Tricke up or trickle down?

[Howard]

I don' think the answer whether wealth moves best from the wealthy to the poor (trickle down) or from the poor to the rich (trickle up) is cut and dry because of various factor. Therefore, I thought it would make a good forum post.

First off, if the referee of the economic game is corrupt, like in many countries in Africa, the question does not apply. If a government does not apply fair rules to ensure a free market, like stopping monopolies, I don't think either trickle up or trickle down economics would work. The corruption issue needs to be addressed first.

Second, one needs to look at the type of econmy one has. If we are talking about a country whose economy is resource based, I think trickle down would work best. An investor would start out small, extract resources and sell them, which in turn allow him to hire more people who will make him more money. Eventualy other investors would catch on, creating more demands for workers, thus increasing their wealth. Light rules and legislation would be important and low fix tax-rates would help implementing such economic model.

On the other hand, in a consumer-based economy like in North America, I think trickle up would work best because the money of the common people translates into higher demand for the goods the wealthy have to sell. The more money the common man has, the more money the wealthy people will make. So why don't all employers pay their employees well so that they will spend their paycheque on their goods and services? Simply because their competitors won't do the same and will offer better prices; it's the prisonner's dilemna. So for a trickle up economy to work, one would need tougher laws, like a good minimum wage, and progressive tax rate to leave the common man more money so they can go out, spend their money and make people wealthy.

Your opinion on what I said, whether you agree or disagree with me, is appreciated. Just to help this forum post rolling, which model do you prefer? How do you justify you anwer?

[Rockblossom]

The thing about economics is that is has a lot in common with poker and stock trading: about equal parts numbers/statistics and knowing the psychology of the players.  An economic model tends to be better at the numbers part than the psychology part, and models don't usually get tested in real life in a way that will definitively show whether it works/usually works/probably will only work in a limited set of circumstances.  In the USA, the "trickle down" model was tested during the Ronald Reagan Presidency, and most people thought it was a complete failure.  Of course, the "true believers" still believe - or pretend to do so if they see a profit in it for themselves. 

 

One thing about large scale economies that the experts generally agree on:  Money needs to move around, get borrowed, invested, spent, and repaid and reinvested.  A hundred million people getting a bit of extra money should get money moving, since there are a lot more people on the lower end of the economic scale than the upper, and poorer people tend to spend extra income rather than saving it.  Houses need to be bought and sold, so the interest rate needs to stay low enough for the average worker to afford a mortgage.  That supports your "trickle up" model. 

 

The problem with that is that for the economy to grow in any real way, there has to be new wealth created.  It is the entrepreneurs, not the "wage slaves" who create new wealth, so a good economic model needs to encourage new businesses.  New, growing businesses create new jobs, which pay workers, who then spend the money and keep it moving around.  And since new businesses are risky and have a high rate of failure, there's a need for economic incentives for owners/managers.  That's why cities give tax breaks to businesses that locate in their area and create new jobs.  I don't see this as "trickle down" as much as it is "spread the new wealth" that was created.

 

I guess I lean a little more to the "trickle up" side, but really, all economic models are too simplistic to work in the real world, where the environment is literally changing every second and is only somewhat predictable.  

[uhtred]

I liked the modified expression: "A rising tide raises all boats - except the ones that are leaking".    Basically if you add money to the economy, the majority of people who are already in reasonably good shape (not necessarily wealthy) will do well, but the people who are already in bad shape may not be helped at all. 

 

I think trying to fix wealth disparity is a tricky problem because the disparity has many different causes. I don't think there are simple answers. 

[what the face]

Within your caveat of a non corrupt system,

I would view the "trickle",

 

Whenever goods or services are exchanged for money, the trickle most  vital /alive flows in the direction of that good or service.

In most modern instances money/capital moves the opposite direction with a trickle largely symbolic /inert.  

 

 

That part of the unhidden meaning of "good" and "service" happens when they are consumed or utilized.  

With consumption or use,  taking internally by the consumer,  comes the possibility of benefit or change.

And in whatever degree of individual beneficial change occurs, lies the possibility of return to the seller a second trickle.

A second vital flow with a return of goodwill or Good Faith towards the provider/seller.

 

Multiplied by the number of individuals changed and the enhanced goodwill . . . ,

 

I would say that it is when goodwill flows or trickles back that society gains most.

[gisiebob]

post scarcity is coming.

[uhtred]

6 hours ago, gisiebob said:

post scarcity is coming.

I don't think I agree. People seem to be wired to compare what they have to what others have.  In 1st world countries all but the most extreme poor have shelter and enough food to survive - and are far better off than our ancestors were 100,000 years ago.    But they see that others have far far more, and quite reasonably want that as well. 

 

If we each had our own private planet, people would complain that their planet was too small, or that someone else had an entire galaxy/ 

[gisiebob]

13 hours ago, uhtred said:

I don't think I agree. People seem to be wired to compare what they have to what others have.  In 1st world countries all but the most extreme poor have shelter and enough food to survive - and are far better off than our ancestors were 100,000 years ago.    But they see that others have far far more, and quite reasonably want that as well. 

 

If we each had our own private planet, people would complain that their planet was too small, or that someone else had an entire galaxy/ 

absolutely we are programmed to understand our garbage lives are a fault of funds. not that there's some mischievous masterminds keeping currency a thing, everyone for the most part are following the rules they were given. but the rules say greed is good, at least to a lot of people. and while one take away from that is the face value reading of the rules, the other side of the coin is that we wrote those rules. and it was a great idea at the time. is it still a great idea?

[Jusey1]

I believe it strongly demands on how the company itself is structured, as it is obvious that the trickle down system does exists as you can see what happens when home businesses are forced to pay and then closed off because they no longer have the money (which means they no longer have the money to trickle down to their employees). However, other businesses has been known to exploit everyone from their consumers to their employees (this is actually pretty common in the gaming industry).

[Howard]

4 hours ago, Jusey1 said:

as it is obvious that the trickle down system does exist

I don't think it's that obvious. Let's say I'm an electrician out on call. I get paid and give the money from the client to my boss, save my salary. Wouldn't that be trickle up?

[uhtred]

9 hours ago, gisiebob said:

absolutely we are programmed to understand our garbage lives are a fault of funds. not that there's some mischievous masterminds keeping currency a thing, everyone for the most part are following the rules they were given. but the rules say greed is good, at least to a lot of people. and while one take away from that is the face value reading of the rules, the other side of the coin is that we wrote those rules. and it was a great idea at the time. is it still a great idea?

Would you be happy with healthy food, comfortable shelter, and other necessities, but nothing else?  Right now you are on a computer which has to be considered a luxury - and which also requires a vast and complex infrastructure in order to function. 

 

I think very few humans are happy with the basics. 

[gisiebob]

4 hours ago, uhtred said:

Would you be happy with healthy food, comfortable shelter, and other necessities, but nothing else?  Right now you are on a computer which has to be considered a luxury - and which also requires a vast and complex infrastructure in order to function. 

 

I think very few humans are happy with the basics. 

the basics are relative. our 'luxury' computers nowadays are for the most part disposable, on an infrastructure we already have in place.

 

absolutely we will not meet wants, at first, in a system without money. there will be availability problems that we will have to struggle through. people will cling to the old gods, especially people who find their "worth" suddenly isn't useful.

 

but think about what we have available right now. how much of that is a dog and pony show of expensive things to insentivize cheap things and cheap things to insentivize expensive things? would there still be a reason to produce nearly everything in a different country if labor here was at will instead of just 'expensive'? what percent of scarcity will be artificial before we flip over?

 

because, yeah, I have no Idea how that switch will be flipped. don't have much to say against "Post scarcity can neverbe born" other than 'capitalism can't live forever'.

 

[Howard]

2 hours ago, gisiebob said:

because, yeah, I have no Idea how that switch will be flipped. don't have much to say against "Post scarcity can neverbe born" other than 'capitalism can't live forever'.

I'd find interesting how you defind capitalism. I personaly define it along the lines of Adam Smith's classical economics. Sure, lots of things are not taken into consideration, like psychology of consumers, but the very basics of how supply and demand work remains at play even if you try to get rid of them. A friend of mine was an economist during the days of the USSR. She had to calculate every year the demand for water for her town so that supply can meet the demand. In gift economies, like most tribes of North American Natives, it was the chief who decided who deserved spoils of a hunt, that he is he needed to allocate supply to those who demanded it. Sure, capitalism can be regulated, currencies re-invented, financing revamped, but capitalism, in one form or the other, will exist as long as humans do, imo. Also, I think the only way we can get rid of scarcity is by ending our desires because scarcity is created by us demanding more collectively than what Earth has to offer. The tricky part is that some of our desires are beneficial to survival, like wanting to eat. 

[uhtred]

A lot of time people blur the lines between "capitalism" (where private parties own the means of production), and "free market" (where people can buy and sell items as they wish. These are separate from a desire for status symbols - which seems to substantially pre-date those other concepts.

 

People talk  a lot about the the economic mechanisms that they want without first agreeing on the goal of those mechanisms, or what their ideal society would be like.  Personally I'm in favor of the galactic empire direction, so I want policies that will lead in that direction. 

 

 

[gisiebob]

yeah, sure if everything is capitalism, a known universal constant, then it never goes away

 

obviously we are transacting words here so this conversation is capitalism.

 

great. ya got me.

[Gloomy]

They both have a symbiotic relationship. Rich people need commoners to work for them and buy their goods and services, and commoners need rich people to employ them and run companies that produce the goods and services they need. If all jobs went to AI, the masses would have no income to buy goods and services and they’d also probably pull a French Revolution on rich people. If all commoners quit working before AI can take any and all jobs, society would collapse due to the lack of goods and services being produced. Giving either of them government handouts takes away their incentives to improve.

[gisiebob]

why do we need rich employers and producers?

[Howard]

@gisiebob We don't need rich employers or producers, really. There exists cooperatives. They tend to be short-lived, as cooperatives that is, though not necessarly by name. By cooperative I mean a group of people that decide to start a business and be the employees or a group of people who decides to build an appartment building and be the tenants. The problem is there is little collusion. Often people opt out when they decide they have enough for reasons xyz and leave, or the business expands to the point that the founding employees become boardmembers. On the other hand, a few or a single person taking all the risks are much more motivated in staying within their businesses. I think that's why individual or partenered proprietorship are longer lasting than cooperative models. Not that we need them, but they tend to be more successful over time.

[gisiebob]

thats still just a buch of people standing on each other's shoulders in a trench coat to pretend they are a rich employer and/or producer.

 

to a tree a burl is how it interacts with an infection, an invasion. a growth that doesn't follow the trunk. but to us outside the tree it's all tree. and yeah their great to artisan carvers but for commercial lumberjacks that is just wrongwood that gets in the way. on the fringe of society you end up being parasites or isolationists. good I guess for case study but not a solution for the world.

[Gloomy]

I don’t know about anyone else, but unless I win the lottery I need my employer so I can pay my rent and not get evicted from my apartment. Most of us are too lazy or just don’t have the time and resources to grow and hunt our own food, make our own clothing, etc., so we need companies to mass-produce those things for us.

[uhtred]

8 hours ago, Gloomy said:

I don’t know about anyone else, but unless I win the lottery I need my employer so I can pay my rent and not get evicted from my apartment. Most of us are too lazy or just don’t have the time and resources to grow and hunt our own food, make our own clothing, etc., so we need companies to mass-produce those things for us.

Civilization is a pretty amazing thing. It lets people do things like type on a little box and almost instantly contact other people all over the world. (like we are doing now).  If I look in my fridge, there is a bit of chocolate, some orange juice,  some cheese, etc. If I get hungry I just open the door and there is food.  In return I work somewhat over 8 hours a day doing a job that is not very dangerous or difficult.  

[gisiebob]

1 hour ago, uhtred said:

In return I work somewhat over 8 hours a day doing a job that is not very dangerous or difficult.   

for a lot of people, not even a job that is meaningful.

why? I mean, yeah there's the idea that yoi have to put in work for society to work for you.

but do we need to suppress our well being to keep that idea alive?

 

if it is more work to make sure people are putting in their fair share of work in a system that is continuously losing its ability to determine what hard work for the good of society is, then is it wrong to allow a society that more or less provides for everyone, without requiring anything specific from them, and allow everyone the freedom to do what hard work for society that they would like to do?

 

[Howard]

@gisiebob I'm not against such a thing as universal, minimal, garanteed income. Still, in order for that income not to be devalued, production will also need to increase. A simplistic example : I'm all alone in the world and the I have an ATM that gives me 1$ a month and a pop machine that produces 1 Pepsi can. That's all that exists in the world. Each month, I take my dollar from the ATM and buy one Pepsi can for a dollar. Now, let's say that the ATM now gives me 2$ but the pop machine still only produces 1 Pepsi can, can we really say that the second dollar that I'm getting is helping me at all? More concretely, if we spread more wealth around (increase demand) but don't increase production (supply remains the same), it will only cause inflation.

Now, there was a garanteed income experiment in Dauphin, Ontario, Canada, and it worked remakably well. One thing though, is that it was only one city, so it was easy to meet Dauphin's increasing demand by shipping in stuff from cities that did not undergo that expirement. Things might be different if a country, particularly if it's capacity to import is weak (like a weak currency), went all across the board with that idea.

[uhtred]

15 hours ago, gisiebob said:

for a lot of people, not even a job that is meaningful.

why? I mean, yeah there's the idea that yoi have to put in work for society to work for you.

but do we need to suppress our well being to keep that idea alive?

 

if it is more work to make sure people are putting in their fair share of work in a system that is continuously losing its ability to determine what hard work for the good of society is, then is it wrong to allow a society that more or less provides for everyone, without requiring anything specific from them, and allow everyone the freedom to do what hard work for society that they would like to do?

 

Who would do the jobs no one wants to do.  Who cleans out sewer clogs, or  bathes the badly disabled, or embalms corpses, or  keeps detailed records of every financial transaction a large company makes.  

 

I'm OK with a very basic level of support, but I think anyone who wants more than  basic food / shelter / medical care / clothing, should contribute to society to the extent they are able to .

[Gloomy]

I think UBI might eventually have to become a thing if most or all jobs go to technology. If the masses are left to starve there would be millions of angry people with nothing to lose and it wouldn't be pretty, and even if they didn't go all French Revolution on rich people, obviously people who are starved to death can't buy from companies which is the very thing that makes business owners rich to begin with. Either way something's gotta give.

 

The way things are currently where we need a vast majority of the population to contribute, I don't think UBI would be sustainable. Sure there's some people like musicians, scientists, etc. who are passionate enough about their work that they don't need a financial incentive to do it, and some people actually like having a job just to have something to do. I've known several people who still took a job or volunteered after retiring from their careers just so they'd have something to do during the day. My aunt had the option to be a stay at home mom since her husband made enough money, but chose to work anyway since she was bored with staying home. However many people do need a financial incentive to work, especially when it comes to jobs like fast food, or jobs that have a lot of dirty, manual labor, etc. 

[gisiebob]

3 hours ago, uhtred said:

Who cleans out sewer clogs

whoever wants working sewers

3 hours ago, uhtred said:

bathes the badly disabled

whoever would want themselves to be bathed when they are no longer able

3 hours ago, uhtred said:

embalms corpses

crazy folk

 

3 hours ago, uhtred said:

detailed records of every financial transaction a large company makes

there would be no more financial transactions.
but maybe there would be a company historian.

[uhtred]

1 hour ago, gisiebob said:

whoever wants working sewers

whoever would want themselves to be bathed when they are no longer able

crazy folk

 

there would be no more financial transactions.
but maybe there would be a company historian.

Do you know how to clean a sewer main? I don't.  Like most jobs, I expect it takes skill and training.  I have a few specialized skills that are useful in a few special situations. So do lots of other people.  The guy who grows corn doesn't know how to manufacture tractors. The people who make tractor tires don't know how to make spark plugs.  The guy  who runs the oven that fires the spark plug ceramics doesn't know how to grow corn.  Probably none of the above can fly an airliner, or operate a steel mill, or run a newspaper press. 

 

 Civilization requires a vast number of skills operating together as part of a vast complex system.   Think about what it takes for the keys you press to make characters appear on my screen  - possibly half a world away.     If we get rid of that complexity and specialization, we loose a lot of the great technologies that we have.  That may sound nice until you think more on it and realize that those include antibiotics, high speed dental drills, non-skid boot soles, elastic band underwear, and dishwasheres and a million other things that people just take for granted. 

 

Its possible to live without all those things - people did so a thousand year ago in Europe - and it really  sucked. 

 

 

[gisiebob]

and why would we be losing all these complex skills? absolutely there would be some "I only did it for the money"s. but would there not be just as many "I can't do it because of money"s? wouldn't the pool of useful labor and trade and technology be flooded by those that find themselves without purpose now that they do not require themselves to profit?

[Howard]

3 hours ago, gisiebob said:

wouldn't the pool of useful labor and trade and technology be flooded by those that find themselves without purpose now that they do not require themselves to profit?

The experiment in Dauphin that I mentionned earlier did observe a raise in IQ within the populace. Not having to worry about immediate needs, the people could use their minds for greater endeavors. For fear of repeating myself, it's not the effect on the people that I fear about UBI, but rather the rampant inflation if we just flood a populace with money without giving them more goods and services to use their money on.

[gisiebob]

5 hours ago, Howard said:

The experiment in Dauphin that I mentionned earlier did observe a raise in IQ within the populace. Not having to worry about immediate needs, the people could use their minds for greater endeavors. For fear of repeating myself, it's not the effect on the people that I fear about UBI, but rather the rampant inflation if we just flood a populace with money without giving them more goods and services to use their money on.

that's a valid worry for a parasite enconomy I'm sure. and we do live in a society where individualistic worry like that in the right place can destroy us.

 

I hope we can get over our fixation on familiarity to decide not to live in that kind of society when things are good, or at least ok, and not require some grand devastation to agree that popularly we were spurned. I would like to see the torch passed, not picked up from the rubble.

[uhtred]

10 hours ago, gisiebob said:

and why would we be losing all these complex skills? absolutely there would be some "I only did it for the money"s. but would there not be just as many "I can't do it because of money"s? wouldn't the pool of useful labor and trade and technology be flooded by those that find themselves without purpose now that they do not require themselves to profit?

Without financial motivation I don't think you would get the right mix of people.  Lots of people want to be landscape photographers, more than the world needs, but not so many want to maintain legacy accounting software. This is why its much easier to get paid to write COBOL than to travel to beautiful places and photograph then. 

 

Some jobs require a great deal of training, sometimes that training uses very valuable resources (for instance becoming an airline pilot). 

 

Money provides a way to adjust how many people go into each field. If there are not enough skilled people, the wages in a field will rise and encourage more people to go into that field.  Its far from perfect, but it mostly works.