Do you still not believe in Supply Side Economics?

Question

http://en.wikipedia.org/wiki/Supply-side_economics

Answer 1

Supply-Side, aka "Trickle-Down Economics". It's theoretically precise, mathematically brilliant, and it works....barely.

Yes, people are empowered by corporate growth because that growth requires more human capital and so raises the wages. However, that wage increase is far short of what it could be.

The reason why Supply-Side Economices only provides a trickle of a jolt to the economy is that the theory overestimates employer altruism. Classicists like Smith and Marshall will say that employees get paid their marginal product. This is not always so - Walrus and Veblen are much closer to the truth. Stiglitz annunciated it best: yes, the theory holds that an employee not getting paid their marginal product will leave, but it's impossible to know what that marginal product is.

In other words, there's very little signal to tell an employee what he or she is worth .... and that's in manufacturing. What about the service industry, which has seen the biggest growth? What is the marginal product of a day's work for a tax accountant or a systems manager?

The lack of signaling is what relegates Supply-Side Economics to a nice idea, but currently beyond the capability of economic analysis.

Oh, and the Laffert Curve? Yeah, most economists now believe we are BELOW the point of maximum tax revenues. In other words, a tax hike now would have little impact on the economy. Supply-Side doesn't apply here nearly as much as a Keynesian demand shift.

Answer 2

Supply-side economics, or "trickle-down" economics, is a bunch of B.S. I mean, you can see it right now in our economy. The idea of easing taxation on corporations obviously hasn't worked, since so many jobs have been lost to cheaper, overseas labor and prices for products still continue to increase no matter what. The entire argument for the theory doesn't take into account simple, plain human greed.

Answer 3

sure