Public Policy and Economic Growth
| English | Chinese | Pinyin |
|---|---|---|
| supply-side policies | 供给侧政策 | gōng jǐ cè zhèng cè |
| Infrastructure | 基础设施 | jī chǔ shè shī |
| Education subsidies | 教育补贴 | jiào yù bǔ tiē |
| Incentives | 激励 | jī lì |
| Deregulation | 放松管制 | fàng sōng guǎn zhì |
Can policy make growth faster?
- Last lesson named the engines of growth: capital, skills, technology, institutions.
- Public policy can feed those engines — these are supply-side policies 供给侧政策.
- They aim to shift LRAS right, not just nudge AD.
- The payoff is slow but permanent: a richer economy for good.
Supply-side policies aim to:
They grow potential output, moving LRAS right.
Roads, ports, power, and broadband are examples of ______.
Infrastructure raises the return on private capital.
Compared with demand-side policy, the payoff from supply-side policy is:
Building capacity takes time, but the larger economy persists.
Building capital: physical and human
- Infrastructure 基础设施 spending — roads, ports, power, broadband — raises the return on private capital.
- Education subsidies 教育补贴 and training build human capital, so workers produce more.
- Both are investments: costly now, but they lift potential output for decades.
- Governments often fund these with the deficit spending we met earlier.
Supply-side, or demand-side?
Supply-side policies grow potential output (shift LRAS right); demand-side policies only move AD in the short run.
Patent protection helps growth mainly because it:
Secure rewards sharpen the incentive to innovate.
Rewarding innovation
- Support for research and development — grants, university science, patent protection — speeds new technology.
- Incentives 激励 matter: if firms keep the reward from an invention, they invest more in it.
- Tax breaks for investment (lower business taxes) encourage firms to build and hire.
- Even simple things — a fast, predictable court system — make innovation worth funding.
Which are supply-side growth policies? (Select all that apply)
The first three lift capacity; the stimulus cheque only shifts AD.
Cutting regulations can boost growth but may also remove protections, so it has costs.
Good policy weighs the long-run output gain against those costs.
Freeing markets to grow
- Deregulation 放松管制 — removing needless rules — can lower costs and let new firms enter.
- Opening to trade lets a country specialise and import better technology.
- The trade-off: some rules protect people or the environment, so cutting them has costs.
- Good growth policy weighs these costs against the long-run gain in output.
Supply-side policies aim to shift LRAS right: invest in infrastructure and human capital, support R&D, sharpen incentives with lower business taxes, and use deregulation and open trade. The gains are slow but lasting — a permanently larger economy.