Why a Focus On the Supply Side Is So Important
AP Photo/Evan Vucci
Why a Focus On the Supply Side Is So Important
AP Photo/Evan Vucci
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Ever since I’ve been studying economics, one of the most important precepts, that bears repeating, has been to keep things simple.  “As you will see,” I tell my students, “there’s much in real life that mucks things up.”

Though it’s unavoidable when the policy chapters roll around, I try to keep politics (the greatest source of said muck) out of the lesson plan.

If, however, my students voted for a bonus class at the end of the semester, asking me to elaborate on the government’s effect on the economy, I might start with something they’re familiar with; regulations.

Given their age, most of their life has come with rules via parental guidance.  No doubt some may wonder why a law can’t simply be created to fix market shortcomings, perceived though most are.

They can rest assured though; it’s as undesirable to be subjected to them as adults as it was when we were kids.  Only in later years, there is collateral and financial damage that comes with them.

As youngsters, and sometimes consumers, we may not feel much of the brunt of regulation directly.  Imagine though, getting a creative spark one day. 

You discover an idea for something that seems quite useful, or it simply satisfies you in some way.  It snowballs from there, delighting your friends and family, some of whom might say “you should try to sell that and make a mint!”

Now all you need to do is make sure that no more than 25% of your home is used for this venture.  Also, no non-residents can be enlisted to help you, paid or not.

In any case, you can’t make food or fix furniture at home for pay.  No music lessons of two or more students, either.

Once all that’s settled, you’d also need a license if you want to sell your wares on the move. 

Additionally, it might be advisable, and is often suggested, to employ the assistance of an attorney to navigate such requirements.

These are a handful of examples just here in the Alamo City. 

Beyond that, and fifty state jurisdictions across the country, there are almost 90,000 pages and over 3,000 rules at the federal level by which Americans must abide.

More than simply the monetary costs of compliance, redirected from productive to non-productive purposes, regulations tug at the fabric of the community.

When a business has to hire help at a rate in excess of the skill set required, a degree of anxiety sets in.  That employee may very well work out.  Or, they may not, at which point the costly turnover process begins. 

This only hastens the inexorable drive toward automation.

There’s the shift of responsibility from the employee to the employer when the latter must divert potential pay from the former to unemployment taxes instead, among other things that purportedly benefit us. 

This in turn incentivizes the employee to more consumption at the expense of savings put aside for a rainy day, or that could be used to fund their own idea some day.

To an extent, the employer assumes a paternalistic role, as when it is compelled to offer health insurance in the absence of a freer, more flexible market

All told, we forgo the most organic, respectable way to register our disapproval of the business practices of a member of the community; hitting their bottom line by depriving them of business.

Instead, these miracles of society are trapped by a triangular firing squad of onerous regulations, potential lawsuits and bad press.  No wonder so few take the dive!

This is precisely why I give at least as much attention to the supply side in class, as I do the demand side.  Entrepreneurs and small business owners are the biggest reason for our affluence.

Though we demanders outnumber them, they are the ones that take the risk to see an idea to fruition.

They put in long hours early on.  Empty their savings.  Marshall resources.  Hire us to help.  Put in some more hours.  It’s not a stretch to say the enterprise is like one of their children.

And it still might fail. 

Whether it’s ignorance, envy, or hunger for power that instigates politicians to throw obstacles at those who drive our prosperity is anyone’s guess. 

If they truly cared about lifting people up, they’d have a slice of humble pie, stand aside, and stop impeding the process.

Christopher E. Baecker manages fixed assets at Pioneer Energy Services, teaches economics at Northwest Vista College, is a board member of the Institute of Objective Policy Assessment, and is a member of the San Antonio Business & Economics Society.  He can be reached via email or Facebook

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