Right wing economics is a lot like a primitive cult

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Demand side puts the requirement of invention and innovation on the supply side so that the supply side can get the money. If you simply give money to the supply side, they'll never work for anything and just be corporate bums who exist merely to exist and take in more money rather than for innovation and quality.

Free markets tend to produce monopolistic corporations only when this is in the consumer's best interest (economies of scale). Most evil corporations exist only where government regulation serves as a barrier to market entry.

No. Real household median income has unsurprisingly been decreasing as "households" are getting way smaller. Median income has been steadily increasing:

I find those explanations workable.


As for the "supply-side vs demand-side" argument that keeps on going on here. Honestly, I get the feeling that we have left solid economic theory here and started to go into random rooting for "the team", based upon whatever flimsy bit of reasoning can be mustered.

Look, the problem with Republican supply-side policies happens to be a few things:
1) Debt-financed tax cuts by their nature reduce investment in the international economy. Why? Because a big old deficit has to be funded by our nations and other nations investors.
2) Internationally financed deficits by their nature increase trade deficits? Why? Because to buy our debt, what needs to be done is that other nations must hold our dollars, and to do so they have to sell us something, and then use that money to buy our debt (which is not on the trade-balance) rather than sell us something and buy something else we make (which is on the trade-balance)
3) Income tax cuts may not really sponsor more productivity. One thing is that this new money will be split between consumption spending and investment spending, and only the latter increases our capital stock. Secondly, the issue of whether income effects or substitutionary effects is relevant. Frankly, Big Income Joe might actually just retire sooner if he keeps more of his checks, but would stay in the economy longer if his taxes were higher. Or, it could be that ambitious Jane would be more motivated, or be able to climb the latter quicker if she kept more of her check. (perhaps by reinvesting her money into her business or something) The issue is that supply-siders have given us no reason to favor outcome 2 over outcome 1.

That being said, we need supply, and promoting the growth in aggregate supply is a GREAT thing. In fact, if it grows, then we can easily say that the economy has grown. That doesn't say anything about the policies needed though, but debating "Supply is great" or "demand is great" is utterly ridiculous as the fact of the matter is that the two intersect, why not argue about the superiority of one blade of a pair of scissors over another while we're at it? We can argue that Republicans aren't doing it right, but that doesn't mean that "right-wing economics is defunct", as the fact of the matter is that Republicans aren't motivated by economic researchers anymore than politicians anywhere are motivated by a spine or conscience. As it stands though, arguing that any policy maker, or political group, right or left, has terrible ideas or policies, does not discredit intellectuals who have aligned themselves anywhere among the conventional political categories. So, saying that "right wing economics is a cult" is really no better or worse than making any other comment about anything else being a cult. It is just silly, and a rather pointless comment for a person who is obviously on the outside of economic discourse to make, even if it can be shown that a lot of right-wing economists can be silly in some form or fashion.

Free markets also encourage the production of new technologies. For example, the Atlantic telegraphic cable was produced by capitalists hankering from profit, not by government fiat. Thomas Edison, an unabashed for profit capitalist, produced not only a working light bulb, but a system for generating electricity. He also produced the grammaphone, motion pictures and prefabricated houses. He also was not a nice man, but who care? He brought the technology on line, all without government fiat. Alexander Graham Bell was a for profit capitalist who brought us the the telephone and the system for carrying phone messages far and wide. The Freres Wright solved the problem of controlling heavier than air flying machines all for 1200 dollars U.S. that came out of their own pockets. Samuel Langley was financed by Congress to the tune of 50,000 dollars and produced failures. The first working transistors were produced as the result of a "midnight" project at Bell Labs (it initially did not have the whole hearted support of management until it succeeded) by three engineer/physicists who did not need Congress to tell them what to do. Salk and Sabin produced the first working polio vaccines without government fiat.

I do admit that the atomic bomb was the result of a government funded, sponsored and commanded program.

ruveyn

When it comes to research, the private side looks at profits, not innovation. As there have been new ways to make lots of money on casino instruments and also on neo-feudalist rent extraction on the newly privatised public domain, the natural monopolies, the private side is even more fickle about quick returns on research. Now, there may have been private individuals driven to innovation and still are, but overwhelmingly the new research into useful technologies are on the government side because they can look long-term unlike the private side that wants their profits now!

Disclaimer: I am a dyed-in-the-wool, card-carrying, Liberal, who works as an appartchik in the public sector. That being said, I am also a red-blooded, market loving capitalist. To my mind, neither side has got the balance right.

From the macroeconomic perspective, money doesn't stagnate. When plutocrats invest in the market, they invest with the expectation of earning a gain, and they only earn a gain if the capital they have invested is put to use. That is how economic activity is created. (And bear in mind, some of the largest institutional investors out there are pension funds, so it is the retirement savings of middle class people that are the largest component of capital in the marketplace). I have no problem with a marketplace that encourages money to work.

But I have a great problem with a marketplace that attempts to shrug off regulation. There are two key components to financial regulation: prevention of misconduct (which the organizations like the SEC and the FSA have done very well) and prudential oversight (in which they have been largely absent, primarily due to a lack of political interest).

The organic nature of markets makes them fantastic, responsive entities. But they do fail, and given the complexity of our modern markets, they can fail spectacularly. More importantly, when they do fail, in the words of George Soros, "those that pay the price are never those who reap the benefits." Even Alan Greenspan, so long in thrall to Ayn Rand, has backed away from his unequivocal cheerleading for market self-regulation.

The micro-economic forum is the playground of the socialists; and is the place where they face their biggest challenge. Every citizen needs food, clothing, shelter, health care, education and security. How these are furnished varies from society to society, but the need never goes away.

In an utopian market economy, everyone will have the capacity to create sufficient wealth that they will earn enough to provide for these needs. The reality, of course, is that some lack this capacity, and that some choose not to exercise their capacity.

The trouble with a socialist approach like a "guaranteed annual income" is that it disincentivizes productivity. Precisely the same problem that planned economies have always face.

But the market driven counterpoint is just as flawed. When we fix our gaze solely on the governments income and expenditure statement, then every person that we get off the welfare rolls is a success story. But the story on the ground is very different. Because those needs continue, they will be filled, generally through unregulated economic activity. The collective economy will continue to pay the price for these people's needs, whether it be through charity, through tax, through theft or through shrinkage; through constraints on property value, through higher insurance costs; and because these costs are hidden, we never have a proper picture of the scope of the cost.

These days more profit is to be had investing money in destructive pursuits than in constructive pursuits. Attempts to do anything about this is condemned as insulting and evil - to the Right, rich people are virtuous by nature and so the idea that policy can be used to direct them into good and not evil is considered to be a supreme insult. They believe that poor people are depraved by definition and thus they must be kept under the tightest control. The idea that the rich should be subject to even a tiny fraction of that control is to them a massive evil and insult.

The Freres Wright were motivated by the problem of constructing a controllable flying machine. That was their passion as inventors and engineers. The quest for profit came later when it turned out there was a market for their machine

ruveyn