[Jay42]

I slept through this portion of my econ courses in college, so I am trying to learn more.

The idea of supply-side or trickle-down economics, is, as I understand it, an approach that says when you minimize restrictions on the rich (or at least lower their taxes and offer grants/breaks at the same level offered to po' folk), the rich will stimulate the economy by purchasing stuff.

In other words, if a yacht owner doesn't feel suffocated by taxes and government restrictions, he will buy another yacht. Buying that yacht can positively impact 100 jobs for the working class (construction, painting, storage, glass-making, cleaning, etc).

Typically, supply-side economics is considered to be a republican stance (although there is a lot of crossover with libertarianism).

The democrat view is typically (though not always) the opposite: you should tax the rich and share more breaks with the working class, thus stimulating the economy by empowering those 100 working-class people economically. They would say that supply-side economics is a theoretical concept that Republicans invented so they can feel better about themselves and continue to exploit the poor.

I claim partial confusedism on the issue. Being a parent, I haven't had time to crack the books and really get edjumucated on this issue.

Please expound!

[Bryan]

Originally Posted by Jay42

I slept through this portion of my econ courses in college, so I am trying to learn more.

The idea of supply-side or trickle-down economics, is, as I understand it, an approach that says when you minimize restrictions on the rich (or at least lower their taxes and offer grants/breaks at the same level offered to po' folk), the rich will stimulate the economy by purchasing stuff.

In other words, if a yacht owner doesn't feel suffocated by taxes and government restrictions, he will buy another yacht. Buying that yacht can positively impact 100 jobs for the working class (construction, painting, storage, glass-making, cleaning, etc).

Typically, supply-side economics is considered to be a republican stance (although there is a lot of crossover with libertarianism).

The democrat view is typically (though not always) the opposite: you should tax the rich and share more breaks with the working class, thus stimulating the economy by empowering those 100 working-class people economically. They would say that supply-side economics is a theoretical concept that Republicans invented so they can feel better about themselves and continue to exploit the poor.

I claim partial confusedism on the issue. Being a parent, I haven't had time to crack the books and really get edjumucated on this issue.

Please expound!

well it's basic economics, a decrease in spending lowers the total GDP. and when our GDP falls below the full-employment level of GDP you have unemployment. And as long as the GDP is below that level full-employment will exist. To get the GDP back up to the full-employment level you have to increase spending. The best way to do this is to cut taxes across the board. Because when you decrease taxes it increases Disposable income. This then increases aggregate expenditures which will increase GDP. Furthermore, an increase in spending will have a greater increase in GDP (this is called the multiplier effect). If consumers spend $20k more it will lead to a greater increase in GDP, perhaps $80k. The greater increase in GDP than the increase in spending depends on the consumers marginal propensities to consume & save. The greater percentage consumers spend the increase in their Disposable Income than save the greater impact the change in spending will have on GDP.

So the more money people have the more they spend, the greater the GDP, and the lower the unemployment rate.

An increase in spending decreases the unemployment rate.

[Jeff]

you're thinking Keynes, Bryan. Supply side economics is based more on industry heads (aka, the rich) being able to expand their supply through more unrestricted use of their profits. problems with this include but are not limited to:

a. corruption
b. rapid consumption of resources
c. sudden economic collapse (see The Great Depression)
d. environmental issues
e. outsourcing
f. greater divide between rich and poor, (assuming that not all the money goes to benefit the workers, which is nearly a given since the people in charge of this money are working with a profit motive-> they are always one step ahead of regulation and unions)
g. stronger hold of corporations on the economy, crowding out smaller businesses and increasing the workload of the average worker.

basically this is simple industrial revolution ideology There is no reason why the rich need more money than anyone else. Their asses aren't more sensitive to rough toiletpaper, and they don't get any hungrier than anyone else. How many new steel and plastic plants does the world need? We only need more cars and DVD players if we're producing too many people, and eventually there will be nothing left to make, and the economy will reach it's ultimate long run supply. Racing to get there makes no sense.

[Bryan]

Originally Posted by Jeff

you're thinking Keynes, Bryan. Supply side economics is based more on industry heads (aka, the rich) being able to expand their supply through more unrestricted use of their profits. problems with this include but are not limited to:

a. corruption
b. rapid consumption of resources
c. sudden economic collapse (see The Great Depression)
d. environmental issues
e. outsourcing
f. greater divide between rich and poor, (assuming that not all the money goes to benefit the workers, which is nearly a given since the people in charge of this money are working with a profit motive-> they are always one step ahead of regulation and unions)
g. stronger hold of corporations on the economy, crowding out smaller businesses and increasing the workload of the average worker.

basically this is simple industrial revolution ideology There is no reason why the rich need more money than anyone else. Their asses aren't more sensitive to rough toiletpaper, and they don't get any hungrier than anyone else. How many new steel and plastic plants does the world need? We only need more cars and DVD players if we're producing too many people, and eventually there will be nothing left to make, and the economy will reach it's ultimate long run supply. Racing to get there makes no sense.

if you cut the supply, prices will increase, and people will stop spending, and then we have recession and then unemployment.

a greater GDP means a better economy for everybody.

[fifsuperpod37]

basically this is simple industrial revolution ideology There is no reason why the rich need more money than anyone else. Their asses aren't more sensitive to rough toiletpaper, and they don't get any hungrier than anyone else. How many new steel and plastic plants does the world need? We only need more cars and DVD players if we're producing too many people, and eventually there will be nothing left to make, and the economy will reach it's ultimate long run supply. Racing to get there makes no sense.

There is a good reason for rich people to be allowed to have more money than anyone else.

1). They have the right to do so
2). They create wealth for those below them.

The idea that we will run out of things to make is preposterous. There is an infinite amount of goods, services, and use of resources with which to work with.
Also, the nature of humans is to seek progress, you won't find humans adopting an ideology of "this is good enough, lets stop here"

[JerryLove]

The early post-industrial-revolution had essentially no regulation of companies and very little taxation on the rich. Trickle-down did not work; while Rockafeller and Carniege became the richest people in hostory, their workers lived in shanties as little more than indentured servents.

Similarly, the economy did not fair well under Reganomics, which was trickle-down... companies used the greater freedom to simply move offshore... Entire cities in Michigan were all but abandoned.

[Jay42]

Interesting, all! Please continue....

[Jeff]

resources are infinite and the nature of humans is progress? I'd like to see an argument supporting this. I would counter that resources are by definition finite, or there would be no economics, and I would counter that humans are conditioned in our society to seek progress where it is not neccessary. Look at all the civilizations we had to destroy to get here, and tell me whether they were all especially interested in progress.

also, bryan, this is inevitable under any system. There is such a thing as long run supply. If we speed through our resources, shortages will come quicker and so will depression and economic collapse. Humans will not always find a way to dodge nature. simply because a decrease in industrial activity leads to lower production, lower employment, and eventually shrinkage of the society does not mean that full speed expansion is preferable. There are reprocussions either way. It seems that in our lofty creation of society, we think we are immune to death, and immune to nature. I counter that the goal of economics is not simply to increase GDP, but to create a livable, enjoyable, stable, maintainable way of life for the population.

[Jay42]

I haven't been swayed to either side yet.

[Cheese]

Originally Posted by JerryLove

The early post-industrial-revolution had essentially no regulation of companies and very little taxation on the rich. Trickle-down did not work; while Rockafeller and Carniege became the richest people in hostory, their workers lived in shanties as little more than indentured servents.

oh how retarded.

The predominant reasons for the concentrations of wealth among people like Carnegie and Rockefeller mainly had something to do with the Government's insatiable urge to make things better for the little or improve the economy in some way.
After the Civil War growth was encouraged in some areas but retarded in others. The first reason this happened would be the implimentation of protective tariffs. Tariffs made American products able to compete with imported products through price controls sure. This benefitted manufacturing but retarded areas such as farming, trade, and sea transportation. It hurt farmers and other consumers by causing them to pay a higher price for manufactured goods from America. It also reduced trade with other countries so domestic goods did not have much of a foreign market. In the end manufacturing benefitted big time, mostly because tariffs that were put into place for the sole purpose of giving American companies an edge in the market were left in place even when companies matured. This was all put into place to help the "little guys".

Another way Government inadvertantly created monopolies was encouraging the devolopement of transportation as well as manufacturing. It did this by providing grants and subsidies in the building of railroads, permitted railroads to exercise the right of eminent domain to acquire privately owned lands, and extended the privelege of cutting timber on government lands for construction purposes. This was to promote the expansion westward (to help the little guy out building new worlds in the West).

Yet another way the Government promoted the concentration of wealth was by issue paper money (fiat money that has no value by itself) and making it legal tender for most purposes. In other words more money is available. Too much money becomes available, causing a decline in the value of money, causing a rise in prices because paper money is not worth much and everybody has some. The same goes for Bonds. Higher prices = more money for manufacturers.

Another thing that caused the concentration of wealth among a few, was the creation of a national banking system. Banks by receiving deposits are by their nature a device for concentrating wealth. The National Bank Act gave the national banks a monopoly of the issuance of paper money currency. National banks were also used by the government as devices for obtaining loans. The national currency was supposed to be issued throughout the United States on the basis of population, but it was concentrated in New England and the northeastern states generally. Hence, monetary holdings tended to be concentrated in areas where industrialization was being pushed the most.

All of this crafted the perfect atmosphere for enterprising people (people who want to make money) to make money. The areas where people were most likely to succeed (because of the government induced atmosphere) were in areas like Transportation and Manufacturing (both Carnegie and Rockefeller were involved in manufacturing.)

It is retarded to insinuate that the monopolies were a result of the Government not taxing enough. Monopolies come as a result of the government getting involved and interfering the natural process of free trade. When the government steps into things and helps one area, it hinders another. A vaccuum is created which will eventually be filled by somebody who has an enterprising bone in their body. Ta-da! Monopolies. Feel the joy and thank your government.

[JerryLove]

It is retarded to insinuate that the monopolies were a result of the Government not taxing enough.

Well gee, if it's "retarded" (a word that occurs 4 times in your post)... but I did not paint it quite that simplistically.

The first reason this happened would be the implimentation of protective tariffs. Tariffs made American products able to compete with imported products through price controls sure. This benefitted manufacturing but retarded areas such as farming, trade, and sea transportation. It hurt farmers and other consumers by causing them to pay a higher price for manufactured goods from America.

Of course, since the same tariffs would have restricted imports of foreign foods, farmers benifited by not having to, themselves compete with foreign interests. But I don't see you connecting this to companies like Standard Oil.

Another way Government inadvertantly created monopolies was encouraging the devolopement of transportation as well as manufacturing. It did this by providing grants and subsidies in the building of railroads, permitted railroads to exercise the right of eminent domain to acquire privately owned lands, and extended the privelege of cutting timber on government lands for construction purposes. This was to promote the expansion westward (to help the little guy out building new worlds in the West).

Something Japan did in the 20th without causing such problems. Again, while I see how this would help grow a business, you have not established how these actions led, themselves, to the shanty-towns and horriffic explottion of the American workforce. Microsoft is also a large, powerful company which does not have armies of homeless derilicts living as indentured servents to Bill.

Yet another way the Government promoted the concentration of wealth was by issue paper money (fiat money that has no value by itself) and making it legal tender for most purposes. In other words more money is available. Too much money becomes available, causing a decline in the value of money, causing a rise in prices because paper money is not worth much and everybody has some. The same goes for Bonds. Higher prices = more money for manufacturers.

We still have paper money, and yet don't have companies functioning as Standard Oil did. In fact, every countriy has paper money (AFAIK) and yes this problem is rare in the first-world.

Another thing that caused the concentration of wealth among a few, was the creation of a national banking system.

Again, which pretty much all countries have without a similar problem.

All of this crafted the perfect atmosphere for enterprising people (people who want to make money) to make money. The areas where people were most likely to succeed (because of the government induced atmosphere) were in areas like Transportation and Manufacturing (both Carnegie and Rockefeller were involved in manufacturing.)

There success is not the issue. What is at issue is that the lack of (for example) labor laws allowed them to exploit a class of indentured servants. Pick a country known for child sweat-shops and you can see it in action today. You'll find that they lack (or don't enforce) labor laws and go for the (advocated) lasse-fare attitude.

Monopolies come as a result of the government getting involved and interfering the natural process of free trade. When the government steps into things and helps one area, it hinders another. A vaccuum is created which will eventually be filled by somebody who has an enterprising bone in their body. Ta-da! Monopolies. Feel the joy and thank your government.

Do you dispute that the government of 2000 is far more involved in business than the gogernment of 1880? Why do we not have shanty towns all over now?

[Jeff]

I think it's interesting that you mention inflation as leading to monopolies. Inflation tends to favor those in debt, which would make it easier for small businesses and independant farming interests to maintain their holdings, since they are not responsible to large workforces, and since the cost of their plant and equipment is paid out in cheaper inflated "papermoney" dollars. Inflation tends to decrease the power of monopolies. See the free silver populists, greenbackers, and many other such pro-inflation parties as examples of anti-monopolists.

[JerryLove]

I think it's interesting that you mention inflation as leading to monopolies.

Based on my search, you are the first person to say the word "inflation" in this thread... to what post are you referring?

[smhatahy]

can we really trust corporate buisnesses with more money? i mean come on look at Enron, Microsoft and every other monoply out there.. they are all just trying to iliminate the competition and make more money, leaving them with control of the supply and higher prices.. supply side leads to monopolies and monopolies our bad.. give the money to the working people.. we'll spend the money, we have to, americans arent known to be big savers, so all the money we get is ussually spent.. that means (due to the multiplier effect).. GDP increases, as does quality of life (due to the increase in spending money)..

[Jeff]

Originally Posted by JerryLove

Based on my search, you are the first person to say the word "inflation" in this thread... to what post are you referring?


by cheese-

-Yet another way the Government promoted the concentration of wealth was by issue paper moneyiat money that has no value by itself) and making it legal tender for most purposes. other words more money is available.too much money becomes available, causing a decline in the value of money, causing a rise in prices because paper money is not worth much and everybody has some. The same goes for Bonds. Higher prices = more money for manufacturers

I'd counter by saying that higher prices in "not worth much" dollars = more "not worth much" money for manufacturers. It is true that increase in the money supply is essential for the growth of corporations, though increasing the supply through the creation of new fiat money does not tend to have as great a direct impact on investment. Most industrial giants don't do their dealing in suitcases full of "cheap dollars" Cheaper money also means that farmers and small business owners with moderate debts can pay those debts off easily, which hurts banks and anyone with large holdings in that bank. This tends to raise interest rates, because banks have to recoup the money they lose due to inflation ( which, though you did not mention it, you defined in the bolded print above), and higher interest rates mean less business loans, which means less growth. Why do you think the groups I mentioned before wanted so much more fiat money (aka unlimited silver)? because it would help them keep their land and oust the railroad, mining, and ranching giants that were (from their perspective) cheating them out of the frontier they broke in.

Also, I'd like to expound on something I mentioned in my first response to this- I said that small businesses would benefit more than giants because they are not responsible to large workforces- this is actually quite essential to my argument.
Inflation is often referred to as a spiral- this is because higher prices cause panic when goods that used to be staples can no longer be afforded. Usually wherever there is inflation, there are massive labor strikes, or at least wage negotiation. These higher wages lead to even higher prices, since businesses must recoup their losses (partly because of the interest rate raising effect that the higher income has- see above), which continues the spiral through another loop. This is disastrous for both mass industrial workers who must continue to strike, and the industrial giants that they a)work for and b)consume from (that's always the pattern in cities - you work for city corps, you eat in the cafeteria, you use the day care, you rent their apartment, etc. - especially back in the early industrial revolution, and even if it's different companies, they are all affected by the inflationary spiral)

farmers and tradesmen, however, especially those who had previously been extremely in debt, find that a.) their loans are now easily repaid b.) they can support themselves with their own product and don't rely on the inflated dollars as much as urban consumers, c.) don't have to deal with strikes d.) are receiving higher prices for their products e.) are able to offer more affordable solutions to consumers who are tired of the big business price jacking, since they don't have any losses to recoup, which gives them a greater market share.

The reason this is so bad is that after the beginning of the 20th century, industry, and even large farming interests, began to take on more of a big business bent. Inflation harmed more and more and benefitted less and less, so that every time the economy overheated, a panic would follow. The economy grew unstable because of its rapid unchecked growth. This is what eventually caused the Great Depression.