supply-side economics


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Supply-side economics

A theory of economics that reductions in tax rates will stimulate investment and in turn will benefit the entire society.

Supply-Side Economics

A macroeconomic theory that a government can best promote growth by providing incentives for persons to produce goods and services. The primary way a supply-side oriented government does this is by maintaining low tax rates so that investors and entrepreneurs may use their money toward production. Maintaining low tax rates on the wealthy is one of the most important and controversial aspects of supply-side economics; the theory states that well off persons have the capital available to produce goods and services and thereby create jobs and grow the economy. Critics contend that this does not happen in reality, and that the wealthy are more likely to keep, rather than invest, their money. In the United States, supply-side economics was crucial to the economic policy in the Ronald Reagan administration. See also: Keynesian economics, Monetarism, Trickle-down economics.

supply-side economics

The branch of economics that concentrates on measures to increase output of goods and services in the long run. The basis of supply-side economics is that marginal tax rates should be reduced to provide incentives to supply additional labor and capital, and thereby promote long-term growth.

supply-side economics

the branch of economic analysis concerned with the productive capability of an economy (POTENTIAL GROSS NATIONAL PRODUCT) and with policies that attempt to expand the stock of factors of production and to improve the flexibility of factor markets so as to generate the largest possible output for a given level of AGGREGATE DEMAND. Supply-side economists have examined institutional rigidities in factor markets and the effect of higher factor prices in ‘pricing people out of jobs’. This has led them to condemn the activities of trade unions in labour markets on the grounds that trade unions impose RESTRICTIVE LABOUR PRACTICES (such as overmanning and demarcation boundaries) and push WAGE RATES up to levels that exceed the MARGINAL REVENUE PRODUCTIVITY of the workers concerned, thereby causing UNEMPLOYMENT and COST-PUSH INFLATION. Such ideas have also led supply-side economists to condemn certain SOCIAL-SECURITY BENEFITS systems and PROGRESSIVE TAXATION systems for creating a POVERTY TRAP that acts as a disincentive for the unemployed to take low-paid jobs.

More broadly, supply-side economics has been concerned with ways in which the AGGREGATE SUPPLY SCHEDULE can be shifted outwards so as to enable more output to be produced in response to growing aggregate demand without raising the PRICE LEVEL.

Governments may adopt supply-side policies to increase the stock of factors of production and to improve the efficiency of resource use by promoting the flexibility of markets in responding to demand changes. These policies include reductions in taxation and other disincentives to work to increase labour participation rates; financial incentives to increase capital investment in plant and equipment and promote similar investments in process and product invention and innovation; education and training policies to improve the supply of required skills; more competition in the financial sector to improve the efficiency of capital markets; privatization and reduced government control of industry (deregulation) to encourage industrial efficiency; regional policy assistance, private rented accommodation and portable pensions to encourage labour mobility; lower tax rates and changed social security benefits to provide incentives to work harder and take risks; curbs on the power of trade unions to improve the flexibility of labour markets, wider share ownership and assistance to the self-employed to promote enterprise culture. These measures can help to increase economic growth rates and reduce unemployment. See also NEGATIVE INCOME TAX, PROFIT-RELATED PAY, LAFFER CURVE.

References in periodicals archive ?
And not only Reagan: From Rudy Giuliani and Newt Gingrich to Mitch Daniels and Paul Ryan, the most effective conservative politicians have always heeded Kristol's admonition that "you can't beat a horse with no horse," and the policies they've championed--from supply-side economics to welfare reform to Ryan's famous Roadmap-have generally sought to reform rather than abolish the post-New Deal edifice.
Supply-side economics | Perhaps Quiggin's biggest disdain is reserved for what he calls "trickle-down economics.
By 1980, the case for supply-side economics had been so widely disseminated that Ronald Reagan was able to claim that "he could simultaneously reduce taxes, increase defense spending and balance the budget because of greater revenues the tax cuts would generate" (p.
However, this chapter does discuss certain basic and universal concepts, the components of the microeconomic theory (such as consumer behavior and price elasticity based on demand) and macroeconomic theory (such as Keynesianism, Monetarism, rational expectations, supply-side economics, government fiscal and monetary policies, inflation, and interest rates).
which ironically launched supply-side economics when President Reagan's tax cuts went into effect in 1983.
As with supply-side economics generally, though, the numbers don't quite justify the story (just 31,000 of the 9 million Swedes belong to evangelical churches--one-third of 1 percent) or make the case that the supply of new churches generates new churchgoers.
This is clearest in the show's celebration of supply-side economics, where visitors can scan barcode simulations of credit cards to access flattering descriptions of the founders of Wal-Mart and VISA.
It was Mr Balls who coined the tortuous phrase "post-neoclassical endogenous growth theory" to sum up - to much hilarity - Mr Brown's belief in supply-side economics.
Mundell, an economist at Columbia University, Wanniski championed supply-side economics in editorials he wrote for the Journal and made a name for himself as an influential economic thinker.
The "trickle-down" theory of supply-side economics has never worked and never will.
We can show how supply-side economics ignores Christ's call to place the poor at the forefront of our endeavors.
Wanniski midwifed supply-side economics, was the first Marxist to work as an editor of the Wall Street Journal editorial page, and is author of The Way the World Works (Gateway).