Sunday, February 1, 2015

The Laffer Curve Was Drawn Up On an Elitist Cloth Napkin

For the record, the Laffer curve which was famously drawn on a napkin (above) by Arthur Laffer while having dinner with  Jude Wanniski, Donald Rumsfeld and Dick Cheney in September 1974, was actually drawn on a cloth napkin.

I have posted this before but it makes sense do so again: Here's Murray Rothbard's great 5 minute and 29 second take down of the Laffer curve:



  1. Oddly enough, he didn't use the "whole" cloth. . . .

  2. So, Rothbard wants us to believe you can increase the cost of doing business (increase taxes), and this will increase "revenue" to the government; But from what extra production is this extra revenue coming, since, all else being equal, production will decline when profits decline?

    1. Ha no. Rothbard wants you to believe that if taxes were raised, tax revenue might increase. So be careful, or some liberal might try and prove you wrong by raising taxes.

      And taxes aren't coming from some "extra production". They come directly out of our mouths, so to speak.

      Yes, there will be less incentive to produce. We don't know the quantitative responses of individual actors in advance, however. So using math and graphs to attempt that impossible feat is useless.

      As libertarians, we can say, not unlike the laffer curve, the less you tax, the richer we will be. Some people aren't concerned with that, though, so the laffer curve is used as demagogy, to shut them up.

    2. A smaller piece of a bigger cake can be bigger than a big piece of a smaller cake but it does not have to be.
      Bob Murphy used to work Laffer and recently explained the laffer curve on the Mises Canada website.

  3. I once had a liberal tell me that, if you tax someone more, they'll work harder to recoup the level of profits they had before. So by raising taxes, you increase revenue for the government AND you provide some extra motivation for people to work harder and produce more. This is the level of cognitive dissonance we're working against, folks.