Arz iktisadı yaklaşımında nisbi fiyatların etkisi ve Keynezyen sisteme getirilen eleştiriler

The impact of relative prices in Supply-Side economics and the criticism of Keynesian system

Faik Bilgili

MPRA Paper from University Library of Munich, Germany

Abstract: The Keynesian approach claims that a reduction in average taxes and/or an increase in autonomous government expenditures will stimulate growth in the economy through multiplier effects. The supply side economics, however, considers mainly the necessary cut in effective economy-wide marginal tax rates on labor and capital income to boost the national output. The supply side approach reveals that government expenditures do not affect aggregate demand but influence the relative prices, which, eventually, alter the labor supply and working capital behavior. Thus, the change in relative prices might change, first, activities of economic agents, and, later, specify national production and aggregate demand. Therefore, policy makers need to correct the relative prices, if necessary, to reach the optimal usage of resources, and, hence, economic efficiency. The opportunity cost of working time is leisure time. Therefore, an increase in marginal labor income by reducing the marginal tax rate on labor income will reduce the demand for leisure. By the same token, opportunity cost of marginal investment is an increase in marginal tax rate on investment income. A marginal expansion of investment profit via diminishing the marginal tax rate on investment income will increase the productive investment activities. Thereby, supply-side model states that, in order for economies to be able to catch the basic targets of higher growth and lower inflation rates, the relative prices should lower leisure time and stimulate investments.

Keywords: Supply-Side economics; Keynesian economics; relative prices; working time; leisure time; investment; consumption (search for similar items in EconPapers)
JEL-codes: B21 B22 B25 D10 E21 E22 E62 E64 H21 H24 H25 (search for similar items in EconPapers)
Date: 1993
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published in Journal of Faculty of Economics and Administrative Sciences, Erciyes University 10 (1993): pp. 183-197

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