Supply side reforms

This is Joseph.

Following up on Jan 27th's post about resilience, I want to really engage why supply side reforms are tricky. The Canadian example is physicians, the capacity of which has been reduced over time to curb demand by restricting supply. In the short term, this can create efficiency and there can be benefits.

For example, food restrictions can reduce the consequences of diabetes:

During the Franco-Prussian War of the early 1870s, the French physician Apollinaire Bouchardat noted that his diabetic patients' symptoms improved due to war-related food rationing, and he developed individualized diets as diabetes treatments.

It is probably true that, in the very short term, restricting food availability in North America could end up creating some health benefits. But it could also go desperately wrong if this overshot and there was a famine. The consequences of a famine are worse than what one is trying to treat, as we see from the lifetime ill effects from the Dutch famine in WW2.  

Another good example of supply restrictions going terribly wrong is in housing. Tight housing restrictions start off by offering benefits (e.g., adequate parking) but can quickly go very, very wrong. What started looking like a good plan for improving livability has turned into an exodus away from crushing housing prices. Once again, a supply side solution shows extremely poor resilience. 

So the point here is a general skepticism about the consequences of this style of reform. It is easy because it lets you address a problem (i.e., increasing medical costs) in a way that the consequences are diffused (wait times are just a little but longer, just a few fewer people get careers as physicians) so that the political costs are minimized. But the consequence appears, increasingly to induce fragility. It is over 40 years since Ronald Reagan made supply side solutions popular -- could it be time for a serious rethink on what we've learned? 

P.S. See this great comment by Josh Marshall

In the long run, it is rarely a good thing to have a weak bench of workers when you suddenly need them.