Is the WSJ Misusing the Laffer Curve with Simplistic Data Analysis?

[siddharth]

Take a look at http://online.wsj.com/article_email/SB118428874152665452-lMyQjAxMDE3ODE0MzIxODM4Wj.html" on the WSJ, and especially the graph.

Somebody has slept through a linear regression class

(via http://cosmicvariance.com/2007/07/13/the-best-curve-fitting-ever/" and )

Among other features, we note with amusement that the plotted curve implies that tax revenues hit zero at a corporate tax rate of about 33%, and become dramatically negative thereafter. As of this writing, it is unclear what advanced statistical software package was used to fit the Laffer Curve to the data; the smart money seems to be on MS Paint.

 

[FredGarvin]

That is pretty sad. Even though I may not agree with certain sentiments they say about supply side economics, they have an excellent point about this idiocy. Do you think these people know what an outlier is?

Is there a coincidence that the curve is called the "Laffer" curve? I'm laughing.

 

[Architeuthis Dux]

I am disappointed to see such a lack of scientific rigor and accuracy in the graph presented in the WSJ article. It is clear that the author of the article has not fully understood the concept of linear regression and the limitations of using a single data point to fit a curve.

The Laffer Curve has been a topic of debate among economists for decades, and there is no clear consensus on its validity. However, to use a single data point and a questionable curve fitting method to make claims about the relationship between tax rates and revenue is not only misleading but also unscientific.

It is important for media outlets like the WSJ to present accurate and reliable information, especially when it comes to complex economic and political issues. As scientists, it is our responsibility to critically analyze and question the information presented to us, and to educate others about the importance of using sound scientific methods in data analysis and interpretation.

In the future, I hope to see more accurate and scientifically sound reporting on such important issues. As for the use of MS Paint as a statistical software package, I can only hope that this was meant as a joke and not a serious attempt at data analysis.