Trickle Down: Here’s How It Happens

Our country’s 40-year experiment in trickle-down Reaganomics has shown us one thing: left to its own devices, a free market pumps the money to the top. It’s the nature of the beast, an inherent property of the system.

Despite wild-eyed assertions to the contrary, trickle-down doesn’t happen unless we make it happen.

Here’s further demonstration of that from the redoubtable Lane Kenworthy. He uses long-term cross-country comparisons — the closest thing we can get to a controlled experiment in a field where you can’t do anything like randomized, double-blind studies. Data from the Luxembourg Income Study — the best data set available.

Over twenty-five years what has made the poor better off?

In the countries where bottom-decile households have gotten better off, it’s happened via government transfers. In the countries where they haven’t (like the U.S.) … they haven’t. Or not much (and that only in the late 90s).

Here’s one comparison highlighting the differences.

Full paper with lots more graphs here.



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One response to “Trickle Down: Here’s How It Happens”

  1. Leroy Dumonde Avatar

    “left to its own devices, a free market pumps the money to the top”

    Wrong! Kenneth Arrow proved long ago (the famous Welfare Theorems) that a perfectly competitive free market will reach the optimal most satisfactory outcome for all after everyone is done horse trading.

    Joseph Stiglitz, among others, showed that the reason we can’t get to the Walrasian Nirvana is that real markets ain’t so free and are fair from perfect.