Source: Self Made
Throughout The Supply Side chapter of Wealth and Poverty, Gilder attempts to address the relationship between supply and demand, and how this relationship impacts a capitalist economy. Gilder focuses on Keynesian theory for a great deal of the chapter as well. He addresses how circumstance plays a big role on economics, and how an economy of supply and demand is exceedingly complicated. He eventually tries to reason that “…the simply and homely first truth about wealth and poverty,” is “Give and you will be given unto”. This, and Gilders claim that the classical model suggests that state intervention is a good remedy for the imperfections of a true capitalist economy are where I have to disagree with him. I feel that his connection between the shortcomings of supply and demand formulas and economic ideologies to the need for government intervention is weak and a little too full of circumlocution to be convincing.
Gilder makes many very good points about the complexity of the economy, and the shortcomings of overly simplistic models of viewing supply and demand. Placing too much importance on the impact of one or the other on its respective counterpart leads to a skewed viewpoint that does not accurately reflect how much sway either has on the economy. At the same time, supply and demand are the backbone of a capitalist economy. One cannot rightly exist without the presence of the other. Importantly, Gilder mentions that supply and demand graphs do not account for the subjective nature of value and that economic texts turn “things into concepts” and manipulate them as though this is reality. In this assertion, Gilder is absolutely correct. The black and white models used in economic studies are often off base by a reasonable degree due to the unpredictability and multifaceted nature of the economy. Furthermore, he is also correct in stating that there is a lot of utopian thought undertaken in the interest of viewing the bigger picture which further distorts these economic assumptions and calculations from reality. Gilder also makes a point of explaining the way in which the government can stabilize the economy by doing things like rising the tax rates on income and capital to deter investments. Showcasing how having an entity capable of making these greatly impactful and encompassing changes can in fact be beneficial to the economy.
However, despite the very valid points that Gilder makes throughout the chapter, I feel that he gives little reason for how the shortcomings he identifies are connected to the assertions he makes. For example, when Gilder is explaining how the classical model of economics is used by many to provide an argument for limited governments, he then says “it in fact gives endless pretexts for state intervention to remedy the inevitable imperfections. Indeed, the perfectionist view has often served more as a way to discredit the messy dynamics of real capitalism than to illuminate its workings.” Thereafter, he begins a new paragraph where he starts to talk about misinterpreting the works of Keynes. It takes him many more paragraphs following to begin connecting his assertion of the classical model highlighting the usefulness of government intervention, and the lengthy roundabout manner in which he makes this connection leaves his earlier claim appearing rather weak. This may be more of a shortcoming of Gilders writing style than of his logic or reasoning, but regardless of the cause it hinders him from getting his point across. This is part of the reason why I am not entirely convinced by Gilder that government intervention is a beneficial addition to a capitalist economy. Other works such as The Law, The Myth of Robber Barons, and The Cure that Works make incredibly compelling arguments against government intervention. Gilder does little to acknowledge or discredit the claim that government intervention leads to a more crippled economy that provides certain businesses and companies with preferential treatment that is overall detrimental to the consumer. In addition, despite the valid points that Gilder does make about the government being able to manage the economy I believe it could be argued that this oversight is unnecessary. The Fed is steering while looking in the rearview mirror, so they can really only make educated guesses about what should be done to direct the economy in the right direction. Furthermore, doing away with a centralized system could be beneficial to the economy and do away with the need for government overwatch in the first place. It would not necessarily directly correlate to a more stable economy or more efficient economic growth, but it would do away with the bailing out of industries that only need to be bailed out because they failed to properly manage themselves.