PKT message, Supply and Demand

SUPPLY AND DEMAND

WHEN IT COMES TO REFORM

The money cranks and deficit-doves tell us demand creates its own supply. They are the demand-siders.

Those opposed say supply creates its own demand. They are the supply-siders—and, possibly, many are inside a Trojan horse whose hidden purpose is to lower taxes paid by the very rich and impoverish government programs intended to help everyone else.

In the real world we have a perpetual shortage of both money and the things we need money should buy. Reform must aim to correct shortages in both demand and supply—and time them so well that inflation and deflation are stopped before they do harm.

One would think we could put everyone on salary—and so end any lack of demand, Yet we instinctively know that such salary would spell the end of a nation—if it were paid for quitting the difficult and necessary jobs.

When we note how much hard essential work is done every day we have to admit that unplanned work in our economy, as we know it, provides a great deal of wealth— guided by habit and a necessity of sorts.

Reformers who want to do more must start by adding to supply when it's low—else they must add to demand.

Everyone knows this—but consensus around how to add to what to supply outside the for-profit economy is not on the horizon.

Most of see only two choices: (1) bureaucratic ministries to guide quality, quantity and price, and (2) free markets to do the same.

Free markets have a serious problem with price and profit in the conventional financial environment. Unless price accommodates wages geared to wealth creation —at an affordable price—the problem of low demand will overtake the problem of low supply—and progress toward higher living standards will not be made.

Bureaucratic ministries have an equally serious problem. Without the freedom associated with private property and individual wealth, they tend to under-perform free markets and, in many cases, to be plagued by corruption and extreme tendencies toward tyranny or disorder.

Is there a third choice? Is there a way to define government-private enterprise partnerships (like those that have built successful systems in the past), and to finance them in ways that virtually all people agree are fair to workers and consumers—and likely to avoid counter-productive inflation and deflation?

Of course there are. Let us hope the current election will bring on discussion of issues like these

John Gelles