I think that his idea on supply was interesting because he directly associated it with the productivity and efficiency of economies. He explained that the best suppliers are able to predict what people want before they even want it, and if countries focus on the demand side of economics and are not actively supplying ideas, they are not necessarily obligated to innovate. By focusing only on responding as opposed to creating new options, economies become lazy.
Conservatives support limited government, and he argues they might prefer demand-side economics because businesses don’t have any influence in supply or creating new things, and only focus on the demand of the public. However, he argues that this encourages even more government intervention, as businesses can ask for government support in order to meet the demand as opposed to crafting ways to ameliorate the supply chain themselves.
Demand is the result of supply. You only want things depending on what you have - or what you don’t have - so it only makes sense to prioritize supply and consider it as the main source of power for capitalism. There is no demand for what doesn’t exist, and supply revolves around the potential in the imaginary. Imagination and risk lead to progress, therefore, supply-side economics is the best way for societies to grow.
His earlier work defined giving not as the absence of a return, but as the uncertainty of what it would be. It’s risky, and he directly links supply to it. Demand is created by the entrepreneur. They take a risk by supplying first and hoping that a consumer out there might want to product. In this sense, capitalism starts by giving.
He identifies risks as “skilled investments” and how key they are to progress and discovering all the things that society will need in the future. I’m assuming that by skilled he means that entrepreneurs definitely have some idea of what their return on giving is most likely going to be, so the uncertainty of giving that he describes in his work is not absolute. I wish he would emphasize that. And this risk aligns with the reality of the world: it will forever be unpredictable, but humans are capable of adaptation and should bring it to the fore.
These risks that he mentions were definitely harder for entrepreneurs centuries ago. Now, entrepreneurs receive feedback on their supply almost in real-time, with wide-reaching marketing and faster transportation. Innovations in one aspect of the world give new opportunities to entrepreneurs, and I think it’s a constant loop.
Gilder supports monopolies, and to my understanding of Prof. Bylund’s talk, monopolies are a direct indicator of innovation that comes from focusing on supply. Innovation means progress, but just because companies can create demand doesn’t mean they have all the power. If that were the case, they would just stop creating new things. Monopolies get their power from the consumer, and to get their vote – or their money – they must be in constant competition with themselves to provide the best value possible, and with rivals that don’t even exist yet.
Just as democracies rely directly on the number of choices the public has, economies rely on the richness of their suppliers and the creativity of their entrepreneurs to innovate and be the first to discover a new demand.
It is not demand that remedies ignorance and stagnation, but it is supply, as it requires innovation and creativity in order to thrive. Going back to Dr. Folsom’s talk, one could argue that Edward Collins was on demand-side economic by attempting to find stability in the government and being solely responsive to the ‘wants’ and whims of the market. On the other hand, Vanderbilt was a creator of options and opportunity. He was on supply-side economics, relying on his imagination and inventiveness to find the most effective way to transport people across the ocean. I found it interesting that Gilder called subsidies an addiction, which is what we saw when the government wouldn’t stop supplying Collins with money, even after he kept asking for more each time.
Intrinsic giving is crucial, that is when giving means risk. Subsidies encourage “entrepreneurs” to give because they know they will receive a subsidy in return, not because they think they can provide society with something they’ve been missing up until now. Accompanied by ‘skilled investments,’ entrepreneurs must want to risk on their own in order for supply-side economics to work. Having true skin in the game is what motivates people to push the boundaries of what’s real today and reach what’s possible.
