Two Schools Of Thought On Supply-Side Policies

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Xiaodong Liu Compare and Contrast Two Schools of Thought on Supply-Side Policies The possession goal of supply-side policies is increasing an economy’s productive potential and its ability to produce. Most supply-side policies aim to enable the free market to work more efficiently by reducing government interference. Also the supply-side policy includes any policy that can improve the productive capacity of the economy. These policies can be divide be two schools: market-oriented policies and interventionist policies. Market-Oriented supply-side policies are changed when the government reduces ordinance and make the market to work more freely. For example, reducing or elimination the power of trades unions and minimum wages can reduce labor market inflexibility’s. Using the tax system to furnish encourage and reward to help irritate factor output, rather than to alter demand. This general means reducing direct tax rates, including income and corporation tax. Lower income tax will act as a reward for unemployed workers to join the labor market, or for existing workers to work harder. Lower corporation tax furnish encourage and reward for entrepreneurs to start and so increase national output. Interventionist supply-side policies are adopting government intervention to overcome market failure. For example, increase spending on education and training to reduce occupational immobility. Better education and training to improve skills, agility, and mobility – also called human capital development. Spending on education and training is likely to improve labor productivity and is a necessary supply-side policy option. A government may spend money directly incentives for private suppliers to enter the market. Government may also set standards of teaching, and force schools to include a skills component in their curriculum. Market-Oriented policy and

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