Supply-Side Progressivism—Ezra Klein — Confessions of a Supply-Side Liberal

I think of the history of “Liberalism” as being much more illustrious than the history of “Progressivism,” and so favor the word “Liberal,” but the “Supply-Side Progressivism” that Ezra Klein has begun advocating is very much in the spirit of the “Supply-Side Liberalism” I have been advocating on this blog since 2012. (See “What is a Supply-Side Liberal?”)

Let me dive into Ezra Klein’s September 19, 2021 New York Times op-ed “The Economic Mistake the Left Is Finally Confronting” in some detail. The phrase “Supply-Side Progressivism” is in the link, making me think that was a working title: https://www.nytimes.com/2021/09/19/opinion/supply-side-progressivism.html

Ezra begins by detailing a set of policies he calls “demand-side,” but that I would call redistributionary policies. I think of demand-side policies as limited to the management of aggregate demand. (Note that I view redistribution as a very good thing whenever it doesn’t hurt the supply side too badly.) Then Ezra quotes the paper “Cost Disease Socialism” by Steven Teles, Samuel Hammond and Daniel Takashto make the case that costs matter:

We are in an era of spiraling costs for core social goods — health care, housing, education, child care — which has made proposals to socialize those costs enormously compelling for many on the progressive left. This can result in a vicious cycle in which subsidies for supply-constrained goods or services merely push up prices, necessitating greater subsidies, which then push up prices, ad infinitum,” they write.

Ezra goes on to lay out some excellent supply-side policy ideas. Let me list them and quote his explanation of each:

1. Increasing direct government support for drug development while reducing drug prices (through either government price negotiation or lessened patent protection):

We should combine price controls with new policies to encourage drug development. That could include everything from more funding of basic research to huge prizes for discovering drugs that treat particular conditions to more public funding for drug trials. Years ago, Bernie Sanders had an interesting proposal for creating a system of pharmaceutical prizes in which companies could make millions or billions for inventing drugs that cured certain conditions, and those drugs would be immediately released without exclusive patent protections. Focusing on the need to make new drugs affordable while ignoring the need to make more of them exist is like trimming a garden you’ve stopped watering.

2. Focusing on speeding up innovation that will help slow climate change:

Climate change is the most pressing example. If the Biden administration gave every American a check to transition to renewables, the policy would fail, because we haven’t built that much renewable capacity, to say nothing of the supply chain needed to deploy and maintain it. In a world where two-thirds of emissions now come from middle-income countries like China and India, the only way for humanity to both address climate change and poverty is to invent our way to clean energy that is plentiful and cheap and then spend enough to rapidly deploy it.

3. Increasing the national and state role in housing policy (as opposed to almost total control by local governments that don’t internalize the benefit of more housing to people who want to move to that locality):

Biden has proposed an expansive plan to increase housing supply in part by pushing local governments to end exclusionary zoning laws. And in California, that’s exactly what’s happening, as I wrote a few weeks back. A decade ago, progressives talked often of making housing affordable, but they didn’t talk much about increasing housing supply. Now they do. That’s progress.

Ezra Klein could have added:

4. Reducing the overgrowth of occupational licensing:

The Obama-era Treasury did some good work on this. I have touched on the scourge of excessive occupational licensing in several posts. See:

Conclusion. There is a lot more to Supply-Side Liberalism on this blog, but all of these fit nicely within Supply-Side Liberalism. Even in a time of extraordinary political polarization, I think there is the realistic potential for even more bipartisan efforts for 2, 3 and 4. And even 1, drug price controls/lower negotiated prices combined with other incentives and support for drug innovation could succeed given widespread support on the part of the electorate for lower drug prices.