Sunday, August 17, 2008

Trickle Up theory of economics

Being at the heart of a another fabulous election (yawn) some of my friends are touting Ronald Reagan as the savior of the western world. I wouldn't know since I did not care much for politics when he was President. I remember the line from the "Back to the Future" movie when doc asks (in the future) who is President now? When he hears about Reagan he exclaims "The actor?!"

In a discussion with a right wing friend I mentioned that the wealth of the US is flowing more and more into the hands of the rich. Something tells me that this is not a good thing for America. I suggested that the new President to be crowned next January should install "trickle up" economics since "trickle down" doesn't seem to be working too well lately.

I did not know that "trickle up" is actually used to describe an economic theory until I checked Wikipedia.

Catch this from Wikipedia.

The trickle down effect is usually used to describe a process by which benefits to the wealthy "trickle down" to benefits for the poor. The trickle up effect, in a corollary to this, states that benefiting the poor directly (for example through micro loans) will boost the productivity of the society as a whole and thus those benefits will, in effect, "trickle up" to benefits for the wealthy.

Possible causes

The trickle up effect states that benefits to the wealthy will be realized due to an increase in sales relative to the amount of benefits that are given to the poor. The trickle up effect argues itself as more effective than the trickle down effect because people who have less tend to buy more. In other words, the poor are more inclined than the wealthy to spend their money. This being so, proponents of the trickle up effect believe that if the lower and lower-middle classes are given benefits, such as tax breaks or subsidies, the increased funds would be spent at a much higher rate than would the upper class, given similar fund increases. Furthermore, the trickle up effect argues, many upper-class individuals do not spend their entire yearly salary to begin with, which is an indication that they will not spend any additional funds. Instead, they will save additional funds, thereby withholding those funds from the economy and increasing the gap between the rich and the poor. The trickle up effect avoids this pitfall by giving more money to those who would be more inclined to spend it.

greg cryns (who only know how to spell "economics" not how to make it work)

1 comment:

  1. Wow! I had never considered this take on things before! Thanks!

    It is clear that "Trickle Down" is a load of shit, sold to us plebians by slick slogans and threatening quotes by rich folks.

    Let's move the "Trickle Up" agenda forward!