In the highly materialistic world that we live in, success is generally measured in financial terms. The same is true in politics, where the success of a politician, especially the President, is measured by how well the economy did during his term in office. It is specifically measured by how well they bring down unemployment, grow the economy and fight inflation. Two basic modes of thought on the subject have pervaded public policy since World War II: supply-side and demand-side economics. .
Demand-side economics is generally known as Keynesianism, named after the English economist John Maynard Keynes. He believed that governments should force interest rates down by printing money and lending it from the central bank at a discount. This would put more money in consumers' hands and encourage them to spend and consume more, thus creating an incentive for investment. This helped to solve some of the problems, but in the long run it is extremely inflationary, because with the increase of the money supply it becomes devalued. Keynesianism also calls for the government to spend more to try to help the economy grow. Keynesianism was a short-term solution to the problem and could only do so much for the economy before inflation caught up with it, and took it into recession. .
On the other hand we have supply side economics, which works on more of a long-term basis. It basically attempts to stimulate economic growth, which would reduce inflation, and raise the standard of living. Supply side proponents say that by reducing government regulations and taxation, this will stimulate more economic growth, and market equilibrium will be reached on it's own, without government impositions. .
Keynesianism was popular until the late 1970's during a period of stagflation', where both unemployment and inflation were rising together. Policymakers realized that they could not solve this problem with Keynesian ways of thought.
