Economist Jude Wanniski passed away suddenly yesterday at the age of 69. More than any other thinker, Wanniski educated the public about supply-side economics, after learning its key principles from Robert Mundell and Arthur Laffer in the early and mid-1970s. On my bookshelf behind me I have several binders worth of his Supply-Side University essays (written every Friday for the last decade or so) and several copies of his 1978 book The Way the World Works. Wanniski was a key force in the economic debates that led to the election of Ronald Reagan and to the implementation of his successful agenda of tax rate cuts, deregulation, and sound money. In his book he predicted that China was at the dawn of a great supply-side economic boom. For the last 25 years Wanniski analyzed the economy and stocks for Wall Street and other institutional clients.
Recently, Wanniski was alienated by — or some might say excommunicated from — the conservative movement for his criticism of the war in Iraq. Wanniski’s split from establishment conservatism began in the mid-1990s when he declared that the U.S. should have a different foreign policy in a now unipolar post-Cold War world. Wanniski’s tone, as much as the content of his thoughts, was responsbile for more than a few rocky professional relationships. Jude didn’t strive merely to win arguments. He sought utter and total capitulation. Even 99 percent agreement from a would-be debating partner was not enough. His argumentative and contrarian style flowed from his firm belief that all important things happen “on the margin,” in intellectual jousting as much as in the macroeconomy.
I am proud to have solicited and edited Jude’s 2001 essay, “The Deflation Monster,” for The American Spectator at a time when most people, even sophisticated economic observers, either did not know or would not acknowledge the monetary deflation that had wrecked Asia in 1997-98, swept through Russia, Turkey, and Argentina, and finally crashed the U.S. markets and economic growth in 2000-01. The Federal Reserve in its opaque and ambiguous way, I believe, has now acknowledged that Jude was correct. Board member Ben Bernanke and Fed chairman Greespan began talking about a potential threat of deflation in late 2002. This of course was after the real deflation had already been relieved by the Fed’s post-9/11 liquidity surge. But implicitly acknowledge it, they did. Even in his Jackson Hole address last Friday, Chairman Greenspan said the Fed’s unusually low interest rate targets of 2002-2004 were designed to avoid the potential catastrophy of deflation.
I am grateful for Jude’s generous teaching over the years and hope that he will be remembered for his many virtues and for his part (however small or large) in changing the
course of world economic history. May he rest in peace.