February 11, 2008

Keynes v. Friedman


Why are we still arguing about supply-side economics? It's an economic question with enough history behind it to have come up with an answer by now. So why are there still two sides? Are we actually arguing about the results now, or are we just debating on the "righteousness" of the approach?

It's like arguing that the Patriots won the SuperBowl because you think they're a better team and SHOULD have won. But, that doesn't change the score.

7 comments:

Steve said...

Les me preface this by saying I have exceedingly limited economics background, so I might just be making a fool of myself here ...

How do you define success? I've heard people on either side of this issue cite different variables. Plus, is it really vs.? Have we ever abandoned Keynes and tried solely supply-side or just mixed Keynesian spending with supply-side tax cuts, which predictably in tandem produced economic growth but also large deficits. And what of the growth under Clinton, which some believe the Bush I tax increases actually helped set the table for?

Sabai said...

no, i think you're right steve. all good points.

But, we've also never tried pure communism under a benevolent dictator. Yet, history has made it clear to most of us, that it would not work.

Sabai said...

also, yes. as we've talked about earlier, some people are happier with a greater gross national wealth, while some people are only happy if it is divied up in a way they like.

Steve said...

Can we really say which is better, supply-side or demand-side, if even during the peak supply-side years we still had demand-side-like spending? And even if using both is best for growth, can we continue to run that size of deficits?

As for the statistics, it's not just pure wealth distribution. I've heard a lot of anti-supply-siders citing median wage statistics (adjusting for inflation) during the Bush II administration as well. That one is more relevant.

Sabai said...

yup, i'm with you. in good times, what do we praise? Is it the economic principles? The programs the Fed chose to subsidize? Or the brilliance of our fearless leader?

And in the bad? who to blame?

Sabai said...

except, what if i KNOW what's responsible! :)

Steve said...

Actually, come May I'll be to blame, seeing as the newly passed tax rebate will be coming about the time I think the next payment for Lisa and my Eastern Europe trip is due. Yep, I'll be helping the economies of Germany, Hungary, the Czech Republic and Austria.