Arthur Laffer: An Economic Genius

Arthur Laffer: An Economic Genius

When you take the time and look at all of the people who have been involved with economics over the years, Arthur Laffer is a man that you will hear a lot about. Laffer had a large affect on the United States economic policy throughout the 1980's due to his theory on taxes (Arthur, 2010). However, his tax theories did not only affect the United States, but the whole world (Economist, 2010). Arthur Laffer is an economic genius and he is recognized as one of the greatest economists in the recent history of the United States.

Arthur Betz Laffer was born on August 14, 1940 in Youngstown, Ohio (Arthur, 2010). He was very intelligent as he was growing up. Laffer did well in school and eventually went on to attend Yale University (Economist, 2010). He graduated in 1963 and received a Bachelor's degree in economics (Biography, 2010). After he received his Bachelor's degree, he enrolled in Stanford, where he graduated with his Master's degree in economics (Biography, 2010). However, a Master's degree was not enough for Laffer. He continued his education at Stanford until he received his Ph.D. in economics (Arthur, 2010). After receiving his degree, Laffer began to draw attention to himself. He proposed supply-side economic theories, and they became popular at very quick rates (Arthur, 2010). This theory stated that held that reductions in federal taxes on businesses and individuals would lead to increased economic growth and in the long run to increased government revenue (Arthur, 2010). Through all of his work with economics, he soon was known as the Father of Supply-Side economics (Economist, 2010).

However, Arthur Laffer is most famous for creating the Laffer Curve (Arthur, 2010). In 1974, Arthur Laffer went to dinner with Dick Cheney and Donald Rumsfeld (Laffer, 2010). The three of them were talking about President Ford's Whip Inflation Now proposal for increasing taxes (Laffer, 2010). Laffer quickly grabbed a pen and a napkin and began to draw a curve on the napkin (Laffer, 2010). This curve helped show Cheney and Rumsfeld what Laffer meant when he was trying to explain the trade-off between tax rates and tax revenues (Laffer, 2010). The basic principle behind the theory is that if tax rates are lowered, tax revenues will be lowered by the amount of the decrease in the rate (Laffer, 2010). However, Laffer claims that he did not come up with the idea originally (Laffer, 2010). He said that the idea and basics behind the theory came from Ibn Khaldun (Laffer, 2010). Ibn Khaldun was a 14th century Muslim philosopher (Laffer, 2010).

Arthur Laffer was very successful as an economist. When Ronald Reagan was the President, Laffer was a member of his Economic Policy Advisory Board (Economist, 2010). He did such a good job that Reagan kept him on the board for both of his terms in office (Economist, 2010).