3.7.5—Effectiveness of supply-side policies

Effectiveness depends on time, design, incentives, finance, political feasibility, implementation and complementary demand conditions.

Some reforms raise potential output but worsen inequality or take years; evaluation needs counterfactual evidence.

State objective, lag, constraint and metric before judging.

A training programme improves employment only if vacancies exist and participants can access it.

A policy announcement is not an outcome.

Market-based constraints include equity losses, time lags, vested interests and environmental damage; strengths include potentially better resource allocation and little direct burden on the government budget. Interventionist policies face fiscal costs and time lags, but can directly support education, infrastructure, R&D or sectors important for growth. Evaluate each against long-term growth, unemployment and low stable inflation, while checking access, implementation, demand conditions and whether any lower costs are achieved by shifting harm to workers or the environment.