Saint Louis: Home of the World’s Largest Laffer Curve
Dr. Arthur B. Laffer, Stephen Moore, and Jonathan Williams recently published the third edition of Rich States Poor States: ALEC-Laffer State Economic Competitiveness Index. In chapter 2, they write:
Finally, one attribute for which Missouri is probably most famous is its Gateway Arch in St. Louis. Admittedly, we have a special fondness for this architectural wonder: It’s the world’s largest Laffer Curve!
I hadn’t noticed it before, but it’s true!
Illustration by Christine Harbin. Photo source: Wikipedia.
But couldn’t it be *any* kind of curve?
Comment by John Payne — April 8, 2010 @ 3:10 p.m.
A problem I have always had with the Laffer curve is that you don’t know where a diverse economy is on it. (Revenue maximization is not exactly a goal of mine. Government should perform necessary services (whatever that means) and the public should pay for them with least amount ‘pain’. If that all can happen on the left side of the curve, so be it.)
For example, in Greece, the bondholders want Greece to raise taxes (and cut services) to make sure that the bondholders get paid back. To raise revenue to pay back the bondholders, should the bondholders actually want taxes cut? I don’t see that being advocated in the financial press to placate bondholders. I can’t find the % of GDP that Greece pays in taxes, admittedly.
Comment by Papillon — April 8, 2010 @ 3:14 p.m.
Re: curves. Nope. It reaches a maximum point, which is at least a type of curve. But I think it looks like this curve: http://tiny.cc/zi60x
Comment by Audrey Spalding — April 8, 2010 @ 3:56 p.m.
Papillon, not only can’t you know where you are on the curve, you can’t know exactly what the curve looks like. This was Martin Gardner’s suggested modification of the Laffer Curve:
http://en.wikipedia.org/wiki/File:Neo-Laffer-Curve.svg
That said, the Laffer Curve was never meant to be a snapshot of any actual set of economic conditions. It’s more of a concretized theoretical reminder that ceteris is never paribus when a variable changes; this suggests one likely type of economic response to another type of changing conditions.
Comment by Eric D. Dixon — April 8, 2010 @ 8:10 p.m.