Karl Marx is best known for two major contributions to political and economic theory. The first was a revolutionary political doctrine asserting that the working class in industrialized nations would eventually overthrow capitalist systems, take control of production, and establish a transitional state known as the dictatorship of the proletariat, which would ultimately dissolve. His second major work, a three-volume analysis of capital flows, contains limited practical value, with only a small fraction of its more than 1,700 pages offering meaningful insight. Marx also theorized that monopolies would consolidate until a single entity controlled all productive assets.
However, Marx’s economic forecasts proved dramatically inaccurate. His political vision, particularly as outlined in “The Communist Manifesto,” fared even worse. The human cost of regimes inspired by his ideology is staggering, with estimates suggesting around 100 million deaths under communist rule, marking it as one of history’s most destructive belief systems.
In academic settings, Marx is typically referenced in two contexts: within the history of economic thought, where his ideas are studied as part of intellectual evolution, and in notation, where the letter ‘K’ is conventionally used to represent physical capital.
Art Laffer, while not comparable to Marx in ideological impact, gained prominence for a different kind of prediction. In 1974, when the top income tax rate stood at 70%, Laffer proposed that reducing tax rates could stimulate such strong economic growth that government revenues would actually rise—a concept later termed the Laffer Curve. Yet, empirical evidence over decades contradicts this idea: tax reductions consistently lead to lower revenue, while tax increases tend to raise it.
Laffer’s theories are far less dangerous than Marx’s call for revolution, and have not triggered societal collapse. Nevertheless, they have repeatedly failed to generate sustained economic expansion or offset lost revenue through growth. Using Laffer’s model to justify tax cuts is intellectually akin to defending communism by claiming the state will eventually vanish.
This discussion is timely, as Indiana’s recent tax legislation was heavily influenced by Laffer and his collaborator Stephen Moore, who also shaped Project 2025, a policy framework linked to former President Donald Trump. If Laffer’s hypothesis holds, Indiana should experience rapid economic growth, a surge in new businesses, massive investment inflows, and significant job creation over the next few years.
So far, the opposite has occurred. Since the passage of Senate Enrolled Act 1, Indiana has lost 3,500 manufacturing jobs and seen a 19% decline in new business formation. While other economic policies may be contributing to these outcomes, the immediate benefits of tax cuts—such as an influx of residents and enterprises—should have been evident by now. Negative consequences, like strained public services and potential future tax hikes, typically emerge over a longer timeframe.
The absence of early gains suggests these benefits may never materialize. Neither Marx nor Laffer is likely to shape future economic policy significantly. In fifty years, both may only merit brief mentions in textbooks. The author, like many economists, expects to be forgotten because his work aligns with established, incremental progress. In contrast, Marx and Laffer will be recalled not for advancing knowledge, but for being consistently and profoundly mistaken in their predictions.
Michael J. Hicks is a professor of economics and director of the Center for Business and Economic Research at Ball State University, with prior academic roles at the Air Force Institute of Technology, Marshall University, and the University of Tennessee. His research focuses on public finance and how policy affects economic activity across regions.
The views expressed are the author’s alone and do not reflect those of Ball State University, its affiliates, funders, or The Indiana Citizen.
— news from the indiana citizen
— News Original —
Hicks Commentary: Art Laffer and Karl Marx remembered for being wrong
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.” n nHis 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. n nMarx’s economic predictions were spectacular failures. But his political predictions in “The Communist Manifesto” were even worse. n nFew 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. n nEconomics 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. n nLaffer is no Marx. His early work with Nobel Laureate Eugene Fama was rigorous and respected, but that’s not what made him famous. n nIn 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. n nNow, 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. n nIf 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.” n nI 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. n nIf 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. n nI 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%. n nYes, 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. n nThe negative effects — more crowded classrooms, higher income taxes, worsening public infrastructure — will take a few years to materialize. n nIf we don’t see benefits soon, it is fair to conclude that we won’t ever see them. n nI 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. n nNow, 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. n nLaffer and Marx will be remembered for being woefully and repeatedly wrong with their predictions. n nMichael J. Hicks is professor of economics and the director of the Center for Business and Economic Research at Ball State University. He previously served on the faculty of the Air Force Institute of Technology’s Graduate School of Engineering and Management and at research centers at Marshall University and the University of Tennessee. His research interest is in state and local public finance and the effect of public policy on the location, composition, and size of economic activity. n nThe 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. Also, the views and opinions expressed do not necessarily reflect the views of The Indiana Citizen or any other affiliated organization.