Editing Supply-side economics (section)

== Historical origins ==
[[File:Rmundell.jpg|thumb|[[Robert Mundell]] popularized the theory of supply-side economics after developing the theory with Arthur Laffer in the 1970s.<ref>{{cite news |title=Robert Mundell, the intellectual father of supply-side economics, is dead at 88 |url=https://www.washingtonexaminer.com/news/robert-mundell-intellectual-father-supply-side-economics-died |access-date=23 September 2022 |work=Washington Examiner |date=5 April 2021 |language=en}}</ref>]]
Supply-side economics developed in response to the [[1973–1975 recession|stagflation of the 1970s]].<ref name="case_780">Case, Karl E. & Fair, Ray C. (1999). ''Principles of Economics'' (5th ed.), p. 780. Prentice-Hall. {{ISBN|0-13-961905-4}}.</ref> It drew on a range of non-[[Keynesian economics|Keynesian economic thought]], including the [[Chicago school of economics|Chicago School]] and [[New classical macroeconomics|New Classical School]].<ref>{{cite book|url=https://books.google.com/books?id=-zVTD8v_qlsC&q=supply%20side%20economics%20chicago%20school&pg=PA105|title=A Critical Evaluation of the Chicago School of Antitrust Analysis|first1=I.|last1=Schmidt|first2=J. B.|last2=Rittaler|date=February 28, 1989|publisher=Springer Science & Business Media|via=Google Books|isbn=9789024737925}}</ref><ref>{{cite book|url=https://books.google.com/books?id=s8SEaWZrSEQC|title=Supply-Side Tax Policy: Its Relevance to Developing Countries|first1= Ved P.|last1=Gandhi|first2= Liam P.|last2=Ebrill|first3= Parthasrathi|last3=Shome|first4= Luis A. Manas|last4=Anton|first5=Jitendra R.|last5=Modi|first6= Fernando J.|last6=Sanchez-Ugarte|first7= G. A.|last7=Mackenzie|date=June 15, 1987|publisher=International Monetary Fund|via=Google Books|isbn=9781455271962}}</ref> [[Bruce Bartlett]], an advocate of supply-side economics, traced the school of thought's intellectual descent from the philosophers [[Ibn Khaldun]] and [[David Hume]], satirist [[Jonathan Swift]], political economist [[Adam Smith]] and United States Secretary of the Treasury [[Alexander Hamilton]].<ref>{{Cite journal|first=Bruce|last=Bartlett|title=Supply-Side Economics: "Voodoo Economics' or Lasting Contribution?|journal=Laffer Associates: Supply-Side Investment Research|issue=November 11, 2003|url=http://web.uconn.edu/cunningham/econ309/lafferpdf.pdf|access-date=November 17, 2008|archive-date=October 13, 2017|archive-url=https://web.archive.org/web/20171013113314/http://web.uconn.edu/cunningham/econ309/lafferpdf.pdf|url-status=dead}}</ref> In 2007, Bartlett stated:

<blockquote>Today, hardly any economist believes what the Keynesians believed in the 1970s and most accept the basic ideas of supply-side economics – that incentives matter, that high tax rates are bad for growth, and that inflation is fundamentally a monetary phenomenon. Consequently, there is no longer any meaningful difference between supply-side economics and mainstream economics.

...

Today, supply-side economics has become associated with an obsession for cutting taxes under any and all circumstances. No longer do its advocates in Congress and elsewhere confine themselves to cutting marginal tax rates – the tax on each additional dollar earned – as the original supply-siders did. Rather, they support even the most gimmicky, economically dubious tax cuts with the same intensity. ... today it is common to hear tax cutters claim, implausibly, that ''all'' tax cuts raise revenue.<ref name="Bartlett">{{cite news |last=Bartlett |first=Bruce |date=April 6, 2007 |title=How Supply-Side Economics Trickled Down |url=https://www.nytimes.com/2007/04/06/opinion/06bartlett.html |work=[[The New York Times]]}}</ref></blockquote>

Current day advocates of supply-side economic policies claim that lower tax rates produce macroeconomic benefits and emphasize this benefit rather than their traditional ideological [[Classical liberalism|Classical liberals]] opposition to taxation because they opposed government in general. Their traditional claim was that each man had a right to himself and his property and therefore taxation was immoral and of questionable legal grounding.<ref>Gray (1995). ''Liberalism''. Minneapolis: University of Minnesota Press. {{ISBN|0-8166-2801-7}}. pp. 26–27</ref> Supply-side economists argued that the alleged collective benefit (i.e. increased economic output and efficiency) provided the main impetus for tax cuts. As in [[classical economics]], supply-side economics proposed that [[Economic production|production]] or [[supply (economics)|supply]] is the key to economic prosperity and that [[consumption (economics)|consumption]] or [[demand]] is merely a secondary consequence. Early on, this idea had been summarized in [[Say's law|Say's law of markets]], which states: "A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value." or, in other words, production (supply) must first occur to enable economic activity or trade.{{cn|date=June 2024}}

Supply-side economics rose in popularity among Republican Party politicians from 1977 onwards. Prior to 1977, Republicans were more split on tax reduction, with some worrying that tax cuts would fuel inflation and exacerbate deficits.<ref>{{Cite journal|last1=Burns|first1=John W.|last2=Taylor|first2=Andrew J.|date=2000|title=The Mythical Causes of the Republican Supply-Side Economics Revolution|journal=Party Politics|language=en|volume=6|issue=4|pages=419–440|doi=10.1177/1354068800006004002|s2cid=144473289|issn=1354-0688}}</ref> In 1978, Jude Wanniski published ''The Way the World Works'' in which he laid out the central thesis of supply-side economics<ref>{{Cite journal|last1=Gross|first1=Neil|last2=Medvetz|first2=Thomas|last3=Russell|first3=Rupert|date=August 11, 2011|title=The Contemporary American Conservative Movement|journal=Annual Review of Sociology|language=en|volume=37|issue=1|pages=325–354|doi=10.1146/annurev-soc-081309-150050|issn=0360-0572|quote=Jude Wanniski, who wrote the supply-side economics bible, The Way the World Works (1978), while an AEI scholar-in-residence}}</ref> and detailed the failure of high tax rate progressive income tax systems and United States monetary policy under [[Richard Nixon]] and [[Jimmy Carter]] in the 1970s. Wanniski advocated lower tax rates and a return to some kind of [[gold standard]], similar to the 1944–1971 [[Bretton Woods System]] that Nixon abandoned.

[[File:Laffer-Curve.svg|thumb|upright=1.05|Three different [[Laffer curve]]s: {{mvar|t*}} represents the rate of taxation at which maximal revenue is generated and the curve need not be single-peaked nor symmetrical.]]