Summations Only

Isn't venture capital people investing in ideas? I wasn't following how your simple question had anything to do with what Straggler and I were talking about. Sure. I know of a company that recently invented a new technology that's just coming onto the market. I could borrow a bunch of money (go into debt) and invest in their company and then after they take off and their stock goes up I could sell it, pay off my debt, and have a shit-pile of money (get rich). So there it is, getting rich by going into debt. Of course if you fail you loose money, that's beside the point. It was about who is going to make more money on the whole deal; the guy who loaned the money that allowed the increase in productivity, or the people who borrowed the money and then got more productive. It could be either way, depending on the deal, but the fact that in the case under consideration it was the guy who loaned the money doesn't mean that the guy who borrowed it didn't benefit from the whole deal. Here's what he said:

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Yet the evidence conclusively shows that it is the wealthiest rather than anyone else who have benefited most significantly from that increased productivity.

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Its easier to make money, if you already have money. Right. But you do need that money to make money in the first place. And the more money you got in the beginning, the more money you can make in the end.ABE:From Message 315: How is the graph showing causation? Not necessarily. If the total wealth grows, then we can both make money. Like when you mortgage a house and the property value increases.Edited by Catholic Scientist, : see ABE

Sure. This is fine in principle. If I have 10,000 invested , and a super-rich dude has 1,000,000, and we both make 10%, then I'll have 11,000, and the rich guy will have 1,100,000. I made just 1,000, and the rich guy made 100,000. That's fair.But what happens when I still just get 10%, but the rich guy gets a 60% return, from the very same investment?I still only made 1,000, and he made 600,000.That's what's happening in the real world - the super-wealthy aren;t jsut getting more because it takes money to make money. They're disproportionately making more money hand over fist off of the rest of us.If thigs were fair, a 20% increase in productivity would result in a 20$ increase in earnings, for the workers and all the way up to the top.Instead, after a 100% increase in productivity, the workers are getting something like a 20% return for their labor, while the wealthy are making more than a 100% increase! It's called the "income gap," and it's getting worse every year.When CEOs fail utterly at their jobs and drive businesses into bankruptcy, they get golden parachutes. When they need government bailouts to keep their doors open, the CEOs get bonuses for screwing up so badly they needed to beg the taxpayers for money.When you or I fail even a fraction of that severity, we just get fired. No bonuses. Hell, I don't get bonuses for saving my company hundreds of thousands or even millions of dollars. I'm lucky if I even get a raise.When you look at the productivity and the earnings graphs, you see that the rate of increase for all classes used to be fairly even. When productivity went up, earnings went up for everyone, and by a similar percentage.Looking at the graphs for the past few decades, something has changed. Productivity didn't change much, it continued to increase at a fairly steady rate. But income, rather than being tied at a steady percentage increase across income levels, started to skew wildly toward the wealthy. The middle-class mostly plateaued, showing some increase but not much, the poor actually lost money because nobody bothered to raise minimum wage despite the existence of inflation, and the wealthy shot so far beyond everyone else it's like suddenly the income of the wealthy was no longer based on anything even remotely attached to the factors that determine income for everyone else.There's no problem with the idea that money makes money, and more money makes more money. Whether you invest $10 or $100,000, you should both get the same rate of return, whether it's 1% or 50%.There's a huge problem when more money makes disproportionately more money. The guy who invested 1% shouldn't be getting a 1% return if the guy who invested $100,000 is getting a 60% return.

Overall, your argument doesn't really go against the prinicples of Trickle Down Economics. Your more arguing against the unfairness of the behavior of certain portions of the rich who were engaging in what should be criminal activity. What's funny about the recent Great Recession, is that the CEOs didn't even understand what they were getting into. Some companies were trading synthetic CDOs, which was an entirely newly created marketplace, that nobody really understood the full ramifications of. It was an unprecidented change in banking transactions that were completely hidden from any regulation because they were private deals. I'm not sure about that one... why should they be the same? I think that's more of a problem with greed than it is the economic policy working or not.

Pretty much sums it up, though I'd add that our elected officials are complicit. I don't know why everyone is straining so hard to blame trickle-down economics.--Percy

I not so sure that complicit is a better word-choice than something more along the lines of incompetent, or maybe even ignorant... but that's getting off topic. Its the hip thing to do these days.

But you didn't get rich because you got into debt; you indebted a company to you, and they paid you back with interest. It wasn't the money you borrowed that made you rich, it was the money you lent.In fact, all you did was move money from one company (your lender) to another (your borrower) in a leaky bucket, basically; you were the middleman. You didn't add value or create wealth in any sense; you just moved wealth from over here to over there and back, and kept a little bit for yourself.Ultimately that's all finance is - money being passed to the left, and the pile is a little smaller each time. No, it's about who is actually who is actually creating wealth and who is just moving it around. You can't base an economy on lending money, because eventually the money has to go back to where it started. It's just musical money chairs. You need to spend money to make money. You don't have to borrow it. The graph shows that the increase in wealth and income at the top 5% is the result of their efforts to appropriate the rewards of an increasing GDP that is primarily the result of broad increases in productivity among American workers. It's like putting in overtime to increase the company's profits, and then your boss - who didn't work any harder at all - cashes your paycheck for you. It's stealing. Sure. But moving money around in leaky buckets doesn't grow wealth. How could it? The money has to be paid back - with interest. How does that make you wealthy? That's only hypothetical value until someone buys the house. That's spending. It's the spending that makes you wealthier, not the mortgage.

In the same way that some people are tone deaf and can't tell when a pitch is rising or falling, you appear to be slope deaf and can't fell when a line is rising or falling. Look again at the line for productivity growth during the Reagan years: It's flat.So I ask you again: where did the money come from?--Percy

The benefit of money moving around in the economy. Again, it's impossible for trickle down to not happen. If one rich person spends one dollar, trickle down happened. I guess we're stuck with the term "trickle down", but the reality is that money flows in all directions in an economy: up, down and sideways.As to whether trickle down economics works, that's a different and much more complex question, plus you have to define what you mean by works. Obviously the cuts in top marginal tax rates from 70% down to 30% in the early 1980s worked by increasing the value of risking money through investment, and by increasing the motivation to increase earnings by taxing away less of each incremental dollar.But while trickle down economics was an appropriate justification for implementing tax cuts to bring us out of the economic stagflation we were experiencing in the late 1970s and early 1980s, it is not an appropriate tool for today's economic environment. Would cutting the taxes of the rich work today? No, of course not, the rich already do not pay their fair share of taxes. The portion you quoted says nothing even remotely like that, so I don't know why you would think this. I haven't made any statements anywhere about where I think productivity gains originate from.Let me repeat the question: Obviously trickle-down happens, but how much does it have to happen before you'd define trickle-down economics as working?All I'm asking for is a simple metric.--Percy

Yet the data clearly shows where productivity gains are ending up. If increased national productivity ends up in the hands of the wealthiest disproportionately to their contribution to that increased national wealth, and such that the wealth of the nation is increasingly concentrated at the top, then what exactly is it that has trickled down?Money circulates. Sure. But that isn't the same thing as trickle down economics working. If a million of the poorest people buy Big Macs that pay the salaries of multi-millionaire McDonalds CEOs then trickle-up of money has indisputably happened. But so what? I am not sure a simple metric is possible given that we are talking about the proportionality of gains from productivity.If the wealthiest 5% are the entrepreneurial innovators that have driven the economy forwards over the last 30 years in a way that would have been impossible without their unique contribution then the sub 20% increase in real incomes of the 95% majority is a success for trickle down economics. The poorest have benefited from the insightful spending of money that they could not themselves have achieved if the same money had been re-distributed. The rich are responsible for the extra productivity and we all benefit from it. This would be trickle-down economics working.If however the 95% majority are responsible for the lions share of that 100% increase per person in increased national productivity and yet have only seen a 20% increase in real incomes then it is very difficult to see what has trickled down. Instead it seems like an unjustified siphoning off of increased wealth by the richest. This would be "trickle-down economics" not working. Arguably it would be trickle-up.Which scenario do you think most closely matches the reality of the situation?

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Paul Krugman noted in November 2011 that all American redistribution of income away from the bottom 80% has gone to the highest-income 1% -- and that a report looking only through 2005 found that almost two-thirds of the rising share of top 1% income went to the top 0.1% (the richests one-thousandth), who saw their income rise more than 400% from 1979 to 2005.

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Edited by Straggler, : No reason given.Edited by Straggler, : No reason given.

I can tell just fine, which is why I'm wondering what on Earth is going on when you show me a line with an abundantly positive slope and tell me "it's flat."Turn your monitor right-side up, Percy. Productivity increased broadly, and the revenue was captured predominantly by the top 5% income groups. The data is abundantly clear on that.I guess everybody is a creationist about something.

Again, this is nonsense. The dollar might have been spent in Zurich. It might have been spent to someone of even higher material wealth.The spending of the rich is not, in and of itself, "trickle down." It may just as likely be trickle-up or trickle-out. And trickle-down economics, the subject of the thread, is the notion that increasing the wealth of the rich improves the economy. We've already shown how this is predicated on your mistaken assumption that the rich consume their income.

I know this is off-topic, but I thought my recent post was unusually coincidental to this recent news . . .

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Jones, an adviser to a bold venture that aims to extract gold, platinum and rocket fuel from the barren space rocks

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Asteroid Mining May Yield Precious Metals, Cosmic Riches, Planetary Resources Adviser Predicts

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HuffPost - Breaking News, U.S. and World News | HuffPost

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Sorry for the interruption, please carry on.

CS - How much of the increased productivity over the last 30+ years do you think is attributable to the top 5%...?How much of that increased productivity have the top 5% pocketed?What has trickled down? It is about lowering the tax rates for the wealthiest specifically rather than anyone else. It is the belief that there is some sort of natural distribution of wealth from the top down rather than the bottom up or the middle out. It also usually entails a whole heap of deregulation of the labour market as well. Because rather than protections for workers these are seen as barriers to the free-marketeers invisible hand and profit. Can you see that actively making the wealthiest wealthier so that you can both in-debt yourself to them and then give the bulk of your increased productivity to them as well leaves you in a inferior position to having that same money redistributed such that you can increase your own productivity and retain the fruits of that productivity?Why cut taxes for the very wealthiest rather than increase the spending power of your customers or increase the ability of a national investment bank to promote your own productivity-doubling entrepreneurial innovation?Why is placing the wealthiest as the both lender and the chief beneficiary of productivity either necessary or desireable? Precisely. So why focus tax and regulations at making the wealthiest wealthier unless you want to promote that snowball effect of disproportionate gains? You are back in Dr A's rising temperature in July terriotory...Why are you attributing economic growth to trickle down policies? Did other economies not grow in the last 30 years? No it's not. It's asking if the majority are better off than they would have been without such policies. Put it this way - If I am going to be poor and hard working I would rather be poor and hard working in a lot of countries other than the US (and the UK is going the same way).The economy relies on it's working population. Yet if the distribution of proceeds of growth for the last 30 years are to be believed we would be better off without the activity of the bottom paid 50% of the UK workforce than the 0.1% wealthiestI think if we (hypothetically) killed off 50% of the workforce and redistributed their wealth to the remaining 50% the productivity of the UK would be rather adversely affected.Yet if we (hypothetically) killed off the top 0.1 wealthiest and redistributed their income among the remaining 99.9% I doubt we would see any fall in national productivity at all.It's speculative (and I'm not suggesting we really kill anyone) but do we really think that the wealthiest are the "wealth creators" to that ridiculous degree or for any reason than because they (increasingly) hold all the wealth? Well they certainly show the proceeeds of growth going to the wealthiest. You can't disagree with that can you?So the question is how much of that growth is attributable to them rather than just the money that they, rather than anyone else, happened to have as a result of focussing policy at specifically making them wealthier?

I think you're over-applying your 'spending is the coolest' principle. I agree with the principle, but its not the be-all-end-all you're making it. I'd have to borrow the money to spend it. And I'm not lending it to the other company, I'm giving it to them in exchange for a portion of their company. When i cash in, it might be somebody totally unrelated that I sell to. The company isn't paying me back unless they buy their own stock back. But I did add value and create wealth... you see: the bank I borrowed from didn't know that this company was so kick-ass that they should invest in it. And with the money I gave to the company, they can now buy that bigger reactor and increase their productivity. Now they are making more money, I'm making more money, and so is the bank. The bucket didn't leak a drop. Not necessarily. If one party makes money then the pile gets bigger. That's you assuming causality, not the graph showing it. Because moving the money over there made that company much more prodiuctive and profitable so that they made more than enough money to cover the interest. Now they have more wealth. And so do I because I was the one who realized the money should be moved over there. We all win! I wouldn't have the house without the mortgage. Now that I do, and its gone up in value, I have more equity that I can turn into money when I do sell. That's wealth.

I don't know, I'm asking you. You're the one implying their contribution is low. You didn't answer the question. But yeah, I can also see how if we all grab our pitchforks and bum-rush their mansions, we could steal enough of their fortune to enrich ourselves. So what? The idea, I think, is that if you make the wealtheist welthier, then that wealth will trickle down to the rest of the people because the whole economy is doing better. As I understand it, the purpose of TDE is to make the whole economy better, so the way we'd measure if its working or not would be to see if the economy is doing better. And how do you measure whether or not the majority are better off? I figure if the economy is better off then everybody is better off. Huh? I think you accidentally a word. I think the economy ultimately relies on borrowing to grow. People who don't already have money need to somehow get money in order to make money. Without the top end lending it, you get stagnation. I don't see any way to measure that.I'm sure they're trying to make themselves wealthier, but they wouldn't do it at the expense of the economy, because they need a good economy to continue making their wealth. And as long as the economy as a whole is doing better, then everyone is better off.I suppose its kinda like this idea: Lets not restrict the pilot, just let him fly this thing, he's not going to crash it on purpose because that'd kill him too, hopefully he flies us far. On the other hand, we could put all kinds of restrictions on him to ensure that he flies a certain distance, but is that going to be shorter than if we didn't?