% tax rate will yield 0 revenue for sure though.) Laffer says it's a learning tool. The article is consistent with that. Many useful thing are theories (eg relativity) but theories can still provide useful insight.
One way forward would be to rename the article Tax Income Elasticity and have a redirect from Laffer curve. Then we could talk more generally about the theory, although of course the Laffer part would still probably be the biggest part. —Preceding unsigned comment added by Gnomatic (talk • contribs) 03:40, 11 December 2009 (UTC)[reply]
If, as you say, the idea was not a new one, then this isn't really a topic that can stand on it's own. What we can say is "The L. curve is a phrase coined in 1978 to help illustrate a need for the central policies of SSE." This is directly in-line with what Wanniski says. What I said about journalists is straight out of Krugman's book, so it's his POV, not mine. I'm not sure why you keep accusing me of arguing from a POV rather than offering sourced statements. I'm not here to present my theories in any shape of form.
I'm open to the idea of an article called tax income elasticity (or something similar), but I want to know more about why you think it needs to be separate from the main elasticity article... yes that article is a bit of a mess, but the purely theoretical information would make for a fairly short section, and the context of the over-arching concept could only help readers understand the topic. Also, I'm still not sold on how you see the concept of the L.curve (not "tax income elasticity") being seperate from SSE. Let's be very clear, I'm not equating the two, but the curve is a phrase and image created and popularized by SSE'ers to promote SSE, so they are intimately intertwined.
You said yourself we should split the theoretical from the application, so putting the theory in Elasticity and the application in SSE fits that criteria perfectly. Whether the main section on the Laffer curve is in Elasticity or in SSE (only need to have it once on WP), criticisms related to the L. curve should be in which ever section discusses application. I would suggest not having any application info or a section named Laffer curve in any purely theoretical article (links yes, sections no) as it would draw all sorts of POV pushing from all sides, simply by virtue of that name.
It's true that such curves are interesting thought experiments. It's also true that many of the shenanigans of the SSE'ers are not actually based on the L.curve. But many of the shenanigans were claimed to be based on the L.curve. When the curve is invoked prominently and their are notable criticisms of policies and actions ostensibly carried out because of the L.curve, it should be noted here (or where ever) so that readers have a full understanding. It's not a problem to explain the difference between theory and reality, but most readers are looking up this term because of what they hear in misinformed public forums, not what they read in academic journals, text books, or in conjunction with actual economics. T34CH (talk) 06:28, 11 December 2009 (UTC)[reply]
I do think that the concept of increasing tax rates having a diminishing return is interesting and useful enough to have its own article, and there is a lot of good material here. Maybe the way to handle it is to make the article more general, and spend quite some time noting that Laffer's was the most influential description and interpretation of the concept. Somehow that doesn't seem quite satisfying though. Gnomatic (talk) 12:11, 14 December 2009 (UTC)[reply]
What would you propose to call the article? It would need to be something that isn't a neologism.
Incidentally, I was looking at an economics text book (Barron's Economics, Wessels, 4th ed.), which states on p. 182 that the principles of SSE are "1) People supply less labor, capital, and other factors when taxes increase [sounds to me like "always decrease taxes, L. curve says so] 2) The decision to supply more or less of a factor is determined by the marginal tax rate (again, L. curve) 3) When the marginal tax rate goes up, aggregate supply goes down. The average tax rate does not matter. 4) This shift in aggregate supply is more important for predictiing what taxes will do than is the shift in aggregate demand." I really don't see how the L.curve and SSE could be any less tied together.
From here on out, could you please try to compromise on edits rather than just reverting everything? You and Bob keep reinserting a fact tag that has no business being there, and reinstituting redundancies that actually make the paragraph much harder to read. I don't pretend what I write is the ultimately polished version, but we should be working together on wording rather than simply reverting everything. T34CH (talk) 19:41, 14 December 2009 (UTC)[reply]
Yes! Your text book is absolutely right! The essence of supply side economics is that if one removes the impediments to the supply of goods and services, then the cost of producing things will go down. As a consequence, economic output will increase and the cost of goods and services will fall (making people wealthier overall). One of the impediments to the supply of labor is the marginal tax rate and therefore to maximise the labor supply one should lower the marginal tax rate as much as possible. There is not an optimal rate: in SSE one should always try to lower the tax rate.
But you have hit the nail on the head on why SSE and the Laffer curve are not the same. The objective function of SSE is to maximise supply, and to achieve this you should always try to lower taxes. The Laffer curve says there is a revenue-maximising point of taxation. In the Reagan years it was probably true that lowering taxes increased supply and also increased tax revenue (so the Laffer curve case for tax cuts and SSE case for tax cuts were in agreement). In later years, people argued that Supply Siders disingenuously used the Laffer curve argument for justifying further tax cuts, when all they really wanted to do was further SSE aims (ie the Laffer curve case for tax cuts and the SSE case for tax cuts were not really in agreement any longer). It's the thought of the latter that makes Krugman and others froth at the mouth. I really think this is a fascinating topic worth explaining clearly. Let's hope we can get it sorted. Gnomatic (talk) 13:18, 15 December 2009 (UTC)[reply]

Simple Mistake - Art Laffer's Name is Missing from the article

The only name mentioned in the entire article is "Laffer". His first name is never given, nor a link. Pretty glaring oversight. —Preceding unsigned comment added by 67.142.130.43 (talk) 22:34, 17 December 2009 (UTC)[reply]

criticism

There seems to be a need for adding more and clearer criticism, since many economists do not think that tax cuts increase incentive. If property was taxed 10%, would anybody stop working? Probably not. (Probably it will not be easy to write an neutral article due to very different opinions concerning this theory) —Preceding unsigned comment added by 80.121.20.135 (talk) 15:03, 24 January 2010 (UTC)[reply]

Good catch, and taken care of. Don't be shy of fixing such issues in the future (be wp:BOLD). T34CH (talk) 00:41, 18 December 2009 (UTC)[reply]


Currently, there is NO CONTENT in the criticism section. C'mon guys. —Preceding unsigned comment added by Lubarsh (talk • contribs) 15:05, 10 February 2010 (UTC)[reply]

A criticism section is actually frowned upon. Criticism should be placed throughout the article where appropriate. Integrate it into the context in the proper section. Morphh (talk) 15:17, 10 February 2010 (UTC)[reply]
Quite so. And indeed many recent edits have been "move criticism back to main".Gnomatic (talk) 10:13, 11 February 2010 (UTC)[reply]
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