Rubik’s Cube, Corporate Raiders, and Other Parallel Epidemics
Another fad appeared around the same time as the Laffer curve. Rubik’s Cube,
invented in 1974 by Ernő Rubik, is a puzzle in the form of a cube-shaped stack
of multicolored smaller cubes. As the narrative went, Rubik was a creative
Hungarian sculptor and architect whose puzzle captivated the scientific and
mathematics community worldwide because it fostered a narrative that it
represented some interesting mathematical principles. Scientific American
magazine did a cover story on the cube in its March 1981 issue, with the lead
article by Douglas R. Hofstadter. Author of the best-selling Gödel, Escher, Bach
(1980), Hofstadter was a science writer with a gift for uniting science with art
and the humanities. His article presented Rubik’s Cube as representing deep
scientific principles. He described connections to quantum mechanics and the
rules for combining the subatomic particles called quarks. Few people remember
these details today, but they do remember that Rubik’s Cube is somehow
impressive. Rubik’s Cube was bigger than the Laffer curve on ProQuest News &
Newspapers, but smaller than the Laffer curve on Google Ngrams. Both show
similar hump-shaped paths through time.
Other narratives in the same constellation with the Laffer curve sprang up
around the same time. The terms leveraged buyouts and corporate raiders also
went viral in the 1980s, often in admiring stories about companies that
responded well to true incentives and that produced high profits as a result. One
marker for such stories is the phrase maximize shareholder value, which,
according to ProQuest News & Newspapers and Google Ngrams, was not used
until the 1970s and whose usage grew steadily until the twenty-first century. The
phrase maximize shareholder value puts a nice spin on questionable corporate
raider practices, such as saddling the company with extreme levels of debt and
ignoring implicit contracts with employees and stakeholders. Maximize suggests
intelligence, science, calculus. Shareholder reminds the listener that there are
people whose money started the whole enterprise, and who may sometimes be
forgotten. Value sounds better, more idealistic, than wealth or profit. Use of the
three words together as a phrase is an invention of the 1980s, used to tell stories
of corporate raiders and their success. The term maximize shareholder value is a
contagious justification for aggressiveness and the pursuit of wealth, and the
narratives that exploited the term are most certainly economically significant.

The Laffer Curve, Supply-Side Economics, and Narrative
Constellations
After the Laffer curve epidemic, the Reagan administration (1981–89) reduced
the top US federal income tax bracket from 70% to 28%. It also cut the top-
bracket US corporate profits tax rate from 46% to 34%, and it reduced the top
US capital gains tax rate from 28% to 20% in 1981 (though it returned to 28%
again in 1987 during the Reagan presidency). If the Laffer curve epidemic had
even a minor effect on these changes, then it must have had a tremendous impact
on output and prices.
For these reasons, the Laffer curve is well remembered to this day, but it was
only one part of the narrative constellation now known as supply-side
economics, which holds that governments can increase economic growth by
decreasing regulation and lowering taxes. The term supply-side economics went
viral around the same time the Laffer curve did. The Laffer curve contributed to
the impact of the many supply-side narratives because it was a particularly
powerful narrative. It had good visual imagery in the form of a scribbled-on
napkin, it had authorities behind it just as Rubik’s Cube had Scientific American,
and it suggested that politicians who raised taxes were fools.
One narrative circulating in the supply-side economics constellation was a
widely spread story about the consequences of the Swedish Socialist government
under Olof Palme, whose government, in a measure of extreme incompetence,
inadvertently made the effective income tax rate (on high incomes) go over
100%. People who worked more ended up with less after-tax income. The story
was reported all over the world, as for example in the United States in 1976 in
the Boston Globe:
The typical Swedish dentist works fewer than 30 hours per week because any
further earning would actually reduce his retained pay. Film director Ingmar
Bergman, probably the country’s most famous and admired citizen, left
permanently last year after tax inspectors harassed him and seized his records
in the middle of a rehearsal—based on a misunderstanding about his
corporate rather than personal taxes.19
This story of tax rates above 100% in Sweden further mutated in 1976 when
Astrid Lindgren, the acclaimed Swedish author of children’s books, published an