From Wikipedia:
Supply-side economics is a school of
macroeconomic thought which emphasizes the "supply" part of "supply and demand". The central concept of supply-side economics is
Say's Law: "supply creates its own demand", or the idea that one must produce before one has the means to buy. In evaluating public policy, supply-side economics is more concerned with the extent to which a reform will change producer incentives, rather than how it may stimulate demand. This emphasis represents a fundamental difference between classical, supply-side economics and
Keynesian or demand side economics.
Supply-side economics was popularized in the
1970s by
Robert Mundell,
Arthur Laffer, and
Jude Wanniski. The term was coined by Wanniski in
1975. In
1978 Jude Wanniski published
The Way the World Works in which he laid out the central thesis of supply-side economics and detailed the failure of high tax-rate, "progressive" income tax systems and U.S. monetary policy under
Keynesians in the 1970s. Wanninski advocated lower tax rates and a return to some kind of gold standard, à la the 1944-1971
Bretton Woods System.
In
1983, economist Victor Canto, a disciple of
Arthur Laffer, published
The Foundations of Supply-Side Economics. This theory focuses on the effects of
marginal tax rates on the incentive to work and
save, which affect the
growth of the "supply side" or what
Keynesians call
potential output. While the latter focus on changes in the rate of supply-side growth in the long run, the "new" supply-siders often promised short-term results.
Supply-side economics is often conflated with
trickle down economics.
The article also mentions Al Franken's cartoon, which started this thread.
