I was listening to Thom the other day when he had Robert Riech on the show and I've heard them both (as well as others) speak previously of demand side economics. The theory that it is soley demand that drives the economy and that if you can put money in anyone's hand you will increase economic activity. It is often accompanied by the statement that supply side economics is a hoax. This argument is also used to promote high wage doctrines and oppose tax cuts for the "wealthy" (or who I term the entrepreneur or investor).
Take any third world village or town where its members walk five miles a day to get buckets of water, lack food, have no medical care, no electricity or other souce of energy, and no security. There is no store, utility company, medical center, etc. within hundreds of miles. The demand side doctrine would say, give these people some money and they will create economic activity. But from a practical perspective you could give each member of the community $100 a week and it would be worthless to them because they have no where to spend the money. So even though they have DEMAND they have no supply of goods and services -- the money is worthless to them and their lives are no better off.
The supply side doctrine would say offer an entrepreneur an incentive to buld a store, utility, or medical center. The investment would provide needed goods and services and create jobs for the members of the community where they could earn money to purchase goods and services (i.e. jobs at the store, utility, etc.). Those that didn't receive employment from these investments would still be able to offer goods or services that those who were employed would be able to pay for because of their employment therefore creating economic activity and creating a financial flow of money. Then those in the second group would be able to purchase goods and services from the store, utility, or medical center. Lather, rinse, repeat. Lather, rinse, repeat.
The supply side scenario sounds much more logical to me than the outcome of the demand side scenario.
In another scenario lets say I have a demand for for a flashlight and batteries. Because money has been put into my hands I can quench this demand by going to the store and purchasing a flashlight and batteries.
In a supply side scenario I go to the same store but the store displays many other goods that I had no demand for when I walked into the store. But because of supply side economics I not only purchase the flashlights and batteries, but I also purchase a handy dandy new shower head, some telfon tape, and a tool to install the shower head.
Which scenario created more economic activity? The one based soley on demand, or the based soley on supply?