In economic theory, the law of supply and demand is considered one of the fundamental principles governing an economy. It is described as the state where as supply increases the price will tend to drop or vice versa, and as demand increases the price will tend to increase or vice versa. Basically this is a principle that most people intuitively grasp regarding the relationship of goods and services against the demand for those goods and services.

When supply and demand are in balance, the economy is said to be in equilibrium between price and quantity.

This is a very simple principle but is it actually a “law” and is it completely true?

This priceless little pearl of wisdom comes from a graph called the Laffer Curve. It is based on the premise that there is a critical point of government taxation where taxes become counter-productive and therefore reduce the flow of revenue into federal coffers. This has become a favorite pronouncement of politicians since they can lay claim to wanting to lower taxes and still raise federal revenues.

Before we start I want to be clear that I am not making predictions, nor advocating any particular solution, since that would only be speculative on my part. Instead I am simply reviewing what is supposed to be a part of modern economic theory to see what it tells us.

Let’s examine the Laffer Curve.

Let me start by saying that I am not an economist. I’ve always been somewhat put off by the topic and felt that it was largely based on supposition and little science. After observing the antics in this country (the U.S.) over the past few months, I’ve become more convinced of it.

If there are any economists in the reading audience, I would welcome your comments, because I really would like to make sense of what’s going on, although I fear that there is little that makes sense.

Despite the glib use with which people invoke the idea of freedom. Freedom is a scary concept. The ability to do absolutely anything one wishes is simply overwhelming.

Of course, in practice this isn’t really what we mean by freedom. Instead we immediately begin putting restrictions on it so that it isn’t simply chaos. Of course, we can’t behave in anyway that is outside the bounds of our physical bodies. We can’t simply will ourselves to fly. We can’t simply hold our breath indefinitely. So there are some obvious boundaries that every creature encounters when considering its “freedom”.