Question

What is the goal of supply side policy? Describe how deregulation works as a supply side policy tool. Why is it unlikely that we will now allow more pollution into the environment?

Answer 1

The goal of supply-side policy is to increase productivity in the economy. That means the government motivation is to increase the production of goods and services in the country to reduce the price level to better serve its consumers. This kind of policy was started during the Reagan period, where the government during that time intended to put more money in the pockets of investors and entrepreneurs so that they would be able to provide better job opportunities in the market. However, it is not true in many cases.The government can take different kinds of measures in order to increase the performance of the economy. Some of them are using tax policies, regulation policies, and policies to control the supply of money.

Deregulation happens through government intending to use a method called "free market policy." The lesser the government intervention, more leeway for corporations to spend and invest their money with fewer restrictions in the market. Regulation means enforcing more rules and regulations for corporations. Deregulation is opposite of that. For example, the 2008 recession happen due to deregulated markets during the previous presidency period. The bubble burst end of Bush's presidency and the start of 2008 the recession occurred. The supply side arguers believe that free market policy would help stimulate growth, job opportunities, and more investments. Yet, what really happened in the last 30 years is deregulation has only lead to more economic repercussions and chaos in the financial and economic market. It is because investors and corporations take advantage of the deregulated markets for their own use and abuse the market by doing, for example, Ponzi scheme (several banks performed this scheme before 2008).

It will unlikely eliminate the minimum wage because deregulated markets mean less government intervention. The free market policies do not help the laborers and especially the labor market since the investors and corporations do not work to solve the problem in stimulating economic growth, instead work to increase their own wealth. Increasing or eliminating the minimum wage would reduce the profit margin for their corporations and themselves, which is not a viable option they would choose. Hence, eliminating the minimum wage is unlikely to happen from an economics point of view for corporations.