Ever since the 1980s, the leading theories in economics were typically tied somehow to “supply side” mechanics. The idea, which gained fame during the Reagan administration, of supply side economics is that by supporting those who produce goods – through tax cuts, subsidies, etc. – market forces are manipulated so as to ensure that prosperity “tickled down” to the rest of the economy.

The people at the top would become even wealthier, and everyone underneath would benefit someway from that wealth.

The people at the top of this economic pyramid certainly preferred to think that they and they alone were the driving force of global production. After nearly three decades of dominance, and multiple destructive recessions, supply side thinking seems to have finally died. Now, the world’s economic brain trust must struggle to find a better mode of building wealth.

The World Economic Forum in Davos, Switzerland, scheduled to run January 27-31, may be just the place to start.

According to Newsweek, some of the world’s best academic minds will descend on this meeting intent on getting the ball rolling. Foremost among their topics to revise is the age-old supply side notion that markets “know best.” One of the first things every economic student learns is that the most efficient means of production is always the one that costs the least, and the one that costs the least is the best option for the economy in general.

In a perfect situation, like the blackboard of a college classroom, this notion is precise and accurate. In the real world on the other hand, it can be just as destructive as it can be beneficial.

In today’s environment it is cheaper for a developed nation to outsource its labor and simply purchase the cheap foreign-made goods. Unfortunately, if you do this for too long, or if you buy too much from overseas, you quickly run out of money and find yourself in a hole similar to the United States today.

We used to assume that the cost savings that corporations would realize through outsourcing would lead to increased domestic hiring in other fields. What we got instead was the outsourcing of those fields as well, with the ones at the top capturing more and more of the profits for themselves.

It is obvious that we cannot tackle modern problems with antiquated strategies. Now is the time to come up with new ideas. Economist and Nobel laureate Paul Krugman has used his substantial notoriety to encourage “buy American” provisions for federal procurements, domestic job stimulus through infrastructure spending, and a host of other ideas, which gained little traction just a few years ago.

Economist and Nobel laureate Joseph Stiglitz has promoted reining in corporate interests, and using new tax models – rather than simple tax cuts – to drive the economy forward.

None of these concepts gained any traction during the boom years, and even during much of 2008 and 2009 the so-called “progressive” government in Washington, D.C. staunchly protected the old status quo.

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