Demand Side Economics

Demand-side economics is frequently referred to as “Keynesian economics” after John Maynard Keynes, a British economist who outlined many of the theory’s most important attributes in his General Theory of Employment, Interest, and Money.

According to Keynes’ theories, economic growth is driven by the demand for (rather than the supply of) goods and services. Simply put, producers won’t create more supply unless they believe there’s demand for it.

Demand-side theory directly counters classical and supply-side economics, which hold that demand is driven by available supply. This may seem like a chicken-and-egg distinction, but it has some major ramifications for how you look at the economy and the government’s role in it.

In contrast to supply-siders, Keynesians place less emphasis on overall levels of taxation, and believe much more in the importance of government spending, especially during periods of weak demand.

Here’s how demand-side economics differs from supply-side:

• Demand-side economists argue that instead of focusing on producers, as supply-side economists want to, the focus should be on the people who buy goods and services, who are far more numerous.
• Demand-side economists like Keynes argue that when demand weakens—as it does during a recession—the government has to step in to stimulate growth.
• Governments can do this by spending money to create jobs, which will give people more money to spend.
• This will create deficits in the short-term, Keynesians acknowledge, but as the economy grows and tax revenues increase, the deficits will shrink and government spending can be reduced accordingly.

There are two-prongs to demand-side economic policies: 

• an expansionary monetary policy
• a liberal fiscal policy.

In terms of monetary policy, demand-side economics holds that the interest rate largely determines the liquidity preference, i.e., how incentivized people are to spend or save money. During times of economic slowness, demand-side theory favors expanding the money supply, which drives down interest rates. This is thought to encourage borrowing and investment, the idea being that lower rates make it more appealing for consumers and businesses to buy goods or invest in their businesses—valuable activities that increase demand or create jobs.

When it comes to fiscal policy, demand-side economics favors liberal fiscal policies, especially during economic downturns. These might take the form of tax cuts for consumers, like the Earned Income Tax Credit, or EITC, which was an important part of the Obama administration’s efforts to fight the Great Recession.

Another typical demand-side fiscal policy is to promote government spending on public works or infrastructure projects. The key idea here is that during a recession it’s more important for the government to stimulate economic growth than it is for the government to take in revenue. Infrastructure projects are popular options because they tend to pay for themselves in the long term.  READ MORE...

Basic Economics

Economics is a complex subject filled with a maze of confusing terms and details which can be difficult to explain. Even economists have trouble defining exactly what economics means. Yet, there is no doubt that the economy and the things we learn through economics affects our everyday lives.

In short, economics is the study of how people and groups of people use their resources. Money certainly is one of those resources, but other things can play a role in economics as well. In an attempt to clarify all this, let's take a look at the basics of economics and why you might consider studying this complex field.

The Field of Economics
Economics is divided into two general categories: microeconomics and macroeconomics. One looks at the individual markets while the other looks at an entire economy.

From there, we can narrow economics into a number of subfields of study. These include econometrics, economic development, agricultural economics, urban economics, and much more.

If you have an interest in how the world works and how financial markets or industry outlooks affect the economy, you might consider studying economics. It's a fascinating field and has career potential in a number of disciplines, from finance to sales to the government.

Two Essential Concepts of Economics
Much of what we study in economics has to do with money and the markets. What are people willing to pay for something? Is one industry doing better than another? What is the economic future of the country or world? These are important questions economists examine and it comes with a few basic terms.

Supply and Demand is one of the first things we learn in economics. Supply speaks to the quantity of something that's available for sale while demand refers to the willingness to purchase it. If the supply is higher than the demand, the market is thrown off balance and costs typically decrease. The opposite is true if demand is greater than the supply available because that commodity is more desirable and harder to obtain.

Elasticity is another key concept in economics. Essentially, here we're talking about how much the price of something can fluctuate before it has a negative impact on sales. Elasticity ties into demand and some products and services are more elastic than others.  READ MORE...

What Do Ya Need?

Many of us Americans as well as those immigrants who have entered this country
illegally want the SAME THING....   MORE...  MORE...  MORE... of everything, such as:

• more money
• more food
• more alcohol
• more drugs
• more sex
• more clothes
• more fun

I was going to add more education but that thought got me to thinking about my previous students who only wanted to memorize what they needed to know for the test and not what they needed to know to retain knowledge...  some would argue that those two statements are not mutually exclusive.

I remember a very wealthy man telling once that all he wanted to do was just earn one more dollar...

What is this obsession with MONEY?

I had a conversation yesterday with a legal immigrant who has become a US citizen and he lives two doors down from me and when we are out mowing our yard at the same time, we always stop and talk...

He is 61/62 years of age and I am 73 years of age, and we both at at that point where we are no longer interested in having the desire to acquire more money...  but instead, have acquired the desire to enjoy the live around us...  that is to say:

• enjoy the sunrises
• enjoy the sunsets
• enjoy the warm weather
• enjoy the birds singing
• enjoy watching the rabbit in the yard
• enjoy the beauty of trees

My fellow American was a builder of homes and rented out my other homes and/or apartments and owns all sorts of equipment that he during his lifetime purchased for cash because of his wealth...  and, while he enjoy being able to do that, his life was not rewarding or satisfying as he expected it to be.

SOUND FAMILIAR???

Success is Relative

There are people or should I say citizens living in the United States that are currently working for $10/hour and if they were to receive a wage increase up to $15/hour then they would feel like they have been successful in their careers.

There are other citizens living in the United States who currently feel that if I do not generate $10 million of annual income that their careers have not been successful.

Both individuals are correct in their assessment of themselves and obviously both live completely different lifestyles...  but... what is the correct measure of success?

• One's paycheck?
• One's net worth?
• One's spiritual beliefs?
• One's family and friends?
• One's healthy lifestyle?
• One's frugal lifestyle?
• One's honesty and integrity?
• One's kindness to animals?

Success accentuates the positive not the negative...  however and this oftentimes happens, if one is to be success one also has to create a certain amount of negativity in order to get there...  wherever there might be.

That is to say that success creates winners and losers and while success sometimes does create winners and winners that oftentimes does not happen due to the circumstances that always leads to one's success...  in that the circumstance always pivot around competition.

You might have enough money to purchase a house for $20,000 over the listed price and because others cannot afford to go higher than $20,000 over listed price, you successfully are able to purchase the house that you want, while others were not successful.

How many times does a loser lose before that loser finally decides to quit?

And, therein lies the difference, the winner does not count the number of loses only the number of wins...  and, mathematically or statistically, a winner loses just as often as a winner wins.

Winners don't quit...  which is why most of them are ultimately successful.

However, one can still be successful by not setting such high and lofty goals.

Why not strive for a net worth of $500,000 instead of a net worth of $10,000,000?

One can be successful at both goals.

BUT, our society only measures true success on the amount of financial capital one accumulates over one's lifetime.  Therefore, the more wealthy are the more successful.

I don't think that is the true measure of success and I feel this way not because I don't have a lot of money saved or invested because I have all that I need to live a comfortable life for the rest of my life.  Some may think my definition of comfortable is wrong because my 1500 square foot home will never compare to their 15,000 square foot home or their 10,000 square foot beach cottage on the coast or at Martha's Vineyard.

What can one do in a 15,000 square foot home?  I mean would you allocate so much time each day to be spent in each room or are those extra rooms there for guests that may or may not show up but once or twice a year, around the holiday period.

Why would you want to read a book alone in a room that could easily hold 100 guests.  All one needs is a chair and a lamp or a window with the curtains open.

I am sitting at my desk right now in an 8 X 10 foot room, looking out the window that my Siamese cat is also looking out of, at the three Dogwood trees that I intentionally planted very close together so that they would create an umbrella affect as they matured.  One blooms pink, one white, and one red in the spring of every year without fail.

I planted them that close to symbolize the religious trinity from which a lot of my inspiration comes these days as I find myself aging out of life.  I look at those three trees and I ponder all sorts of things but mainly how I have survived two types of cancer growing side-by-side in my body for over 12 years.

To me, having a window to look out of and see these three trees that enables my mind and thought to be grateful and appreciative of the life I have been given, to me, is being successful.  I don't need a lot of money to help me generate happiness...  and, I feel sad for those who need money or perceive that they need money to generate their happiness for themselves and others.

The Calculation of Wealth

We all know that WEALTH is the accumulation of money and the more money one has acquired over one's lifetime, the more wealthy one will be when one FINALLY DIES...  which is the ENDGAME that all of us must face...  and we see this final solution more vividly the older we become...  resulting in finding ways to hold onto our wealth or having buildings named after us so that our lives will NO BE FORGOTTEN...  as the Scottish might have said once upon a time.

But, wealth can also be calculated in other ways as well:

• the wealth of being healthy
• the wealth of having what you can never purchase
• the wealth of being physically fit, skilled in many areas
• the wealth of never lying to yourself or others
• the wealth of being mindful through meditation
• the wealth of connecting to a cosmic consciousness
• the wealth of being artistically skillful
• the wealth of saving many "souls"
• the wealth of knowing you were "admired" and "respected" by many
• the wealth of one's religious belief and faith in God
• the wealth of having many "real" friends
• the wealth of children and grand children
• the wealth of having a love for mankind and animals
• the wealth of love and marrying one's "soul mate"

As AMERICANS in the TWENTY-FIRST CENTURY have a tendency to measure wealth through money and nothing else which is an unfortunate place to be, especially when one find oneself on one's deathbed knowing that shortly one will not exist and that one's money cannot be taken with one once that final breath of air is taken...

Can you imagine how empty and alone a person like that is going to be?