The Real Supply-Side Economics. Occasional Paper No. 80.

Economic policy today is often stated in the terms of "demand managers" and "simple supply-siders" who look upon economic policy simply as a matter of stimulus or restraint. It matters little what programs are cut as long as overall spending is reduced to cool inflation. On the other hand, the real supply-side economists recognize the necessity for an education, training, and social services structure to develop human capital into a productive work force. Current antinflationary policies are especially destructive of human capital development, the real force that will lead to increased prosperity. A plan of moderate, rather than indiscriminate, budget cutting would be more sensible; this plan should scrutinize every expenditure, sparing certain ones, such as for vocational education, that have a potential for encouraging productivity and price stability. As we move toward this type of real supply-side policies, programs that emphasize the development of human capital should become more important. Also, if supply-side policies are to succeed, they must be more decentralized in their application. The real supply-side economics would encourage an increased capacity for bottom-up, subnational economic development. Vocational education should continue to play a major role in this process of development. (KC)