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  • Originally posted by Adam Smith
    "Supply Side" has had two different meanings. Orignially it meant cutting taxes a la Arthur Laffer. But more recently both Democratic and Republican administrations have taken "Supply Side" to mean adopting policies which will make the economy more efficient and competitive. When these policies were adopted, prices fell. For example, deregulation of the US railroad inductry cut railroad rates by more than half. There are plenty of other examples.
    Prices eventually fall a little, but not enough to prevent a recession. Profits fall and businesses then cutback. That is to say that, everytime supply is stimulated there is overproduction and a recession which follows.
    I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
    - Justice Brett Kavanaugh

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    • Originally posted by Kidicious
      everytime supply is stimulated there is overproduction and a recession which follows.
      And this statement includes cases of technical innovation which is, after all, an expansion of supply?????
      Old posters never die.
      They j.u.s.t..f..a..d..e...a...w...a...y....

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      • Originally posted by Lawrence of Arabia
        heres a comprehensive review of Reaganomics done by the Cato institute. http://www.cato.org/pubs/pas/pa-261.html

        This part says its all on the accuracy of its analysis and predictions.
        I've seen this. What is your point though. There was a lot more demand stimulus during the 80s than during the 90s. Even the tax cuts didn't work the way that Reagan thought they would. They didn't increase the savings rate. The tax cuts were spent and placed in the stock market.
        I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
        - Justice Brett Kavanaugh

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        • Originally posted by Kidicious
          The tax cuts were spent and placed in the stock market.
          Stock market = investment, right?
          Old posters never die.
          They j.u.s.t..f..a..d..e...a...w...a...y....

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          • Originally posted by Adam Smith
            And this statement includes cases of technical innovation which is, after all, an expansion of supply?????
            Innovation is a different matter. Innovation creates new industries and increases profits. Supply side fiscal policy causes current industries to become too competitive which cuts into profits.
            I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
            - Justice Brett Kavanaugh

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            • Originally posted by Adam Smith
              Stock market = investment, right?
              I think the theory claims to increase business investment.
              I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
              - Justice Brett Kavanaugh

              Comment


              • I've seen this. What is your point though. There was a lot more demand stimulus during the 80s than during the 90s. Even the tax cuts didn't work the way that Reagan thought they would. They didn't increase the savings rate. The tax cuts were spent and placed in the stock market.
                Which is exactly why they didnt work. What I didnt understand was that he was cutting taxes to increase Aggregate supply, but then went into a huge deficit, which increases Aggregate demand, which wipes out any gain made my the tax cut. What an idiot.
                "Everything for the State, nothing against the State, nothing outside the State" - Benito Mussolini

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                • Originally posted by Lawrence of Arabia


                  Which is exactly why they didnt work. What I didnt understand was that he was cutting taxes to increase Aggregate supply, but then went into a huge deficit, which increases Aggregate demand, which wipes out any gain made my the tax cut. What an idiot.
                  I think there was some crowding out that occured in the late 80s, but initially it worked. The deficits worked OK when the economy was weaker, but as the economy grew the deficits got bigger. It's suppose to work the opposite way.
                  I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
                  - Justice Brett Kavanaugh

                  Comment


                  • I think the theory claims to increase business investment.


                    Investment is on the supply side, whether business investment or personal investment.
                    “I give you a new commandment, that you love one another. Just as I have loved you, you also should love one another. By this everyone will know that you are my disciples, if you have love for one another.”
                    - John 13:34-35 (NRSV)

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                    • Demand does create its own supply. Even the neo-classicals admit that where ever there is an ability and a willingness to buy, the sale will be made. It's in the price. Prices go up just fine, but they don't go down so well. That's why demand-side stimulus works and supply-side stimulus doesn't.


                      If I recall the S-D graph, a rightward shift in Supply would decrease prices, while a rightward shift in Demand would increase prices. You say prices don't go down so well, but I'd disagree. When you increase technology (ie, on the supply side), real prices will fall. Nominal prices may not fall, but blame inflation for that.
                      “I give you a new commandment, that you love one another. Just as I have loved you, you also should love one another. By this everyone will know that you are my disciples, if you have love for one another.”
                      - John 13:34-35 (NRSV)

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                      • Originally posted by Imran Siddiqui
                        I think the theory claims to increase business investment.


                        Investment is on the supply side, whether business investment or personal investment.
                        You'll have to explain how a personal investment produces a good or service.
                        I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
                        - Justice Brett Kavanaugh

                        Comment


                        • Originally posted by Imran Siddiqui
                          Demand does create its own supply. Even the neo-classicals admit that where ever there is an ability and a willingness to buy, the sale will be made. It's in the price. Prices go up just fine, but they don't go down so well. That's why demand-side stimulus works and supply-side stimulus doesn't.


                          If I recall the S-D graph, a rightward shift in Supply would decrease prices, while a rightward shift in Demand would increase prices. You say prices don't go down so well, but I'd disagree. When you increase technology (ie, on the supply side), real prices will fall. Nominal prices may not fall, but blame inflation for that.
                          An increase in technology has nothing to do with the AS-AD graph. Technology is a assumed to be constant. It's not a determinent of AS. You have to remember that it is assumed that time is static.
                          I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
                          - Justice Brett Kavanaugh

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                          • Originally posted by Imran Siddiqui
                            So now, correlation means causation?
                            It's certainly a much better indicator of causation than the lack of correlation.

                            Such as the supply-side policies of Reagan and the greatest one-day drop in the market of all time (when measure in Dow point) or the greatest one-day drop in the market since the great depression (when measured in percentage).

                            Or such as the supply-side policies of Bush 43 and a 20% drop in the Dow.

                            Supply-siders keep messing up the finances of this county and then taking credit for the upturn once demand-side policies are put into place to fix the problem.

                            A higher minimum wage tends to create more unemployment. Look at Europe, for instance.
                            Or look at what happened under Clinton.

                            Comment


                            • Originally posted by Kidicious
                              Innovation is a different matter. Innovation creates new industries and increases profits. Supply side fiscal policy causes current industries to become too competitive which cuts into profits.
                              Invention (new product), innovation (new way to produce and existing product), increased trade, and increased efficiency all have the same effect: they shift AS to the right, lowering prices. Income increases in any of these cases, since we have more goods and services available for the same number of people. Some industries and workers may have reduced income, but this is more than offset by gains in other sectors.

                              You'll have to explain how a personal investment produces a good or service.
                              When a firm sells stock to an investor it uses the proceedes to buy capital goods, which produce output. This is pretty basic stuff.

                              PS:
                              Are you DuncanK's DL?
                              Old posters never die.
                              They j.u.s.t..f..a..d..e...a...w...a...y....

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                              • Are you DuncanK's DL?




                                AS answered your queries. AS does shift with technology, and of course stock sales end up with output.

                                It's certainly a much better indicator of causation than the lack of correlation.


                                I'm glad to know that the stagflation of the 70s means demand-side economics is a failed policy .

                                Such as the supply-side policies of Reagan and the greatest one-day drop in the market of all time (when measure in Dow point) or the greatest one-day drop in the market since the great depression (when measured in percentage).


                                Remember the second greatest one day drop in the market? That's right, 1998, during Clinton's heydey. So is Clintonomics a failure too?

                                That big one day drop? It was reversed in about two weeks. It was nothing, a blip.

                                Supply-siders keep messing up the finances of this county and then taking credit for the upturn once demand-side policies are put into place to fix the problem.


                                I didn't know that that the upturn in 1983 was from a demand-sider!

                                Or such as the supply-side policies of Bush 43 and a 20% drop in the Dow.


                                You mean the drop which started during Clinton's last year? That damned supply-sider, Clinton, he's so evil .

                                I love how lefties blame supply-siders for everything that goes wrong with the economy, but don't even acknowledge what they do right. They think demand-side economics **** don't stink. Of course, then you look at the 70s and realize it does .

                                Like I said before, a combination of both is best. You just have to know when to use each (For example, I think now calls for some demand side policies).
                                “I give you a new commandment, that you love one another. Just as I have loved you, you also should love one another. By this everyone will know that you are my disciples, if you have love for one another.”
                                - John 13:34-35 (NRSV)

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