SUPPLY-SIDE POLICY

Supply-Side Policy

Supply-Side Policy

Introduction

The supply-side policy (including supply-side economic policy) is an economic policy concept, which is based on the assumption that employment and growth of an economy depends primarily on the general conditions of supply (Atkinson, 2006: 19). Companies would be based on their income and expected returns on investments and thus decide on the creation of jobs. The focus is on improvement of investment conditions. On state intervention in the economic process should be largely unnecessary. The supply-side policy is a departure from the Keynesian concept of demand management.

Theoretical Foundations

Theoretical basis of supply-side policy is the neoclassical economic theory. After that, the private sector, a stable system, economic fluctuations are based on exogenous shocks and imperfections of the market. In essence, the supply-side economics is the theorem saysche back. It is based on the assumption that the offer itself ensures optimal conditions to demand to create (Bartlett, 2007: 1).

Discussion

The supply-side policy has been developed by economists in the 1930s and taken up again in the 1970s. A supply-side economic policy was partly in the United States under Ronald Reagan practiced (Reaganomics), in Great Britain under Margaret Thatcher (Thatcherism) in New Zealand under Roger Douglas in Ireland and elsewhere. In these countries declined in the aftermath clearly 1980-1983 (Murray, 2003: 63), the rate of inflation, but at the cost of rising unemployment and lower economic growth, mainly due to the change in monetary policy was first implemented. The assessment of long-term effects of this extremely difficult, that often a more or less large discrepancy between actual and promulgated actualized economic policy is clear.

Supply side economics emerged in the United States, the 70 in response to the failure of Keynesian economic policy; the most disturbing symptom was stagflation. The source of inspiration for the economics of supply was a classical political economy (David Hume, Adam Smith, Alexander Hamilton, Joseph Schumpeter), and Austrian Economics (Ludwig von Mises, Friedrich von Hayek).

The creators of the economics of supply were: Robert Mundell, Arthur Laffer and Jude Wanniski . Came from the assumption that the cause of the crisis, in which the mid-70s Twentieth century, plunged the U.S. economy was state intervention, conducted in accordance with the theory of John M. Keynes (Case & Fair, 2007: 12). They argued that state intervention will not be able to overcome the crisis, and distort the market mechanism. The term economics was coined by the supply of Judah to distinguish from the two dominant schools of macroeconomic - Keynesianism and monetarism, whereby the main instrument of government economic policy is to regulate the level of aggregate demand.

The majority of economists in Germany declined in recent years to offer the policy. Thus formulated in 2005, more than 250 German professors of economics a supply-driven consensus in Hamburg appeal. After Michael Huether , a signer of the Hamburg appeal, "is always also a component of the supply-side economics have been" is that with strong demand slumps, such as in light of the financial crisis of 2007 , the adaptability of the ...