If supply side economics worked

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If supply side economics worked wouldn't Gini score and Gdp per capita have a positive correlation?

Both supply side and demand side do their bit to keep the pot boiling.

The problem with supply side is that it will promote the production/provision of those goods and services that yield the best rate of return (profit). It will not necessary promote goods and services that are needed. Consider the problem of producing drugs for diseases that are rare and affect very few people. There is little supply side incentive to promote the production of drugs to help people suffering from such diseases.

ruveyn

Supply side has no interest in equality as an outcome, only economic growth.

It would be better to look at GDP per capita vs tax rate.
Better yet cut out all the lucky countries living off geological good fortune.

Even better ignore GDP completely and compare the tax burden to the final price of a standard product across all countries. (I feel a big mac coming on) Lower taxes should mean more competition and lower prices for products if supply side economics hold true.

Why should there be an equality of outcome? There is no equality of productivity.

ruveyn

what is prbably meant is equality of outcome given identical enviromental and personal variables.

it does not implicitly mean equality of outcome no matter what.

Nope and nope.

When I said 'Supply side has no interest in equality as an outcome' what I meant was that the GINI coefficient is a specific measure of equality and supply side economics does not care about equality it only cares about delivering maximum economic growth.

Because supply side economics is not supposed to deliver equality it is unfair to measure it using that metric to evaluate it's success.

It is a bit like complaining that your kettle is rubbish because it doesn't make good toast. Of course it won't make toast, it isn't supposed to...

Supply side usually is seen as meaning let's give money to the rich and they'll use it to produce stuff and that's how there'll be growth. Giving money to already rich tends to cause more inequality. Thus, the more inequality, the more supply-side the orientation, that's the assumption and a very fair one I may add.

High gini score means high inequality have another go at it with that in mind.
If supply-side economics worked countries with high gini scores would also be richer.
They aren't so it doesn't.
Now do you get it?

Last edited by JakobVirgil on 14 Sep 2012, 9:04 am, edited 1 time in total.

Supply side creates economic bubbles. Real wages stagnate, but the wealthy investor class still wants to keep growing it's excess wealth. They can no longer do so without creating an acceleration of private debt upon which to grow their "investments". Most of this private debt is equity borrowed against inflated assets. Then when people finally wake up and stop the unsustainable borrowing, the entire bubble bursts. Then the people on the bottom of the food chain are basically screwed no matter what. You can't "punish" the wealthy for their misdeed by allowing their banks and corporations to go bankrupt and allowing the free market to met out justice. The problem is the free market is not just. In a recession it's always the little guy with the least options that gets f***ed the hardest. The CEO's can lose 95% of their wealth and still retreat to their townhouse and live happily ever after. They don't wind up starving on the streets like the laid-off masses.

No one should be giving money to anyone except their own money. Charity paid for by taxpayers is theft.

ruveyn

Sorry Jakob, maybe I'm being really, really dense here...

The graph doesn't seem to distinguish countries that use supply side economics and countries that don't, how can I distinguish the USA from North Korea on that graph?

As supply side economics is primarily interested in growth surely a comparison of annual percentage growth between supply/non-supply countries is required with the proviso that all the countries are starting from roughly the same level?

I just don't get you disprove supply side using that graph.

PS I'n not trying to defend supply side, trickle down or rising tide arguments but I genuinely don't understand how this graph is relevant to a critique of the theory.

I think the wonder of the chart is that it does not matter what the policies of the countries are. The countries that de facto use supply-side are the ones on the right of the chart.
It looks like at very low wealth levels there is no correlation (making most world bank and IMF decisions based on bullsh!t). as wealth increases there is a weak correlation between income-equality and wealth per capita.
The fundamental Idea of trickle down economics is that income-inequality causes growth
and makes wealth for all folks. So countries with higher inequality should have higher wealth.
They don't so it doesn't.

This makes a lot more sense now thanks!


PS But if you really want to prove the point ditch Norway (tiny population huge natural resources) and instead chuck in countries like Holland and Denmark who have bugger all natural resources.

Nobody reasonably says the wealth of Saudi's is down to lots of oil and not sharia law for example.

And Luxenburg
Saudi was excluded from both charts they do not disclose economic info.

Tax haven!

Tax havens with a very poor indigenous population will have high Ginis and GDP-PC.

I wonder if poverty level and gini score would be a more telling chart?