The Laffer Curve in Everyday Life

Inspired by PGL’s reference to the debate between Nouriel Roubini and Art Laffer, I visited Laffer’s house to talk to him. But before I had a chance to ask him why he thinks the Laffer curve (the idea that cutting taxes will actually lead to higher tax revenues) actually has any empirical relevance to the US economy today, I overheard the following conversation between Laffer and his neighbor, an economist:

Laffer: “I cut the grass in front of my house last weekend. And this week, it really grew rapidly. You should see how tall my grass is now! Yes, we received plentiful rain during the week. But really I think that my cutting it last week is what really led to it getting so tall.”

Neighbor: “In order to tell whether cutting the grass last weekend caused it to grow so tall, wouldn’t you have to compare it to how tall it would have been, and how fast it would have grown, if you hadn’t cut it last weekend?”

Laffer: “Don’t get all mumbo-jumbo technical with me. I cut the grass last weekend, and it grew this week. QED.”

Upon hearing this I gave up my quest to have a serious conversation with Laffer, turned around, and went home.