We typically hear arguements of Supply-Side vs. Demand-Side Economics. But aren’t those two virtually the same? Don’t they both rely on government intervention?
Also, if you were to have a specific name for Austrian Economics, what would it be called? It’s not supply side, and not demand side either.
Choice-side
good one.
What is the government’s role under Supply-Side economics? All I hear about is Keynesian, which is basically demand-side.
From my understanding, both deal with government intervention, however the type of intervention is specific for supply siders (Keynesian) and demand siders:
Demand Side:
invests in production
Supply Side:
Either way these are government interventionist policies. Therefore, unacceptable.
However, I would favor government investment (from its own funds) in social infraestructure. Highways, parks, schools, hospitals, historical centers and many others.
I wouldn’t consider tax breaks as governement intervention. I consider it more like pure happyness.
I was introduced to Austrian economics via Supply-Side economics, which has a great respect for the Austrians. The Supply-Siders I learned from (mostly the Wanniski branch as opposed to the Mundell or Laffer branches, though I did study with Mundell at Columbia) were constantly quoting Mises and Hayek (but not Rothbard).
The difference between Supply-Side and Demand-Side economics is that Supply-Siders think that production drives the economy and Demand-Siders think consumption drives the economy. Thus, Supply-Side policies tend to focus on things like tax cuts, decreased government spending and a stable currency (i.e. one tied to gold, though not necessarily convertible to gold) to stimulate the economy, and they oppose Demand-Side policies which tend to promote tax increases, increased government spending, and credit expansion to stimulate the economy.
The difference between Supply-Side economics and Austrian economics is that Supply-Side economics is a utilitarian, ends-based framework, while Austrian economics is a morally consistent, means-based framework. For example, Supply-Siders think high taxation is inefficient (using the Laffer Curve as their theoretical basis); Austrians think any taxation is evil robbery. Supply-Siders think the state can work fine, if only producer-friendly policies were pursued; Austrians obviously are enemies of the state.
When I attended Mises U. in 2005, I was still half Supply-Sider, but I’m a full on Austrian now [:)]
How can a government invest with its own funds? The government is not a wealth generator, so funds used to invest in social infrastructure are taken from the public through taxes. Besides, private enterprise can produce highways, parks, schools,ext, at a lower cost and whose quality exceeds that which the government can provide.
The problem with demand-side is that it always forces a choice between inflation and unemployment. It provides no good options for the current state of stagflation.
Perhaps the trouble with Supply-Side tax breaks, is that they are selected tax breaks, rather than across the board.
Ends-Means is a great way to put it.
The current US market looks to be going into a depression, not stagflation.