Looking for Laffer-Likes

We anchor ourselves to the few things we know for certain, the extremes, and extrapolate backward to explain the messy middle. It feels like rational thinking. It has destroyed better arguments than this one. The question isn't whether passive investing or algorithms will break markets at the margins. It's whether we're asking the right question about why they might change how prices get set.

• The Laffer Curve wasn't absurd because it was wrong about extremes. A 0% tax rate yields no revenue and a 100% rate yields none either. The problem was treating those certainties as proof of what happens in between.

• We do this whenever systems grow too complex to predict. When we lack a good model, we grab the few bits we understand and build everything else from there. It feels reasonable. It's how we fool ourselves.

• The current versions of this mistake are passive investing and algorithmic trading. Investors worry these will break price discovery. The worry rests on extrapolating from extremes without asking what's actually changing at the margins.

• The real shift isn't that information stops moving prices. It's that the composition of people responding to information has changed, and so has which information matters.

• The cost of this kind of thinking is subtle but serious. We replace complex questions with simple stories that feel grounded in fact. We become confident in narratives that are mostly convenient and only partially true.