[quote=EconProf]Thank you SK and CAR. You are both revealing two common mistakes about the economy that cloud your thinking. One is that the economy’s output is a fixed amount to be divided up, like a pie. That’s true in the short run, but in the long run, which is what really counts, it is dynamic and grows. So increased productivity tends to benefit all groups, albeit disproportionately. Your comment about wages being flat or declining for three decades shows this mindset. Total compensation, including health and other fringe benefits are clearly up, and actual living standards, which include technological changes in goods and services we buy push up living standards further. Secondly, you are ignoring incentives, for both workers and employers. Supply-side advocates, like myself, stress incentives and expanding the overall economy, while your demand-side approach only divides what exists in the short run.[/quote]
Where has the benefit of increased productivity over the last 35 years gone? Not to employees. Total compensation has barely budged. The only thing that has increased is profits enuring to equity holders. The fallacy of supply side theory is that increased productivity will be shared. It hasn’t been shared. Living standards have not increased. Total compensation has not even kept pace with inflation.
Beyond that, I’m a bit flabbergasted by your description of demand-side economics. You should be embarrassed if you actually teach your students that garbage.
