REAGANOMICS, THE ECONOMICS OF SUCCESS
The economic policy pursued by Ronald Reagan is often called Reaganomics or supply-side economics. Fortunately, this policy meant a radical cut of Keynesianism where consumption was stimulated with massive government spending. Keynes put the emphasis of economic policy on the demand-side (consumption). Reagan, by contrast, put the emphasis on the supply-side (production). Keynes believed that demand would create supply, but Reaganomics started from the opposite idea, namely that supply would create demand. In this way of thinking, the supply side of the economy (economic activity, production etc) had to be stimulated in order to create wealth. The best way to do this was to cut the marginal tax rates on personal income. Such a tax cut would create a strong incentive to increase economic activity and would have spectacular effects on growth, investment, risk-taking and saving.
