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How can any logically thinking person believe in top-down economics? (self.askaconservative)

submitted by policeboy0

Top-down "economics" isn't even considered a type of economic policy by most reputed scholars because of how anti-logic it is. This is a serious question.

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[–]bennyscConservative 5 ポイント6 ポイント

What exactly do you mean by 'top down economics?' I'm going to answer assuming you mean a theory of fiscal policy that says economic growth for higher incomes will ultimately have a positive affect on lower incomes.

The reason it's not considered it's own established economic policy is that it doesn't need to be, it's just an interpretation of established policy. It is essentially based on the Keynesian idea that increases in disposable income will increase consumption and facilitate economic growth.

This is the same idea that says increased government transfer payments can increase consumption.

The Laffer curve is a good logical demonstration of the benefits of this interpretation of Keynesian policy.

[–]Borland92 [score hidden]

Correct me if I'm wrong...but those who subscribe to the idea of "Trickle Down Economics" (mainly Republicans) are against the government spending that Keynesian economics requires. One of the core principals of the GOP is to cut government spending, period, which would harm economic growth if we are going by Keynesian economics.

[–]bennyscConservative [score hidden]

Keynesian economics as a policy involves increasing the amount of money available to consumers. Often this means increasing government spending, but not necessarily. Cutting taxes has the same effect.

[–]Borland92 [score hidden]

Keynesian economics as a policy involves increasing the amount of money available to consumers.

That's only half of Keynesian economics. According to Keynesian economics, money is injected into the economy during times of recession to increase demand which is met with an increase in supply (and more jobs). Once out of recession, the government decreases spending (and usually increases taxes) as a way to prevent inflation.

Often this means increasing government spending, but not necessarily. Cutting taxes has the same effect.

Cutting taxes does not have the same effect. Fiscal measures are too slow and far too uncertain to be used as a recovery measure. They are too slow because new laws don't take effect until the next tax year. On top of that, it is impossible to accurately predict the cost and benefit of fiscal measures. With direct stimulus (a check from the government given to every American) predictions are fairly simple. If you have X number of citizens and you give them each a check for Y dollars, the total cost of a measure is simple multiplication. Multiply that dollar amount by a demographic's MPC (Marginal Propensity to Consume) and you can predict how much of that stimulus will be spent (and enter the US economy). With tax cuts, however, there are so many different factors (ranging from changing sales for a company, an individual losing a job, etc) that the cost of the tax cut (and therefore the benefits) cannot be measured. Most importantly though, to comply with Keynesian theory those tax cuts must be taken away after the economy recovers. There is little chance that the tax cut's beneficiaries will allow that to happen. Even if it is taken away, it is delayed by another tax year.

[–]policeboy0[S] [score hidden]

Exactly, but the top-down economics that Republicans believe in is cutting the tax rate for the top 1% in the belief that doing so will allow the "job-makers" to hire more people. The renewal Bush-era tax cuts clearly show this and its honestly as idiotic as idiotic gets. In a recession the reason the economy isn't doing well (and a big factor that prolongs recessions) is that the average consumer is not spending as much as they would during a boom. In a recession, not being able to match demand is obviously not a problem for the job-makers so how in the world do they expect lowering tax rates for the rich to allow them to hire more jobs. If anything, you should lower the tax rates for the consumers so they can get spending again.

[–]Wannabe2good 1 ポイント2 ポイント

it's this simple: you and I have never been employed by a poor person

or to switch to Karl Marx: land, labor and capital are the means of production. all 3 are needed

[–]lannister80Liberal 1 ポイント2 ポイント

http://www.brainyquote.com/quotes/quotes/a/abrahamlin395631.html

"Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration."

Abraham Lincoln

[–]Wannabe2good 0 ポイント1 ポイント

labor has to stand somewhere (land). labor can't buy supplies without capital

[–]Borland92 [score hidden]

It is because of the working poor that any of us are employed though. The working poor are consumers, they create demand. There is no reason to produce (and therefore no need for land, labor, and capital) if there are no consumers who demand the good produced. Many goods are perishable and inelastic (meaning that even though your income increases, you still consume the same amount of the good. Insulin for diabetics is a good example of this). Giving money to the rich in the hopes of them consuming more perishable, inelastic goods is unrealistic. The idea of them reinvesting money to increase production of inelastic goods is also unrealistic. Without any increase in demand for a product, an increase in production will only result in excess goods (and therefore decrease the price of those goods). By giving the money to the working poor, you increase the demand for an inelastic good, which would create the need to invest more in a business. This leads to business owners hiring more people.

[–]TheSecretExit [score hidden]

Wouldn't the decrease in the price of inelastic goods also help the poor, insomuch that they can buy more stuff with the same amount of money?

[–]Borland92 [score hidden]

There would be no decrease in the price of those inelastic goods because that scenario of overproduction would never happen. It isn't logical for the producer to produce more than is demanded. Each unit of a product produced beyond the number demanded does nothing but devalue the previous ones. It isn't profitable.

It is the very simple concept of supply and demand. This is literally Economics 101. I dare say it is Chapter 1, Page 1.

[–]TheSecretExit [score hidden]

That is correct, I guess I didn't read the above post through and through.

[–]Borland92 [score hidden]

No problem, man. Glad my post made sense to you. Very little of what I say in life makes sense to anyone. haha

[–]policeboy0[S] [score hidden]

Maybe on paper its that simple but top-down economics doesn't translate into jobs in the real world. First, any taxes you cut on the big corporations that are "job-creators" are likely going to be spent in building factories in China or making stores in other countries as companies try to beindependent of having to rely solely on America for sales. Second, in a recession, top-down economics is probably the worst possible policy. According to you, top-down economics allows the demand to go up because it creates jobs and allows people to obtain "land, labor and capital". In the recession we currently face, supply is high and demand is low, this is obvious in the fact that companies are laying off so many individuals. They're laying off individuals because people aren't BUYING their product. If a company did have regulations and taxes relaxed on it during a recession, why in the world would it spend capital on creating jobs when theres no consumers who will buy the products that the new workers will make? This is such a fundamental flaw I have yet to see a conservative address.

[–]TheSecretExit [score hidden]

Just putting this out there: people in China need jobs, too

[–]policeboy0[S] [score hidden]

Sure, they can have them, just not with my tax money. And certainly not by having taxes reduced on the rich so they can hire more sweatshop slaves.

[–]TheSecretExit [score hidden]

Okay, cool, I agree.

[–]rr_econpol [score hidden]

http://imgur.com/a/zh1s9

[–]policeboy0[S] [score hidden]

Sorry, I don't have time to read that. :/

[–]jub-jub-bird [score hidden]

Top-down "economics" isn't even considered a type of economic policy by most reputed scholars because of how anti-logic it is. This is a serious question.

I agree 100% and all libertarians and most conservatives agree too.

Sadly the democratic party is fully committed to a top-down economic model, and even more sadly there are far too many scholars who believe in top-down economics that are considered reputable despite the failures of "managed" economies.

[–]policeboy0[S] [score hidden]

Not sure what Fox News show you've been watching but Republicans were the one that advocated renewing Bush-era tax cuts for the rich.

[–]TheSecretExit [score hidden]

Obama did extend those tax cuts, I believe, for the middle class, who were not covered under the Bush tax cuts.

[–]policeboy0[S] [score hidden]

Yes, which is the logical thing to do. In order to get the middle-class spending you have to reduce the burdens on the consumers. However, Republics wouldn't allow the middle-class tax reduction to pass without a provision of the bill that extended Bush-era tax cuts).

[–]TheSecretExit [score hidden]

But there were no middle-class tax cuts in the Bush tax cuts. They were for the rich.

[–]TheSecretExit [score hidden]

I don't see what's so hard about the concept of wealth coming from the top. Rich people are rich because they have money. They buy things with that money, those things being made by other peoples. Those people then buy things, and so forth.

Sure, most wealth movement comes from the middle class, but the top 1% doesn't have zero wealth movement.

[–]policeboy0[S] [score hidden]

Tell me what exactly the Koch Brothers will purchase with $48 Billion that they wouldn't have bought when they had $47 Billion.

Regardless, why would you support a policy that reduces burden on the part of the population that doesn't even need burden reduced? Its like reaching around your neck to touch your elbow (or whatever the phrase is).

[–]TheSecretExit [score hidden]

I'm not advocating policy, I'm just saying wealth does move from the top down. People buy things. Rich people buy things. I'm not saying they need help in buying things.

[–]mayonesa -2 ポイント-1 ポイント

economic growth for higher incomes will ultimately have a positive affect on lower incomes

This is true, so long as the people who make higher incomes are doing so based on actual supremacy of ability.

In our society now, thanks to both regulation and the tendency of the mob to reward bread and circuses, we're often handing high incomes to obedient fools.

[–]Snedeker 0 ポイント1 ポイント

Maybe I don't understand your point. Why does that matter? If I go out and buy a million dollar boat, I'm helping to provide income to a whole chain of people involved in the manufacture of the boat.

Why does it matter if I'm an idiot who inherited the money, a lottery winner, or a businessman who earned it?

[–]mayonesa [score hidden]

There's a secondary consideration: those who have money should be the smart ones so they use that money in intelligent ways.

This applies more to investments and charity than to buying yachts, but what you mention is ALSO important.