What the Left Cannot Supply, the Right Will Not Demand

Recently I’ve been toying with the idea of doing a series of posts looking at the recent survey purporting to know a lack of economic knowledge on the Left, with one post for each of the eight questions on the survey. As I look at the list of questions, however, a clear theme emerges, namely that liberals tend to think that the price of a good or service isn’t much affected by the supply of that good or service or visa versa. According to the survey, liberals tend to think that restricting the supply of housing doesn’t increase the price of housing (question 1), that restricting the supply of doctors (through licensing) doesn’t increase the price of doctors (question 2), and that price floors won’t decrease the supply of either rental space (question 4) or jobs (question 8).

Coincidentally, I’m currently reading a (surprisingly good) book by Paul Krugman, in which he argues that conservatives tend to minimize or dismiss the part changes in demand have on getting us into or out of recessions. Naturally this got me thinking whether one of the things separating left from right in this country is a difference in the importance of supply and demand in economic phenomenon. For the above issues, at least, liberals seem to be ready to discount the importance of supply, whereas conservatives underestimate the importance of demand.

Of course, the sample size I’m working with is fairly small, and what appears to be a fundamental political/economic disagreement may just be a result of sample bias. The easier way to refute the Left/Demand vs. Right/Supply theory would be to come up with examples where conservatives deny the relation of supply to price or where liberals discount the role of demand. But I can’t think of any. There are cases where conservatives want to restrict the supply of a given good or service (immigration, say, or drugs), but in such cases they would generally be either indifferent to or view favorably the idea that such restrictions would increase prices. Nor do any examples of liberals discounting demand spring to mind.

Can anyone else think of any examples?

12 Responses to What the Left Cannot Supply, the Right Will Not Demand

  1. M.Z. says:

    I realize there is a standard argument that licensing restricts supply. Does it though? I think it is akin to arguing the ACT artificially restricts the supply of college students. (Admittedly, most colleges don’t require the ACT, but work with me here.) In both cases, there is a nominal fee and a background requirement, either explicit or implicit. While it is certainly true that there are people capable of going to college that don’t don’t take the ACT, there are also people capable of becoming doctors that don’t complete the formal requirements to do so. But is it truly the case that the ACT or licensing is restricting supply?

    In the case of supply, I think an example would be airline regulation. By essentially setting a price floor, money was able to be spent on R&D resulting in better aircraft over time. I think a lot of the interurban rail arguments are similar as well, where you have to have a sufficient base of supply before demand will truly kick in.

  2. restrainedradical says:

    It’s true liberals tend to be Keynesian demand-siders and conservatives tend to be Say’s supply-siders. But you can be a Keynesian like Krugman and still get those questions right. Our political divide on economic issues seems to be primarily driven not by Keynesians and supply-siders but illiterate Keynesians and supply-siders. I bet if you get Krugman and Gary Becker in a room, they’d come out with pretty sensible economic policy roadmap.

  3. John says:

    The best lecture on supply and demand is

  4. Art Deco says:

    But is it truly the case that the ACT or licensing is restricting supply?

    Does it render the supply of providers smaller than it would otherwise be? If so (and there would not be much point to licensure if it did not) then it restricts supply and affects price.

    A more telling example than that of physicians would be certification requirements for school teachers and librarians, which are often a parody of vocational training.

  5. I would imagine that the degree to which licensing restricts supply is directly proportional to how much of an obstacle the licensing is.

    If a license was as easy to procure as the ACT, it seems unlikely that it would restrict supply much — though it would do so slightly at the margins. (Arguably, the sort of college student who fails to go to college because he doesn’t get around to taking the ACT isn’t that much of a loss, academically.)

    However, when licensing requirements become steep, they restrict supply more. Librarian work is probably a decent example. My mom works as a library aide. The work she does is essentially the same as that which the librarians do (a bit more shelving and less answering questions), but the city she lives in only hires people with masters degrees in library science. Since a lot of the sort of people who want to work part time at a library are not going to go sink $30k+ and two years into getting a masters degree for it, the librarians are in comparatively short supply and highly paid (while there are lots of aides, and they’re low paid.)

    I find it hard to imagine that the masters requirement is not inflating the salary (by decreasing the supply) of librarians relative to the actual skills required.

  6. The President’s speech tonight was a classic example of the utter economic ignorance that dominates the left.

    “Lets all stand in a circle, hold hands, and embrace a new “green economy”, because the time is now. Here it is, I think its coming. There, we did it, a brand new green economy.”

    Mr President, stop the BS, our country has been ripped off by false promises and promoters of junk science for years now. FOSSIL FUELS ARE BY FAR THE CHEAPEST SOURCE OF THE ENERGY AVAILABLE. If you have to subsidize something to get it to compete with fossil fuels, then its less economic. The money to subsidize it has to come from somewhere, and that means a net loss of productivity and jobs.

    A green economy is a less productive economy because our economy is more productive when energy is cheaper. He’s gonna make some green jobs, but what he isn’t telling everyone is that for each green job we’ll lose many regular jobs as even more manufacturers and businesses go somewhere else where the energy is cheaper.

  7. T. Shaw says:

    Yes We Can!! Gulf D-Day 58, or is it 59?

    It’s tragic. Quis Ut Deus could have declared war on the Gulf. That could be very good for the Gulf.

    Kumbaya, my Lord! Kumbaya!!!!

    This is what happens when liberals, clueless college profs, people with multiple PhD’s in theology, economists of the income-redistribution-is-everything school, community agitators, ex-weather underground terrorists, etc. take over everything. Some dad-gummed fact that adults have lived with since God created us jumps out and bites them in the @$$.

    And, he fired that other gen’l. and put in snake-eater McKrystal as OIC of Afghanistan ‘war.’ Go long on the Taliban. Short US health care and the Gulf.

    It’s okay! They can always blame Bush.

  8. M.Z. says:

    I imagine the argument would be that while you may not see librarians and library assistants as distinct goods, those hiring them do see them as such. I’m not sure of the extent economics has seen every man as a potential supplier of goods. I’m well familiar with licensing being a bugaboo for a while.

    Does it render the supply of providers smaller than it would otherwise be? If so (and there would not be much point to licensure if it did not) then it restricts supply and affects price.

    This is of course dependent on what you want to consider supply. For example, I can supply oil changes to your car, but I haven’t increased the supply of car mechanics. Most folks outside economics see licensing as a way of legally certifying duties and providing a means of redress when incompetence occurs. Not only does a plumber who consistently allows sewer gases to enter a home get sanctioned civilly, he can be sanctioned by license loss and prevented from harming other households.

  9. M.Z. says:

    I’m not sure of the extent economics has seen every man as a potential supplier of goods.

    I take that back. In Econ 101, there are assumed to be no frictional costs to transitioning.

  10. Blackadder says:

    I’m not sure I see the analogy to the ACT. Aside from the fact that you don’t have to take the ACT to get into college, simply taking the ACT doesn’t mean you’ll get into college, whereas getting a license does mean you can work in the given field.

  11. c matt says:

    perhaps its not the licensing per se, but the entrance costs to the chosen field that does the limiting. The licensing portion, after all, is the least costly of it, unless you include the capital requirements (college and grad school) that go into getting that license. Dropping the licensing requirement for doctors would not likely reduce costs much, since it would still be prohibitively expensive for most to become.

    I suppose you may have several tiers of “doctors”, those that deal with more complicated ailments and conditions, and those treating run of the mill stuff (maybe for $30 you’d be willing to go to someone with a bachelor’s in biology if you had a headache, but willing to pay $8,000 to an M.D. for a C-section).

  12. […] Econ Thoughts on Licensing This was going to be a comment on Blackadder’s post which has turned into a discussion on licensing and whether it raises prices, but since I only have time to write out one thought process today I […]

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