1 victory for the supply-siders,
OWNED
The flaw in demand side economics is that supply is not only perfectly inelastic in the long-run, it's damn near perfectly inelastic in the short-run. What this means, in turn, is an increase in aggregate demand has a nominal (nearly insignificant) effect on the quantity of supply. This, in turn, means that increasing aggregate demand DOES not creates growth (it simply can't). The only way to have TRUE economic growth is to alter the factors of production. If the factors of production are not altered, no growth can occure.
To illustrate this...let's look at a simple economy where there is 1 consumer and 1 producer. I.e, a main that lives on an "island". He can only consume what he "produces". To eat 2 apples, he must pick 2 apples. To eat 3 oranges, he must pick 3 orange. In short, the only way he can consume more is to pick more. Let's imagine he has printing press that prints green paper with pictures of dead guys on it. He can print these pictures (what we call it money). But printing these pictures really does not help him.
Money does not create growth in the long-run (does it even in the short-run?). In short. borrow from tomorrow to pay for today. But we must realize their is no free lunch. Stealing from tomorrow means stealing from tomorrow.
"In the long run, we are all dead." True. But I don't think a statement like this should influence economic policy that is, in part, based on a perpetual time period.
OWNED
The flaw in demand side economics is that supply is not only perfectly inelastic in the long-run, it's damn near perfectly inelastic in the short-run. What this means, in turn, is an increase in aggregate demand has a nominal (nearly insignificant) effect on the quantity of supply. This, in turn, means that increasing aggregate demand DOES not creates growth (it simply can't). The only way to have TRUE economic growth is to alter the factors of production. If the factors of production are not altered, no growth can occure.
To illustrate this...let's look at a simple economy where there is 1 consumer and 1 producer. I.e, a main that lives on an "island". He can only consume what he "produces". To eat 2 apples, he must pick 2 apples. To eat 3 oranges, he must pick 3 orange. In short, the only way he can consume more is to pick more. Let's imagine he has printing press that prints green paper with pictures of dead guys on it. He can print these pictures (what we call it money). But printing these pictures really does not help him.
Money does not create growth in the long-run (does it even in the short-run?). In short. borrow from tomorrow to pay for today. But we must realize their is no free lunch. Stealing from tomorrow means stealing from tomorrow.
"In the long run, we are all dead." True. But I don't think a statement like this should influence economic policy that is, in part, based on a perpetual time period.