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Article: My time with supply-side economics. (Memoir & Defense).
- Article from:
- Independent Review
- Article date:
- January 1, 2003
- Author:
CopyrightCOPYRIGHT 2003 Independent Institute. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Supply-side economics is a major innovation in economics. It says that fiscal policy works by changing relative prices and shifting the aggregate supply curve, not by raising or lowering disposable income and shifting the aggregate demand curve. Supply-side economics reconciled micro- and macroeconomics by making relative-price analysis the basis for macroconclusions. The argument is straightforward: relative prices govern people's decisions about how they allocate their income between consumption and saving and how they allocate their time between work and leisure.
The cost to the individual of allocating a dollar of income to current consumption is the future ...