Laffer: Laughable As Always

R Davis spends a whole lot of words (and numbers) explaining why Arthur Laffer’s latest WSJ editorial is false and ridiculous, but those who think about data — at all — really only need to read one line. Laffer’s key error — which a high-school statistics student could spot — is to:

compare growth in GDP rates with government spending as a percent of GDP. He is testing for a relationship between two variables but expressing one of them (spending) in terms of the other (GDP).

So when Estonia or Ireland’s GDP drops, its government spending/GDP increases.

This is obvious proof that higher government spending causes lower GDP.

It’s hard to imagine that a well-educated person could not be aware of how specious this argument is. But I’m guessing that he really and truly does not realize it.

Cross-posted at Asymptosis.