Supply Side Economics

"If you build it, they will come."
-- The Field of Dreams

 
"Buy now."
-- Herbert Hoover, during the Great Depression

 
"With what?"
-- Reply from a man on the street

 
   Basic to all economics is the Law of Demand and Supply. Once you understand that law, the professor said to students, you've pretty well got it down. All else proceeds from there.
   Let's proceed. One theory of economics claims that supply creates its own demand, and this was popular during the Reagan Era, with its "trickle down" premise of Reaganomics. That strategy suggested that if business was encouraged to increase production, through tax breaks and other aids, then the economic benefits would then trickle down through the rest of the economy, eventually benefiting all consumers; increased supply would result in lower prices, which would generate a rise in demand to consume the increased supply.
   All well in theory. Eventually. In the long run. Maybe.
   Consumers need an incentive to buy, but if they don't have the financial means, nothing happens. In addition, corporations are just as likely to keep the tax breaks to themselves to bolster their own bottom lines, and not pass on the benefits to consumers.
   Advertising and marketing programs can provoke increased purchases, but if, on the street level, the consumer is out of work, there is no money to buy.
   So which comes first, supply or demand?
   Hoover invoked patriotism to boost demand. It didn't work. Reagan provided benefits to suppliers to promote activity. Did it work? Questionable. The economy improved, but other factors were also at work.
   So here we are, at the Keynesian crossroads. This route says that when consumers can't buy for lack of funds, resulting in a drop in supply and a continuing downward cycle, then the government can and should step in by stimulating purchases. One way is by financing infrastructure projects -- roads, bridges, etc. -- thus giving construction workers money to buy. Another is by helping state and local governments increase employment of teachers, police and firefighters.
   If workers have money, they will buy.
   If you build it, they will come, but only if they have the price of admission.