Trickle Down, Supply Side…

Call it what you want, economist John Quiggin says we can now write the obituary for the idea that the richer the rich get, the better off we’ll all be.

“The trickle-down theory can be examined using the tools of econometrics. But, at least for the US, no such sophisticated analysis is required. The raw data on income distribution shows that households in the bottom half of the income distribution gained nothing from the decades of market liberalism. Although apologists for market liberalism have offered various arguments to suggest that the raw data gives the wrong impression, none of these arguments stand up to scrutiny. All the evidence supports the commonsense conclusion that policies designed to benefit the rich at the expense of the poor have done precisely that.”

To me, one of the big red flags about the “trickle down” theory is that it essentially bribes you rich people for agreeing with it. “Want to help America?” it asks. “Help yourself first.” As a result, it just seemed like this theory was never going to get analyzed as critically as a theory that suggests that helping others might require some level of sacrifice, and so there was a great risk of personal-interest bias creeping in.

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