Memo To: Supply-Side Students of Georgia State U.
From: Jude Wanniski
Re: After 20 years, a First!
This year marks the 20th anniversary of the publication of The Way the World Works, which I wrote in the nine months from January through September, 1977. There will soon be a 20-year anniversary edition of the book, a fourth edition, published by Regnery, with an introduction by Robert Novak. In all those years, to my knowledge there has never been a college or university that included in their curriculum an actual course in supply-side economics with TWTWW as the official text. Now there is one at Georgia State University, which has just taken 180 copies of the book out of my dwindling hoard from the Third Edition. The course is being taught by Spencer Reibman, one of Art Laffer's best students at the University of Chicago more than 20 years ago, before Art knew what he was teaching was "supply side," what I came to call the classical economics of production.
TWTWW has over the years been suggested reading in a course here or there, for the most part in schools of business and finance. Departments of Economics, having been steeped in "demand-side" economics over the past half century, have thus far treated the work of supply-siders as marginal and moderately eccentric. Most college economics texts have a page or two devoted to "supply-side economics," generally presenting a picture of the Laffer Curve and characterizing the school of thought as exclusively arguing that tax cuts will pay for themselves. And that's all there is to know.
I had not heard from Spencer in more than a decade, but he showed up in my e-mailbox a few months back, announcing that he had discovered our website and was all excited about Supply-Side University. He has been a part-time economics instructor in Georgia, with a high-tech entrepreneurial business that occupies most of his time. The work of our last two semesters and the summer session of last year was impressive enough for him to persuade the relevant faculty to permit him to break new ground and offer an introduction to supply-side economics. At first, I thought he was talking about a class of 10 or 15 oddballs who might be interested, until the order for 180 books came in after Christmas.
People laughed 20 years ago when Art Laffer was asked by Basic Books for a blurb to stick on the book's dustcover and he said, "In all honesty, I think it is the best book on economics ever written." At least it was the best (and only) one ever written that had a detailed explanation of his famous Curve, which I named in his honor. Alfred Regnery, whose father founded the conservative publishing house that won my everlasting gratitude for keeping in print Ludwig von Mises' Human Action, agreed to publish the anniversary edition of TWTWW before Spencer showed up with his order for 180 books. I explained that Das Kapital barely sold at all in the first 20 years after Karl Marx first had it published. It takes time for masterworks to be appreciated!
It took the Internet to do it. For the last several years, I had become increasingly anxious that the original supply-siders were all getting older, and no new crop had been taught. How would we ever train the many thousands of economists to teach and practice the only variations specifically dedicated to producing non-inflationary growth? Jamie Galbraith, the son of John Kenneth Galbraith, now teaches economics at the University of Texas. Jamie tells me the only market for PhD economists coming out of the graduate schools are other schools who need to replace the teachers who are retiring. The private sector has decided that demand-side PhD economists produce negative returns on investment. This does not have to be the case. Young PhD economists don't have to unlearn everything they have been taught. They have to learn more than they have already been taught. Bob Mundell about 30 years ago wrote that an economist has to know all the models, the way a carpenter has to learn all the tools of carpentry. Different tools do different jobs at different times, and there is no doubt that the insights of John Maynard Keynes and Milton Friedman belong in all the tool boxes.
On Wednesday in New York City, I had lunch with Pedro Aspe, who was the finance minister for the six glorious years of the Salinas administration in Mexico. He now runs a small, entrepreneurial investment bank in Mexico City and teaches economics at the University of Mexico in a Friday class. I told him that Fd been talking to Jack Kemp and told him I was going to have lunch with the best finance minister in the world of the past 25 years. Kemp said, "Pedro Aspe?" Dr. Aspe has a PhD in economics from Harvard, but when faced with the problem of a nation mired in intractable poverty, he threw the book away, as he put it. He began his tenure with a dedication to a strong peso — fighting off the demands of the International Monetary Fund that it be devalued — and insisting on tax cuts to restore incentives to production, which got him a stern letter of reproach and warning from the IMF. One month after he left office as the administration changed hands, the Keynesians from Yale and Stanford in the government of Ernesto Zedillo engineered the devaluation with the help of the Clinton Treasury and the IMF, which of course imploded the Mexican economy. At our lunch, I told Aspe about Supply-Side University, and he said he would take a look and maybe even follow the lead of Georgia State with his own students. I bet he does!
In any case, the regular student body of SSU, now more than 300 strong all over the world, welcomes our visitors from Georgia State. We will pass the word to Newt Gingrich that history is once again being made in his backyard. Perhaps we can also persuade him to sign up for a refresher course.