Encyclopedia of Law and Economics

2019 Edition
| Editors: Alain Marciano, Giovanni Battista Ramello

Laffer Effect

  • Francesco ForteEmail author
Reference work entry
DOI: https://doi.org/10.1007/978-1-4614-7753-2_280


The Laffer effect, that takes its name from Arthur Laffer, the economist who presented it in discussions to support tax cuts by US President Ford (1974-1977), consists of the increase of the tax revenue caused by reductions of tax burdens. This principle had already presented in the past by Suetonius (119/122), Pufendorf (1672), Hume (1742), Montesquieu (1748), in various contexts, either for the maximization of tax revenues or for that of national wealth and welfare. In contemporary economics, the tax cuts to increase tax revenue and GDP have been theorized in a supply side and public choice approach by James Buchanan and others, either as mere tax policies or in broader supply side-policy frame, as that of deregulation. The Laffer effect may be misunderstood through fiscal illusions. Is has often been muddled with Keynesian demand-side approaches.

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Authors and Affiliations

  1. 1.Department of Economics and LawSapienza - University of RomeRomeItaly