7 ms·

Hopefully supply-side economics is the next to die. It didn’t work in the Reagan 80s, and it didn’t work in the 2010s in Kansas [0] Laffer and this guy that die

Hopefully supply-side economics is the next to die. It didn’t work in the Reagan 80s, and it didn’t work in the 2010s in Kansas [0] Laffer and this guy that died are a total joke. Their theories exist to give political cover to politicians who aim to line the pockets of the rich. [0]https://en.m.wikipedia.org/wiki/Kansas_experiment https://en.m.wikipedia.org/wiki/Kansas_experiment

JumpCrisscross 6y ago
> Laffer and this guy that died are a total joke Laffer curves are empirically corroborated [1][2]. For most taxes, there is a point past which raising the tax rate starts decreasing revenue. The problem was politicians defining a made-up number as that point and voters going along with it. [1] https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.475.7051&rep=rep1&type=pdf https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.47... [2] https://www.sciencedirect.com/science/article/abs/pii/S030439321100064X https://www.sciencedirect.com/science/article/abs/pii/S03043...
- jayd16 6y ago
  Agreed. Its not controversial that at a 100% tax rate, work would not be done, and at a 0% tax rate no tax will be collected. The issue has always been using these points to extrapolate any policy you want because where you land on the curve or even the shape of said curve IS up for debate.
gradys 6y ago
I don't have comment on the legacy of supply-side economics and and how successful e.g. Reagan's economic policy was, but it looks to me like we have more of a supply-side issue right now than demand-side. We have shortages of semiconductors, congested ports, all of the supply issues with early COVID PPE, absurdly low housing supply in the most desirable places to live, and so on.
- ohazi 6y ago
  The "supply side" of "supply side economics" is a red herring. The theory has less to do with what actually affects the supply of goods at any given time and more with the theory that lowering taxes and decreasing regulation always necessarily results in more supply and lower prices even when it clearly doesn't. The theory ignores everything else that affects supply and only focuses on complaining about taxes and regulation.
- elliekelly 6y ago
  That’s not quite what “supply-side economics” means. From Wikipedia[1] > Supply-side economics is a macroeconomic theory that postulates economic growth can be most effectively fostered by lowering taxes, decreasing regulation, and allowing free trade. According to supply-side economics, consumers will benefit from greater supplies of goods and services at lower prices, and employment will increase. Cf. Demand-side economics[2]: > Demand-side economics is a term used to describe the position that economic growth and full employment are most effectively created by high demand for products and services. According to demand-side economics, output is determined by effective demand. High consumer spending leads to business expansion, resulting in greater employment opportunities. Higher levels of employment create a multiplier effect that further stimulates aggregate demand, leading to greater economic growth. > Proponents of demand-side economics argue that tax breaks for the wealthy produce little, if any, economic benefit because most of the additional money is not spent on goods or services but is reinvested in an economy with low demand (which makes speculative bubbles likely). Instead, they argue increased governmental spending will help to grow the economy by spurring additional employment opportunities. They cite the lessons of the Great Depression of the 1930s as evidence that increased governmental spending spurs growth. [1]https://en.m.wikipedia.org/wiki/Supply-side_economics https://en.m.wikipedia.org/wiki/Supply-side_economics [2]https://en.m.wikipedia.org/wiki/Demand-side_economics https://en.m.wikipedia.org/wiki/Demand-side_economics
  - imtringued 6y ago
    Supply side economics works if everyone is poor and there isn't enough stuff for everyone, the assumption is that the supply side can never be saturated and there is always excess demand (think of a hedonic treadmill). It works fine in developing countries with a young population. As soon as you have a developed nation with an aging population where everyone is scrambling to save for their own retirement, you get the exact opposite problem. People are deferring spending, which means deferring incomes, which means deferring jobs which means unemployment. There is lots of money available to invest into businesses, in fact, people are investing too much, interest rates fall through the floor. Low interest rates allow unproductive companies to stay alive and when the long term debt cycle ends they all die at once. That's not good for your retirement. When you expect to retire in 10 years, you want your savings to actually be able to buy things, by making sure there are people in the future willing to work for your money. That's why you invest your savings, to make sure companies exist that sell stuff to you in the future, but how are those companies supposed to survive the 10 years until you retire, if you never buy anything?
throw0101a 6y ago
> [...] this guy that died are a total joke. An article Krugman wrote in 1999: > Later Mundell would broaden this initial insight by proposing the concept of the “impossible trinity”; free capital movement, a fixed exchange rate, and an effective monetary policy. The point is that you can’t have it all: A country must pick two out of three. It can fix its exchange rate without emasculating its central bank, but only by maintaining controls on capital flows (like China today); it can leave capital movement free but retain monetary autonomy, but only by letting the exchange rate fluctuate (like Britain–or Canada); or it can choose to leave capital free and stabilize the currency, but only by abandoning any ability to adjust interest rates to fight inflation or recession (like Argentina today, or for that matter most of Europe). * https://slate.com/business/1999/10/o-canada.html https://slate.com/business/1999/10/o-canada.html His theoretical work allowed the Euro to be developed (which may or may not have been a good idea).
- andrepd 6y ago
  > His theoretical work allowed the Euro to be developed I rest my case.
  - throw0101a 6y ago
    If only people had actually listened to what Mundell actually said / wrote: > The four often cited criteria for a successful currency union are:[6] > * Labor mobility across the region. […] > * Openness with capital mobility and price and wage flexibility across the region. […] > * A risk sharing system such as an automatic fiscal transfer mechanism to redistribute money to areas/sectors which have been adversely affected by the first two characteristics. […] > * Participant countries have similar business cycles. When one country experiences a boom or recession, other countries in the union are likely to follow. This allows the shared central bank to promote growth in downturns and to contain inflation in booms. […] * https://en.wikipedia.org/wiki/Optimum_currency_area https://en.wikipedia.org/wiki/Optimum_currency_area * https://www.jstor.org/stable/1812792?seq=1 https://www.jstor.org/stable/1812792?seq=1 In 2012 Krugman laid out three things that needed to be done to make the Euro work better: * https://www.journals.uchicago.edu/doi/full/10.1086/669188#_i9 https://www.journals.uchicago.edu/doi/full/10.1086/669188#_i...

JumpCrisscross 6y ago

> Laffer and this guy that died are a total joke Laffer curves are empirically corroborated [1][2]. For most taxes, there is a point past which raising the tax rate starts decreasing revenue. The problem was politicians defining a made-up number as that point and voters going along with it. [1] https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.475.7051&rep=rep1&type=pdf https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.47... [2] https://www.sciencedirect.com/science/article/abs/pii/S030439321100064X https://www.sciencedirect.com/science/article/abs/pii/S03043...

jayd16 6y ago
Agreed. Its not controversial that at a 100% tax rate, work would not be done, and at a 0% tax rate no tax will be collected. The issue has always been using these points to extrapolate any policy you want because where you land on the curve or even the shape of said curve IS up for debate.

gradys 6y ago

I don't have comment on the legacy of supply-side economics and and how successful e.g. Reagan's economic policy was, but it looks to me like we have more of a supply-side issue right now than demand-side. We have shortages of semiconductors, congested ports, all of the supply issues with early COVID PPE, absurdly low housing supply in the most desirable places to live, and so on.

ohazi 6y ago
The "supply side" of "supply side economics" is a red herring. The theory has less to do with what actually affects the supply of goods at any given time and more with the theory that lowering taxes and decreasing regulation always necessarily results in more supply and lower prices even when it clearly doesn't. The theory ignores everything else that affects supply and only focuses on complaining about taxes and regulation.
elliekelly 6y ago
That’s not quite what “supply-side economics” means. From Wikipedia[1] > Supply-side economics is a macroeconomic theory that postulates economic growth can be most effectively fostered by lowering taxes, decreasing regulation, and allowing free trade. According to supply-side economics, consumers will benefit from greater supplies of goods and services at lower prices, and employment will increase. Cf. Demand-side economics[2]: > Demand-side economics is a term used to describe the position that economic growth and full employment are most effectively created by high demand for products and services. According to demand-side economics, output is determined by effective demand. High consumer spending leads to business expansion, resulting in greater employment opportunities. Higher levels of employment create a multiplier effect that further stimulates aggregate demand, leading to greater economic growth. > Proponents of demand-side economics argue that tax breaks for the wealthy produce little, if any, economic benefit because most of the additional money is not spent on goods or services but is reinvested in an economy with low demand (which makes speculative bubbles likely). Instead, they argue increased governmental spending will help to grow the economy by spurring additional employment opportunities. They cite the lessons of the Great Depression of the 1930s as evidence that increased governmental spending spurs growth. [1]https://en.m.wikipedia.org/wiki/Supply-side_economics https://en.m.wikipedia.org/wiki/Supply-side_economics [2]https://en.m.wikipedia.org/wiki/Demand-side_economics https://en.m.wikipedia.org/wiki/Demand-side_economics
- imtringued 6y ago
  Supply side economics works if everyone is poor and there isn't enough stuff for everyone, the assumption is that the supply side can never be saturated and there is always excess demand (think of a hedonic treadmill). It works fine in developing countries with a young population. As soon as you have a developed nation with an aging population where everyone is scrambling to save for their own retirement, you get the exact opposite problem. People are deferring spending, which means deferring incomes, which means deferring jobs which means unemployment. There is lots of money available to invest into businesses, in fact, people are investing too much, interest rates fall through the floor. Low interest rates allow unproductive companies to stay alive and when the long term debt cycle ends they all die at once. That's not good for your retirement. When you expect to retire in 10 years, you want your savings to actually be able to buy things, by making sure there are people in the future willing to work for your money. That's why you invest your savings, to make sure companies exist that sell stuff to you in the future, but how are those companies supposed to survive the 10 years until you retire, if you never buy anything?

throw0101a 6y ago

> [...] this guy that died are a total joke. An article Krugman wrote in 1999: > Later Mundell would broaden this initial insight by proposing the concept of the “impossible trinity”; free capital movement, a fixed exchange rate, and an effective monetary policy. The point is that you can’t have it all: A country must pick two out of three. It can fix its exchange rate without emasculating its central bank, but only by maintaining controls on capital flows (like China today); it can leave capital movement free but retain monetary autonomy, but only by letting the exchange rate fluctuate (like Britain–or Canada); or it can choose to leave capital free and stabilize the currency, but only by abandoning any ability to adjust interest rates to fight inflation or recession (like Argentina today, or for that matter most of Europe). * https://slate.com/business/1999/10/o-canada.html https://slate.com/business/1999/10/o-canada.html His theoretical work allowed the Euro to be developed (which may or may not have been a good idea).

andrepd 6y ago
> His theoretical work allowed the Euro to be developed I rest my case.
- throw0101a 6y ago
  If only people had actually listened to what Mundell actually said / wrote: > The four often cited criteria for a successful currency union are:[6] > * Labor mobility across the region. […] > * Openness with capital mobility and price and wage flexibility across the region. […] > * A risk sharing system such as an automatic fiscal transfer mechanism to redistribute money to areas/sectors which have been adversely affected by the first two characteristics. […] > * Participant countries have similar business cycles. When one country experiences a boom or recession, other countries in the union are likely to follow. This allows the shared central bank to promote growth in downturns and to contain inflation in booms. […] * https://en.wikipedia.org/wiki/Optimum_currency_area https://en.wikipedia.org/wiki/Optimum_currency_area * https://www.jstor.org/stable/1812792?seq=1 https://www.jstor.org/stable/1812792?seq=1 In 2012 Krugman laid out three things that needed to be done to make the Euro work better: * https://www.journals.uchicago.edu/doi/full/10.1086/669188#_i9 https://www.journals.uchicago.edu/doi/full/10.1086/669188#_i...