Supply-side economics is a school of macroeconomics that argues that economic growth can be most effectively created by lowering barriers for people to produce (supply) goods and services as well as invest in capital. According to supply-side economics, consumers will then benefit from a greater supply of goods and services at lower prices: furthermore, the investment and expansion of business will increase the demand for employees.Sounds reasonably promising thus far...right? Except the means for this encouraging quote mostly comes down to:
Typical policy recommendations of supply-side economists are lower marginal tax rates and less regulation.Aah, less regulation: the ever desirable situation which seldom translates into realities for greater economic access. Readers are already aware of my dubious response to ongoing tax shuffles - political and legal stalemates are "made of this". At first glance, the Wikipedia quote appears to address some of the structural issues alluded to in yesterday's post. But...regulation changes for who? Do those changes seek to create a pathway, or obstruct existing pathways? In other words, what are regulation specs intended to accomplish, and is that obvious to everyone involved? Do more individuals gain the chance to participate, or less?
As to tax rate changes, they serve as a fallback method not just for business interests, but for everyone else as well. Economic progress? Hmm, depends on which party is in power and how one feels about the party. In all of this, actual structural issues tend to be swept aside, and the initial impetus to provide economic access gets lost. Perhaps this is why some supply side efforts are disregarded as trickle-down economics.
When discussions turn to inequality, a partially broken or missing marketplace makes it difficult to determine any reasonable course of action. Governments can't provide something that may not even exist - particularly services. In what sense are service related supply side factors "responsible" for inequality? It depends. Hence, even though it's obvious where some price rigidities reside - such as rising prices for cancer drugs - where does one even begin? A high tax on the profits of successful pharmaceuticals is not going to solve the medical access or production problems they have created for everyone else - businesses included.
Nor is a low tax on their profits likely to encourage them to lower prices or hire more researchers. It's painful for me to witness media accounts of people making walks across the country (or related efforts) to raise money for research into cures. How many precious research hours will those hard won dollars actually provide? The way these institutions have specialized time value, the (traditional economic) value of time such as my own - similar to that of many people around the globe - would hardly represent a drop in their valuable bucket. And yet for centuries, research was performed because people wanted the challenge and scarcely gave a second thought to the time involved, not because a few isolated individuals were christened with the special privilege of healing, on the "supposed" behalf of taxpayers and everyone else. What kind of rationale is that?
Step back for a moment and consider where today's pharmaceuticals gained their protected position in society. They were able to do so in large part because of the already existing prestige of physicians associations. As a result, pharmaceutical companies were also able to slowly wear away at the ability of local environments to produce and partake in countless means for healing, until healing at low income levels and in rural regions has become practically nonexistent in the U.S.
However, the reason they gained this competitive advantage in the first place was the fact that the service formation of physicians - over time - had gained the status of a superior good. While in a sense there is nothing wrong with such status - given the years required for the education and intense commitments required for doctors, the problem is that the marketplace was effectively removed for everyone else. Yet governments have been foolhardy enough to insist on somehow apportioning to all, the generous rewards of extreme artificial time use scarcity. Good luck with that.
This removal of the alternative marketplace is so thoroughly entrenched, that it continues to threaten what remnants still exist. When the media recently warned of of an altered substance in some herbal capsule formulations, the warning came along with an admonition to never rely on herbal remedies in the first place! And my alternative as a low income consumer - other than the far more limited realm of over the counter drugs is - ??? I've never received a warning from the media to cease and desist taking (the constantly TV advertised) prescription drugs as a general rule, should any of these companies be foolish enough to tamper with their own product. And in several instances over the years, I've not come across either prescriptions or OTC medication which take the approach I actually need.
Circumstance such as these are why it is difficult to overcome the complete takeover in the marketplace, by what is now considered traditional medicine. However, the fact this has occurred holds considerable responsibility for the worst inequality and economic access issues in the services marketplace. Most important is that - particularly in an age of growing automation and concern about employment prospects for the future - it has become dangerous to assume all services work can be assigned either superior good status or else leftover "dregs for dummies".
To be sure, the law of one price is problematic in this regard. People in the U.S. who can afford to do so, travel to other countries to access affordable (i.e. "differently" priced) medicine, instead of expecting to find it somewhere at home. It's often not reasonable to expect pricing differentiation for services product, locally. Why? Unlike more obvious quality indicators of tradable goods, time based "cheaper" service variants call expensive time based variants into question. How does one know what is actually different?
The fact that knowledge use systems would work completely differently (through coordinated time arbitrage) is precisely what allows them to sidestep the law of one price problem. Fortunately, consumers tend to be more forgiving about pricing in other non tradable good formations. For instance, it's not difficult to understand differences in land valuation and the non tradable good of buildings. The geographic component makes it easier to understand differences in price for these.
At the very least, a marketplace for time would mean the possibility of services on normal and not just "superior" terms. The worst thing about services as designated "special" good for middle upper and upper income? In spite of the time scarcity everyone holds in an individual sense, overall time aggregates are grossly shorted in value, which creates asymmetries everywhere one looks. A marketplace for time use would "right" many wrongs in terms of services exclusion, in places where it is needed most.
Knowledge use systems would in effect be a "direct side" approach, to much needed marketplace formation. Any time that societies reach a point where immigration is discouraged and eugenic references creep back into any national dialog, it becomes clear that more than taxation and political strategies are needed. Knowledge use systems would also be able to maintain information and time use structures digitally, so that new methodology can be shared with others who seek to establish knowledge use systems as well.
It's not that commonly used knowledge couldn't be available for all. However, the inability of either government or existing businesses to supply adequate knowledge use and services, needs to be addressed. Increasingly, large swathes of existing knowledge and underutilized humanity need to be tapped, to narrow what has become a growing intelligence use gap, between the rich and the poor.