Thursday, December 10, 2009

Danny and the Laffer

Great Danny produces one of those perfectly satisfying arguments. The Laffer Curve is meaningless because its reverse is also true. The Fink, as he is also known, really is one of the sharpest knives in the hack box.
Posted by Bryan Appleyard at 3:53 pm

14 comments:

  1. RecusantDecember 10, 2009 4:25 pm

    I don't know where you got the 'meaningless' from that. There is no reverse to the Laffer Curve, it has always said that at both extremes no revenue would be raised.

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  2. DavidDecember 10, 2009 4:26 pm

    Hmmm... the line between "perfectly satisfying" and "inordinately dumb" must be thinner than I think.

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  3. Bryan AppleyardDecember 10, 2009 4:28 pm

    Yes, Recusant, but Danny's point is that as the extremes are approached there will be a fall off. That's the point. Once you've said that the Laffer becomes a truism

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  4. maltyDecember 10, 2009 4:41 pm

    Watched him working the boards last night amid the chaotic discussions following the gobshite on Fluoxetine Liam the Lame's jaw droppers. Even Dan struggled, possibly everyone's jaw had dropped so much that lockjaw had set in.

    The curve has a point or at least is the graphical representation for "f...k that for a lark, I ain't working for nothing."

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  5. DavidDecember 10, 2009 4:42 pm

    Yes, but to paraphrase Coase, a truism is an argument that we disagree with, but which is plainly correct.

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  6. Tom P.December 10, 2009 4:50 pm

    The problems with the Laffer curve are that (1) there is no way to know where you are on the curve at any given moment (2) the curve isn't smooth in real life and (3) there are about a billion different variables that go into the curve so it is useless.

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  7. Gareth WilliamsDecember 10, 2009 4:58 pm

    Isn't it simply a parabolic sorta curve? An upside-down bell? Not sure why this makes it either 'not true' or a 'truism'.

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  8. mongooseDecember 10, 2009 5:02 pm

    The whole point of the Laffer curve is that the ends are zero tax take but that nobody knows what the shape of the curve is between those end ranges. If we did, we could optimise taxation systems tomorrow, couldn't we?

    A Laffer curve - if one could draw a full one - would have to describe the response of an individual to tax rates. Sounds a bit complicated to me - and far from certain to be a single hump at an optimal rate.

    And the left hand end has always been a truism - "reduce tax rate to zero and you get no tax take". Yeah, thanks. The other end is far from clear however. What did take Labour get from their 95% (96%?) rate in the 1970s?

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  9. AnonymousDecember 10, 2009 10:17 pm

    i think I might write a Mutley Curve showing how higher taxes mean bigger public spending to pay the taxes for public sector staff like teachers, soldiers, Police, social workers and what not.

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  10. elberryDecember 11, 2009 10:26 am

    However, the Elberry curve shows that higher taxation leads to higher public spending leads to more middle managers who serve no function but are many and pestilent and eat too much chocolate cake and are always bitching about how they can't seem to lose weight no matter how much chocolate cake they eat. In the Elberry curve, efficiency increases as management is suffocated (sometimes literally), till, finally it reaches its maximal peak as all managers lie dead in a ditch in Bradford.

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  11. RecusantDecember 11, 2009 12:38 pm

    Is that you Elberry? I thought you had disappeared into the marches of Scandinavia, there to run your 5th life runic terror over the natives of Kiel.

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  12. BritDecember 11, 2009 12:39 pm

    The Fink/Great Danny is making a much simpler point than most of you commenters think - he's merely saying that "Lower tax rates mean higher tax revenues in the long run" is, in itself, meaningless.

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  13. elberryDecember 11, 2009 1:31 pm

    Like the bad penny i return.

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  14. VinceDecember 12, 2009 2:07 pm

    When Henry VIII, did his bit with the Monastic houses, what he did was prevent the transfer of product. In the last thirty or so years people have been wittering on about the Free Market without one word of what the hell that market was all about.
    Put it this way, is there any reason why the middle class of China should support your word count.

    Oh a few days ago, correct comment, wrong blog,

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