Conservative Economist Sees Benefit in Supply-Side Theory
"Supply-side economics means different things to different people--especially David Stockman," economist Alan Reynolds, a supply-sider, told an audience of 25 last night in a talk sponsored by the Harvard-Radcliffe Conservative Club.
Reynolds, former economics editor of National Review, described supply-side theory as the revival of classical ideas of 18th century economics, which contrast with the neo-Keynesian economics of the past few decades.
"The most serious obstacle to the U.S and world economics is the general unwillingness to finance long-term loans," Reynolds said advocating the interest rate stability that he said results from adherence to classical monetary theories such as the gold standard and fixed exchange rates.
Reynolds noted that for 200 years mortgage and loan rates never exceeded 5 or 6 percent, but that in the nearly 20 years since the United States has moved away from the gold standard long-term rates have tripled. To achieve stability again, he said, the government must provide a monetary unit of predictable value. Reynolds endorsed gold as such a unit because of its "historical use and its psychological appeal."
In discussing the economic policies of previous, administrations, Reynolds said, "Models don't work--supply-side economics is talking human behavior." He said that supply-side economics would provide the framework for efficient and long-term growth.
"We know what happens when we do what we've been doing." Reynolds said, asking his audience to give decreased tax rates and slowed federal spending policies of supply-side economics a chance to succeed.