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May 1981

The Power of Negative Thinking: Government Regulation and Economic Performance

by Murray L. Weidenbaum

Murray L. Weidenbaum warns that, at a time when the importance of tax incentives on economic activity is being debated, economists should not overlook the continually increasing array of government regulation that impairs economic activity. In the current maze of government regulation, the impact of a change in the after-tax rates of return may, according to Dr. Weidenbaum, have little effect on production. On the other hand, the response of the economy to supply-side tax cuts can be greatly enhanced by simultaneously reducing the burden of regulation on the economy.