Supply side, Martin Gardner, and Tomorrowland

One of the problems I have with the anti-supply-side is that they repeatedly go one ambitious step too far, and you get a sense that, all along, that's actually the step that they've been pushing.

It's not just the anti-supply-siders. Another recent example is China Mieville's attack on the more unrealistic seasteaders: he takes his attack one massive step too far, using an ultra-obscure, long-forgotten (if it was ever noticed), ludicrous example of seasteading (which is itself a topic so obscure that the two-line article stub it has in Wikipedia has the comment that it should be merged into Ocean colonization, which is itself a pretty lonely topic) to launch an implied attack on libertarianism, attempting to tar libertarianism by association with unrealistic plans that in all probability very few libertarians take seriously outside of the actual utopians whose brainchild the Freedom Ship is. And these supposedly libertarian utopians may not, in fact, be libertarians, as Dave points out at the end of his entry. What might have been a valid (if not particularly interesting) critique of the Freedom Ship had Mieville kept to the modest goal of critiquing it, is invalidated by his transparent attempt to tar libertarianism with the same brush, an attempt that evidently worked with his intended audience (the jubilation of the choir at which his article was aimed testifies to this). What would have been a valid attack on a tiny and not particularly interesting target, becomes a straw man attack on libertarianism (one that dupes its intended readership, which is not, it must be said, all that much of an accomplishment). As Patri has pointed out, Mieville's attack does not even refute seasteading, never mind libertarianism. It refutes the Freedom Ship, but in that it is superfluous, since a moment's glance refutes the Freedom Ship. The Freedom Ship meanwhile remains as charming as it ever was, because it is an unmistakable throwback to the science fiction visions of the 1940s and earlier. The computer illustrations of the boat remind us of the visions of tomorrowland, which we remember and miss even today.

The anti-supply-side has a point, a limited point, which is defensible. If only they'd stick to it. The particular tax cuts did not obviously increase revenue above what it would have been without the tax cuts. Okay, that's certainly possible. The data seems to support their critique. Supply side was, evidently, oversold.

But they don't quit while they're ahead - probably because it's not really the game they were hunting. They have bigger quarry in mind. For starters, they go on to say that it's "foolish" to think supply side might possibly have been right, for such-and-such basic reason. Well, no, it's not, as JTK has pointed out. Zubon has also raised a valid point about the long term effects of tax cuts. The anti-supply-sider quote that Zubon is reacting to mentions Cheney's comment about the long term effect of a tax cut, misidentifying it as yet another expression of debunked supply-siderism, but as Zubon points out, Cheney's claim is not the debunked short-term claim of the supply siders. Here again we see the anti-supply-siders overreaching, trying to refute more than they really can refute. Anti-supply-siders mislabel as "supply side" any suggestion that lower taxes might be good for the economy and therefore, indirectly, good for the government.

One contributing factor to the survival of support for supply side ideas may be that the attacks on it insisted on more than they had any right to insist on, thereby refuting themselves. In their overeagerness, they trip over themselves, like the Keystone Cops.

There was another attack on the Laffer curve that bit off more than it could chew. I'm referring to Martin Gardner's parody of the Laffer curve, dubbed the Neo-Laffer curve. Gardner's argument was that the Laffer curve assumes that the relationship between tax rate and revenue is a simple one (represented by the simple Laffer curve). Gardner pointed out that it might very well be complex (represented by the tangled Neo-Laffer curve). Well, that might be true, but there's an immediate problem with Gardner's attack on the Laffer curve: his attack, by the very same token, constitutes a critique of the idea that increasing the tax rate will increase revenues. This idea also assumes that the relationship between the tax rate and the revenue is a simple one. And this is the key idea that the Laffer curve critiques, and the idea that the anti-supply-siders are, ultimately, defending. Gardner's attack on the Laffer curve, then, is equally an attack on its critics.

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Gardner's attack

Funny, like Laffer it also seems to ignore the strong hysteresis effects.

Good point.

Good point.


Problem with the Laffer curve is simple: it has never been validated. Period. I have yet to see one testable proposition come out of the theory, except the clearly false one claimed by supply-side "economists", that tax-cuts ALWAYS lead to increased revenues.

Laffer himself has never made clear where the maximum (maxima if you believe Gardner) of his "curve" lies, or how you would go about determining it. But that maximum would be by far the most important aspect of the theory; it is, after all, a theory about what constitutes an optimal level of taxation.

It's a "curve" with no shape, no equation. It's not a theory, it's not even a hypothesis. It's an ideology.

The same could be said of supply and demand

Spend an afternoon learning the supply and demand model of price and you won't come away with an ability to predict the actual prices of actual goods. In fact you can learn a lot of economic theory without gaining the ability to predict specific prices, or to predict much of anything specific (though you do come away with an appreciation for why it is so difficult to predict prices). It is nothing peculiar to the laffer curve that a key concrete number such as the actual maximum is unknown.

Gardner's attack on the

Gardner's attack on the Laffer curve, then, is equally an attack on its critics.

Your logic is faulty. Laffer's claims were based entirely on extrapolating a smooth curve from two datapoints. Gardner refuted that reasoning. He did not refute arguments based on something more intelligent, like deriving smooth sections of the curve from multiple datapoints.

Oh come on

Laffer's claims were based entirely on extrapolating a smooth curve from two datapoints. Gardner refuted that reasoning.

Then Gardner "refuted" pretty much all of economics. Open up any major economics text and tell me whether you see it filled with smooth curves, and then tell me how many datapoints those curves were extrapolated from. The Austrian attack on neoclassical economics is similar to this - the Austrians point out that the neoclassicals rely heavily on unrealistic representations of messy real-world economic activity. For instance, neoclassical curves apply to infinitely divisible goods, but no actual goods are infinitely divisible.

So, sure, there is something to it if Gardner is attacking all of mainstream economics. But to specifically target just Laffer is obviously either partisan (if Gardner actually knows anything about economics and yet remains silent on the rest of it while attacking Laffer) or clueless (if Gardner does not know anything about economics - which I consider more likely).

He did not refute arguments based on something more intelligent, like deriving smooth sections of the curve from multiple datapoints.

Actually, Gardner even "refuted" those arguments. Any finite number of datapoints can be fitted with an infinite number of curves even crazier than the one Gardner imagined for Laffer. So, no, Gardner "refuted" even those arguments (even if he asserted otherwise). If Gardner thinks it's reasonable to extrapolate even short distances from data points, he can be attacked in the same way he attacked the Laffer curve.