This blog originated as a private conversation, mostly focusing on the various political, economic and social debates of the day, and football too. So much of the current media and political discourse lacks seriousness and is unhinged from truth (You know who you are). As our conversation progressed we thought it would be useful, plus it appealed to our egos, to add our voices to those who are vigorously debating, in an honest way, the choices we face.
We will not always, or even regularly see eye-to-eye. We will argue, cajole and inform each other. Occasionally we may even get mad. We remain convinced that the best solutions may not satisfy all, but that there are answers to the difficulties we face. The more vituperation that comes our way from partisans on both sides of the isle, the more we’ll believe we are making progress.
Re: "trickle-up" economics
ReplyDeleteDear Eli & Bill,
Responding to the Blog's post of Nov. 15, 2012 concerning a proposed increase in government outlays for college education and health care (and, of course, the bottom 48% who want this "stuff"). I have spent my life outside the realm of economics so am not informed re: economic theory and discourse, but I have wondered why there is never a reference to what I'll call "trickle-up economics."
After all, it *does* matter that whatever products or services made or offered by those individuals in the upper percentiles of the economy (the "producers") can be paid for and consumed. If American buying power decreases due to an dramatic imbalance in wealth and ability to participate in the market (the bottom portion disproportionally sick, disabled, financially ruined by medical bills, and with hs educations), the economy will fall flat.
So, lots of great "stuff" to buy, but buyers situated principally at the top will be disproportionately the only consumers. Only the top will be producer and consumer --- the remainder of individuals largely left out of the market.
Seems that for the health of the market it would be preferable to open up the market and allow as many people to buy washing machines, toasters, and cars as possible.
There is an interesting publication referencing the problem of wealth imbalance as a cause of the Great Depression found in the New York Times reference section on the Great Depression ---- "Main Causes of the Great Depression" by Paul A. Gusmorino III, May 13, 1996, published in Gusmorino World.
Who is Paul Gusmorino III? According to a Harvard Crimson entry, he studied at Harvard circa 2000 and concentrated in computer science. "Gusmorino's World" was his website. Beyond that, I found scant information, but his paper remains at the New York Times webpage on the Great Depression and is an interesting read, particularly apropos our times.
See, http://www.gusmorino.com/pag3/greatdepression/index.html. See, also, reference to Paul Gusmorino III at "Election Profile: Paul Gusmorino & Sujean Lee | News | The Harvard Crimson,"
http://www.thecrimson.com/article/2000/12/4/election-profile-paul-gusmorino-sujean/
Gusmorino makes the point that there were very large imbalances of wealth globally at the time of the Great Depression --- these imbalances affected all economies, and were a significant cause in precipitating the economic collapse of those times.
(continued on next post)
(continued from above)
ReplyDeleteMoving on to today's problems -- reportedly, some U.S. car manufacturers have claimed they cannot compete with foreign manufacturers because a significant percentage of the cost of producing a car goes to paying health care expenses for their workers. Logically, if that burden was removed or lessened, auto manufacturers could compete more successfully in global markets.
And, if U.S. workers had more access to education, the U.S. economy could expand with direct benefits to U.S. corporations.
Are these corporations going to be nothing but free-riders? Is there no expectation that they should have to help pay the cost of the benefits they reap from bearing less of the cost of health care for their workers? And are there any arguments that they should help pay the cost of student loans for workers?
Who is to pay for these "gimme's"? Re: education, we are now on the cusp of the broad adoption of online education, which may revolutionize problems of cost and access to college and graduate level educations. The costs of a college education could virtually plummet. But if the costs do not plummet, is it fair to place the total cost on the backs of each individual when there are economic benefits reaped by the American taxpayer and private corporations?
In this theory of "trickle up" economics, one would expect to see increased revenue for corporations across the board (small to large cap), and the growth of new corporations --- all of this causing IRS coffers to grow with corporate tax monies helping to ameliorate our problem with deficit spending.
One would also expect market equity indices to rise with benefits to private and institutional investors.
Theoretically, one would expect to be able to calculate at what point there is the ideal balance between the "takers of stuff" and the "producers of stuff" (you know -- the way economists draw those charts . . .)
Of course, there are some at the top who are not producers, but are merely the takers of stuff, also, which might skew an attempted calculation, but economics seem to be good at all that math.
This is slightly off topic, but there is concern that the "producers" of "stuff" will leave the U.S. due to any tax increase. Surely, it must be possible to calculate to what degree this is a factor. Just *how many* will leave, and what will be the cost? I did see a story about an extremely wealthy female song writer who is leaving her US passport for a life in London in order to escape US taxes. This appeared in Bloomberg or Forbes in a story regarding David Geffen's purchase of her NYC townhouse. but news of those desiring to leave the US is rare. I more often hear of people at the*low end* of the tax spectrum desiring to leave in order to stretch their retirement dollar.
So - what about "trickle up" economics? Yes? No? Is it that our poorly educated masses (and educated) won't find it plausible in the least because the theory, even though the language is just a metaphor, defies the law of gravity (i.e., Newtonian physics, but let's not go there with these muppets), and from about age two, we've all observed everything goes to ground.
Could that be the special power of the argument for "trickle DOWN" economics? "Trickle-up" goes against the law of nature!
I await your gracious comments.
Dr. Schlepper
Tucson, AZ