Via twitter, a wonderful image of how trickle-down economics works:
This is not really surprising. The idea of trickle-down economics is that the government somehow has (control of) some surplus cash; it should give it to (or not take it from) rich people, who will invest in job-creating industries, and everyone will prosper.
But rich people do not start businesses out of the goodness of their hearts - not generally, and certainly not in the modelling world of trickle-down economics. They start them in the hope of making money. So they will invest in capital goods to make things more cheaply, which will destroy some jobs, and they will retain as earnings the money that would have been salaries. Don't get me wrong; destroying jobs is a good thing. It's the reason I am not slaving twelve hours a day harvesting crops. But that's not how wealth trickles down.
They may create new things to sell to people, and these new industries will involve new jobs. But the new things will be designed to appeal to people who have money to buy them, because that's how markets work. And the people who have money are the people you just gave it to - rich people.
Or they may just buy stuff themselves. But the goods that rich people buy are often quite wasteful, and particularly what they will buy with those extra dollars. Your million-dollar sports car will not go fifty times faster than a regular sedan; it will not get fifty times better mileage or last fifty times as long. And it is especially wasteful it's your third car and it sits in the garage and gets driven on Sundays.
Instead, I would like to introduce the idea of trickle-up economics. Give that extra money to poor people, the poorer the better. Poor people can be dug out of intractable holes with delightfully small amounts of money - a few hundred that gets them out of the payday loan cycle, or lets them repair a car properly, or fix a hole in the roof. Some of them will undoubtedly waste the money. Some will simply spend it in ways that bring them far more benefit than that small chunk would bring to a rich person. Some will invest it in training or equipment for the climb to prosperity. The far-sighted and the determined will be shaken out of the back streets and given the chance to apply their talents.
And as that money gets spent, it will find its way back to the rich, because it always does. But instead of just giving it to the rich, it will go to those who are good at making things that poor people want. In the process jobs will be created, just as trickle-down economics claims to do; but the economy will apply itself to making things that poor people need, that will be used efficiently and extensively - because the poor cannot afford to waste things as the rich can.
So when you hear a rich person complaining that the poor get too many benefits, ask them if they are incapable of providing those benefits and therefore getting paid for them.
What we want out of our market economy is that those who are most skilled at producing the goods society needs are given control of more resources. An efficient economy should get the most work and management skill out of those people with the least amount of wastage in the form of incentives (such as luxury cars). Trickle-down economics hands over the incentives first; trickle-up makes people compete.
And what is free market economics about, if not competition?
This is not really surprising. The idea of trickle-down economics is that the government somehow has (control of) some surplus cash; it should give it to (or not take it from) rich people, who will invest in job-creating industries, and everyone will prosper.
But rich people do not start businesses out of the goodness of their hearts - not generally, and certainly not in the modelling world of trickle-down economics. They start them in the hope of making money. So they will invest in capital goods to make things more cheaply, which will destroy some jobs, and they will retain as earnings the money that would have been salaries. Don't get me wrong; destroying jobs is a good thing. It's the reason I am not slaving twelve hours a day harvesting crops. But that's not how wealth trickles down.
They may create new things to sell to people, and these new industries will involve new jobs. But the new things will be designed to appeal to people who have money to buy them, because that's how markets work. And the people who have money are the people you just gave it to - rich people.
Or they may just buy stuff themselves. But the goods that rich people buy are often quite wasteful, and particularly what they will buy with those extra dollars. Your million-dollar sports car will not go fifty times faster than a regular sedan; it will not get fifty times better mileage or last fifty times as long. And it is especially wasteful it's your third car and it sits in the garage and gets driven on Sundays.
Instead, I would like to introduce the idea of trickle-up economics. Give that extra money to poor people, the poorer the better. Poor people can be dug out of intractable holes with delightfully small amounts of money - a few hundred that gets them out of the payday loan cycle, or lets them repair a car properly, or fix a hole in the roof. Some of them will undoubtedly waste the money. Some will simply spend it in ways that bring them far more benefit than that small chunk would bring to a rich person. Some will invest it in training or equipment for the climb to prosperity. The far-sighted and the determined will be shaken out of the back streets and given the chance to apply their talents.
And as that money gets spent, it will find its way back to the rich, because it always does. But instead of just giving it to the rich, it will go to those who are good at making things that poor people want. In the process jobs will be created, just as trickle-down economics claims to do; but the economy will apply itself to making things that poor people need, that will be used efficiently and extensively - because the poor cannot afford to waste things as the rich can.
So when you hear a rich person complaining that the poor get too many benefits, ask them if they are incapable of providing those benefits and therefore getting paid for them.
What we want out of our market economy is that those who are most skilled at producing the goods society needs are given control of more resources. An efficient economy should get the most work and management skill out of those people with the least amount of wastage in the form of incentives (such as luxury cars). Trickle-down economics hands over the incentives first; trickle-up makes people compete.
And what is free market economics about, if not competition?
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