What’s the problem with supply-side economics?
Economics are demand-side.
From wikipedia:
Supply-side economics is a school of macroeconomic thought that argues that economic growth can be most effectively created using incentives for people to produce (supply) goods and services, such as adjusting income tax and capital gains tax rates.
The definition of supply-side economics provides insight into its problems. Income tax and capital gains tax are used to centrally control a desired output from the market. It does not allow the market to decide what goods/services needs to be produced/consumed, but rather relies on government to make that decision. By doing so, the government interferes with market dynamics, providing artificial information via incentives. Individual choice is altered via the incentives, hence making choices they would have most likely never made in a market economy.
So what school are supply-side economics a part of , Keynesian or Chicagoan, or both?
I just thought supply-side economics had to do with cutting taxes to increase state revenue and to help the economy. Tax cuts do do those things.
Chicagoan.
The other day someone asked "Is there a difference [between Supply-siders and Keynesians]? What’d he mean by that?
Supply-side economics isn’t really a school of it’s own. It’s more of a group of neoclassical economists who believe that removing disincentives to production, like high marginal income tax rates, would speed economic growth. They have all the same problems other neoclassical economists have: lack of capital structure, usually positivist in nature, heavy reliance on unrealistic models and maths, etc.
He meant that one school wants to use government to stimulate spending and demand, the other wants to use government to stimulate savings and investment. Either way, both schools want intervention as oppossed to letting the market play out preferences.
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The 2004 CBO report on the Bush Tax cuts which was led by a Supply sider, and used dynamic modeling - which requires making some political assumptions - all those assumptions being “PRO supply side”, in which the conclusion was that the Tax Cuts would fail to increase revenue. But a BIG dent in supply side theorists, and many of them migrated to monatarism.
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Laffer, who created the famous Laffer Curve, has done a lot of discussion lately in which he thinks people took it too far and exaggerated or misapplicated his theories. Hearing him ‘trash’ Republicans for the dogma to his theories was entertaingin.
Ixtellor
P.S. Oh and the people here think the millions of pages of economic data/theory/testing/analysis/and explanations are all bullshit, so I guess thats a big problem for them.
I wonder why it is bull…