Has the Failure of Trickle-Down Supply-Side Economics Discredited the Austrian School of Economics?
One might wonder why people continue to confuse trickle-down supply-side economics with the Austrian School of Economics. To shed light on this question, let us first explore the doctrine of Austrian economics and the criticisms levied against it.
John Maynard Keynes vs. the Reality of Economics
Comparing the failures of trickle-down supply-side economics with the Austrian School is like judging the effectiveness of acupuncture based on a misunderstanding of its principles. As the renowned economist, John Kenneth Galbraith, once said, Faced with the choice between changing one’s mind and proving that there is no need to do so almost everybody gets busy on the proof. This sentiment captures the essence of the resistance faced by the Austrian School in the face of supply-side economics.
Keynesian Critiques and the Parity Fallacy
John Maynard Keynes, a central figure in economic thought, famously criticized the decadent international but individualistic capitalism of his time. Keynes argued that the current system was not intelligent, beautiful, just, or virtuous. More importantly, it did not deliver the goods desired by the masses. This critique finds resonance in the current economic landscape where supply-side economics has often failed to live up to its promises.
The Myths and Realities of Supply-Side Econmics
The term trickle-down supply-side economics is a strawman argument designed to misrepresent the principles of supply-side economics. Advocates of supply-side economics propose a package of reforms including tax cuts, spending cuts, and deregulation to stimulate the market's natural growth. Tax cuts alone, as some mistakenly believe, are insufficient. For genuine supply-side policies to be effective, they require a holistic approach that addresses multiple fronts.
Current Economic Policies and Their Impact
Unfortunately, the policies implemented post-war largely resemble Keynesian demand-side policies. This includes extensive stimulus spending, subsidies, and bailouts. The government has been adding thousands of pages to the Federal Register, while simultaneously incurring trillions of dollars in deficits. Tax cuts have been attempted, but spending and regulation have not been reduced. In essence, the government has not adhered to the strict supply-side principles.
Key Sophistications of Austrian Economics
Austrian economics delves into more fundamental critiques of government intervention in the market. It advocates for the abolition of the income tax, a free market, the abolition of the Federal Reserve, and deregulation to the extent of a complete free market. Some even go as far as advocating for the abolition of the state itself. These radical ideas suggest a completely different approach to economic governance.
Practical Outcomes and Policy Critiques
Given the stark contrast between the prescriptions of Austrian economics and the current policies, it is clear that the failure of modern economic policies to deliver on promised outcomes validates the Austrian perspective. Austrian economists would indeed exclaim, We told you so! The emphasis on free market principles has, in many cases, shown to be more effective in promoting true economic growth and well-being. By contrast, the current reliance on state intervention and demand-side management has demonstrated limited success and significant inefficiencies.
Conclusion
In light of the evidence, it is reasonable to conclude that the failure of purported supply-side economics to deliver on its promises does not discredit the Austrian School. Instead, it validates the underlying tenets of Austrian economics. The Austrian School provides a critique of the current economic systems and offers a more nuanced and effective approach to economic governance.