Supply-Side Economics

supply-side economics, economic theory that concentrates on influencing the supply of labor and goods as a path to economic health, rather than approaching the issue through such macroeconomic concerns as gross national product. In the United States during the 1980s, supply-side economics was associated with conservative proponents of the free-market system. Such measures as tax cuts and benefit cuts to the unemployed are basic supply-side tactics, with the intention of increasing the incentive to work and produce goods and services. The theory holds that high marginal tax rates and government regulation discourage private investment in areas that fuel economic expansion, and that more capital in the hands of the private sector will "trickle down" to the rest of the population. The theory gained popularity during the late 1970s, with a tax revolt in California and economic hardship during the Carter administration (1977–81). Arthur Laffer and his "Laffer curve" doctrine became the heart of the economic programs of Ronald Reagan's presidency, during which tax rates were cut substantially. Although supply siders maintain that the tax cuts of the 1980s were responsible for the decade's economic growth, critics argue that such policies caused massive federal deficits, penalized the poor and middle class, and induced excessive speculation that severely damaged America's economy. The subsequent tax increases under Presidents George H. W. Bush and Bill Clinton and the concurrent corporate investment, economic growth, and drop in unemployment during the 1990s further undercut supply-side suppositions.

See V. Canto, Foundations of Supply-Side Economics (1983); R. L. Bartley, The Seven Fat Years (1992).

The Columbia Encyclopedia, 6th ed. Copyright© 2014, The Columbia University Press.

Selected full-text books and articles on this topic

The Truth about Supply-Side Economics
Michael K. Evans.
Basic Books, 1983
Wealth & Poverty
George Gilder.
ICS Press, 1993
Librarian’s tip: Chap. 4 "The Supply Side"
Reaganomics: Rhetoric vs. Reality
Frank Ackerman.
South End Press, 1982
Great Experiments in American Economic Policy: From Kennedy to Reagan
Thomas Karier.
Praeger, 1997
Librarian’s tip: Chap. 4 "A View from the Supply Side"
Tax Incentives and Economic Growth
Barry P. Bosworth.
Brookings Institution, 1984
Librarian’s tip: Chap. One "The Supply-Side Debate"
Dangerous Currents: The State of Economics
Lester C. Thurow.
Random House, 1983
Librarian’s tip: Chap. 5 "Supply-Side Economics: An Aberrant Current or the Economic Mainstream?"
Hard Heads, Soft Hearts: Tough-Minded Economics for a Just Society
Alan S. Blinder.
Perseus Publishing, 1988
Librarian’s tip: "Supply-Side Economics: The Suspension of Disbelief" begins on p. 87
Supply Side Reform and UK Economic Growth: What Happened to the Miracle?
Oulton, Nicholas.
National Institute Economic Review, No. 154, November 1995
PEER-REVIEWED PERIODICAL
Peer-reviewed publications on Questia are publications containing articles which were subject to evaluation for accuracy and substance by professional peers of the article's author(s).
Agenda for Excellence 2: Administering the State
B. Guy Peters; Bert A. Rockman.
Chatham House Publishers, 1996
Librarian’s tip: Discussion of supply-side economics begins on p. 50
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