His ideas were promoted with evangelical zeal in the 1970s, notably by two economists: Arthur Laffer, known for the “Laffer Curve,” who postulated that lower tax rates would generate higher government revenues, and Jude Wanniski, Wall Street editor Journal, whose opinion pages picked up Professor Mundell’s case after a series of lunches and dinners at Michael’s restaurant in Midtown Manhattan that were later described by Robert Bartley, the Journal’s editor-in-chief, in his book “The Seven Fat Years” (1992).
Professor Mundell’s reasoning gained ground in part because mainstream Keynesian economists were on the defensive and struggled to explain the unexpected combination of slower growth and rising inflation during much of the 1970s. Contrary to conventional wisdom, Professor Mundell argued that low tax rates and simple fiscal policies should be used to fuel economic expansion, and that higher interest rates and tight monetary policies are the appropriate tools to contain inflation.
This approach, the results of which are still debated today, was welcomed in the 1980s by President Ronald Reagan, who slashed tax rates in political moves known as Reaganomics and supported Federal Reserve Chairman Paul A. Volcker He raised interest rates to control inflation.
Step on “intellectual toes”
During his career, Professor Mundell battled frequently with the giants of the profession, including Milton Friedman of the University of Chicago and Martin Feldstein of Harvard. But he also longed for recognition and welcomed the prestige – and the $ 1 million award – that the Nobel Prize bestowed.
In his 2006 interview, he said that “I particularly liked winning the Nobel Prize because my work has been quite controversial and has undoubtedly stepped on many intellectual toes”.
He added, “Even more, when I say something, people listen. Maybe they shouldn’t, but they do. “
At the Nobel Banquet, Professor Mundell, clad in a white tie and tails and accompanied by Ms. Natsios-Mundell and her 2-year-old son Nicholas, finished his speech by bringing a verse from Frank Sinatra’s signature song to the surprised but enthusiastic guests.