“Some of these stories are closer to my own life than others are, but not one of them is as close as people seem to think.” Alice Murno, from the intro to Moons of Jupiter

"Talent hits a target no one else can hit; genius hits a target no one else can see." Arthur Schopenhauer

“Why does everything you know, and everything you’ve learned, confirm you in what you believed before? Whereas in my case, what I grew up with, and what I thought I believed, is chipped away a little and a little, a fragment then a piece and then a piece more. With every month that passes, the corners are knocked off the certainties of this world: and the next world too. Show me where it says, in the Bible, ‘Purgatory.’ Show me where it says ‘relics, monks, nuns.’ Show me where it says ‘Pope.’” –Thomas Cromwell imagines asking Thomas More—Wolf Hall by Hilary Mantel

My favorite posts to get started: The Self-Righteousness Instinct, Sabbath Says, Encounters, Inc., and What Makes "Wolf Hall" so Great?.

Friday, October 1, 2010

Supply Side Theory Wins Through Better Marketing

It seems everyone knows the damn economic theory that posits cutting taxes and deregulating are the key to a more productive market place. If you try to have a discussion about tax cuts or government programs to help the poor, you will very likely be given an economics lecture which treats this theory as gospel.

But there is an alternative theory, one which seems to me to be much better supported by evidence. The problem is the plutocrats who can afford to market an ideology are the same people who benefit from supply side policies.

Economist talk about multiplier effects for dollars spent by the government. If you spend them by cutting taxes, supply side theory suggests that people will have more money to spend, which will give the economy a boost. This is especially true of rich people, who are supposedly more likely to spend the money left over from paying fewer taxes on business endeavors that create jobs. "No one's ever gotten a job from a poor man," is the slogan for this idea, which goes by the name Trickle Down Economics.

The alternative theory, which I hardly ever hear explained in any detail, is demand side economics (also called Keynesian Economics, though they're not exactly the same). The government money directed to poorer or middle class people multiplies because these people are much less likely to save or hoard it. They spend it because they have to, which creates demand, which prompts businesses to expand, which creates jobs.

Let's not forget there are two theories and approaches to dealing with recessions and encouraging prosperity.

1 comment:

caynazzo said...

Trickle-down economics is like a chromatic shadow. When applied it's the opposite of its appearance.