reaganomics

[redcannon]

from what i know, reagonomics and supply side economics are essentially the same thing. however, i'm not entirely sure what either of those are, so here is my question:

what is reaganomics, and why did it destroy small businesses?

[Kwisatz Haderach]

Well, I'm not really familiar with the details of Reagan's presidency, so I'll let someone else explain reaganomics.

However, supply-side economics, in a nutshell, is the belief that the business cycle is driven primarily by aggregate supply. Government intervention in the economy, whether through fiscal or monetary policy, can only affect aggregate demand. Therefore, supply-side economics essentially postulates that government intervention has little or no effect on the overall state of the economy. Supply-side economists believe that the government is powerless to reduce unemployment or lift the economy out of a recession, so it shouldn't even try.

Oh, and also, supply-side economics is based on a set of really crazy assumptions - the reason why they say government intervention has no effect is because each and every person in the general population is always paying close attention to things like the inflation rate and the bond market, so we are able to very quickly adjust our expectations and economic decisions so as to neutralize the effect of any government action.

Yes, this theory really is that stupid.

[Dimentio]

Another important feature associated with Reaganomics is "trickle-down economics", which means that we should lower taxes for those with high income. They will consume more and therefore "create" more wealth then.

[Red Rebel]

http://en.wikipedia.org/wiki/Reaganomics
1. reduce the growth of government spending
2. reduce marginal tax rates on income from labor and capital
3. reduce regulation
4. control the money supply to reduce inflation


why did it destroy small businesses?

It brings capitalism closer to complete laissez-faire economics. Capitalism competition breeds monoploies. The local shop on the street corner can't compete with the vast material wealth & supplies of lets say Wal-Mart.

[Demogorgon]

There is all sorts of really quite nasty elements to Reaganomics. One part of it actually involved raising taxes on lower income earners, partly to pay for tax cuts for higher earners and partly to encourage them to become higher earners (really).

Anyay needless to say it doesn't work. Not even at what the capitalists want. It is based on some faulty assumptions about the manner in which taxes affect people's propensity to earn and so forth. It does give very big business something of a free hand though, which I guess was all some of its proponents were going for.

[Die Neue Zeit]

Not defending "Reaganomics" here, but does demand really drive ALL economic activity? <_<

There are certain areas that are indeed driven by supply, namely information and media (http://www.revleft.com/index.php?showtopic=68832).

[Kwisatz Haderach]

Originally posted by [email protected] 18, 2007 03:03 am
Not defending "Reaganomics" here, but does demand really drive ALL economic activity? <_<

There are certain areas that are indeed driven by supply, namely information and media (http://www.revleft.com/index.php?showtopic=68832).
The point under contention is not whether demand or supply is the driving force behind economic activity. The point under contention is whether an increase in aggregate demand can stimulate the economy to produce more. Supply-side economists say it cannot.

In graphical terms, supply-side economists say that the aggregate supply curve is vertical. Therefore any shift in the demand curve will only change the price level (i.e. cause inflation or deflation), leaving Q (i.e. GDP) unchanged.