ShmoopTube

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and finance Allah shmoop What Our supply side economics All

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right people We all know that classic graph the most

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famous of all economics crafts showing the upward sloping supply

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curve there and the downward sloping demand curve there Yeah

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we all know that where supply and demand crosses the

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price there and the quantity where goods can be sold

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on the market most efficiently well suppliers supply acts amount

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of why goods at ze price and consumers by X

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amount of why goods at ze price and yada yada

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yada you get the picture There it is If it

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takes two to tango and create economic growth both supply

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and demand tingling there Why is their supply side economics

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and then demand side economics Well it's kind of a

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chicken and egg problem Demand siders The trickle up believers

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think the economy is driven by consumer demand You know

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at the bottom of the economic pyramid I eat you

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can't make consumers buy stuff they don't want to buy

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For instance way back in the seventeenth and eighteenth centuries

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the Brits saw China as a huge market to tap

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so they tried to come up with all this stuff

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the Chinese people would want to buy But the Chinese

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people didn't want any of their British stuff They were

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only interested in the silver which they were getting in

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heaps since Britain was importing a ton of porcelain tea

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spices and silks from China into Europe and depleting themselves

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of silver we'LL supply siders The trickle Down Believers believe

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the economy is driven by producers who are at the

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top of the economic pyramid like they're going to produce

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and whatever they produce consumers will buy How will the

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economy grow if the people with all the money at

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the top aren't investing it into creating and growing a

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new businesses The logic is that the head honchos of

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the economy I either job creators the entrepreneurs the investors

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the visionaries They have a lot of money which can

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be either well held onto or invested well The supply

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siders theory is that if taxes are high then high

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income earners are incentivized to well just sit on their

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hands leaving their money to collect dust when it could

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be doing something more useful But if taxes are low

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on the other hand well then the producers are incentivized

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to invest that wealth in the economy or at least

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more incentivised and that in theory would create more jobs

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and lead more spending and boost economic growth That's the

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money trickle down theory from the high income earners to

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low income earners Supply siders have a similar theory when

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it comes to regulations on all this stuff like higher

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capital gains and income tax on high income earners Business

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regulations are seen by supply siders to be a disincentive

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for that group to invest in economy well Likewise Supply

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Sider see monetary policy as reigning on their parade Monetary

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policy happens when a central bank tinkers with interest rates

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and the money supply and hoping to balance unemployment and

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inflation for supply siders the central bank is sticking their

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sticky fingers into the natural functioning of the markets where

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they don't belong Well the reason we have a central

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bank tinkering with things that happens because well the norm

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in macro economics today is a bastardized version of Kane's

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Ian Theory Kane's Ian's our demand siders So when they

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see the economy going into a slump from consumers having

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the blues while then those Keane's Ian's think the solution

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is government intervention including monetary policy tinkering right But on

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the other hand supply siders say Kane's Ian's well have

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got it all wrong At the end of the day

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the market will always be a mix of both supply

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and demand We'LL just keep letting that Adam Smithy and 00:03:34.558 --> [endTime] invisible hand you know do its thing at no

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