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Definition: supply-side economics from Collins English Dictionary


1 (functioning as singular) a school of economic thought that emphasizes the importance to a strong economy of policies that remove impediments to supply

Summary Article: supply-side economics
From The Columbia Encyclopedia

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 Canto, V. , Foundations of Supply-Side Economics (1983);.
  • Bartley, R. L. , The Seven Fat Years (1992).
The Columbia Encyclopedia, © Columbia University Press 2018

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