American economics departments don't teach Karl Marx or Arthur Laffer for the same reason: their economic theories were wrong. Yet Laffer's discredited ideas are now driving Indiana's tax policy.

Marx is most famous for two sets of writings. The first was a political treatise predicting the working classes of affluent nations would overthrow their governments, seize the means of production and build a new society (the dictatorship of the proletariat), after which the state would “wither away.”

His second work was a three-volume series on the flow of financial capital, which is useful for six or seven of the more than 1,700 pages he wrote. Marx predicted the expansion of monopoly would leave a single firm owning all the means of production.

Marx's economic predictions were spectacular failures. But his political predictions in “The Communist Manifesto” were even worse.

Few thoughtful adults need reminding of communism's toll. Perhaps 100 million people died under communist governments, making it the most destructive ideology in history. It has been pure evil.

Economics classes mention Marx in two settings. First, we teach the history of ideas of our discipline, so we may learn these points in one of those classes, as I did. Second, we usually use the letter ‘K’ to denote productive capital rather than financial capital. And that’s it.

Laffer is no Marx. His early work with Nobel Laureate Eugene Fama was rigorous and respected, but that's not what made him famous.

In 1974, when the top tax rate was 70%, Laffer argued that cutting taxes would boost growth so much that revenues would actually increase. This prediction, called the Laffer Curve, has never materialized. Despite tens of thousands of tax changes since then, the evidence is clear: Tax cuts reduce revenue, tax increases raise it.

Now, Laffer’s theories are nowhere near as dangerous as Marx’s “Communist Manifesto.” Cutting taxes in a stable democratic republic or American state hasn’t led to a dangerous revolution. But, it also has never spurred significant economic growth or caused tax revenues to replace those lost from the tax cuts.

If you are using Laffer’s theories to justify a tax cut, you are on the same intellectual footing as a Marxist arguing that Communism will cause the “government to wither away.”

I write about this because the tax cuts that passed through Indiana’s legislature this year were heavily inspired by Laffer. Laffer, and co-author Stephen Moore, heavily influenced Project 2025, the blueprint for President Donald Trump’s economic policies. So, over the coming year, we have the opportunity to see firsthand if Laffer is right.

If Laffer is right, the next two or three years should see a resurgent economy in Indiana, growth exceeding anything we’ve seen in the past several decades, thousands of new businesses, hundreds of billions of dollars in net investment and tens of thousands of jobs.

I hope his predictions are right and am eager to write a column admitting I was wrong. But, since Senate Enrolled Act 1 — the Laffer-inspired bill — passed, Indiana has lost 3,500 factory jobs and new business starts are down 19%.

Yes, I know there are other daft economic policies hitting Indiana pretty hard. These might offset some of the putative benefits of deep tax cuts. But, as any economist would tell you, the big benefit of tax cuts should happen right away as new residents and businesses flock to Indiana to take advantage of the lower tax bill.

The negative effects — more crowded classrooms, higher income taxes, worsening public infrastructure — will take a few years to materialize.

If we don’t see benefits soon, it is fair to conclude that we won’t ever see them.

I write about this not because I expect Marx or Laffer to be influential economic forces in the future. In a half-century, Laffer and Marx will be no more than footnotes in economic textbooks.

Now, to be fair, I won’t be well remembered. I will be forgotten because, like many others, my economic work is largely correct, and others will improve upon it in the normal course of research.

Laffer and Marx will be remembered for being woefully and repeatedly wrong with their predictions.

Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.