Historical origins
Robert Mundell
Supply-side economics developed during the 1970s in response to
Keynesian economic policy, and in particular the failure of
demand management to
stabilize Western economies during the
stagflation of the 1970s.
[14] It drew on a range of non-Keynesian economic thought, particularly the Chicago School and Neo-Classical School.
[15][16] Bruce Bartlett, an advocate of supply-side economics, traced the school of thought's intellectual descent from the philosophers
Ibn Khaldun and
David Hume, satirist
Jonathan Swift, political economist
Adam Smith, and even United States '
Founding Father'
Alexander Hamilton.
[17]
However, what most separates supply-side economics as a modern phenomenon is its argument in favor of a low tax rate for primarily collective and notably working-class reasons, rather than traditional ideological ones. Classical Liberals opposed taxes because they opposed government, taxation being the latter's most obvious form. Their claim was that each man had a right to himself and his property and therefore taxation was immoral and of questionable legal grounding.
[18] Supply-side economists, on the other hand, argued that the alleged collective benefit (i.e. jobs) provided the main impetus for tax cuts.
As in
classical economics, supply-side economics proposed that
production or
supply is the key to economic prosperity and that
consumption or
demand is merely a secondary consequence. Early on this idea had been summarized in
Say's Law of economics, which states: "A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value."
John Maynard Keynes, the founder of Keynesianism, summarized Say's Law as "supply creates its own demand." He turned Say's Law on its head in the 1930s by declaring that demand creates its own supply.
[19]
In 1978, Jude Wanniski published
The Way the World Works, in which he laid out the central thesis of supply-side economics and detailed the failure of high tax-rate progressive income tax systems and U.S. monetary policy under Nixon in the 1970s. Wanniski advocated lower tax rates and a return to some kind of
gold standard, similar to the 1944–1971
Bretton Woods System that Nixon abandoned.[
citation needed]
In 1983, economist Victor Canto, a disciple of
Arthur Laffer, published
The Foundations of Supply-Side Economics.
[20] This theory focuses on the effects of
marginal tax rates on the incentive to work and
save, which affect the
growth of the "supply side" or what Keynesians call
potential output. While the latter focus on changes in the rate of supply-side growth in the long run, the "new" supply-siders often promised short-term results.[
citation needed]
doesn't matter which school you choose (except state capitalism like that practiced in the USSR actually 
I don't think they ever had a recession or depression, technically speaking).
