Do trickle-down economic theories work?

[Sochi]

…If all jobs paid the same, the nobody would try for the more difficult jobs like doctors or engineers. Society would collapse…

Do you have a lot of experience with people? I don’t know, but what I can say from my several decades of living in many parts of North America, and traveling, is that people are phenomenally curious and highly creative, as a rule. Your assumed collapse may be based on the inflated of the myth of lazy people getting handouts or something. Besides the fact that the total of handouts given to very rich people makes all of our social services put together look paltry, we need to consider that given the basics, people just get busy.

In my area, there are large numbers of people who do volunteer work, have hobbies, even extraordinary ones, and who continue on their own to build and help in their community. It’s kind of like the old Kaiser motto: “Find a Need and Fill It.” Also there are many models and interpretations of possible economies that would, even without taxation, give all citizens a basic minimum wage. That allows for freedom from economic want. It also allows for pursuit of interests, both creative and economic. Check out Buckminster Fuller and Robert Heinlein and their model economies. Heinlein even invented a game to demonstrate how it works. There are many organisations that advocate alternate and fair economies as well, usually resource based ones.

Nuf said for now, but just because we have been brain washed into thinking it has to be a certain way, it doesn’t mean that there are not other feasible ways to do things. If you look at how our money system actually works in any detail you might see that it would be very useful to all of us to find another way.

 

[shockerfan]

Do you have a lot of experience with people? I don’t know, but what I can say from my several decades of living in many parts of North America, and traveling, is that people are phenomenally curious and highly creative, as a rule. Your assumed collapse may be based on the inflated of the myth of lazy people getting handouts or something. Besides the fact that the total of handouts given to very rich people makes all of our social services put together look paltry, we need to consider that given the basics, people just get busy.

In my area, there are large numbers of people who do volunteer work, have hobbies, even extraordinary ones, and who continue on their own to build and help in their community. It’s kind of like the old Kaiser motto: “Find a Need and Fill It.” Also there are many models and interpretations of possible economies that would, even without taxation, give all citizens a basic minimum wage. That allows for freedom from economic want. It also allows for pursuit of interests, both creative and economic. Check out Buckminster Fuller and Robert Heinlein and their model economies. Heinlein even invented a game to demonstrate how it works. There are many organisations that advocate alternate and fair economies as well, usually resource based ones.

Nuf said for now, but just because we have been brain washed into thinking it has to be a certain way, it doesn’t mean that there are not other feasible ways to do things. If you look at how our money system actually works in any detail you might see that it would be very useful to all of us to find another way.

People in general respond to incentives or disincentives. Yes, there are exceptions, but people for the most part respond to incentives. This is why we raise taxes very high on liquor, or cigarettes, and some want to increase taxes on soda pop, just for example. Right now we have a shortage of doctors for a variety of reasons. Do you thing the shortage would get worse if made doctor’s salaries the same as teachers?

I was a little bit loose with my language, but the general points still hold. “From each according to his ability and to each according to his need” is an economic model that didn’t work too well…agree?

 

[Sochi]

“From each according to his ability and to each according to his need” is an economic model that didn’t work too well…agree?

It is working very well right now as the vacuum cleaner economic system that contrary to even the warnings of Adam Smith is accumulating an astounding and unprecedented amount of wealth in the 1%>.001% Problem here is the "need"has been artificially created and is being filled on the back of the rest of us. Did you go to any of those links in post 17?

My bet is that if wages were based on interest past a basic universal living wage, the distribution of people in jobs would adjust to actual needs, not artificial ones. And as I tried to point out, the “everybody must work to make the economy go” idea is not real any more. What we have is a fear based economy designed to promote an exceptionally high concentration of power, such as one you might fear as the result of a communism. But really it is about how it is accumulated and pooled.

Money is like blood. If it pools, rather than circulates, disease ensues, then gangrene, and excision. Looking at the fact that any of the four richest families on the planet could feed and shelter the entire world a few times over, one might well wonder if there is an actual pathology going on. Medically, in assessing burn trauma, parts of the body, torso, head, arms, legs, each are assigned percentages. The genitals constitute 1%. By that analogy, by far the greatest portion of the world’s “blood” is astonishingly pooled in that 1%. In the US, the “genitals” contain 47% of the blood. The neck, say, has another 27%. Skipping a bit, we end with 80% of the body having 7% of what’s needed to keep the body alive. Perhaps the genitals are happy with their condition at the moment, but this erection has lasted far more than four hours, and other business necessary for the survival and advancement of life is at stake. So how about we let a bit of flow get moving, so that the body, including those wonderful genitals, may live to enjoy another day?

I’m not saying that money should be flatly distributed. No way. But money has to circulate, and not just among a few leaves at the top of the tree, to use another analogy, or a twig or two. A tree lives from its roots; as the former owner of a landscape firm, I know that putting 80% of the money in the soil is the best assurance of the plant’s health and prosperity. Even Adam Smith, the “guru” of economists, was wary of corporations, and warned that capitalism, having a great tendency to pool money at the top, must be mitigated so that there is circulation back to the bottom by some means. We give or make laws to give gazillions to people who could WAY better than average on far less than they have, and we balk at at helping people to eat and have medical attention.

Those people, had they money, are the ones who would actually spend it, creating jobs by demand for goods and services. Austerity for whom? Certainly not the already greatly moneyed. And the money they get goes more into investments and lobbying, because both of those are far more lucrative than creating jobs, job which would be meaningless unless there was money at that level to spend. Money doesn’t trickle down; it gets siphoned up. Otherwise you wouldn’t pay the sticker price on a house to cover the added value portion, and them pay that twice or three more time to the bank for administrating your debt. Your debt is the bank’s asset.

So is our ignorance. There is good reason and great financial profit inherent in the dumbing down of America, often by psychometric means, which has gone from first to around 20th or worse among developed countries on many scales. What we are first in is incarcerations, military spending, murders, and difference in pay levels between the people who produce goods and services and their CEOs. Our economy has become more like an autoimmune disease, or an antagonistic parasitism. And what is sad is that had we the circulation I’m talking about, this Nation and this world could or would be an experiential paradise. There is in fact no shortage of work; there is a shortage of vision as to how we can cooperate without niggling about a bit of cash going to indigents that is paltry compared to what the grand thieves take home openly and with our permission.

 

[Sochi]

I’m with the Pope on this one: scontent-b-sjc.xx.fbcdn.net/hphotos-frc3/t1.0-9/p720x720/10171616_10152339879422908_811133304090981356_n.png

 

[shockerfan]

It is working very well right now as the vacuum cleaner economic system that contrary to even the warnings of Adam Smith is accumulating an astounding and unprecedented amount of wealth in the 1%>.001% Problem here is the "need"has been artificially created and is being filled on the back of the rest of us. Did you go to any of those links in post 17?

My bet is that if wages were based on interest past a basic universal living wage, the distribution of people in jobs would adjust to actual needs, not artificial ones. And as I tried to point out, the “everybody must work to make the economy go” idea is not real any more. What we have is a fear based economy designed to promote an exceptionally high concentration of power, such as one you might fear as the result of a communism. But really it is about how it is accumulated and pooled.

Money is like blood. If it pools, rather than circulates, disease ensues, then gangrene, and excision. Looking at the fact that any of the four richest families on the planet could feed and shelter the entire world a few times over, one might well wonder if there is an actual pathology going on. Medically, in assessing burn trauma, parts of the body, torso, head, arms, legs, each are assigned percentages. The genitals constitute 1%. By that analogy, by far the greatest portion of the world’s “blood” is astonishingly pooled in that 1%. In the US, the “genitals” contain 47% of the blood. The neck, say, has another 27%. Skipping a bit, we end with 80% of the body having 7% of what’s needed to keep the body alive. Perhaps the genitals are happy with their condition at the moment, but this erection has lasted far more than four hours, and other business necessary for the survival and advancement of life is at stake. So how about we let a bit of flow get moving, so that the body, including those wonderful genitals, may live to enjoy another day?

I’m not saying that money should be flatly distributed. No way. But money has to circulate, and not just among a few leaves at the top of the tree, to use another analogy, or a twig or two. A tree lives from its roots; as the former owner of a landscape firm, I know that putting 80% of the money in the soil is the best assurance of the plant’s health and prosperity. Even Adam Smith, the “guru” of economists, was wary of corporations, and warned that capitalism, having a great tendency to pool money at the top, must be mitigated so that there is circulation back to the bottom by some means. We give or make laws to give gazillions to people who could WAY better than average on far less than they have, and we balk at at helping people to eat and have medical attention.

Those people, had they money, are the ones who would actually spend it, creating jobs by demand for goods and services. Austerity for whom? Certainly not the already greatly moneyed. And the money they get goes more into investments and lobbying, because both of those are far more lucrative than creating jobs, job which would be meaningless unless there was money at that level to spend. Money doesn’t trickle down; it gets siphoned up. Otherwise you wouldn’t pay the sticker price on a house to cover the added value portion, and them pay that twice or three more time to the bank for administrating your debt. Your debt is the bank’s asset.

So is our ignorance. There is good reason and great financial profit inherent in the dumbing down of America, often by psychometric means, which has gone from first to around 20th or worse among developed countries on many scales. What we are first in is incarcerations, military spending, murders, and difference in pay levels between the people who produce goods and services and their CEOs. Our economy has become more like an autoimmune disease, or an antagonistic parasitism. And what is sad is that had we the circulation I’m talking about, this Nation and this world could or would be an experiential paradise. There is in fact no shortage of work; there is a shortage of vision as to how we can cooperate without niggling about a bit of cash going to indigents that is paltry compared to what the grand thieves take home openly and with our permission.

Wow, all that when I made the point that there might possibly be a reason to pay doctors more than McDonalds workers, based on what I felt was a very extreme point of the poster I responded to. You seem to have taken a very narrow point I made and conflated it into much more than it was. If we are going to solve problems, then we need to actually listen to others, and not make rash assumptions.

 

[shockerfan]

I’m with the Pope on this one: scontent-b-sjc.xx.fbcdn.net/hphotos-frc3/t1.0-9/p720x720/10171616_10152339879422908_811133304090981356_n.png

One of the issues with a thread like this is that terms are not defined well enough. What I mean is what is “trickle down economics”? Is it in your view ‘Reaganomics’, in a country where the average poor person has an Iphone, a house, 2 TVs and a car? Or, is it Russian style economics? Chinese style economics? Indian style economics…Places where the poor might live on 50 cents a day? There is a big difference. The Pope is speaking to a world wide audience.

We must also avoid going to extremes on issues like this. Francis didn’t throw the baby out with the bath water and contradict a whole host of Popes that spoke out against socialism. We have a system in the US that has brought a lot of people out of poverty…how do we improve it? (I’d love to hear your specific ideas…perhaps we will find common ground)

 

[SuperLuigi]

I also find it sad and frustrating that if some one disagrees with your politics then they aren’t really Catholic

What’s sad is that many people ditch their Catholicism in favor of their politics, and then have the gall to insult my intelligence by making excuses on websites like CAF thinking it’s actually going to work. :dts:

And if I cannot be fooled, what are they going to do about God?

 

[SuperLuigi]

Wow, all that when I made the point that there might possibly be a reason to pay doctors more than McDonalds workers, based on what I felt was a very extreme point of the poster I responded to. You seem to have taken a very narrow point I made and conflated it into much more than it was. If we are going to solve problems, then we need to actually listen to others, and not make rash assumptions.

It’s what liberals have to do since facts are not on their side.

 

[SJBurgess]

You do not have a greater understanding of God than anyone else. I don’t mind opinions that differ from my own but your arrogance is astounding. I believe God will show you the same compassion and judgement you show others.

 

[SJBurgess]

It’s what liberals have to do since facts are not on their side.

Those liberals are your bretheren and God does not love you more than He loves them. Not everyone who disagrees with unregulated capitalism such as it is stupid and Godless. Just as not all right wingers are educated and Godly.
Furthermore attacking and discrediting a person’s commitment to Christ and the Church is nothing more than an immature bully tactic used to automatically discount a desenting opinion. I disagree with you but I would never question your faith as a tool to manipulate you into agreeing with me or to get others to automatically dismiss your opinion. Peace be with you.

 

[Sochi]

Wow, all that when I made the point that there might possibly be a reason to pay doctors more than McDonalds workers, based on what I felt was a very extreme point of the poster I responded to. You seem to have taken a very narrow point I made and conflated it into much more than it was. If we are going to solve problems, then we need to actually listen to others, and not make rash assumptions.

The poster is not extreme at all. What is extreme is what it points to:

facebook.com/photo.php?fbid=749559725078511&set=a.190167221017767.44131.186219261412563&type=1

 

[Raskolnikov]

The very phrase “trickle-down economics” is a pejorative. Nothing is supposed to “trickle down” at all and it does not depend in the least on the beneficence of the rich; quite the opposites, it assumes the rich behave in a rational self-interested manner. The actual term, supply side economics basically functions like this:

By lowering the marginal tax rates for middle and upper class people, you induce them to save more money, because richer people have a higher savings rate than poorer people, who spend more and save less out of necessity. The money rich people save is then either reinvested in companies, leading to increased production and therefore greater demand for labor, and more jobs/higher wages, or goes into the bank accounts; this means the banks have more money to loan, meaning the interest rates go down, and small businesses and more easily afford to take out loans, and therefore produce more (lowering prices, making everyone better off) and hire more employees.

There is the other half of the equation: demand side economics, which favors giving tax credits or benefits to the poor instead of tax breaks for the middle and upper classes, so as to boost demand for goods, thereby increasing profit and also demand for investment leading to more people investing, leading to higher production, and so on.

Now, much as people love to pick one side or the other, the truth is, they both work. Both Supply side and demand side economics “work” in different situations. Neither is always a good plan. You can, for example, have too much money being savedor invested by rich/middle class people, and not enough being spent, leading to overproduction and deflation, which can cause economic crisis. On the other hand, you can have too little saving/investment (such as when taxes on middle/upper classes are too high) relative to spending in which case you may have underproduction and inflation, which can cause economic crisis. In reality, we do not want to just increase supply or demand ad infinitam. What we really want is the optimal equilibrium where supple and demand are at the maximal point where they are both equal. The political question is, which side of that equilibrium are we currently on? In fact, that depends on the industry. Some industries would benefit from lower taxes, others from higher taxes.

Anyway, here’s an interesting post by an economist on the pope’s comments about ‘trickle down economics.’
gregmankiw.blogspot.com/2013/11/the-popes-rhetoric.html

 

[Raskolnikov]

The poster is not extreme at all. What is extreme is what it points to:

facebook.com/photo.php?fbid=749559725078511&set=a.190167221017767.44131.186219261412563&type=1

It goes without saying that a company is not obligated to share increased earnings with workers. Why would they be?

If a company fails and goes out of business and all the people who invested in it are ruined, lose all their money, should the employees have to forefeit all their wages from the last year? When a company is doing badly and the investors are losing money, should the workers work for free?

No, because the workers aren’t there for profit; they’re there to trade labor for a fixed price, the wage; and they expect that wage to be paid to them as long as they’re employed there no matter how well or badly the employer’s stock price does. In short, the employee absorbs none of the risk. It is the investor who takes the entire risk; his payout is on the line and depends on how the company does. The employee collects his check no matter how the company does. So yes, the investor gets all the excess revenue, called profit, and the employee gets only the pre-arranged wage. Investors take the financial risk, so they reap the financial reward. Why, you may ask, are investors usually wealthier than employees? Well because the only person who is willing to risk a million dollars is probably someone who has two million. If you’d like a more rigorous explanation of why wealthier people are more willing to risk their money (an therefore end up making more money from profits than employees from wages) try looking at this wikipedia article: en.wikipedia.org/wiki/Diminishing_marginal_utility#Diminishing_marginal_utility

 

[Tony_the_mad]

It goes without saying that a company is not obligated to share increased earnings with workers. Why would they be?

If a company fails and goes out of business and all the people who invested in it are ruined, lose all their money, should the employees have to forefeit all their wages from the last year? When a company is doing badly and the investors are losing money, should the workers work for free?

No, because the workers aren’t there for profit; they’re there to trade labor for a fixed price, the wage; and they expect that wage to be paid to them as long as they’re employed there no matter how well or badly the employer’s stock price does. In short, the employee absorbs none of the risk. It is the investor who takes the entire risk; his payout is on the line and depends on how the company does. The employee collects his check no matter how the company does. So yes, the investor gets all the excess revenue, called profit, and the employee gets only the pre-arranged wage. Investors take the financial risk, so they reap the financial reward. Why, you may ask, are investors usually wealthier than employees? Well because the only person who is willing to risk a million dollars is probably someone who has two million. If you’d like a more rigorous explanation of why wealthier people are more willing to risk their money (an therefore end up making more money from profits than employees from wages) try looking at this wikipedia article: en.wikipedia.org/wiki/Diminishing_marginal_utility#Diminishing_marginal_utility

Do you honestly believe that the ‘employee takes none of the risk’? The poor person who loses his job loses most of his resources. He or she have no real way of diversifying and owns no assets to sell when the going gets rough. When the stock market bombs they can lose almost the entirety of their 401k.

Consider the last great recession. The rich took the risk while the poor (through the bailout and the companies being too big to fail) paid the price. Some rich paid a little, but the stock market is roaring again (before it crashed once more). The lesson should be that risky behavior is bad for an economy, especially when the people who take the risk do not pay the price.

The greatest thing about being rich is that you have the power to be above the market economics. With money comes power and with power comes the ability to make someone else pay for your mistakes. Why invest in a better product when you can buy out any challenger before they get too big to challenge you? Why spend billions in development when you can spend millions in advertisement and bribing people in power?

 

[Ridgerunner]

A few points.

First, a major reason why a small percentage of the population has a higher income than the majority, is because the minority owns productive assets. The Popes from Pope Leo XIII on have all encouraged the widespread acquisition of productive, inheritable assets. There is nothing inherently wrong with it.

The percentage of national income going to productive assets (“capital”) relative to that of labor is always lowest during periods of high employment and highest during periods of high unemployment. This has been true since 1929, when the government started keeping track.

Productive assets for the majority of “the rich” were actually earned, not inherited. One of the major reasons most people don’t own any significant amount of productive assets is because they spend their entire incomes on consumer goods…something the Popes have also condemned in the Social Encyclicals.

It seems evident, then, that high employment should be the goal; that mere redistribution of income does nothing to improve the lot of those whose source of income is their labor. Unfortunately, we presently have an administration that frustrates high employment in almost everything it does.

Broadly calling a market system “trickle down” economics is simply a statement intended to generate envy and anger. The truth is that a thriving economy requires both efficient capital and efficient labor. So, in a sense, wealth or income "trickles down’ from both.

 

[hu324b]

If your super rich its a damm good theory - if your poor not so much.

 

[JSSD]

Do you honestly believe that the ‘employee takes none of the risk’? The poor person who loses his job loses most of his resources. He or she have no real way of diversifying and owns no assets to sell when the going gets rough. When the stock market bombs they can lose almost the entirety of their 401k.

Is it fair to say most “poor” do not have a 401k?
Is it also fair to say the risk in your 401k is almost completely separate from the actual risks taken by your company of employment? Stock options are one thing, but most 401s are a collection of fund products.

Rather than bashing capitalism, I would personally love to hear about this superior system that must be out there that apparently has so much allure, not to mention a justification for all the envy of “the rich.”

 

[hu324b]

I’m not for the theory that by making the rich richer that more crumbs will fall from their table for the poor.

 

[Cricket2]

Lets use an example:
Which is harder to do: Become qualified to flip burgers at McDonalds or become a doctor? In order to work at McDonalds (which is an honorable job) it is not required that you complete high school or college. There is no requirement of sacrifice outside of the job in order to be qualified to do it. There is no cost associated with meeting the requirements of working at McDonads.
Now lets consider doctors. In order to become a doctor, someone had to go to medical school, college and high school. In order to graduate from medical school, it requires a person get good grades, which requires sacrifice and money. In order to get into medical school, a person had to get good grades in college, which requires sacrifice and money. Those people (more than likely) also studied hard in high school, which involved sacrifice.

If all jobs paid the same, the nobody would try for the more difficult jobs like doctors or engineers. Society would collapse.

I hope you see my point

I see your point but disagree. We all have different levels of skill and talents and are to use them accordingly. There is nothing wrong with someone wanting to “flip burgers” or having too to make ends meet. After all, those hungry folks out there go to burger joints for a cheap fast meal. As far as degrees and such. Bull. I have two, one in Biology and a Masters in NPO. So what?

I also have a chronic neuromuscular illness, failing heart and lungs that keep me working full time if at all. And what about all those laborers out there who put your house up, pave your streets, pick up your trash? Without them we would all be living in grass huts, with our own waste running down the street. We need to stop acting like getting a “higher education” makes us more worthy of higher pay. That is rubbish and egotistical.

All work is needed to maintain a civilization, and should be seen as valuable. No one should have to feel ashamed of the work they can do, better than another person who can’t do what they can do, or more worthy of compensation than another person. Those ideas are not Christian. Never have been.

 

[Cricket2]

A few points.

First, a major reason why a small percentage of the population has a higher income than the majority, is because the minority owns productive assets. The Popes from Pope Leo XIII on have all encouraged the widespread acquisition of productive, inheritable assets. There is nothing inherently wrong with it.

The percentage of national income going to productive assets (“capital”) relative to that of labor is always lowest during periods of high employment and highest during periods of high unemployment. This has been true since 1929, when the government started keeping track.

Productive assets for the majority of “the rich” were actually earned, not inherited. One of the major reasons most people don’t own any significant amount of productive assets is because they spend their entire incomes on consumer goods…something the Popes have also condemned in the Social Encyclicals.

It seems evident, then, that high employment should be the goal; that mere redistribution of income does nothing to improve the lot of those whose source of income is their labor. Unfortunately, we presently have an administration that frustrates high employment in almost everything it does.

Broadly calling a market system “trickle down” economics is simply a statement intended to generate envy and anger. The truth is that a thriving economy requires both efficient capital and efficient labor. So, in a sense, wealth or income "trickles down’ from both.

You have got to be kidding!

He who owns the land, the resources, the money, owns the people. That is “trickle down economics” in a nut-shell. It is the “let’s give them one less piece of bread and make em work two extra hours” mind set in action.