This one did not make a lot of sense to me in the first place. As far as the Laffer Curve, the logic - lowering taxes causes no change in revenue - just seems very faulty. Trickle-down economics seems to only benefit the rich, who turn around and give those same politicians money. That defeats the point of having the policy to benefit all citizens. -Megan Myers
Supply side is based off the Laffer Curve. It suggests that their are two points on the curve where the government would receive the same amount of revenue. If the taxes are too high, it takes away incentive to work and stay in the country. Trickle-down theory, also known as voodoo economics, is where the tax cuts go to the rich as incentive to expand, creating more jobs.
A problem i see with trickle down economics is that not everyone will be able to "keep up with the jone's" because they may not be making as much money yet or may have unexpected expenses (operations, car crash, family death etc) and thus may not have enough money to buy the same fancy car carl has or whatever. also, with the laffer curve, it seems logical. but the problem i see is that because taxes are a government based operation, people WILL pay, no matter what because there are serious repercussions otherwise. so for me, that's a flaw in the laffer curve
Supply-side economics, which was first introduced by President Reagan, is a step away from government intervention in the economy. The main tenet, based on the Laffer Curve, is that there are points at which the government can tax less and receive the same amount of revenue that it can if it taxed more. Businesses then have more freedom to spend, and Reagan believed that more money would benefit everyone, as it would "trickle down" from big business to individuals. As avant-garde as it seems, the government really doesn't have to do a thing, which appeals to conservatives. -Ian Carroll
Neoclassical economics is made up of a bunch of assumptions that common to many of the other schools of thought. They have three main assumptions... 1.people have rational preferences 2.individuals max utility & firms max profits 3.people act independently based on full and relevant info
In theory, money is supposed to "trickle-down" from the businesses to the workers. But in reality when businesses are given these tax cuts in hopes of expansion and an increase in gross private investment thus incresing GDP; businesses only save the money and it does nothing for the economy. So the government continues spending at a rapid rate while cutting taxes in hopes businesses keep up with their spending so they don't go into a deficit. Yet because of this our deficit is at an all time high and continues to grow rapidly.
Uh-uh. Does not work. This principle works wonderfully, in theory, but it makes way too many assumptions for its own good: -that rich people will spend the money they receive from tax cuts rather than line their pockets -that rich people will spend the money in a way that creates DOMESTIC jobs- the rise in outsourcing and mounting unemployment rate thus present a contradiction -that the tax cuts (and resulting defecit) will be made up by a future profit (yet our defecit shows no signs of decreasing) "trickle-down" economics simply doesn't work. Hoover tried it during the stock market crash and failed. And the W Bush tax cuts in wartime have certainly not helped with our recession today.
In my opinion, the effectiveness of this concept of economics highly depends on which political party is in control of office and how well they stick to their agenda. Whether you're democratic and you choose to spend a lot on expansionary policies and thereby sacrificing a bit on taxes or if you're republican and you cut taxes and watch people trickle down money, or even vica versa (democrats sending out government checks or republicans increasing taxes due to increased costs in investing in foreign markets to reduce cost in imports...oil...among other economic factors as well...correct me if I'm wrong). Unfortunately, due to behavioral economics when it comes to politics, especially in this case, we can never have a perfectly functioning neo-classical supply side system. We have selfish political agendas, greedy/unresponsible aristocrats, wars, and since we're not a nation of 300 people, but 350 million poor souls fighting over who is ethically/logically correct, not only are we bound to have massive reforms that inadvertantly make us more disobediant and uncooperative to the government's efforts to help the economy, but money itself is fated not to trickle down to the masses as some may think it does. This is a politcally neutral statement. As is my mentality.
Supply side economics is a movement away from keynesian economics. The laffer curve illustrates how a decreased tax rate can produce the same government revenue as a greater tax rate. Supply side is synonomous with trickle down economics. Trickle down economics has been shown to be a faulty plan. The money does not trickle down, the rich simply pocket the increase.
For me, this is another "sounds good on paper" spinoff of classical economics. Supply Side is also tied to politics; Reagan first implemented it, right? It seems to be a primarily Republican idea, tax cuts, backing government out of the economy, and the whole concept of trickling back down to consumers/the public.
Ladder curve- sounds nice..... Very unintelligent in action though. Lovely theory though. Trickle down theory- makes a who lot of sense and it sounds like it would work and it has proven to work. Although the rich would still get richer from this process
Reagonomics. If taxes are drastically cut, people will be motivated to work harder because they get to keep a larger percentage of their earnings. Yay Laffer Curve. Oh wait, people usually don't increase their earnings enough to make up for the loss in government revenue. Cue huge deficits.
Neo-classical promotes government expansion, tax cuts, and the trickle down strategy. The trickle down strategy involves paying the rich, and hope that the money "trickles" down through the social classes and wealth classes.
NeoClassical thinking with supply side is when the government uses the "trickle down" effect. This idea of economics gives the rich money, thinking it will cause the economy to flourish from expansion in businesses, causing more jobs, labor, money, supply, and demand. This is a class idea of what Keynesian's think.
this economic thought seems to have been over used in the political field. First appearing through reagan, this economic thought has some very lofty ideas, such as the laffer curve, that can't really be tested. I think it becomes risky to theorize in such ways. As the fist Bush put it, this is voodoo economics that can be logical but in an unsettling way.
Neoclassical economics makes many unfounded and unrealistic assumptions that do not represent real situations. For example, the assumption that the wealth of the nation will "trickle-down" to the poor if we keep giving the rich more money. It did not work when Hoover was in office, and it still wouldn't work now.
Supply Side economics was used in the Reagan administration and deals with the Laffer Curve. Dealing with reducing regulation to make supply of goods easier and cheaper is a dangerous thing to get into. By say lowering taxes, the amount of income would take a sharp decline and possibly cause secondary problems.
Ah-ha! As JCaz mentioned, Hoover tried the trickle-down economics plan and failed. I would like to add that FDR made sure not to try the same plan, and he succeeded. Supply-Side Economics is dumb: proven.
As previously stated multiple times, supply side economics focuses around the trickle down effect. But contrary to what Nirav said, this trickle down effect can work, it was not because of the lack of the trickle down effect that FDR suceeded, it was because of WWII that FDR suceeded economically. In fact, FDR's economic plans were mostly flops and only succeeded because of the war.
Thanks to the Laffer curve, Reagan and other conservatives at the time determined that there exists 2 points of taxation that yield equivalent revenue levels. People like less taxes, so you can get re-elected. I am doubtful.
This one did not make a lot of sense to me in the first place. As far as the Laffer Curve, the logic - lowering taxes causes no change in revenue - just seems very faulty. Trickle-down economics seems to only benefit the rich, who turn around and give those same politicians money. That defeats the point of having the policy to benefit all citizens. -Megan Myers
ReplyDeleteSupply side is based off the Laffer Curve. It suggests that their are two points on the curve where the government would receive the same amount of revenue. If the taxes are too high, it takes away incentive to work and stay in the country. Trickle-down theory, also known as voodoo economics, is where the tax cuts go to the rich as incentive to expand, creating more jobs.
ReplyDeleteA problem i see with trickle down economics is that not everyone will be able to "keep up with the jone's" because they may not be making as much money yet or may have unexpected expenses (operations, car crash, family death etc) and thus may not have enough money to buy the same fancy car carl has or whatever.
ReplyDeletealso, with the laffer curve, it seems logical. but the problem i see is that because taxes are a government based operation, people WILL pay, no matter what because there are serious repercussions otherwise. so for me, that's a flaw in the laffer curve
This comment has been removed by the author.
ReplyDeleteSupply-side economics, which was first introduced by President Reagan, is a step away from government intervention in the economy. The main tenet, based on the Laffer Curve, is that there are points at which the government can tax less and receive the same amount of revenue that it can if it taxed more. Businesses then have more freedom to spend, and Reagan believed that more money would benefit everyone, as it would "trickle down" from big business to individuals. As avant-garde as it seems, the government really doesn't have to do a thing, which appeals to conservatives. -Ian Carroll
ReplyDeleteNeoclassical economics is made up of a bunch of assumptions that common to many of the other schools of thought. They have three main assumptions...
ReplyDelete1.people have rational preferences
2.individuals max utility & firms max profits
3.people act independently based on full and relevant info
In theory, money is supposed to "trickle-down" from the businesses to the workers. But in reality when businesses are given these tax cuts in hopes of expansion and an increase in gross private investment thus incresing GDP; businesses only save the money and it does nothing for the economy. So the government continues spending at a rapid rate while cutting taxes in hopes businesses keep up with their spending so they don't go into a deficit. Yet because of this our deficit is at an all time high and continues to grow rapidly.
ReplyDeleteUh-uh. Does not work. This principle works wonderfully, in theory, but it makes way too many assumptions for its own good:
ReplyDelete-that rich people will spend the money they receive from tax cuts rather than line their pockets
-that rich people will spend the money in a way that creates DOMESTIC jobs- the rise in outsourcing and mounting unemployment rate thus present a contradiction
-that the tax cuts (and resulting defecit) will be made up by a future profit (yet our defecit shows no signs of decreasing)
"trickle-down" economics simply doesn't work. Hoover tried it during the stock market crash and failed. And the W Bush tax cuts in wartime have certainly not helped with our recession today.
In my opinion, the effectiveness of this concept of economics highly depends on which political party is in control of office and how well they stick to their agenda. Whether you're democratic and you choose to spend a lot on expansionary policies and thereby sacrificing a bit on taxes or if you're republican and you cut taxes and watch people trickle down money, or even vica versa (democrats sending out government checks or republicans increasing taxes due to increased costs in investing in foreign markets to reduce cost in imports...oil...among other economic factors as well...correct me if I'm wrong). Unfortunately, due to behavioral economics when it comes to politics, especially in this case, we can never have a perfectly functioning neo-classical supply side system. We have selfish political agendas, greedy/unresponsible aristocrats, wars, and since we're not a nation of 300 people, but 350 million poor souls fighting over who is ethically/logically correct, not only are we bound to have massive reforms that inadvertantly make us more disobediant and uncooperative to the government's efforts to help the economy, but money itself is fated not to trickle down to the masses as some may think it does. This is a politcally neutral statement. As is my mentality.
ReplyDelete*irresponsible
ReplyDeleteSupply side economics is a movement away from keynesian economics. The laffer curve illustrates how a decreased tax rate can produce the same government revenue as a greater tax rate. Supply side is synonomous with trickle down economics. Trickle down economics has been shown to be a faulty plan. The money does not trickle down, the rich simply pocket the increase.
ReplyDeleteFor me, this is another "sounds good on paper" spinoff of classical economics. Supply Side is also tied to politics; Reagan first implemented it, right? It seems to be a primarily Republican idea, tax cuts, backing government out of the economy, and the whole concept of trickling back down to consumers/the public.
ReplyDeleteWhat really doesn't make sense is why the Laffer curve is represented not as a function. In my opinion, the x and y axis values should be switched.
ReplyDeleteLadder curve- sounds nice..... Very unintelligent in action though. Lovely theory though. Trickle down theory- makes a who lot of sense and it sounds like it would work and it has proven to work. Although the rich would still get richer from this process
ReplyDeleteReagonomics. If taxes are drastically cut, people will be motivated to work harder because they get to keep a larger percentage of their earnings. Yay Laffer Curve. Oh wait, people usually don't increase their earnings enough to make up for the loss in government revenue. Cue huge deficits.
ReplyDeleteNeo-classical promotes government expansion, tax cuts, and the trickle down strategy. The trickle down strategy involves paying the rich, and hope that the money "trickles" down through the social classes and wealth classes.
ReplyDeleteNeoClassical thinking with supply side is when the government uses the "trickle down" effect. This idea of economics gives the rich money, thinking it will cause the economy to flourish from expansion in businesses, causing more jobs, labor, money, supply, and demand. This is a class idea of what Keynesian's think.
ReplyDeletethis economic thought seems to have been over used in the political field. First appearing through reagan, this economic thought has some very lofty ideas, such as the laffer curve, that can't really be tested. I think it becomes risky to theorize in such ways. As the fist Bush put it, this is voodoo economics that can be logical but in an unsettling way.
ReplyDeleteNeoclassical economics makes many unfounded and unrealistic assumptions that do not represent real situations. For example, the assumption that the wealth of the nation will "trickle-down" to the poor if we keep giving the rich more money. It did not work when Hoover was in office, and it still wouldn't work now.
ReplyDeleteSupply Side economics was used in the Reagan administration and deals with the Laffer Curve. Dealing with reducing regulation to make supply of goods easier and cheaper is a dangerous thing to get into. By say lowering taxes, the amount of income would take a sharp decline and possibly cause secondary problems.
ReplyDeleteAh-ha! As JCaz mentioned, Hoover tried the trickle-down economics plan and failed. I would like to add that FDR made sure not to try the same plan, and he succeeded. Supply-Side Economics is dumb: proven.
ReplyDeleteAs previously stated multiple times, supply side economics focuses around the trickle down effect. But contrary to what Nirav said, this trickle down effect can work, it was not because of the lack of the trickle down effect that FDR suceeded, it was because of WWII that FDR suceeded economically. In fact, FDR's economic plans were mostly flops and only succeeded because of the war.
ReplyDeleteThanks to the Laffer curve, Reagan and other conservatives at the time determined that there exists 2 points of taxation that yield equivalent revenue levels. People like less taxes, so you can get re-elected. I am doubtful.
ReplyDelete