Friday, 5 December 2014

What comes first - Supply or Demand?

Interesting controversy - is there a demand deficiency in Europe, and if so what can or should be done to boost demand? I tend to support Frank Shostak's argument that supply comes first. Demand is never 'sufficient' and we all have 'demands' that are larger than our incomes can support. Microeconomic arguments (The Baker producing bread in this case) are severely neglected by the economics and policy tribes - including the media commentators. Maybe Shostak's example is a bit simplistic and needs refining but I think he is on the right track. Just pumping money out of thin air (Martin Wolf, FT, The curse of weak demand) just papers over the cracks in the economy.

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