Supply Side v Demand Side(moved from CN&Events)

[Moral Orel]

I keep seeing it pop up from time to time in various threads with varying degrees of on-topicness, so I thought we could start a thread specifically for this debate and duke it out for a while.

Now I'm sure we've got some folks around here with economics degrees that are going to object to my oversimplification of the matter, but it seems to boil down to this:

In supply-side economics, you put more money into the top, and it works it's way down to the bottom.

In demand-side economics, you put more money into the bottom, and it works it's way up to the top.

Which works best at boosting the economy?

ETA This was supposed to be in the American Politics section, my mistake. Admins, please move it when you have the chance. Thanks for the quick move mnorian!

 

[mnorian]

Mod Hat on

To American politics
From Current News & Events
On request by the OP
Carry On​

 

[timewerx]

In supply-side economics, you put more money into the top, and it works it's way down to the bottom.

In demand-side economics, you put more money into the bottom, and it works it's way up to the top.

Which works best at boosting the economy?

Future plans in many developed countries puts money in the bottom. It's called the "Universal Basic Income".

Many countries already do it under a different label and mechanics in Gov't support like in New Zealand and Australia and this financial support is actually generous. It helps in many ways like reducing the income gap between citizens and helps stimulate business activity.

It is a win-win situation in that business activity is stimulated, small business thrive, and it actually helps solve poverty in a huge way. I've seen it myself at work in New Zealand. There's very few homeless and often the homeless are handicapped in some way so they don't know how to access this gov't. assistance. If they knew, they won't be homeless. It doesn't prove that it lowers crime rate as the crime in NZ seems concentrated towards a specific cultural group so it may have more to do with the culture than the income gap. The huge advantage is the very little economic pressure so it helps in a huge way in improving the quality of life.

By real life example it works. Putting money in the bottom is the superior way to actually improve quality of life for more people.

 

[SkyWriting]

In supply-side economics, you put more money into the top, and it works it's way down to the bottom.In demand-side economics, you put more money into the bottom, and it works it's way up to the top.Which works best at boosting the economy?ETA This was supposed to be in the American Politics section, my mistake. Admins, please move it when you have the chance. Thanks for the quick move mnorian!

Testing is the only way to find the answer.
Now we will test the Trump method since
the Obama method was not satisfying.

 

[dysert]

What does it mean to "put money in at the bottom"? How does that work exactly?

 

[Moral Orel]

What does it mean to "put money in at the bottom"? How does that work exactly?

A lot of different ways. One is to lower taxes on lower incomes. Just like "putting money in at the top" is lowering taxes on higher incomes. These aren't the only ways though.

 

[Moral Orel]

Testing is the only way to find the answer.
Now we will test the Trump method since
the Obama method was not satisfying.

These things aren't new. They've already been tested long before Obama came along.

 

[yeshuaslavejeff]

By real life example it works. Putting money in the bottom is the superior way to actually improve quality of life for more people.

By Scripture also.
This is directed in OLD TESTAMENT TORAH, and in NEW TESTAMENT.

 

[yeshuaslavejeff]

Testing is the only way to find the answer.
Now we will test the Trump method since
the Obama method was not satisfying.

These things aren't new. They've already been tested long before Obama came along.

I think the BIBLE provides the only way to find the answer,
and the outlook for the usa for the last hundred years has
been declining every year
although just like it did for Egypt
once upon a time -
then the Egyptians ended up drowning at that time,
while God's People ended up being saved.
(then wandering in the desert for a while)

 

[dysert]

By real life example it works. Putting money in the bottom is the superior way to actually improve quality of life for more people.

I think the answer is "it depends". For example when you put money in at the bottom, the people will most likely spend it on necessities for themselves. So one unit of money in yields one set of persons benefited. Putting money in at the top *could* result in expanding business, so one unit of money in yields many sets of persons benefited. But I realize corporate greed may choose to simply pocket the extra and make no investments that would help others. It's a complicated question whose answer depends on what set of assumptions you choose.

 

[Moral Orel]

For example when you put money in at the bottom, the people will most likely spend it on necessities for themselves. So one unit of money in yields one set of persons benefited.

Is it just those persons that are benefited? What about the place that person spends the money? They benefit too. That's part of the basis for demand-side economics. Poor people are going to spend all their extra income they get from policies.

 

[dysert]

Is it just those persons that are benefited? What about the place that person spends the money? They benefit too. That's part of the basis for demand-side economics. Poor people are going to spend all their extra income they get from policies.

You're right of course, but it's still small potatoes compared to a multi-million dollar organization opening a new plant (if they would!).

Personally, I like the bottom-up approach because I can count on it benefiting me the most. I'm selfish that way.

 

[Jack of Spades]

You're right of course, but it's still small potatoes compared to a multi-million dollar organization opening a new plant (if they would!).

Multi-million dollars on the bottom would just be less concentrated, but the overall impact could be still same or better. If you create 1 job in 100 different places, it's better than creating 100 jobs in 1 place, because all the eggs are not in the same basket -> reduces all the random risks involved in business.

f.e. A grocery store does better when people buy more food, they hire one extra worker, and also put more money in the supply chain for their suppliers, who in turn get to invest a bit more.

 

[Jack of Spades]

I was thinking of the question of how the possible investment flow out of the country behaves in both models. Is there a significant difference for how likely the money is to stay home or to be invested in foreign countries, if the money is put on top versus bottom?

Intuitively, it would feel like the ultra rich are more free to invest abroad, than local businesses etc. are, but I realize that the process might not be that simple.

 

[Moral Orel]

You're right of course, but it's still small potatoes compared to a multi-million dollar organization opening a new plant (if they would!).

That's what I wonder, though. Why would they? Unless there's more demand, what reason is there to build a new plant?

 

[Jack of Spades]

That's what I wonder, though. Why would they? Unless there's more demand, what reason is there to build a new plant?

And to double down on that: What prevents from building the plant in some other country, if there is more demand and if there is cheaper labor?

 

[Moral Orel]

Weird. Trump's tax plan is seriously skewed towards supply-side economics, and yet no one is going to defend it?

 

[Moral Orel]

And to double down on that: What prevents from building the plant in some other country, if there is more demand and if there is cheaper labor?

Not much. I work in manufacturing right now, and the only reason they can't ship jobs overseas is that we produce custom products for customers that need a quick turnover from order to delivery. We can't produce massive amounts of the same exact product, and then ship them on container ships and then store them in a warehouse until they sell. Ironically enough, though, the biggest part of our corporation are paper mills who ship tons and tons of paper to China.