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Arthur Laffer

Arthur Laffer

Overview
Arthur Betz Laffer is an American economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...

 who first gained prominence during the Reagan
Ronald Reagan
Ronald Wilson Reagan was the 40th President of the United States , the 33rd Governor of California and, prior to that, a radio, film and television actor....

 administration as a member of Reagan's Economic Policy Advisory Board (1981–1989). Laffer is best known for the Laffer curve
Laffer curve
In economics, the Laffer curve is a theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation. It is used to illustrate the concept of taxable income elasticity . The curve is constructed by thought experiment...

, an illustration of the theory that there exists some tax rate between 0% and 100% that will result in maximum tax revenue for governments. He is the author and co-author of many books and newspaper articles, including Supply Side Economics: Financial Decision-Making for the 80s.
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Encyclopedia
Arthur Betz Laffer is an American economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...

 who first gained prominence during the Reagan
Ronald Reagan
Ronald Wilson Reagan was the 40th President of the United States , the 33rd Governor of California and, prior to that, a radio, film and television actor....

 administration as a member of Reagan's Economic Policy Advisory Board (1981–1989). Laffer is best known for the Laffer curve
Laffer curve
In economics, the Laffer curve is a theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation. It is used to illustrate the concept of taxable income elasticity . The curve is constructed by thought experiment...

, an illustration of the theory that there exists some tax rate between 0% and 100% that will result in maximum tax revenue for governments. He is the author and co-author of many books and newspaper articles, including Supply Side Economics: Financial Decision-Making for the 80s. Laffer is Policy Co-Chairman (with Lawrence "Larry" Kudlow) of the Free Enterprise Fund.

Life and career


Laffer was born in Youngstown, Ohio
Youngstown, Ohio
Youngstown is a city in the U.S. state of Ohio and the county seat of Mahoning County; it also extends into Trumbull County. The municipality is situated on the Mahoning River, approximately southeast of Cleveland and northwest of Pittsburgh, Pennsylvania...

, the son of Marian Amelia "Molly" (née Betz), a homemaker and politician, and William Gillespie Laffer, a president of the Clevite Corporation. Laffer received a BA
Bachelor of Arts
A Bachelor of Arts , from the Latin artium baccalaureus, is a bachelor's degree awarded for an undergraduate course or program in either the liberal arts, the sciences, or both...

 degree in economics from Yale University
Yale University
Yale University is a private, Ivy League university located in New Haven, Connecticut, United States. Founded in 1701 in the Colony of Connecticut, the university is the third-oldest institution of higher education in the United States...

 in 1962. He graduated from Stanford University
Stanford University
The Leland Stanford Junior University, commonly referred to as Stanford University or Stanford, is a private research university on an campus located near Palo Alto, California. It is situated in the northwestern Santa Clara Valley on the San Francisco Peninsula, approximately northwest of San...

 with an MBA
Master of Business Administration
The Master of Business Administration is a :master's degree in business administration, which attracts people from a wide range of academic disciplines. The MBA designation originated in the United States, emerging from the late 19th century as the country industrialized and companies sought out...

 in 1965 and a PhD
Doctor of Philosophy
Doctor of Philosophy, abbreviated as Ph.D., PhD, D.Phil., or DPhil , in English-speaking countries, is a postgraduate academic degree awarded by universities...

 degree in economics in 1971.

Laffer was a tenured professor at the University of Chicago Graduate School of Business at the time of his discussion of the Laffer Curve with Nixon/Ford administration officials. Later on, after leaving the University of Chicago and during his tenure at the University of Southern California
University of Southern California
The University of Southern California is a private, not-for-profit, nonsectarian, research university located in Los Angeles, California, United States. USC was founded in 1880, making it California's oldest private research university...

, Marshall School of Business, Laffer played a key role in the writing of Proposition 13, the California property tax cap initiative that inspired similar initiatives in other states.

During the mid-1980s, Laffer left to teach at Pepperdine University
Pepperdine University
Pepperdine University is an independent, private, medium-sized university affiliated with the Churches of Christ. The university's campus overlooking the Pacific Ocean in unincorporated Los Angeles County, California, United States, near Malibu, is the location for Seaver College, the School of...

 in nearby Malibu. Laffer remained on the faculty for several years.

In 1986, Laffer was a Republican
Republican Party (United States)
The Republican Party is one of the two major contemporary political parties in the United States, along with the Democratic Party. Founded by anti-slavery expansion activists in 1854, it is often called the GOP . The party's platform generally reflects American conservatism in the U.S...

 primary candidate for the US Senate in California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...

. (Congressman Ed Zschau
Ed Zschau
Edwin Van Wyck Zschau represented California's 12th District in the United States House of Representatives from 1983-1987. In 1986 he ran as the Republican candidate for a seat in the United States Senate...

 won the nomination and lost in the general election to the incumbent Democrat
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...

, Alan Cranston
Alan Cranston
Alan MacGregor Cranston was an American journalist and Democratic Senator from California.-Education:Cranston earned his high school diploma from the old Mountain View High School, where among other things, he was a track star...

). Laffer identifies himself as a staunch fiscal conservative and libertarian
Libertarianism
Libertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...

. He has stated publicly that he voted for President Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...

 in 1992 and 1996. Laffer references President Clinton's conservative fiscal policies as cornerstones of his support.

He was named a Distinguished University Professor of Economics by Mercer University
Mercer University
Mercer University is an independent, private, coeducational university with a Baptist heritage located in the U.S. state of Georgia. Mercer is the only university of its size in the United States that offers programs in eleven diversified fields of study: liberal arts, business, education, music,...

 (Georgia) in 2008.

Professional activities


Laffer is the founder and CEO of Laffer Associates in Nashville, Tennessee
Nashville, Tennessee
Nashville is the capital of the U.S. state of Tennessee and the county seat of Davidson County. It is located on the Cumberland River in Davidson County, in the north-central part of the state. The city is a center for the health care, publishing, banking and transportation industries, and is home...

, an economic research and consulting firm that provides global investment-research services to institutional asset managers, pension funds, financial institutions, and corporations.

He sits on the board of directors of several public and private companies. Laffer has been appointed to the advisory board of Sonenshine Partners
Sonenshine Partners
Sonenshine Partners, is a boutique investment bank based in New York City that offers integrated strategic and financial advisory services. The firm was founded in 2000 and is led by Marshall Sonenshine and Carlo Bronzini Vender, who were members of Wolfensohn....

, an independent investment bank focused on providing integrated strategic, financial and corporate advisory services. In 2004 Laffer joined the Board of Pillar Data Systems, a non-public Data Storage Company funded by Tako Ventures, a funding arm of Larry Ellison
Larry Ellison
Lawrence Joseph "Larry" Ellison is the co-founder and chief executive officer of Oracle Corporation, one of the world's leading enterprise software companies. As of 2011, he is the third wealthiest American citizen, with an estimated worth of $33 billion.- Early life :Larry Ellison was born in the...

. In 2008, Laffer joined the Board of Alpha Theory, a non-public Fundamental Portfolio Optimization software for hedge and mutual funds.

In 2010, Laffer joined the Boards of Executive Trading Solutions, an LLC providing the top technological solution for management of Rule 10b51
SEC Rule 10b5-1
SEC Rule 10b5-1 is a regulation by the United States Securities and Exchange Commission in 2000. The SEC states that Rule 10b5-1 was enacted in order to resolve an over the definition of insider trading, which is prohibited by SEC Rule 10b-5....

 stock trading plans, and Consensus Point, a provider of an enterprise prediction markets platform.

Laffer also regularly writes opinion articles in The Wall Street Journal.

Laffer Curve



Although he does not claim to have invented the Laffer curve concept (Laffer, 2004), it was popularized with policy-makers following an afternoon meeting with Nixon/Ford Administration officials Dick Cheney
Dick Cheney
Richard Bruce "Dick" Cheney served as the 46th Vice President of the United States , under George W. Bush....

 and Donald Rumsfeld
Donald Rumsfeld
Donald Henry Rumsfeld is an American politician and businessman. Rumsfeld served as the 13th Secretary of Defense from 1975 to 1977 under President Gerald Ford, and as the 21st Secretary of Defense from 2001 to 2006 under President George W. Bush. He is both the youngest and the oldest person to...

 in 1974 in which he reportedly sketched the curve on a napkin to illustrate his argument. The term "Laffer curve" was coined by Jude Wanniski
Jude Wanniski
Jude Thaddeus Wanniski was an American journalist, conservative commentator, and political economist.- Early life and education :...

, who was also present. The basic concept was not new; Laffer himself says he learned it from Ibn Khaldun
Ibn Khaldun
Ibn Khaldūn or Ibn Khaldoun was an Arab Tunisian historiographer and historian who is often viewed as one of the forerunners of modern historiography, sociology and economics...

 and John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...

.

A simplified view of the theory is that tax revenues would be zero if tax rates were either 0% or 100%, and somewhere in between 0% and 100% is a tax rate which maximizes total revenue. Laffer's postulate was that the tax rate that maximizes revenue was at a much lower level than previously believed: so low that current tax rates were above the level where revenue is maximized.

Publications


The following is a partial list of publications for which Arthur B. Laffer is an author (mainly focusing on articles for which he is first author), in descending order by date.
  • Arthur B. Laffer, "The U.S. Balance of Payments—A Financial Center View," Law and Contemporary Problems 34 (1), p. 33-46 (1969).
  • Arthur B. Laffer, "Vertical Integration by Corporations, 1929-1965," Review of Economics and Statistics 51 (1), p. 91-93 (1969).
  • Arthur B. Laffer, "Trade Credit and the Money Market," J. Political Economy 78 (2), 239-267 (1970).
  • Arthur B. Laffer and Eugene F. Fama, "Information and Capital Markets" J. Business 44 (3), p. 289-298 (1971).
  • Arthur B. Laffer and R. David Ranson, "A Formal Model of the Economy," J. Business 44 (3), p. 247-270 (1971).
  • Arthur B. Laffer and Eugene F. Fama, "The Number of Firms and Competition", American Economic Review 62 (4), p. 670-674 (1972).
  • Arthur B. Laffer, "Monetary Policy and the Balance of Payments," J. Money, Credit, and Banking Part I 4 (1), 13-22 (1972).
  • Arthur B. Laffer and Richard Zecher, "Some Evidence on the Formation, Efficiency and Accuracy of Anticipations of Nominal Yields," J. Monetary Economics 1 (3), p. 327-342 (1975).
  • Victor A. Canto, Douglas H. Joines, and Arthur B. Laffer, Foundations of Supply-Side Economics—Theory and Evidence (New York: Academic Press, 1982).
  • Arthur B. Laffer, "Reinstatement of the Dollar: The Blueprint," Economic Notes 0 (2), p. 158-176 (1982).
  • Arthur B. Laffer, "A High Road for the American Automobile Industry," World Economy 8 (3), p. 267-286 (1985).
  • Arthur B. Laffer, "The Ellipse: An Explication of the Laffer Curve in a Two-Factor Model," The Financial Analyst's Guide to Fiscal Policy, p. 1-35 (New York: Greenwood Press, 1986).
  • Arthur B. Laffer, "Heightened foreign competition only route for American prosperity," The Journal Record (9 June 1987).
  • Arthur B. Laffer, "America in the World Economy: A Strategy for the 1990s: Commentary," America's Global Interests: A New Agenda, p. 122-125 (London: Norton, 1989).
  • Arthur B. Laffer and Christopher S. Hammond, "Either California's Housing Prices Are Going to Fall or California's in for One Helluva Rise in Personal Income," Investment Strategy and State and Local Economic Policy, p. 49-64 (London: Quorum Books, 1992).
  • Arthur B. Laffer, "Trading Policy Outlook," Industrial Policy and International Trade, p. 175-186, Volume 62 in Contemporary Studies in Economic and Financial Analysis (London: JAI Press, 1992).
  • Arthur B. Laffer, "The Reagan-Clinton Presidency," International Economy 12 (2), 22-24 (1998).
  • Arthur B. Laffer and Thomas J. Martin, "Bullish on Japan," American Spectator p. 28-30 (1 June 2001).
  • Arthur B. Laffer, "The Laffer Curve: Past, Present, and Future," Heritage Foundation Backgrounder #1765 (1 June 2004).
  • Arthur B. Laffer, "The Tax Threat to Prosperity", Wall Street Journal (January 25, 2008).
  • Arthur B. Laffer, "The Age of Prosperity Is Over", Wall Street Journal (October 27, 2008).
  • Arthur B. Laffer and Stephen Moore, "Soak the Rich, Lose the Rich", Wall Street Journal (May 19, 2009).
  • Arthur B. Laffer, "Get Ready for Inflation and Higher Interest Rates", Wall Street Journal (June 11, 2009)
  • Arthur B. Laffer, "The Prognosis for National Health Insurance: A Colorado Perspective, Independence Institute
    Independence Institute
    The Independence Institute is a conservative think tank based in Golden, Colorado. Founded in 1985, the Institute " expertise education, the environment, transportation, personal freedom, government reform, local government, and criminal justice."- Current Staff :As of June 2010, the Independence...

    (August 2009)
  • Arthur B. Laffer, "Taxes, Depression, and Our Current Troubles", Wall Street Journal (September 22, 2009)

External links


  • Jude Wanniski
    Jude Wanniski
    Jude Thaddeus Wanniski was an American journalist, conservative commentator, and political economist.- Early life and education :...

    , "Sketching the Laffer Curve," The Yorktown Patriot (14 June 2005)