OK – so I just read it from a link on a Krugman blog post, but it’s worth repeating.
An example of fad economics occurred in 1980, when a small group fo economists advised presidential candidate Ronald Reagan that an across-the-board cut in income tax rates would raise tax revenue. They argued that if people could keep a higher fraction of their income, people would work harder to earn more income. Even though tax rates would be lower, income would raise by so much, they claimed, that tax revenue would rise. Almost all professional economists, including most of those who supported Reagan’s proposal to cut taxes, viewed this outcome as too optimistic. Lower tax rates might encourage people to work harder, and this extra effort would offset the direct effects of lower tax rates to some extent. But there was no credible evidence that work effort would rise by enough to caues tax revenues to rise in the face of lower tax rates. George Bush, also a presidential candidate in 1980, agreed with most of the professional economists: He called this idea “voodoo economics.” Nonetheless, the argument was appealing to Reagan, and it shaped the 1980 presidential campaign and the economic policies of the 1980s…. Congress passes the cut in tax rates… but the tax cut did not cause tax revenue to rise… tax revenue fell… government began a long period of deficit spending… largest peacetime increase in the government debt in U.S. history. Fads can make experts seem less united than the actually are… when the economics profession appears in disarry, you should ask whether the disagreement is real or manufactured… [by] some snake-oil salesman who is trying to sell a miracle cure…
Answer over the fold:
Greg Mankiw: But that was the first edition of his Principles of Economics. (I’ve not read it, but Krugman tells us that this passage hasn’t appeared in subsequent editions. Meanwhile as Krugman puts it “The Bush debacle undermined the control once exercised by the establishment, which tried to keep up the appearance of reasonableness; and now people like Pawlenty and Romney need to sound crazy even if they (possibly) aren’t.”