ARTHUR LAFFER AND THEORY OF SUPPLY-SIDE ECONOMY: A REVIEW

Abstract

Supply- side economists are branch of economics that consider how to improve the productive capacity (aggregate supply) of the economy, unlike New Keynesians and Post-Keynesians, which are often concentrated on the side of aggregated demand. The purpose of this article is to analyze the teaching of the theory of economics of supply arising as a counterweight to Keynesians, on whose core is effective demand. The Economists on the supply advocate for an economy with huge tax cuts for individuals and corporations deregulation of business and a strong incentive for investment. Based on Say’s Law, and supported by classical and monetary economists, it is still opposed to Keynesian (the demand side) economy which theorized that aggregate demand is the primary driving force and strength of stabilization in an economy. Also subject to elaboration in this paper will be Laffer’s curve. Arthur Laffer. He has its own contribution to the extreme claim that the government can reduce tax rates without losing money. In fact, if anything, the government will probably get higher tax revenues after the reduction in tax rates. But this view was not supported by empirical evidence about the elasticity of tax at that time by some economists.