Each Wednesday the team at EconArticles links to a few economics articles that are worth taking the time to read.
1. The tax cuts for which former President Ronald Reagan has been remembered were based on what is known as the Laffer curve. The Laffer curve depicts a relationship between the tax rate and tax revenue that approximates an inverted-U. Note that the ideas behind the Laffer curve are not universally supported by economists including Dr Gregory Mankiw. Nonetheless an interesting, though lengthy, backgrounder on the Laffer curve by Dr Arthur Laffer is available at http://www.heritage.org/Research/Taxes/bg1765.cfm . Dr Laffer recently published an article in the Wall Street Journal on the current economic climate and his expectations http://online.wsj.com/article/SB124458888993599879.html . When reading the article it should be remembered that his is just one opinion and there are many who disagree. One well-known opponent is Dr Paul Krugman, 2008 Nobel Laureate, who not only argues that, as he puts it, the ‘big inflation scare’ does not make sense http://www.nytimes.com/2009/05/29/opinion/29krugman.html but that former President Reagan and his advisors (presumably including Dr Laffer) are substantially responsible for the current global economic recession http://www.nytimes.com/2009/06/01/opinion/01krugman.html .
2. From the above point it can be seen why it is said that for every two economists, there are three opinions; the point being that economists are rarely certain, and often disagree – even with themselves. One reason for this is that in economics it is notoriously difficult to ever entirely disprove something. The data is always being updated, circumstances are always changing and opportunities for controlled experiments are rare. From a philosophy of science perspective it can be thought of through the ideas of Imre Lakatos, but where degenerative scientific programs are never made completely defunct. Dr Robert Skidelsky, a professor of political economy at the University of Warwick, recently published an article in the Financial Times which provides a brief introduction to the evolution of economic thought over the past one hundred years http://www.ft.com/cms/s/0/31e89136-5511-11de-b5d4-00144feabdc0.html?ncli... .
Post-script (12/6/09): The AFR has an excerpt from Laffer's article in today's paper. You got it here first.